A new broom doesn't always sweep clean . . .
THE year 2022 will certainly be remembered as a time of great change. We have a new prime minister in Downing Street, a new Chancellor next door to her, a new pensions minister and, of course, a new monarch in Buckingham Palace.
New brooms sweep clean, as they say, and Liz Truss has put together her new cabinet, with Kwasi Kwarteng as Chancellor and Alex Burghart stepping into Guy Opperman's shoes as the new pensions minister.
All of these are eminently qualified, but will they gel together as a unit? The International Monetary Fund (IMF) already have their doubts, and have slammed the government's latest tax moves as likely to cause greater inequality.
I am reminded of what a famous conductor once said about his equally famous symphony orchestra: “All of our players are soloists in their own right. It's when we get them playing together that we have the problems.”
Former pensions minister Steve Webb hit the nail on the head when he summed up the challenge they face: “A change of leadership offers a unique opportunity to reassess priorities – something which is urgently needed.”
Wise words, but words that don't apply just to the government, however. On a smaller scale, they apply to each of us.
In recent days the pound has been dragged through a red vale of tears in relation to the dollar. It hit a low of $1.033 last Monday, then recovered slightly, but the bottom line is: life will be getting even more expensive for most of us in the near future.
One of Guy Opperman's last acts as pensions minister was to inform MPs that around 12 million people are under-saving for their retirement. That amounts to 38 per cent of the nation's working age population, and proves that Steve Webb is right – it's time for us all to pay what they're now calling ‘pension attention'.
It would appear to be the perfect moment to take a general look at our finances, right across the board.
Here are our top tips for what our priorities might look like:
:: Regular readers will know that one subject dear to my heart is the wisdom of a regular pensions review. Last week we revealed that 31 of the investment funds where our pension savings are invested have missed their growth targets in each of the last three years. These funds hold a total of £10.7bn between them, and include three “megafunds” with over £1 billion in assets. If your money is in there, you are missing out on savings growth you otherwise could have had. A simple pension review can check where your money is invested, and if necessary switch it into better-performing funds. This will ensure your pension is growing as strongly as it can.
:: Another top tip would be to consider family protection insurances, if you haven't done so already. I refer principally to life insurance and critical illness insurance (CI). A good life policy will shelter your family from financial hardship, if the worst were to happen to you.
:: A good critical illness policy will offer them (and you) a financial safe haven, paid tax-free, if you have to give up work, and lose your income, due to a major illness such as cancer, stroke, heart attack, MS, or major surgery, among many others. One strategy favoured by many is to plan your cover to pay off the mortgage, thus removing one of your major outgoings if your earning power is impaired. Many of the UK's 200+ CI policies these days cover a whole range of illnesses and conditions, not just the main ones mentioned above, but policies and the application process can be complex. You have to understand what's covered and, equally importantly, what is not. That's where good financial advice comes in.
:: Our final top tip for today: make a will. A properly written and up-to-date will ensures that your wealth is passed on to your beneficiaries exactly as you would have liked. If you die without an up-to-date will in place, you die ‘intestate' and your wealth will be distributed according to the laws of intestacy, which may distribute it in a way that broadly, but not exactly reflects your wishes. The main function of a will is to manage your money, of course, but a will can do so much more. You can appoint guardians for your children under 18, for example, in case you and your spouse both suffer a tragic accident. You can also make provision for your pets to be cared for, or leave money to your favourite charity, whether to aid animals, or perhaps a third world cause. A will consists of many parts, and has many purposes.
Space here is limited, but we have plenty of other useful tips. Why not give us a ring to arrange a friendly chat?
Perhaps it's time to pick up that new broom, and tidy up your finances!
:: Michael Kennedy is an independent financial adviser and pensions specialist and can be contacted on 028 71886005. Further information on Facebook at Kennedy Independent Financial Advice or on at www.mkennedyfinancial.com