Business

Have you ever thought of having a ‘financial MOT'?

In many respects, our finances are like our car - they can well do with being fine-tuned
Gareth McKeown

I HAD the car looked at by a mechanic the other day, in preparation for the MOT.

He put in new brake pads, checked the suspension, and made sure the lights were perfect. The result? A pass with flying colours.

In many respects, our finances are like our car - they can well do with being fine-tuned to ensure they are running for optimum performance, and that the investments underlying products such as our personal pension are working as hard as they can.

However, while the law demands we regularly maintain and ensure top performance from our car, there's no such requirement for our money - it is left to us to maintain high performance from our finances.

A financial MOT can involve checking on what we have in place already, but also considering new ‘parts' we might like to put in place.

For instance, many people who have a personal pension regard it as a fixed entity that grows at its own speed, over which they have no control.

Far from it! Many of us are unaware that by working with a ‘financial mechanic' – in other words, an advisor – we can check to see that our pension fund is invested in a way that gets the best return for us.

The investment group Bestinvest tell us that 26 of the top funds in the UK, containing £6.4 billion, are badly underperforming, and have been doing so for three years. In fact, at times they fail to meet their targets by over 5 per cent. This is not the engine you want fuelling your pension - but your savings could well be invested in those funds. An adviser can transfer your savings into better performing funds very easily.

Half an hour with your financial advisor can tweak your investments so that by the time you retire you could have hundreds, even thousands more in the pot than you would have had. Not bad for half an hour's work?

Then there's the question of insurance. If you are a home owner, chances are you already have life insurance. But have you thought about critical illness insurance?

This can be particularly important if you have a family. If you are incapacitated by a severe and unexpected health setback, the loss of your health is bad enough – but the loss of your income can be devastating for everyone in your household.

And when you consider that one in three men and one in four women will have to give up work due to a critical illness at some point, and that Legal and General tell us the average age for this is just 47, then family protection against critical illness is clearly an advisable move.

Then, in terms of saving, you might look at opening an Individual Savings Account (Isa) if you have not done so already. Over 12.7m adults have now done so, to take advantage of the tax-free returns that the Isa offers.

The various Isas give you the option to save in cash, or in stocks and shares, and with the annual Isa allowance now at £20,000, there's never been a better time to do it.

These are just some of the many ways to boost your finances – but remember, if you don't call to see the mechanic, you could well miss out on your MOT!

:: Michael Kennedy is an independent financial adviser and pensions specialist, and can be contacted on 028 71886005 . Further information is on the Facebook page 'Kennedy Independent Financial Advice Ltd'.

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