Denise Saunders
Investment Reviews
The short days of winter have gone and spring is here. It’s the time for planting and cutting the grass.
Your finances might also benefit from the same action, in a manner of speaking. Check out the old life insurance policies. Do these still meet your current circumstances? Are the limits enough if you have taken on more debt? You may find that if you have given up smoking for more than a year the premiums will be lower. It is now possible to receive tax relief at your highest marginal tax rate on your life insurance if you set it up as a pension term assurance. This could result in savings on your net premiums.
Check out your investments. Following the check in the bull run in equities the portfolio may need re-balancing so that you are not over exposed to equities. It may be sensible to talk to your IFA to take your equity profits now and consolidate in to lower risk funds. Some commentators are suggesting that equity markets will have increased volatility as uncertainty over the price of oil and terrorists’ actions increase.
Take another look at your with-profits bonds. If the fund is a closed fund (accepting no new investments) the chances are that it will be invested very conservatively and unlikely to produce reasonable returns in the foreseeable future. If the fund is still open, you will probably find that the underlying fund has had good returns for the last two years but the bonus rates are still low.
If moving out of With Profits is the correct course of action, the good news, relatively speaking, is that some of the Market Value Reductions (MVRs) are lower now than a year ago. There are also some contracts offering high allocation rates (eg 109%) which can go a long way to overcoming the MVR. However before moving from With Profits you must be comfortable that the risk level of the new investment is acceptable and realise that you may lose the benefits of terminal bonuses and investment smoothing.
Contact Langtons to prepare your finances for what may be ahead.