New financial year: the resolutions worth keeping
As we head into the new financial new year, with no sign of spring in sight, it is worthwhile spending some time indoors getting your financial house in order.
Getting into good habits like reviewing investment portfolios, regular saving and pension planning can make a big difference to the amount of wealth you acquire in the end.
Here are our top tips to help maximise the available tax relief, cut costs and improve overall investment performance.
Plan your contributions
A vast majority of investors leave contributing to their ISA and SIPP until the end of the tax year, but choosing to invest more at the start could add thousands of pounds to your savings pots.
According to advisers at AJ Bell, a person who invests their £11,520 ISA allowance at the beginning of each tax year into a Sippdeal ISA for the next 15 years could accrue £284,598, assuming a 6% growth rate and a 1% annual investment charge.
However, if the same person contributed the same amount over the same period but at the end of the tax year, they might only have £256,529.
Consider your investment strategy
Don’t just dump your hard earned money into an investment and forget all about it. Reviewing your portfolio regularly can cut costs and increase returns, so it is worth taking a stock of how your investments are doing throughout the year.
Fine-tuning your portfolio could see significant benefits – research consistently shows that the majority of investment returns come from asset allocation.
The new tax year has brought with it a reduction in pension tax relief for high earners, but you can still benefit from the 45% tax relief.
The basic tax advantages of pension saving should be valued by all investors – every £1 saved into a pension costs a basic rate taxpayer only 80p and the net cost after all tax relief to a higher rate taxpayer is just 60p.
The Treasury is set to allow the six million savers with child trust funds transfer their money in to Junior ISAs.
By using a JISA, adults can save for a child and hopefully deliver stronger returns on their investment without eating into their own tax-free yearly savings allowance.
Figures from AJ Bell’s Sippdeal platform show that making an annual payment of £3,720 into a JISA from a child’s birth date until they are 18 could deliver a fund of more than £109,174 (assuming 6% annual growth and 1% annual charges).
Charges and fees
Remember that charges can heavily impact your investment returns.
Regularly reviewing how much your yearly charges and fees are could save you a packet. Keep an eye on special deals and when they may expire, and doing a little homework will also let you know if you are with the best provider in the market or not.