How to recession-proof your finances

A recession affects everyone in one way or another – job security, changing interest rates, lack of available credit, inflation… Those with a big savings pot may worry about the institutions looking after their money while those who rely on credit to survive may find the cost of borrowing rising considerably.

Here are some things to think about when it comes to your own financial position.

Are you double-insured?
If you work in a large company you may have valuable benefits such as permanent health insurance as part of your employment contract. It’s worthwhile ensuring that you are not paying for expensive Permanent Health Insurance if your employer provides this for free. Bear in mind, though, that your employee benefits cease when you leave a company.

Take those free contributions
Make the most of employers who match some or all of your pension contributions into a company scheme. This is effectively free money for your future which can provide a tax free lump sum and or income at retirement.

Check your mortgage protection
Check whether your mortgage protection is aligned with your mortgage debt. Many mortgage brokers arrange level term cover so that you receive a flat lump sum if you or your partner die during the mortgage. Its cheaper to have decreasing cover that falls in line with your mortgage debt.

Review your cash accounts
Review where you put your cash funds. Many current accounts pay rates below inflation in order to keep the value of the money from being eroded by inflation. Look to utilise your tax free cash ISA allowance for any funds in old accounts and look for a bank or building society that offers a consistently good rate.

Try to consolidate multiple pensions
If you have built up lots of small pensions, either by opting out or through work, try to consolidate these. You will need expert help from an independent financial advisor because some older pension funds have valuable guarantees.

Are your investment funds performing?
A recent survey showed that more than £9 billion is invested in funds that have underperformed their own benchmarks by more than 10%. If you have savings that are invested and you are unsure as to how they are being managed and how successfully they are managed, seek professional advice.

Pay down short term debt with tax free cash
If you have expensive credit card debts or loans and you are over 55, consider releasing the tax free cash from any pensions to pay off these liabilities. Again, seek expert advice.

This article was written by Tim Geoghegan, an IFA from G&C Financial in Fareham, Hampshire.

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