NOW IS A GREAT TIME TO ASSESS YOUR FINANCES

Now the biggest shocks of coronavirus are hopefully behind us, many of us will be assessing where we are in life. The pandemic brought huge change – and underlined the need for people to build a solid financial foundation.

A pension is one of the largest assets many of us will build in our lifetime and so it’s a crucial starting point when getting your finances in order.

We’ve teamed up with Robert Cochran, pensions expert at Scottish Widows, for his top six tips to help you prepare your financial future.

You may have been furloughed or your income may have dipped during lockdown, or maybe you’ve decided you need to put a bit more away so you can have a more comfortable financial future ahead. If so, consider reviewing how much you are paying into your workplace pension.

Remember, what you put in is topped up by your employer and the Government via tax relief. Employers will often match, or even exceed, your contributions beyond the minimum statutory level.

This also applies to furloughed workers thanks to the Government’s coronavirus job retention scheme.

However, you may see a dip if your employer does not make up the difference between your full salary package and the Government scheme.

Small changes in monthly contributions can make a huge difference to your final retirement pot, especially if you are a younger worker and have years for investments to grow.

These paper slips that come through once a year should definitely be filed away and kept.

A pension statement lists everything you need to know about the state of your pension pot – which is also why it can seem bewildering.

If you are unsure about where to look, start by keeping track of these three things: the fund value, the investment performance and the forecasted retirement income. Looking at the overall value of your pension pot will help with planning and keeping track of the charges you’re paying over time.

Secondly, understanding where your money is invested and how it is performing can inform your decision on the best funds to meet your financial objectives.

And lastly, taking stock of the projected retirement income section will allow you to see if you are comfortable with this amount to fund your future.

People with a Lloyds

Bank, Halifax or Bank of Scotland bank account can also see their retirement savings in their online banking web pages so can view their pension whenever they log in. Don’t just start saving and hope for the best. Keep an eye on how your fund is doing and then you have an idea if it’s on track to fund the retirement you desire.

For those who can afford to keep contributing to their pension or are now lucky enough to have some spare cash from say, reduced commuting costs due to working from home, there are benefits to investing at this time in particular.

Buying ‘units’ in a pension fund when the market is cheaper can work well in the long run if the value of the units goes up.

More importantly, with a long-term investment such as a pension, you should aim to continue building your fund as you normally would.

You will benefit both from the tax relief mentioned before, as well as compound interest. This is the interest earned on previous interest that helps pension funds to grows significantly over time.

It’s a good idea to know where your money is invested and whether it’s the right fund choice for you. Even though now may not be the best time to make significant changes to your investment plan, it is an opportunity to get to grips with your financial future.

Workplace pension providers will invest your money in a ‘default’ fund if you can’t or do not want to make your own investment decisions. If you want to take a more active role, you choose the types of funds you invest in, which can vary depending on your risk preference, asset type, investments in geographical locations and so on.

Review your pension contributions

Track your yearly pension statement

Consider investing

You should aim to review your pension plan/plans on a regular basis as various factors could impact the fees you are paying to your scheme.

If you change jobs frequently, for example, you may be registered to several pension schemes and some could be charging higher fees than others.

It’s important to compare and consider consolidating these different pension pots into one if it results in providing better value for money. But do be wary of any guaranteed benefits

Compound interest helps pension funds to grow significantly over time

Review where your money is invested

Avoid unnecessary scheme fees