Top Ten Tips: Plan ahead to make sure your savings are working for you

RESEARCH from Bank of Scotland Private Banking suggests that a staggering 50 per cent of Scottish investors think their money should be performing better – so are you happy with how your savings are performing? Willie Raeburn, director of Bank of Scotland Private Banking, offers his top tip on making the most of your extra funds.

Plan, plan, plan

Our research suggests that while many Scots have taken financial advice, only 56 per cent of those who have done so go on to make tangible plans for their money. Higher rate taxpayers, or older people who have done the majority of their spending and saving, can sometimes struggle to find advice that suits their personal needs. So make sure that you commit to a plan of action – and then you can review it regularly to ensure that it is still delivering.

Understand your long-term goals

It can be difficult to understand what you really want to do with your money. Suggestions can be made, but for the process to work you need to really understand what you want to do. Book a meeting with an independent financial adviser and talk not about products or accounts, but about aspirations and what you’d like your money to do for you.

Keep your eyes on the TARGET

Once your goals are understood a plan can be put into action, monitored and, if needed, revised on a regular basis. A good adviser will be able to keep you informed of how things are going and recommend any changes that could be beneficial as markets change. If your investment isn’t developing as planned then take action. Inactivity will not solve anything,

How hungry are you?

A huge factor in getting the right plan together is your attitude to risk. Risk is a word that is almost becoming taboo in financial circles, but it is a reality of investing money and you should think carefully about how you feel about this. Generally, the larger the risk the bigger the potential returns, but also the possibility of a loss. Don’t be focused purely on the returns as striking the right balance for you is the key.

Quality not Quantity

The internet has made it easy to access a huge variety of information, but having vast amounts of tips without anyone to apply that knowledge to your circumstances won’t help. Having a relationship with an adviser you trust will ensure you make decisions that are best for you personally. Quality advice is worth much more than a huge quantity of advice.

Watch the bottom line

Trust is the foundation of a good relationship, but it’s important to be fully aware of any fees, when they might be charged and how they might be applied. Are you paying too much? Are you paying for services you don’t need? You should be dealing with a qualified adviser, not a sales person.

Be proactive

Just 39 per cent of Scots are content that their investments are performing as well as they should be. Don’t be afraid to shop around and seek out various sources of advice which will either provide you with the comfort that you are doing the right things or with questions to challenge your adviser regarding your current position.

Take a holistic approach

The internet has made it easy to compare products, but getting the best rate is just the beginning of the process. Seven in ten Scots have a savings account while 66 per cent have a cash Isa, but a classic mistake is to think of your savings products in isolation. It’s important to look at how your whole savings and investments portfolio is working for you, from how you pay tax on your savings to risk profile and access to cash in case of emergency.

Avoid the pensions tax trap

Financial planning needs to take into account every stage of your life, particularly those years when you have stopped working. The government is making significant changes to pension plans and recently brought in changes to pensions tax relief by reducing the tax-privileged pension allowance. Wealthy individuals need to be really proactive in planning for retirement. They should consider pensions in the same way they look at any savings: as tax efficient as possible.

Pass it on

The days of passing on an inheritance that will help set up your children for the future are long gone. In many cases today, those children are 50 or even 60 years old, so the chances are they have “made it” on their own by then. However, there can be a number of tax-efficient savings to be made by passing on your wealth early, which could be a real help at the right time.