Is it time to Spring Clean your finances?

Today sees the official start of spring and an end to the long, dark winter months. This is a time of year when the mornings become lighter, trees and shrubs start to blossom and it is also when many British families like to give their homes a thorough freshen up and declutter with a traditional “Spring Clean”. Sweeping away the cobwebs and emptying the cupboards of accumulated junk and worn out clothes can be quite a cathartic experience, creating space and order and a sense of new beginnings.

However, why stop at cupboards, skirting boards and kitchens? With the 5 April end to the 2018/19 financial year fast approaching, Bestinvest, the online investment supermarket, argues this time of year is as good a time as any to spruce up your finances.

Jason Hollands, Managing Director, Bestinvest, sets out a check list for areas that might deserve taking a “financial feather duster” to:

Review your outgoings

“Over time it is all too easy to build up standing orders and direct debits for services or memberships that are perhaps under-used or even forgotten about. A little time spent reviewing your regular outgoings against your income can quite quickly help identify potential savings. Alongside this, it really does make sense to check that you are on competitive tariffs for utilities and service suppliers.”

Is your mortgage competitive?

“If you have a mortgage and haven’t reviewed it for a while, now might be good time to do so. Interest rates remain very low in the UK but are expected to rise over time and so it may be worth considering a fixed rate deal.”

Track down missing pensions

“Research from Tilney has revealed that one in five UK adults admit to having lost track of at least one pension pot and an estimated £400 million in pension savings goes unclaimed. This is a problem exacerbated by the fact that people now move jobs a lot more regularly than previous generations. In fact, people have had on average 11 jobs in their working lives, often collecting a new workplace pension with each move. Over the years, it is very easy to forget to tell previous employers that you have changed address and that can mean losing contact with your pension and how well it is doing. It really does make sense to spend some time tracking down missing pensions and then potentially consolidating these into one plan. A good place to start is the Department of Work and Pensions free online Pensions Tracing Service at www.gov.uk/find-pension-contact-details”

Dog proof your investments

“If you already own investments, for example in Individual Savings Accounts and Pensions, when was the last time you checked how they are doing? The differences between the best and worst performing investment funds can be huge and it really is important to periodically review how they are doing and consider whether there are any that might be worth switching. In Bestinvest’s most recent Spot the Dog report, we highlighted 111 seriously poor performing funds that held an astonishing £55 billion of investors’ hard-earned cash. The full report can be downloaded here www.bestinvest.co.uk/research/spot-the-dog”

ISAs: use them, or lose them!

“Every adult gets an annual Individual Savings Account allowance each tax year, enabling them to shelter a thumping £20,000 of cash or investments from the tax man. The allowance is available on a ‘use it, or lose it’ basis: if you do not take it up by midnight on 5 April then it will disappear for good. Importantly, ISAs are very flexible: you can withdraw your money from them at any point. If you have the funds available, there is no real reason not to fund an ISA by midnight on 5 April.

“ISAs are particularly useful for long term investments. However, if you cannot decide where to invest or are unsure whether it is a good time, there is no need to make a rushed decision: most stocks and shares ISAs enable you to open the account with cash and then decide where and when to invest it later. If you change your mind, you can always withdraw the cash.”

Give yourself a tax-cut

“It is estimated that 4.28 million people will pay income tax at the higher rate this year, a 34% increase in a decade. Those staring at a big income tax bill this year can however reduce this, with the most common route for doing so being to contribute to a pension. This is because pension contributions attract tax relief at your relevant income tax band, so someone who pays tax at the 40% rate can get £10,000 in their pension for a net cost after tax relief of £6,000. Of course it is important to realise that pension pots cannot be accessed until age 55 at the earliest, but for those able to commit their money – particularly if they are higher rate tax payers – they really are very attractive.”

Hollands concludes: “This is by no means an exhaustive list, but if you feel motivated to do some Spring-cleaning, or are inspired by Marie Kondo to declutter your house, this could be a great time to take the same approach with your finances.”