It’s that time of year again, so what financial resolutions should you be making? New Year resolutions have a tendency not to last very long. By the time the festive season finally ends and the decorations are put away, the eat less/drink less/exercise more resolutions have often also disappeared.
For 2018, why not adopt a different type of resolution – a financial one?
Here are four possibilities:
1. I will review my will.
Whatever your December excesses, contemplating your own mortality is not an exercise you should rush into. However, ensuring your will is up to date is one way to make sure your assets are dealt with in the way that you want when you are not around. Although it is sometimes possible to restructure a will after someone has died, all parties to any amendment must agree, which can create its own problems. If – as many people do – you have no will and assume the laws of intestacy will resolve everything, you could be seriously mistaken. Intestacy does not always mean everything passes to a surviving spouse or civil partner – and it is especially hazardous if you are in an informal relationship.
2. I will complete a Lasting Power of Attorney.
In many respects, no will is complete without a matching pair of Lasting Powers of Attorney (LPAs) or the equivalents in Scotland or Northern Ireland. An LPA allows you to appoint one or more people to make decisions for you if your health – mental and/or physical – prevents you from doing so. There are two LPA variants: one covering your property and financial affairs, and the other deals with your health and welfare.
Without LPAs, your family could find themselves having to deal with the Public Guardian, which can be an expensive and impersonal legal process.
3. We will review our ownership of investments.
The past few years have seen a steady flow of changes to the personal tax treatment of investment income, such as the introduction of the personal savings allowance and the reform of dividend taxation. It is now more important than ever for couples to review who owns which investment. For example, next tax year’s cut in the dividend allowance to £2,000 could mean it makes tax sense, where unused allowance
is available, to transfer some fund holdings from a basic rate taxpaying spouse to their higher rate tax-paying partner.
4. I will obtain an estimate of my current pension benefits.
The recent multitude of changes to pension rules impacted on both the state and private pension provision. They could well have altered your retirement income, how you can draw benefits and even when you will receive some of your pension. If you have been automatically enrolled in your employer’s pension, a review is particularly relevant because of the significant contribution increases due over the next 18 months. In personal financial planning, as in many other aspects of life, putting things off is seldom wise. Delays can all too easily add to cost. The four resolutions listed here are one-offs – they do not require you to keep doing something regularly, which is how the typical 1 January pledge fails.
The value of tax reliefs depends on your individual circumstances.Tax laws can change. The Financial Conduct Authority does not regulate tax, will writing, Lasting Powers of Attorney, trust advice and some forms of estate planning.