In the journey of life there are many bumps along the road. When we are faced with these adversities and life changing moments, expert advice could make a world of difference.
This article will briefly outline five factors that may indicate you need to consider taking financial advice.
To be clear, this article itself is not advice and you should seek advice if you are not sure whether the following factors are relevant to your circumstances.
You have no retirement plan
Retirement age here in the UK is 55, so this is the earliest you can draw funds from your pension. This is due to increase to age 57 in 2028. As the population is ageing, I am finding that more and more people have given little thought to their retirement. Small decisions such as how and when to access your pension, could have a significant impact on the income you receive for the rest of your life. To ensure that this is a positive impact, seeking advice is the key.
An advisor can understand your circumstances, needs and options, and devise the perfect plan to cement your financial future. Financial advice can ensure that your pension is on track to pay you the money you need when you reach retirement age.
You have or will be inheriting a lump sum
We refer to a large amount of funds as a lump sum and the majority of people will receive some inheritance at some stage in their life.
It can be very daunting when receiving a lump sum as there are endless possibilities to what it can be used for. One way to narrow down the options, is to consider your long-term goals. Whatever your goals may be, it is instrumental that you get your money working as hard as it can do, in a tax efficient manner.
An advisor can not only build a well-balanced portfolio whilst considering your circumstances and goals, but they can also make sure you’re making the most of your tax allowances and reliefs. The latter part is crucial as less tax means more money in your pocket.
It is possible to choose your own investments, but would you opt to fix your own boiler if it broke? Leaving it to a professional is usually in your best interests. Tax rules are always changing, and having an advisor could save you thousands of pounds by staying on top of the changes.
Please remember that with any investment, values can go up as well as down. So, there is a chance you could get back less money than you put in.
Estate Planning
More and more of us are facing the problem of estate planning and this could really leave your loved ones in a struggle when you pass away.
By taking both financial and legal advice, you can ensure that the right amount of money goes into the right hands at the right time. Taking advice in these areas will make things easier for you and for your loved ones.
Inheritance tax (IHT) planning is a major issue an advisor can assist you with. IHT is paid on assets that you pass down to your family or friends and its currently 40% on the value of a person’s estate above £325,000, or £650,000 for a couple. There is also an additional allowance of up to £175,000 (up to £350,000 for a couple) if you pass on your family home to direct descendants*.
A person’s estate can include property, monetary funds, investments, and any other possessions one may have.
If you are unsure on the amount of IHT you may need to pay, advice in this area will be invaluable.
You have multiple and complicated pension plans
Having several pensions pots is very common, as most people will have multiple jobs throughout their life. It can be difficult to manage and plan retirement when you have different pension pots. It’s often easier and clearer once you’ve consolidated your pensions.
In plain language, consolidating your pensions means that you would put all the pots you have accumulated into one pot however you shouldn’t rush this process.
Not only can it be hard to know where to start at times, you then must decide where to invest your pension and what you should invest the funds in. There can also be several hidden benefits or excessive charges that may be applied which can have a large impact on your pension pot.
This is where having an advisor can be the difference between you being able to retire at your intended retirement age or you having to work past that. Having an advisor will save you a lot of time and stress since they will be researching and comparing your pensions and begin creating a plan on how you can reach your goals.
You’re over the age of 50 and your pension is approaching or over £1m
The lifetime allowance is a cap on the size of your pension pot, and it is currently £1,073,100. If your pension pot grows above this figure you may be liable for the lifetime allowance tax charge which can be 25% or 55% on the excess funds.
For those with complex cases, there are many lesser-known tax-saving strategies available. Rules and benefits are dependent on each individual circumstance, and they are always changing. An advisor will stay up to date with rule changes and ensure you do not make any costly mistakes.
If your pension pot is approaching the lifetime allowance amount or if you think your pot may come close, you should seek advice because it could cost you if you don’t.
Next Steps
These reasons are only a handful of factors that may suggest you may need financial advice, there are many other reasons why financial advice can be valuable. If you believe you could benefit from advice, you are welcome to get in touch and I would be happy to help.
*Please do not rely on these figures for your own calculations, seek professional advice