Seven tips for reviewing your investments at the mid point of the tax year.

4th October 2013

Are you going to leave all your financial planning until the end of the tax year because most financial experts suggest you give yourself a lot more time to take stock and then take any action necessary.

Fund manager and platform Fidelity has put together a list of seven things to review about your investments at the mid point of the tax year which we bring to you below. Looking at the list, we can see the firm clearly believes it is sure of its ground – for example when it comes to the costs of its trackers. But altogether it strikes Mindful Money as quite a useful list.

1)     Make the most of your tax allowances. “When putting money away to achieve your financial goals it is important that you keep as much of it as you can by protecting it from the tax man. Investments may produce an income and increase in value, both of which could make you liable for tax if you exceed your annual tax-free allowances. However, if these investments are held inside an ISA, a tax-efficient wrapper, there is no tax on any of the income you receive and no tax due on any capital gains. An ISA allows you to save and invest your money without worrying about tax or even having to tell the tax man about your investments.”

2)     Invest with the right fund supermarket. “When deciding which provider to use it is important to ensure they offer a wide range of funds. Not all do. Fund supermarkets also offer varying degrees of tools, guidance and insight to help investors assess which asset classes and types of funds to invest in. Even simple things like being able to pick up the phone to speak to somebody about your investments can make saving easier and more stress free.”

3)     Don’t overpay for your investments. “Cost and value are important. Make sure that if you are paying for active investment management then that is what you are getting. If you prefer to invest in a passively-managed tracker fund ensure high active-management fees aren’t eating into your investment. Many investors pay over the odds for passive investments because they are unaware that similar products are available at a much better price. highlights the amount of money being wasted by savers when they are not in full possession of the facts.”

4)     Put money away each month. “Saving small amounts on a regular basis can help to combat the natural tendency of investors to sell when markets are low and buy when they are high.  It is hard to establish the best time to buy and sell shares and funds so investors who try to time their entry and exit are likely to mis-time their moves in and out of the market. One way investors can avoid the temptation to time the markets is to set up a monthly savings plan – you can invest from £50 a month into any fund with Fidelity’s fund supermarket.  Our data shows that investing £1000 in the FTSE All Share index 15 years ago could have returned £2,098 but if investors tried to time the market and missed the best 40 days the same investment would only be worth £380 today*”

5)     Define your retirement goals. “Research conducted for Fidelity by Opinium** shows a large number of people in the UK have no idea how much they have saved for retirement or what they might have to live on once retired.  The survey shows 42% of the UK population doesn’t know how much income their current retirement savings could provide while around 1 in 4 people (28%) who have a pension provision don’t even know the size of their retirement pot.  Pre-retirees expect their retirement savings (which they estimate at around £13,972 a year) will fall far short of the £21,734 they believe they will need.  With a £7,762 a year short-fall between desired and anticipated annual retirement income, now is the time to review your retirement plans.”

6)     Consider putting all your pensions in one place. “Having several pension pots can make it difficult to keep track of savings and lead to returns being lower than they should be. To make the most of their retirement savings, investors should consider consolidating old or multiple pensions into a single pot. Having all the information in one place allows savers to monitor and manage their pension more easily.

7)     Make sure your child’s savings are tax efficient. “Junior ISAs bring the same tax benefits to children as those available to adults. As such, they are a great way for friends and family to save for a child’s future needs. A Junior ISA could help them put money aside for a deposit for a first home or a wedding.  Fidelity calculates that by investing £84 a month for 18 years parents can achieve a lump sum of £25,000 which would cover the cost of an average wedding*** with some left over. Even just £50 a month over the same period could build up a fund worth nearly £15,000 which would make a decent contribution to a house deposit****. Under current rules you can invest up to £310 a month into a Junior ISA.”

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