Top Ten Tips: Spring clean for sunny finance

WITH the new tax year begun and winter behind us it’s time for spring cleaning - and not just around the house.

Taking an hour or two to review your finances can reap often surprising dividends, whether from identifying money wastage, spotting new ways to boost your income or improving the arrangements you already have in place.

Paul Lothian, director at Verus Financial Planning in Dundee, presents his ten tips for tidying your financial affairs.

1 CASH ISAS

You can contribute up to £5,640 to cash individual savings accounts (Isas) in the new tax year. Those with sufficient capital or surplus income should try and maximise their available tax-free Isa allowances. If you have already built up cash Isa funds, make sure you are getting a competitive rate of interest to maximise the tax benefit. Cash Isas can easily be transferred, so don’t let loyalty to your bank or building society (or your inertia, which these institutions exploit) cost you money. See comparison sites such as www.moneyfacts.co.uk and www.moneysupermarket.com for the best rates.

2 STOCKS AND SHARES ISA

The annual limit for stocks and shares Isas is £11,280 in the 2012/13 tax year, minus the amount you put into a cash Isa. Long-term investments should be made as tax-efficient as possible and this means maximising the use of stocks and shares Isa allowances. For those with sufficient capital/ income, financial advisers generally advocate foregoing cash Isa subscriptions in favour of maximising the stocks and shares Isa allowance. This is because the potential returns (and therefore the tax savings) are greater in stocks and shares. Remember too that cash a Isa can be converted/ transferred into a Stocks and Shares Isa (but not visa-versa).

3 PENSIONS

Have you reviewed your retirement savings lately? Do you know whether they will be sufficient to meet your retirement objectives? Check out www.moneyadviceservice.org.uk/yourmoney/interactive/pension_calculator.aspx for a handy calculator. Also, where are your pension funds invested? Is your money languishing in a poor-performing managed or with-profits fund? Look into the options under your plan. Find out what you are paying in charges.

4 MORTGAGE

If you are not locked in to your current mortgage deal by redemption penalties, see how much you could save by re-mortgaging. Those whose mortgages are less than 75 per cent of their property’s value are most likely to be able to make savings. Many lenders offer re-mortgage products with no fees. Consider overpaying on your mortgage in order to repay the loan ahead of schedule. Over-payments can generally be taken back as payment holidays in the future if necessary.

5 LIFE COVER

Is your current level of catastrophe protection adequate? Are you receiving good value for money from your current policies? www.invidion.co.uk/life_insurance_calculator.php will help you answer the first of these questions and www.confused.com/campaign/life-insurance will help with the latter. Remember, don’t cancel any existing policies until the new cover is in force.

6 INVESTMENTS

Do you have an investment strategy, or are your investments a hotch-potch of seemingly random shares, funds and products? Do you understand what risks your capital is exposed to or how your funds have performed relative to the market and their peers? www.morningstar.co.uk offers an independent fund rating service and also maintains fund performance statistics.

7 UNSECURED BORROWING

If you have credit-card or overdraft balances, make sure you are not paying more in interest and other charges than necessary. Average personal-loan interest rates have risen sharply since the credit crunch, so it may be difficult for all but those with the best credit scores to effect any savings on unsecured borrowings. Zero per cent interest deals on credit-card balance transfers remain available but they tend to come with an initial fee nowadays, typically of 3 per cent of the transferred amount.

8 CAR AND HOME INSURANCE

Despite almost universally rising premiums, this remains a fiercely competitive market. Increasingly, significant savings can be made by handing your motor and household insurance to a single provider. Don’t wait until your renewal date looms (when time pressures may mean that you don’t manage to shop around effectively). Visit one of the many comparison sites now to get an indicative quote. You can then save your details to enable a quick re-quote when the renewal dates comes around. There are significant differences in cover offered, so make sure you are comparing like with like.

9 UTILITIES

It’s quite a daunting prospect to change suppliers of our gas, electricity, broadband or phone. However, with comparison sites such as www.uswitch.com help is at hand. Also, before switching, contact your current provider to tell them you are leaving – they may well try to retain your custom by offering to sweeten their terms.

10 HOUSEHOLD BUDGET

Do you know how much you spend and on what? Most people would be surprised (and even shocked) if they took the time to note down in detail exactly what they have coming in and where the money goes. Once you’ve done this you can identify areas for improvement and changes.