So, the time to start thinking about your financial future is here. Christmas and New Year are well and truly behind us and your finances don’t appear too healthy. While January and February may be months of financial frugality, you need to look at the bigger picture. Have you got any savings for the future? Have you even considered your pension options?
Here is where you should start.
Soon you may be automatically enrolled onto a workplace pension scheme through the Government’s new auto-enrolment initiative, but it also pays to look into your personal pension options, with SIPPs (self invested personal pensions) proving an attractive option. Where once these were thought to be pensions only for the super-rich, with a number of SIPP providers now offering low cost options it’s something worth investigating.
A SIPP pension is effectively a “do it yourself pension” scheme whereby you make all the decisions on how and where your pension pot is invested. These include stocks and shares, corporate bonds, and government bonds, amongst others. They actually have a much wider range of potential investments than a standard personal pension, so offer you the chance to really build a significant pot for retirement. As is the case with any investments, there is a chance the shares you choose will go down as well as up, so it does require you to be a bit savvy when it comes to choosing where to invest your money.
Did you neglect your savings in the final part of last year? It’s something many of us do, but with ISA just around the corner it’s time to move fast. Each financial year, you have a specific ISA allowance which you can both save and invest with significant benefits. For the tax year 2012-13 you have until early April to reach your allowance of £5,640 for a cash ISA and £11,280 for an investment ISA. If you have any spare funds, it’s time to make sure you put them to good use.
For many people a cash ISA is the perfect place to start as any interest you earn on your savings is tax free. Combined with potentially good rates of interest it offers a better option than a standard savings account. However, for a really inflation beating option a stocks and shares (or investment ISA) is the way to go as this enables you to invest your money (rather than simply gain interest) with significant tax benefits. Your allowance is also double that of a cash ISA, so the potential for greater returns is there. Again it requires you to be savvy with your investments, but it could well be worth it in the long run.