The value of a financial healthcheck
While you have the support of your Old Mill financial planner, with the financial landscape having changed quite significantly in the last year, we thought you may find it helpful to have some suggestions of where family and friends could make savings for 2023. If family or friends would welcome a discussion regarding their own finances, we would always be delighted to help.
8th December 2022
Neil Rushton See profile
There is a big difference between the highest and lowest savings rates. You will see in the article below, we give an indication of the rates that are now available. With the recent rise in interest rates, it is definitely worthwhile now shopping around to secure a better return.
’A penny saved is a penny earned’ is well worth remembering when it comes to looking at the cost of financial products. There continue to be huge numbers of outdated and expensive products held by people who are often completely unaware that far better and often lower cost alternatives exist.
While products are offered with mortgages, or in conjunction with other loans, they may not be competitively priced and it may be possible to get the same cover for a lower premium.
In the last ten years or so, the cost of many pension and investment products has fallen. Where old style plans are held, reducing costs and avoiding poorly performing investment funds can significantly increase the amount that can be accumulated.
There can sometimes be valuable guarantees attached to these old plans and understanding the value of these benefits can be extremely important as a cheaper product is not always a better product. It is therefore important advice is sought before making any changes.
If you know of family or friends who may be holding such products and would welcome a ‘financial healthcheck’ to look at the cost and suitability of their present arrangements, we would be delighted to help. Some large investment houses can charge circa 2.5% a year or more for investment funds and product costs, while suitable clients at Old Mill incur significantly lower costs.
For business owners, pensions can be valuable tools that not only provide for retirement but also can be used more flexibly in the business by being able to lend money to the business or even to acquire the business premises in certain circumstances. Old Mill are uniquely placed to advise on the use of pension funds by business owners through our specialist Pensions consultancy. If you would like to understand more on how your pension can work more effectively for you and your business, please speak to your usual Old Mill financial planner in the first instance.
With changes to Capital Gains Tax (CGT) and Dividend allowances from next year, it may be worthwhile for those who do not have a Financial Planner to seek a review of existing investments to ensure that they remain suitable and tax efficient in the new tax climate.
The Autumn Statement extended many ‘stealth taxes’ – where the rate at which tax is paid or higher rates of tax start is frozen. This means over time, as income goes up, the amount of tax also increases. A stark example of this is the Inheritance Tax nil rate band which has been frozen at £325,000 since 2009 and this will continue until 2028. If the nil rate band had increased by inflation it would have risen to over £473,000 by October 2022*. The stealth Inheritance Tax (IHT) on this frozen allowance is over £59,000 (£473,000 – £325,000 x 40% IHT). Even if you have considered inheritance planning in the past, changing circumstances, asset prices and changing legislation may make the new year a good time to revisit your succession planning arrangements.
*Source: Bank of England Inflation Calculator – Consumer Price Index