1. Switching pensions
As we move through different jobs we will accumulate several different pensions and it can make sense to consolidate them into one pot to make them easier to keep track of. However, although this can be a good idea, it may leave you open to other issues. Examples of these could be exit penalties or losing valuable benefits.
2. Inheritance tax (IHT) planning and gifting
Wanting to financially support family members is understandable. This could entail lending money for a property deposit or helping a loved one through a difficult financial time. However, gifting money away can lead to difficulties. For instance you could give a lump sum to a family member at a time when it feels affordable only to fall on financial difficulties later on. Similarly you might fall foul of IHT gifting rules and leave your family with a substantial bill. An adviser can help you document your gifting history to ensure you stay within gifting limits and also make sure you are not leaving yourself short of money.
It is always a good idea to take legal advice before making a will to ensure your assets are distributed in a way that accords to your wishes on death. However, it is also important to take financial advice as there may be simple steps that can be taken to minimise IHT payable. Writing life insurance policies into trust also means payment to beneficiaries will likely be quicker as it doesn’t need to go through probate.
Speaking to an adviser is important before making any investments. They can assess whether they meet your appetite for risk, are appropriately priced and sufficiently diverse. They can also help protect you against scammers.
5. Scam prevention
Many investment scams involve someone being contacted out of the blue by someone offering access to a high performing investment. The victim is then pressured into transferring money quickly to the scammer who then disappears. Speaking to an adviser when you have been approached with an investment opportunity will help you understand if the opportunity is right for you. They can also help if you think you may have been scammed.
Alex Binnington, a financial adviser at Pareto Financial Planning Ltd. was recently contacted by a client who was concerned he had been scammed into transferring his pension to a fraudster.
“This particular client was extremely vulnerable and after receiving emails from a scammer he was persuaded to transfer money from his pension. The next day he contacted me concerned about what he had done. I was able to work with Royal London to quickly stop the transfer and the client suffered no financial loss.”
Clare Moffat, head of intermediary development and technical at Royal London, said:
“Our research2 shows people who speak to a financial adviser regularly feel more in control of their finances with 75% saying they feel more financially secure and stable. Others feel taking advice has helped them understand key aspects more with non-advised customers three times more likely to say they wouldn’t know where to start with things like preparing for retirement or taking out life insurance compared to their advised peers. However, many others do not seek advice because of the perceived cost without realising there are hidden pitfalls that can end up costing them and their loved ones money. Speaking to an adviser can help people navigate these areas and other financial risks successfully.”