Spring clean your finances ... in autumn!

SEPTEMBER marks the start of autumn, the new school year and darker nights. It also marks the halfway point in the tax year, a perfect time to take stock of your savings, investments and financial goals.

Savers are limited by what they can add to their pension fund. The first is an annual £40,000 allowance, or a sum equivalent to your earned income for the year if less than that. A lower limit of £4,000 may apply if you are already accessing your pension.

The second limit is the lifetime allowance. For the 2019/2020 financial year this is £1,055,000. This allowance is the maximum to which your total pension savings can grow.

It is important to review your contributions regularly. If you exceed either of these allowances you will trigger an annual allowance charge and will not receive income tax relief on any contributions above your allowance.

Add together the contributions made by you and your employer already this year, and those that will be made before April. Compare those to your annual and lifetime allowances to see if you can top up your pension without penalty. You can raise monthly contributions, or add a lump sum to make the most of your allowance. Carla Morris, financial planner at wealth manager Brewin Dolphin, says: ‘ Many instant access accounts pay less than 0.25 pc in interest a year so it may be worth using any spare cash savings you have, aside from your rainy day fund, to top up your pension and make the most of those tax breaks.’

Due to pension tax relief, every £1 you add to your pension only costs basicrate taxpayers 80p, and higher-rate taxpayers 60p. But you cannot withdraw your savings until age 55.

Ms Morris adds: ‘ Pension tax relief gives your savings a huge boost straight away and you should earn investment returns on top of that.

‘The children are back at school now, so maybe you don’t need to pay for childcare at the moment. Those few hundred pounds could be made to work hard in your pension.’

Bear in mind that you have little over six months to top up your Isa before you lose this tax year’s allowance. An Isa allows you to earn tax free interest on a cash savings or stocks and shares account. Since Isas arrived two decades ago the upper limit on tax- free savings has increased from £7,000 to £20,000. Up to £4,368 can also be held in a junior Isa, for children under the age of 18.

Compare the deposits made to date against your Isa limit to identify how much of your allowance is remaining. Low interest rates have meant minimal returns from cash Isas. Moving to a stocks and shares Isa could boost the long-term growth of your savings but their value can go down as well as up.

The £20,000 annual limit applies to your total Isa savings in the tax year. You can move your money from your cash Isa to your stocks and shares Isa without affecting your allowance.

To do this, ask your Isa provider to make the transfers and ask if they allow partial transfers if you don’t want to move it all. Check the terms of your cash Isa to see if you would face a penalty for withdrawing funds.

If you transfer the money yourself by withdrawing it from your old provider and taking it to the new one it will count towards your annual allowance as it will be treated as new Isa cash.

Ms Morris says: ‘For those who don’t want to lock spare funds in their pension until they are least 55, a stocks and shares Isa is another great idea.

‘You don’t get tax relief on your deposit, but your savings are tax free when you withdraw them. Both pensions and stocks and shares Isas invest in the stock market so your savings are at risk but over the long term they generally rise in value.’ It pays to spread your risk. If you put too much into one area of the stock market, or one type of investment, your nest egg is at risk if these underperform. Instead, you should invest in a mix of UK stocks, overseas shares, fixed- interest bonds, property and cash.

During volatile times in the stock market the make up of your portfolio can change hugely over a short period. Investments that have performed well throughout the year will grow in value and therefore account for a large proportion of your portfolio.

This puts you at risk of being over exposed to one type of investment, if it suddenly starts to perform badly.

Look at how the shape of your portfolio has changed over the past six months and rebalance it if necessary.

Patrick Connolly, financial planner at Chase de Vere advisers, says: ‘You should sell investments that have done well in favour of those that have done badly. That way you are effectively selling at the top of the market, when the share price is high, and buying at the bottom, when it is low.’ s.partington@dailymail.co.uk