EACH week The Scotsman gives you a top ten guide to pertinent financial issues. Recent research by HSBC Insurance found that nearly a fifth of women in the UK are doing nothing to prepare financially for retirement, while a third said they did not understand their finances. Susann Kulhas, managing director of Edinburgh IFA Female Financial, offers her top ten tips for women sorting out their finances.
1 GET A PROFESSIONAL WILL Off-the-shelf packages are available, but the correct legal format means everything when it comes to getting the right amounts to the right people. Also consider a Power of Attorney, which allows a trusted
friend to organise your affairs if you are incapacitated or simply out of the country during an emergency.
2 PROTECT YOUR DEPENDENTS During a time of emotional trauma don't leave them struggling financially. However, although life cover should not be a top priority if you are on you own with no dependents, do consider insuring your income so you can continue to pay your monthly bills in the event of sickness or redundancy. Don't forget that stress due to financial worry will not aid a fast recovery.
3 SAVE FOR YOUR FUTURE Put aside 10 per cent of your net earnings for short-term needs and a further 10 per cent into savings for your future. An emergency cash cushion should ideally hold four to six months of net income. Interest rates on individual savings accounts (Isas) are at a historical low, so look for the Isa providers offering top rates and, provided no penalties apply, transfer your current holdings to a better paying Isa. However, don't expect it to happen overnight; some providers will take their time. If you are a non-taxpayer, make sure to tell your bank so you can claim any interest gross rather than 20 per cent being taken at source.
4 SAVE FOR TOMORROW Assessing your attitude to risk is essential if you're considering investing in stocks and shares, so ask an independent financial adviser to conduct a risk profile analysis. Even if you are cautious you can still invest in cash deposits or government bonds and claim valuable tax relief through a pension. If you are offered an employer's sponsored pension scheme to which they contribute, join it – opting out is equivalent to asking for a pay cut. When you are preparing to take your personal pension benefits shop around, as the pension provider that holds your fund may not offer the best income. If you suffer from poor health you may get considerably more by requesting an impaired or enhanced life annuity quote.
5 LONG-TERM CARE We are lucky in Scotland, as many of the care costs are currently covered. But accommodation costs are not, if you have total assets in excess of £22,500. With women living far longer than men but suffering far more illnesses during their lives, many of us will face a spell in care as we get older. Choice is everything and so if you do have the facility to make arrangements for this eventuality, consider setting money aside. Properly organised arrangements may also help with IHT planning.
6 PERSONAL ACCOUNTS To be introduced in 2012, this government-driven workplace pension scheme will see a 3 per cent contribution from your employer and a 4 per cent employee contribution, with a further 1 per cent raised through tax relief. Assuming affordability is not an issue, if you are close to retirement, but have not made any other provision other than a state one, consider the impact of joining, as it may well reduce your entitlement to pension credit.
7 DIVORCE OPTIONS In the event of divorce or separation potentially all assets built up during your time together can be split equally. Get professional advice to help you consider the options you will be given. Opting for the inflation-proofed guaranteed pension at 65 might at first seem the most sensible choice, but not if you cannot afford to live comfortably until then.
8 CHECK FOR CHARGES Previous paid-up personal pension schemes may still have high charges being applied to them. Gather up any details you have on them and ask an adviser to analyse the costs. It may be in your best interests to transfer them to a newer, lower charging plan. Whether you stay or go, it is always worth reviewing the funds regularly to make sure you are maximising growth.
9 STATE PENSION FORECASTS These forecasts can be obtained from Department of Work and Pensions or by completing a BR19 form. If you have insufficient contributions to claim a full state pension, an ex-husband's contributions made during his lifetime may go towards allowing a full state pension for yourself, without impacting at all on his benefits. If you plan to continue work after you reach state pension age you should consider deferring it. For every five weeks of deferment you will receive an additional 1 per cent of your normal weekly state pension.
10 THINK ABOUT A FIX Mortgage rates are rising, but if you are on a variable rate or tracker you will still be enjoying lower costs. However, rates will rise and fixed rates are already on their way up, so consider buying into a fix rate deal soon.
