It’s official: the UK fell into recession in the second quarter of 2020 after the Office for National Statistics reported the second consecutive quarterly fall in GDP (gross domestic product) - that’s the sum of the value of all goods and services produced in the economy.
It is the first time the UK has been in recession since the dark days of the financial crisis. Back then, the economy shrank by no more than 2.1% per cent in a quarter. In the second quarter of this year, it contracted by 20.4% — that’s a record, but not one which anyone will be celebrating.
In these financially uncertain times, a lot of people will be experiencing salary cuts or even dealing with the prospect of redundancy. If you have been affected in some way by recent events you can still take steps to secure your future.
Here are a few ways you can give yourself - and your family - a financial boost in later life.
1. Your pension
Remember that even if you leave your employer, any retirement savings you have built up in your pension plan is still yours. You don’t lose these savings, so don’t neglect them.
If you’re able to continue contributing to your pension, you’ll benefit from a 20% government uplift on contributions in the form of tax relief - for every £80 you pay in, £100 is invested.
It could be even more if you are a higher rate taxpayer. This tax relief applies to all contributions up to £40,000 every year.
2. Your retirement date
We all want to retire as soon as we can, but have you considered the potential benefits of retiring later than planned?
Working on for a few more years means more contributions from you and your employer going into your pension savings. There’s also the benefit of government added tax relief on those contributions. When you consider all of this, plus the investment growth extra years of investing could bring, delaying retirement for a while could mean a more financially comfortable life after work.
3. Your beneficiaries
If the worst were to happen, and you died before taking your pension benefits, you’d want to make sure that your loved ones were looked after financially. By completing and keeping your Expression of Wish form up to date, any unused retirement savings can be paid to them quickly and efficiently.
The form allows you to nominate who to pay your retirement savings to after you pass away, and if you die before age 75 your beneficiaries would receive the money without having to pay a penny of tax on it. It takes just five minutes to make sure your loved ones are looked after for years to come.
Log into PlanViewer or speak with your employer to find out how to nominate or update your beneficiaries.
4. Your other investment options
If you still have money available to invest, consider investing in an ISA. You can currently invest up to £20,000 in these tax efficient accounts. If you have children, they can have a Junior ISA (or JISA for short) which you can invest up to £9,000 in. Just remember that the money will be locked away until they reach age 18, where the investments move over to them.
Both ISAs and JISAs are considered as medium to long term investment products, but being able to put away money now and benefit from tax free savings could pay off further down the road.
The world around us is constantly changing, but don’t let uncertainty derail your plans. Instead, use it as an opportunity to lay the foundations for a strong financial future.
Investors should note that the views expressed may no longer be current and may have already been acted upon. Tax treatment depends on individual circumstances and all tax rules may change in the future. Junior ISAs are long term tax-efficient savings accounts for children. Withdrawals will not be possible until the child reaches age 18. A Junior ISA is only available to children under the age of 18 who are resident in the UK. It is not possible to hold both a Junior ISA and a Child Trust Fund (CTF). If your child was born between 1 September 2002 and 2 January 2011 the Government would have automatically opened a CTF on your child’s behalf. If your child holds a CTF they can transfer the investment into a Junior ISA. Please note that Fidelity does not allow for CTF transfers into a Junior ISA. Parents or guardians can open the Junior ISA and manage the account but the money belongs to the child and the investment is locked away until the child reaches 18 years old. The minimum age you can normally access your pension savings is currently 55, and is due to rise to 57 on 6 April 2028, unless you have a lower protected pension age. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.