New Year’s Resolutions 2011, Some Financial Planning ideas

With the memory of Christmas still fresh in our minds, the New Year is nearly upon us and many of us are making plans as to what new challenges we would like to achieve in 2011. From a financial perspective, 2010 was a tricky year for many businesses and individuals and there are likely to be a few more challenges in 2011 as the year unfolds.

I have penned a few notes in this blog to allow you to consider some of financial issues you may want to consider when looking at your financial planning over the next 12 months. This is not an exhaustive list because each of us will have different circumstances. You will already know that VAT is going to rise from 17.5% to 20.0% from the 04^th January and this seems certain, bar any last minute change in Government policy. What is not certain is what will happen to Bank of England base rates over the coming period. With the base rate having reached a historic low of 0.5% some 21 months ago (March 2009) many are predicting that this will rise in the spring of 2011 and this may have an affect on savers and those with mortgages, loans and credit card debts.

Some financial planning ideas for your 2011 Resolutions:

1. VAT increase: If you are planning a purchase of a large capital item, such as a car or caravan and are ready to buy, you might want to try and beat the VAT increase of 2.5% from 04^th January. This is not a large increase, but on larger sums, it may make a significant difference.

2. Review your borrowing costs and conditions: With the possibility of borrowing costs increasing in 2011, check you borrowing costs and charges to see if they offer value and if they need to be changed. Look out for redemption charges and set up fees if you are thinking of switching providers.

If you are in a position to pay down debt, then have a look at this to keep your costs down.

3. Check your deposit savings rates: Some reasonable savings rates are still available from many institutions, although you do have to hunt around. With the deposit protection/compensation limit increasing to £85,000 from £50,000 from 31/12/2010 (announced by the FSA in December 2010) those with larger savings amounts should find it easier to protect their savings. One of the most impartial comparison sites is from the FSA at www.fsa.gov.uk/tables.

It is still prudent for individuals to hold 3-6 months income in readily accessible savings to protect against unforeseen events as an emergency deposit fund.

4. Make a Will: Always has to be on this list, however, make a Will if you have not already done so. You may not think that you have much to leave, but making it easy for your loved ones with a simple Will is always worthwhile. I would recommend that you use a professional solicitor to achieve this. If your budget does not allow this, then think about a Will Kit from any good stationers, cost about £15-£20.00.

5. Pension changes: Every year we talk about this year’s proposed changes to the way you can save for your retirement, and this year is no different. The amount you can save into a pension is changing in the next tax year to try and simplify the rules for many investors. This may mean that for some who prefer to save a lot into their pensions, they will be restricted to £50,000 in the tax year. Also, the age to which you have to buy an annuity has already increased to 77 from 75 and for those with pension incomes above £20,000 per annum, you may not have to buy an annuity at all. With these and other changes in mind, review your retirement savings strategy both now and regularly in the future.

6. Use your tax allowances: You have tax allowances available each tax year that are lost if not used within 06 April-05^th April (The tax year). A simplified example list is noted below.

ISA (Individual Savings Account):

• Cash ISA maximum £5,100
• Stocks and Shares ISA £10,200

Capital Gains Tax(CGT)

• £10,100 tax free gain allowed in this tax year

Annual Gift Allowance

• £3,000 can be gifted away by an individual in a tax year and the gift falls outside their estate for inheritance tax (IHT) purposes.
• If they did not use last year’s allowance of £3,000, they can go back 1 year, making a total possible gift of £6,000 for both years.

7. Protecting the family: When is the last time you checked your life assurance protection and your protection in the event of ill health and inability to work because of this? For many, these subjects may come low on the priority list, but they can be vital in protecting the wellbeing of the family if something goes seriously wrong.

8. Monthly budgeting: Many of us budget every month to ensure that our income covers the costs of our outgoings, hopefully with some left over to enjoy. If you have not looked at this recently, then now is a good time to look at your bank statements and payslips to make sure that everything is in order and is balancing. If not, make sure that you make changes to balance the books.

As noted before, this is not an exhaustive list because we are all different and therefore, this article should not be seen or used as individual advice. Seek Independent Financial Advice (IFA) for your circumstances.

Churchouse Financial Planning Limited wishes you a happy and prosperous New Year!

Further details of our service are available at our website, www.churchouse.com

Keith Churchouse, Chartered Financial Planner

ISO22222 Certified Financial Planner

Director of Churchouse Financial Planning Limited, Guildford, Surrey. 01483 578800

Churchouse Financial Planning Limited is Authorised and Regulated by the Financial Services Authority