"During the first couple of months of any year I often speak with customers who are looking at ways to improve their financial situation for the coming year and beyond."
During the first couple of months of any year I often speak with customers who are looking at ways to improve their financial situation for the coming year and beyond. There are all the usual financial resolutions; pay off your debts, switch to a more suitable mortgage, save more.
But if you made (and managed to stick with) those resolutions last year, what should you be looking at for 2022? Here’s my Top 3:
Your retirement income
For those who want to check how their pension is doing and if they’re on track, Q1 is a great time to have a general review, before the end of the tax year. We use advanced computer systems to create a “shortfall analysis” – a detailed picture of how the contributions you’re making measure up against the contributions you need to make to hit your target income. If it turns out you need to start contributing more to your pension, the sooner you start the greater the return will be! And making additional contributions before the end of the tax year makes sure that you don’t miss out on annual tax advantages.
The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested.
Tax treatment varies according to individual circumstances and is subject to change.
Your investment portfolio
An annual review of your investment portfolio – looking at performance, risk and objectives – is something we offer every Ginkgo client. Increasingly, we’re finding that people want to know not just how profitable their portfolio is, but how ethical. The best measure of this is the Environmental, Social & Governance (ESG) rating system. This examines the corporate behaviour of the companies behind investments to determine how sustainable, ethical and accountable they are. All the investment funds we use at Ginkgo are rated for ESG.
Even if you’re not sure how important ESG is to you, it’s worth taking our questionnaire. It will help you understand what “ethical” looks like to you – whether you’re aware, focused or dedicated to these issues – and provide guidance on the sorts of investments that match your profile or that you should avoid. We can then analyse your investments in detail to see how well they comply with your ESG investor profile.
Your legacy planning
No one likes to think about their own death but planning for the inevitable fact that we won’t be around for ever is one of the kindest things we can do for our loved ones. That way, when the worst happens at least your financial affairs will be one less thing for them to worry about.
Having a will in place ensures your loved ones – particularly children, step-children and unmarried partners – are looked after when you are gone. If you don’t plan ahead, the part of your estate that exceeds the inheritance tax threshold of £325,000 could be taxed at 40%. Bear in mind this threshold includes property, meaning you don’t have to be particularly wealthy to leave behind a large inheritance tax bill.
We encourage all our clients to make sure they have a well-drafted and up-to-date will and Power of Attorneys. If you don’t, we’ll help you arrange them.
Will writing is not part of the Quilter Financial Planning offering and is offered in our own right. Quilter Financial Planning accept no responsibility for this aspect of our business.
It’s also sensible to involve your wider family early to avoid unnecessary stress or even disputes after you are gone. If you have children and other dependents, have you made a clear record of your financial affairs and do your family know where to find it? Do they know what your wishes are? Have they made wills of their own? If you have elderly parents, are you sure they’ve put clear plans in place? We’re happy to meet multiple generations of a family together to get to know you all, put everything down on paper and iron out any wrinkles. That way, you’ll have the best chance of making sure everything goes as smoothly as possible when the time comes.
So, there you have it! My Top 3 financial resolutions for the New Year.
Over the course of 2022, I will be looking at each of these subjects in more detail, but if want to start the New Year by getting your finances in order I would be delighted to help.
By Daren Wallbank, Chartered Financial Planner
