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SPONSORED: Money Matters – Your money in the new normal

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INDEPENDENT FINANCIAL ADVICE ON MONEY MATTERS AROUND THE HIGHLANDS, ISLANDS & MORAY

Charles Stewart of Stewart Lyon

As we continue to grapple with the new normal created by the Coronavirus
pandemic, it’s important to take time to consider how this affects our financial wellbeing.

Local lockdowns, the winding down of the furlough scheme, recession – all these add to our day-to-day worries. So what should you do – and not do – to ease the strain?

Pensions

The biggest single investment you will make in your lifetime is your pension, which is
designed to pay you an income through retirement. Of course, given the longevity of any pension provision, the 5-month Coronavirus blip in returns will have little impact.

However, there has never been a better time for checking whether your pension is invested in appropriate funds, given your retirement expectations. Too safe an investment strategy when your defined contribution pension has over 10 years to go – plus hopefully 25+ years of retirement – will severely impact your retirement income.

Short term fears have created a “live now” philosophy, but don’t be tempted to spoil your retirement quality of life by cashing in pension funds early, believing that you will not miss them when you are retired. Whether you need money to plug gaps in your finances, make a big ticket purchase or if you’re worried about recent market volatility, you should always seek financial advice to explore your options and avoid making ill-advised decisions, which could potentially leave you worse off in the future.

Investments

The almost V-shaped bounce-back for investments, despite Covid continuing to be a major concern, reassures us that investing in balanced portfolios is still the right decision for medium to long term investments, particularly given the exceptionally low rate of return on bank accounts and the potential for high inflation, which will erode the value of your lifetime savings.

Avoid internet sensationalism suggesting that gold or bitcoins is the way to go. Apart from anything else, these adverts are often from unregulated providers who will offer no compensation if it all goes wrong. Experts agree that instead of chasing the next ‘big
thing’, you should seek advice to build a diversified portfolio suitable for your longterm
plans and appropriate for the amount of risk you are willing to take.

Mortgages

The property market has bounced back since the end of lockdown and is enjoying huge demand from buyers looking to move or relocate. However a quick glance at the news will tell you that many high street lenders have changed their lending criteria, making it harder for buyers, especially first time buyers, to find a mortgage.

There has been a reduction of over 80% in lenders willing to offer mortgages to buyers with deposits of less than 10%, as well as to buyers with gifted deposits or on furlough.

However, there are still opportunities for everyone looking to buy a new home, as these restrictions do not apply to all lenders and there may be options you have not considered, such as the extension of some schemes which help with raising deposits.

That’s why it’s important to speak to an independent mortgage adviser who will help
you to navigate through to the best deal for your circumstances.

Critical Illness and Income Protection

Covid-19 has made many people realise just how damaging an income shock can be.

As the death rate from the virus in the UK has slowed considerably, the long term side
effects of the virus have left many people unable to work. And other health conditions
have not gone away – doctors are seeing a rise in people reporting severe mental health
difficulties and diagnostic delays are predicted to lead to an increase in cancer diagnoses.

Critical Illness cover pays a lump sum or income upon diagnosis of a potentially life-threatening illness. As it is such a new disease, Coronavirus may not be covered on many critical illness insurance policies but complications from the virus that lead to
conditions that are included in the policy, such as kidney, heart or respiratory failure, will lead to a successful claim.

Income Protection policies, on the other hand, will pay you an income if you are unwell and cannot do your usual job.

Most policies will cover the virus, although not government lockdowns, self-isolation or redundancy.

Despite the pandemic, premium prices have stayed much the same, so buying cover now may be no more expensive that it was a few months ago, although there may be more exclusions.

And applications may be postponed for one to three months for anyone who has tested positive recently or who has symptoms of Covid-19 at the time of applying.

Next Money Matters topic is on ‘Retirement and beyond’


Your Local to Highlands, Islands and Moray Contributors – Click to visit their website.