Saving money is not easy – especially when your bank balance is still reeling from the effects of the holiday season. But there is no better time than the New Year to take stock of your stocks, and free up some spare cash for your savings.
We’ve put together five tried-and-tested ways to help you save more money in 2018, no matter what your income may be. Read on for more…
1. Try to Use up Your ISA Allowance
If you have any existing savings or investments, make sure that they are being invested through an ISA wrapper, so that you can get the benefit of long term tax-free returns.
The ISA tax break may not appear to be worth much at first glance, but over the years these tax-free savings can really add up. All UK taxpayers can invest up to £20,000 per year in their ISAs.
If your returns amount to seven per cent per annum, you would receive £1,400 in interest by the end of year one. Roll this over to year two, and add another £20,000 in capital, and your profits will be £2,898. If you carry on investing £20,000 per year and receiving seven per cent per annum in returns, by year eight your interest will amount to £11,929.70, taking you above the £11,300 threshold for Capital Gains Tax.
Basic rate taxpayers investing outside of an ISA structure would be liable to pay £125.94 to HMRC, and this amount will rise exponentially year after year. However, ISA investors are immune from any taxation, no matter how high your returns.
If your current investments are not being held within an ISA, it may be worth investigating other, more ISA-friendly options. A stocks and shares portfolio can be transferred into a Stocks and Shares ISA, an instant-access savings account could just as easily become a Cash ISA, and alternative lending can sit within an Innovative Finance ISA. Just about every asset class is now eligible for ISA relief, which means that you are essentially losing money by not taking full advantage of your annual allowance.
Before the end of the financial year, review your savings and investments and transfer as much as you can into an ISA. When the new financial year begins on 6 April 2018, carry last year’s ISA balance forward and invest as much as you can afford of your new £20,000 allowance.
2. Switch up Your Utility Providers
Utility bills are an essential household expense, so if you can reduce your monthly or quarterly costs, your savings will stack up.
According to recent research from Ofgem, two thirds of households in the UK are on a standard variable rate (SVR) tariff, resulting in an average energy bill of £1,140 per year. However, for households using a fixed term utility contract, the average energy bill drops to £830 a year. That’s a potential saving of £310 per year, which could be diverted into your ISA or pension fund instead.
What’s more, many energy firms offer cashback deals, direct debit discounts, and one-off switching bonuses. Shop around to find the most competitive deals, then before you switch, call your existing utility provider and give them an opportunity to match a rival firm’s offer. If they agree – great. If not, you can simply move on to another provider.
3. Change Banks
It’s often simplest to just stick with the same bank that you’ve been using since your student days. However, your continuing loyalty could be costing you a lot of money. The low interest rates environment of the past ten years has left most current and savings accounts unable to offer more than one per cent in annual returns. And with inflation at 3.1 per cent, this represents a loss in real terms.
However, it’s possible to supplement low interest rates with cashback deals and new customer bonus offers. And in fact, it has never been easier to switch banks. In 2013, the Current Account Switch Service launched as a free service to help individuals switch their bank account without any added hassle. Use the service to find out which bank can offer you the best deal, then place any bonus payments or monthly savings into your investment portfolio or savings account.
4. Use Cashback Sites
Cashback sites such as TopCashback and Quidco have risen in popularity in recent years. They work by tracking your clicks, so you have to log onto the cashback site before making any purchase. Click on your vendor of choice (e.g. Amazon or eBay), and you will be sent to the site, where you can make your purchase as usual.
Any cashback will appear in your account within a few weeks. While you might only gain a few pounds per transaction, this will add up over time, and you could end the year with several hundred pounds in your cashback wallet. Make quarterly or annual withdrawals, and transfer the money straight into your savings account.
5. Review Your Pension Plan
If you have been an employee of any UK company over the past few years, the chances are that you have a pension fund. In fact, you may even find that you have a few forgotten pensions from past jobs! If you suspect this to be the case, use the government’s free pension tracking service to track down any money that is owed to you.
No matter what sort of pension plan you have, it is always worth taking some time to conduct an annual review of your portfolio. You may find that your risk profile has changed, and that you want to reduce your exposure to riskier markets, and refocus on long-term debt investments instead. Or you may wish to maintain your profile but increase your contributions.
If you are unhappy with the fees that you are paying, or the performance of your investments, you might want to consider a new pension provider altogether. However, you should always speak with your financial adviser before you make any major changes, then identify any potential savings that could be used to top up your pension pot.
 Returns for year three = £4,402.86; for year four = £5,908.20; year five = £7,413.57; year six = £8,918.95; year seven = £10,424.32; and year eight = £11,929.70.