The key to being prepared for any household emergency is having the right tools to hand – and, as with any good system, a toolkit needs regular ‘tweaking’ to keep it well-stocked and up to date. Your ‘financial toolkit’ is no different. Your mortgage, pension and personal insurances need regular reviews. Don’t fall into the trap of leaving your financial plan under the stairs, gathering dust with those old tins of paint and that old carpet!
Here are a few thoughts on your financial products, that could actually save you money.
Mortgages: the mortgage market is changing every week, and while most of us hold only one mortgage, we still have access to thousands of mortgage deals. With an independent financial adviser who can take a ‘whole-of-market’ approach and trawl through all the mortgages available, it is highly likely that looking at your existing arrangement could result in a better – and cheaper – mortgage deal.
Pensions: Some people complain about the way their pension is performing. We have news for you – pensions don’t ‘perform’!
A pension is a ‘wrapper’ that provides a tax-free investment in a group of underlying investment funds. It’s the investment funds, not the pension, that are performing – or not performing – for you. By overhauling your pension from time to time, you can ensure that your investment isn’t running into the sand. Remember – with an immediate 20% in tax relief on contributions, there’s no other savings product that even comes close to your pension. Did you know – during the lifetime of the average pension, every £1 invested in the early years can turn into £28 for you!!* Your pension is the taxman at his most generous.
Insurances: Some you have, some you don’t, and some you don’t need. Still, it does no harm to be aware of the options available.
Life insurance: alongside home contents insurance, this is the most familiar insurance product. Life cover pays out to your beneficiaries when you die, to ensure they do not suffer financial hardship from the loss of your income. It can also be used to clear a mortgage, or to meet the anticipated costs associated with Inheritance Tax when transferring your wealth to your children.
Critical Illness Insurance: pays out a lump sum if you fall victim to a list of defined negative health events, such as heart attack, stroke, or cancer. This insurance is perfect for protecting yourself and your family against loss of income if you are rendered unable to work due to health problems – and, considering that one in four of us are, before retirement, it’s a good insurance to have.
Income Protection Insurance: provides a replacement income when you are struck down by ill-health, and pays monthly, unlike critical illness with its lump-sum payout. Various types of income protection insurance are available: some pay for just one or two years, others (known as ‘permanent health insurance’) can pay you up until you retire. A popular but not inexpensive option for the self-employed in particular.
Accident, Sickness and Unemployment Insurance (ASU): this is the only insurance that protects you against losing your job. It provides regular payouts that will assist in paying the bills while you are unemployed. You are also covered if you must stop work due to a workplace accident, or general ill-health. Often used to cover mortgage repayments, in which case it is also known as Mortgage Payment Protection Insurance (MPPI).
 *Source: Hargreaves Lansdown
