2024 is already starting to race past. Christmas and New Year are beginning to feel like a dim and distant memory, and there is a definite sniff of spring in the air.
Time does pass quickly, and there are so many things that we fully intend to do but just never get around to. Especially if those things don’t seem particularly urgent.
But you never know what’s around the corner, and it really is worth taking time now to do a few simple things that could make all the difference to your family’s future finances. It’s hard to think about the “what ifs”, but reassuring to know that plans are in place to protect our family if any worst case scenarios should unfortunately happen.
In this article we look at five top tips to help you safeguard your family’s future finances. These tips revolve around:
It is never too early to start planning your pension. There are three types of pension that you need to be aware of:
The current state pension age in the UK is 66, but this will rise to 67 by the end of 2028 for all those born after April 1960. The current state pension is a maximum of £203.85 per week, though the actual amount you get will depend on various factors, including the amount of National Insurance you have paid.
You can check your state pension forecast on the Gov UK website. You may also have the opportunity to fill any gaps in previous year’s National Insurance payments to maximise the amount of state pension you will get.
You may also have an employer’s pension scheme – an occupational pension – if you earn more than £10,000 per year and are aged between 22 and state pension age. You should be automatically enrolled into it but if not, check with your employer what the situation is.
Both you and your employer will contribute money into your pension, and you will also usually have the option of making extra payments into it. This is well worth doing if you can, as not only does it increase the value of your pension but you will also pay less tax, as pension contributions are taken out of your salary before tax.
Whether or not you have an occupational pension scheme, you can also take out a private pension. One of the advantages of doing this is that you can access a private pension earlier than state pension age, and can withdraw up to 25% of it tax free. So if you have plans for early retirement, starting a private pension now could be really helpful later on.
You can make payments into a private pension by lump sum and/or on a regular basis. And just like the occupational pension scheme, private pension payments are usually eligible for tax relief.
Some employers include life insurance as a benefit and, if this is the case, it’s worth looking through the details carefully to see what is and is not included. And if you don’t have life insurance, perhaps consider taking out a policy suitable for the needs of you and your family.
A life insurance policy could pay out either a lump sum or regular payments to your family if you were to die, and so provide them with financial support when they most need it. There are different types of life insurance, so you may want to get some financial advice about it. For example, some life insurance includes critical illness cover, that would provide a tax-free payment if you were to be diagnosed with a major illness and support your family finances while you are having medical treatment.
Another aspect of safeguarding your family’s future finances is to set up Lasting Power of Attorney, or LPA. This authorises one or more other trusted people (known as “attorneys”) to make significant decisions for you and act on your behalf if you become unable to do so yourself.
There are two types of LPA. One covers property and financial affairs, and the other covers health and welfare. You can decide whether to make one type or both:
This authorises your attorney(s) to make decisions about money and property for you, such as managing your accounts, paying bills, collecting pension or benefits, or selling your home.
This authorises your attorney(s) to make decisions about your medical and personal care, including where is the best place to live, what care you need to receive, and whether or not you should undertake life-sustaining treatment.
To set up either type of LPA you can do this yourself by completing forms available from Gov UK, then registering them with the Office of the Public Guardian. The cost is £82 to register each type of LPA and the process can take up to 20 weeks. Another option is to get a solicitor to do it for you, bearing in mind they will charge for their services as well as the £82 LPA fee.
Making a will is something that so many of us intend to do but don’t. In fact, around half UK adults do not have a will. But it’s really important to do so.
If you were to die “intestate” – i.e. without making a will – this can lead to all kinds of complications for your family. For example, your estate (which includes your home and any money, savings or other assets) would be legally allocated to your surviving relatives starting with your spouse/civil partner and then your children. But nothing would go either to a partner who is not a spouse/civil partner or to any stepchildren.
It is definitely worth taking the time to make a will so that your intentions are clear and there are no family disputes. It will also speed up the process of getting money into the hands of your family members who need it.
You either write a will yourself, or have a solicitor or will writer do it for you. Either way it needs to be signed by you and two witnesses, and then kept in a safe place such as your home, with a solicitor or at a bank. If you have nowhere safe to keep it, you can store it at HM Courts & Tribunals Service (HMCTS). Remember to let your nearest and dearest know where the will is kept, to avoid any undue stress should they need to find it.
Another consideration to safeguard your family’s future finances is to set up a funeral plan. Not only does this set aside money to pay for your funeral but it also provides reassurance to your family about the kind of funeral you would want, and helps to reduce the stress of planning everything.
Funerals can be expensive, and a pre-paid funeral means that your family does not have to scrabble around for money to pay for everything at what is already a difficult and stressful time. Again, just remember to let them know where the details are, so that both you and they have the reassurance of knowing that everything is taken care of.
We hope that this article has helped you to look into the future and start taking action to safeguard your family’s future finances.
In the meantime, if you and your family have any urgent financial needs, remember that Munzee offers 24 month loans that may be able to help.
Check back here soon for more lifestyle and financial tips from Munzee Loans.
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