Did You Know - New Year 2009

New Year’s Savings Resolutions 2009

Many people are concerned about what 2009 holds and how the effects of the current economic climate will affect them. Most people have been affected, whether they be savers (or borrowers), young or old alike.

With some careful financial planning in early 2009, the potential to make improvements to your savings strategy may be available.

Listed below are some ideas to help with your New Year’s Savings Financial Planning:

  1. Shop around for savings rates. Many have found that their interest returns have fallen over 2008. There are still savings rates available in excess of 5.00% AER gross (December 2008) and with some shopping around, these can help to maintain income from savings. www.fsa.gov.uk/tables
  2. Don’t forget that the maximum protection that can be afforded to each individual saver is £50,000 (£100,000 for joint accounts) under the Deposit Protection Fund scheme. Dependant on the total level of your savings, Churchouse Financial Planning Limited can help you co-ordinate your savings to ensure that you try to maximise the protection of this cover. Some deposit providers are part of a larger marketing group and care needs to be taken not to exceed the protection available within one group. (click here to see a list of companies covered by the UK deposit protection scheme). €100,000 is covered for international accounts.
  3. There are alternatives to deposit savings which offer high levels of security. The first example is Premium Bonds. Premium Bonds allow for the security of the capital invested whilst providing the potential of winnings/tax free income after the first calendar month of investment. The maximum holding is £30,000 per person and is invested with the Government. There is no maximum time for maintaining the holding. If you prefer, you can also save monthly.
  4. The second example (and alternative) is to buy Gilts, Government bonds. Gilts are available over the shorter (under 5 years), medium (5-15 years) or longer term (15 years +). As an example, medium dated Gilts, which will currently provide returns around 3.0-4.00% pa gross (dependant on the gilt selected as some are trading over par/December 2008) but have the security of being low risk investments. These can be bought directly or via a stockbroker and we can help you either way. The latter would have higher costs, but has the potential of securing a known rate if this is attractive. Interest returns are paid gross, but are taxable and any tax return would need to reflect this.
  5. When building your savings portfolio, it is worth using your Cash ISA allowance, where available. The new limit in this tax year is £3,600 and this offers the potential of tax free return on your savings interest. This allowance is available each tax year, starting 06th April. Therefore, it is possible to use this year’s allowance now (if unused) and next year’s tax allowance from 06th April 2009.
  6. With regards to the level of savings that should be maintained, we would normally recommend that an individual maintains around 3-6 months income in cash type holdings (deposit account with instant access) to meet any short term liabilities. This could be for unforeseen emergencies, such as the loss of employment or the need to replace a car. We refer to this as an emergency deposit fund.
  7. Finally, for those who have a more adventurous attitude to investment risk, you can consider investing into Stocks & Shares. This is not an alternative to deposit savings, but an addition once you have sufficient savings for your needs. This can be achieved by investing into Unit Trusts/OEICs or Stocks & Shares. As an example, each individual usually has an ISA allowance of £7,200 per annum (2009/2010) available to them in the tax year and this can be used to invest into equity type investments.  This is again a tax efficient option for future saving.

In the current economic climate financial planning in 2009 will be very important. Collating a strategy for your savings may become vital in maintaining an appropriate income stream for your needs and aspirations.  

UPDATE 2009

The Chancellor, Alistair Darling, has announced in his April Budget 2009, that the ISA allowance will increase to £10,200 for individuals from 2010/2011. For individuals over the age of 50, the increase applies in this tax year 2009/2010 from the 6th October 2009.

Speak to Churchouse Financial Planning Limited on 01483 578800.

Please note this information is for guidance only and is not intended as personalised investment advice. We recommend that you seek further financial planning advice from an independent financial adviser before proceeding further. Churchouse Financial Planning Limited is Authorised and Regulated by the Financial Services Authority. The Financial Services Authority does not regulate taxation advice.

 

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