Money Matters

Money Matters

Have you thought about a Financial MOT?

A Financial MOT is a periodic review of your financial situation to ensure that your finances are in good shape 

Money Matters

A Financial MOT can help you in several ways. Firstly, a financial MOT can help you to protect what matters most. You may have insurance policies in place to help you and your family cope with the financial upheaval that illness or death can bring. Reviewing these policies regularly is important. If you’ve had a pay rise, for example, you might need to increase the amount of income you’re insuring. And if you’ve increased your mortgage or made overpayments, you might need to increase or decrease your life insurance cover accordingly. Reviewing your protection will help to ensure your family is protected should the worst happen to you, and that you’re not overpaying for any types of cover.

Secondly, a financial MOT can help you to check your retirement savings are on track. A financial MOT will help you understand whether you’re on track for a comfortable and fulfilling retirement. If it looks like you’re facing a shortfall in your savings, this could be a good time to top up your pension. Using your pension annual allowance each year will help you maximise the amount of pension tax relief available to you. The combination of tax relief and compounded investment returns over time could make a big difference to the size of your pension at retirement. Reviewing your pensions will also help you understand whether you’re at risk of breaching the lifetime allowance, a financial adviser can help you understand whether you’re nearing the lifetime allowance and, if so, what steps to take.

Thirdly, it can help you to rebalance your portfolio. Over time, some of your investments may have underperformed, while others may have done well. A financial MOT can help you to identify these investments and make any necessary adjustments to your portfolio. This can help to ensure that your portfolio still reflects your attitude to risk, your time horizon, and your goals.

Finally, a financial MOT can help you to invest more tax efficiently. There are a whole host of other tax reliefs and allowances that could help you invest more tax efficiently. For example, you can invest up to a maximum of £20,000 a year in ISAs to benefit from tax-efficient income and growth. Meanwhile, Junior ISAs let you invest up to a maximum of £9,000 a year per child; this could grow into a significant pot of money over time, perhaps helping your child pay for university or a deposit on their first home.

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