Top 10 tips for wise savers
IF you want to manage your finances properly, it helps to know your stuff. Yet money is a complicated business, and it is all too easy to get the basics wrong.
Chase de Vere chartered financial planner Patrick Connolly said a little knowledge can sometimes be a dangerous thing: “The more you understand about how to manage your money, the better.” The following 10 basic financial facts can help you plan your future properly. 1. STATE PENSION Many people have no idea how much they will receive and when. Request your state pension statement from Gov.uk/check-state-pension or call the Future Pension Centre on 0800 731 0175. “This will tell you how much you might get and when, and if there is any way that you can increase it,” Connolly said. 2. YOUR WILL If you have not written a last will and testament, the rules of intestacy will apply when you die.
Connolly said: “Your assets will be distributed according to set rules and won’t necessarily go to the people you want.” Your will is automatically revoked if you marry, and partially revoked if you divorce. 3. JUNIOR ISAS Children can take control of their tax-free Junior Isa at 16 and access money at 18. As there is nothing you can do to stop this, Connolly said: “Either educate your children to handle money properly or save outside of a Junior Isa instead.” 4. CASH ISAS Interest rates on cash Isas are often lower than on standard savings.
The personal savings allowance lets basic rate taxpayers earn £1,000 of interest each year from a non-Isa deposit account free of income tax, or £500 for higher rate taxpayers. 5. NEST EGGS Under pension freedom rules savers can access nest eggs at 55, but this age is not fixed and will rise.
The rule says you can access your pot 10 years before state pension age, 65. This will rise to 66 for all by 2020, then to 67 in 2028, when you will have to wait until at least 57. 6. SAVINGS PROTECTION The first £85,000 of savings in a UK regulated bank are protected by the Financial Services Compensation Scheme (FSCS), but you could exceed that if your cash is spread with subsidiaries of the same bank.
For example, Bank of Scotland, Halifax, Intelligent Finance, Birmingham Midshires (BM Savings) and St James’s Place Bank all share the same licence. Connolly said: “Money held by peer-to-peer (P2P) lenders and the Innovative Finance Isa is not covered by the FSCS, so be careful.” 7. OVER-50s LIFE PLANS These low-cost insurance policies offer guaranteed life cover without a medical but tend to be poor value for healthy people with longer life expectancy.
“To stop the unhealthiest people benefiting, policies don’t pay out for the first year or two.” If in good health, a standard life policy with a medical could give better terms. 8. GOLD This so-called safe haven can be very volatile. The price topped $1,800 in 2011 but trades at below $1,200 today. “Sharp fluctuations in gold prices are not new,” Connolly said. 9. DEFAULT PENSION FUNDS Many workplace pensions have “default” funds, that shift your money into lower risk, lower performing investments before you retire. Check if yours matches your plans. 10. FINANCIAL ADVICE Some financial advice companies can only sell a restricted range of products so choose an independent financial adviser that can sell the best plans and policies across the entire market, Connolly advised.