FIVE NEW YEAR RESOLUTIONS FOR 2022

The beginning of a New Year presents the perfect opportunity to explore a shaping up your finances.

In the same way you might make a plan to be healthier this year, there are also measures you can take in an attempt to build your wealth and put measures in place to protect it.

Here are five ways you can improve your finances in 2022:

1. Sort out old pensions

Round up all your pensions to make sure you’ve got the full picture for your retirement savings. You might even unearth money you had forgotten about. Losing track of a pension is more common than you might think with around 1.6 million lost pension pots worth £19.4 billion, according to the latest estimates[1].

If you think you have some money lurking in an old workplace pension scheme, you can get in touch with your former employer and ask for the details. Be ready with the dates you worked there and your National Insurance number. The Government’s Pension Tracing Service can help reunite you with your savings if your old employer is no longer trading.

For personal pensions, you can try the Pension Tracing Service. You will need the name of the provider to find the contact details. Where old life companies have been taken over and no longer trade under that name, the database will recognise it anyway and direct you to the new provider that now looks after those schemes.

If you don’t have any luck there, try Experian’s Unclaimed Assets Register (UAR). This is more comprehensive because you can search for old shares and insurance policies, as well as pensions.

2. Don’t leave too much in cash

Money that’s earmarked for the future – rather than what’s in your rainy-day account – will see its value eroded if it’s left in cash for the long-term. This is even more apparent now with rising inflation and ultra-low interest rates. This combination means your money is guaranteed to make a loss when it comes to real returns over the long term. Save for a rainy day, invest for your future.

3. Use tax allowances

There are plenty of allowances to make use of. Remember the tax year runs from 6 April to 5 April, so make sure you use allowances before it’s too late.

One of the most popular is the ISA allowance, which is £20,000. You won’t pay income tax, dividend tax or Capital Gains Tax (CGT) on any investments you hold in an ISA. You don’t even need to mention it on your tax return. Parents can also open a Junior ISA and save up to £9,000 a year into it. Crucially, an ISA allowance cannot be rolled over into next year. If you don’t use it, you lose it.

You should also consider the valuable tax breaks from pensions. If you’re a basic rate taxpayer, for every £80 you pay in, the taxman will top it up to £100. And if you’re a higher or additional rate taxpayer you can claim back up to an additional 20% or 25% through your self-assessment tax return.

Don’t forget that some investments also offer upfront tax benefits, so if you want to invest in start-ups and younger companies, investments such as Enterprise Investment Schemes, better known as EISs, could be attractive to you. There’s also a Venture Capital Trust (VCT) – another investment offering upfront tax benefits, that is designed to raise money for start-ups.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen

4. Write a Will

Making a Will ensures your assets and possessions are passed on to the people you choose. Without one your wealth will be passed according to the “laws of intestate” – and not your wishes. Writing a Will can save on inheritance tax as well as spell out how you wish your wealth to be distributed.

5. Talk to a professional

A financial adviser can help you understand your financial priorities and put a plan in place to help achieve goals. Professional advice can go a long way to provide peace of mind that you are addressing the needs of you and those of your family.

Advice can be viewed as an investment in itself. Receiving professional financial advice between 2001 and 2006 resulted in a total boost to wealth (in pensions and financial assets) of £47,706 in 2014/16[2].

Source:

[1] https://www.abi.org.uk/news/news-articles/2020/05/19.4-billion-of-pension-pots-unclaimed-just-because-of-house-moves/

[2] https://ilcuk.org.uk/financial-advice-provides-47k-wealth-uplift-in-decade/