The push to be better
Planning your pension
The fire in your belly to push on up every ladder you have access to – work, property, income, business – is still alive and well and burning away at you every day. With the responsibilities of partners, family, mortgage, child care costs and home improvements bearing down on your finances, the need to push to be better has never been so pronounced. And you want to get most of it done because you fear the dreaded ‘40’ tag a few years away!
You’re ambitious and keen to succeed, and this should be reflected in – and supported by – your financial planning. You’ve probably built up some savings, maybe some stocks & shares investments, and it’s likely that you’ll have a pension plan or two over your evolving career. But are they working as hard as you are?
Sure, retiring might seem a long way off at the moment, that’s what your parents do, but the day will come eventually – how will you support yourself? The State Pension will only cover the very basics, if it still exists by then. And anyway, you’ve got to pay for family, holidays, Christmas, car insurance... you know what’s in the way in the meantime.
Lots to think about... luckily, the SaidSo team is on hand to help.
Pensions: check what you’ve got and think about further funding
Hopefully you’ve got a pension going, even a few. Whether these are small or large pension funds, it’s important to make sure the underlying investment funds are in line with your attitude to investment risk. Plus, keep an eye on the charges that you’re paying on each plan. Don’t forget to check the death benefit nominations on all your pension plans as well – you may have last made them when you were without a partner, or with a different partner.
If you haven’t really been interested in contributing into a pension up to now, there’s still time – although it’s ideal to start saving for your retirement as early as possible. You’ve sadly still got 25+ years or so of work ahead of you and those years will fly by, though, so get your pension planning sorted now.
Check your (and your partner’s) State Pension at the same time. It’s a valuable source of index-linked income in retirement and it’s a great idea to check what you might be entitled to when you reach State Pension Age. Get your free forecast here.
So you know, the State Pension age is rising, and will reach age 66 for both men and women by 2020, increasing further after this.
Your savings and investments
Hopefully you’ve built up some cash savings by this stage and potentially some stocks & shares investments too. Make sure you maintain cash savings equivalent to around 3-6 months’ income as a minimum in readily accessible funds so that it’s easy to get to in an emergency. You might want more to feel secure. If you’ve built up more cash than this, is it working hard enough for you? Check out the interest rates available on the high street and don’t forget about other cash-type investments, such as NS&I Premium bonds.
And remember to use your tax-efficient ISA allowance every year, either for cash or stocks & shares investments: it’s a great opportunity to shelter at least some of your money from tax. If you have a partner, they can also use their allowance each year.
Being your own boss
If you’ve started your own business, you probably know by now the ups and downs of each year’s trading. Exciting and scary, all rolled into one!
There are lots of tax-efficient ways you can control your income from a business. As an example, the way dividend income is taxed changed in April 2016, with Dividend Tax Credit being replaced by a new tax-free dividend allowance. This means that you won’t pay tax on the first £2,000 gross of your dividend income in the current tax year, regardless of what other income you have coming in. The headline rates of dividend tax are as follows, above the tax-free level of £2,000 gross pa:
7.5% on dividend income within the basic rate income tax band
32.5% on dividend income within the higher rate income tax band
38.1% on dividend income within the additional rate income tax band
We are not accountants and you might need to take some advice in this area, but SaidSo can look at the implications for your financial planning.
Protecting the family
Always important, especially at this key part of the tapestry that is your life story. If you’ve got enough then great, but check this position to make sure you’re correct. If not, make sure that once debts are repaid, there is enough to keep the family afloat if you died or suffered from ill health. Don’t forget to check your partner’s protection to ensure that if they die or fall ill, you are protected as well. This is often overlooked, with horrid consequences if it goes wrong.
Also, make a will and keep it up to date. If you die without one, your estate will be distributed according to the laws of intestacy, and this might not be what you want, especially if you’ve got a partner and children.
We hope you have been inspired to take action for your financial planning from the notes above. This SaidSo free guide is for guidance only.