Top tips for spring cleaning your finances

With the arrival of a new tax year, households could save thousands of pounds by shopping around for a better deal on financial products and by mopping up unused tax free allowances, according to Find.co.uk, UK consumer finance portal.

Areas that households should look at are:

Pensions

During the tax year 2007-08, you can save up to 100 per cent of your salary into any form of pension/s, subject to an annual limit of £225,000. You automatically get tax relief at 22 per cent and can claim a further 18 per cent tax relief via your self assessment tax return, if you are a 40 per cent taxpayer.

You can save into as many different pensions as you like, so that even if you belong to a company pension scheme, you can also make contributions to any other form of pension, such as a stakeholder or Sipp, providing the total amount you put into your pensions (including company pensions) does not exceed the limit mentioned above.

Mortgages

Despite recent rises in the base rate, you can still get excellent mortgage deals which are lower than the standard variable rate. Halifax’s standard variable rate is currently at 7.25 per cent, but there are hundreds of mortgages charging less. For example, Nationwide is offering a 4.96 per cent base rate tracker, discounted variable rate mortgage for two years, with a £599 arrangement fee.

But beware - arrangement fees have nearly doubled in the last three years according to Find.co.uk’s research, so make sure that the overall package, including all fees, such as exit and early repayment charges, is competitive, not just the headline mortgage rate. You should also take into account all costs that you will incur if you redeem your existing mortgage.

Personal loans

Lenders usually charge tiered interest rates, with lower rates generally applicable on higher amounts. Look closely to see the rates each lender charges on different loan amounts as you could end up paying less by taking out a larger loan.

Three lenders – ASDA, Masterloan and GE Money - are currently charging between 5.9 per cent and 6.3 per cent for a £5,000 personal loan repayable over three years, but bear in mind that these deals will only be available to people with excellent credit records.

Credit cards

If you are looking for a new credit card, think first about what type of borrower you are:

If you have a good credit record, go for a card with a 0 per cent charge rate for an introductory period, such as Sainbury’s Bank MasterCard;
Alternatively, if you know you will pay off your bill in full each month, look for a card with generous loyalty scheme, such as Goldfish;
And if you know you won’t meet your monthly payments, go for a card with a consistently low interest rate.
Whatever you do, don’t use credit cards for cash withdrawals as this is one of the most expensive ways of accessing cash. Use a debit card for withdrawing cash. This facility is usually free if the withdrawal is from your own bank or building society’s cash machine.

Also consider taking out more than one card, and using each one for different purposes in order to avoid charges. For example, use one card for a balance transfer and another for purchases. And always review your credit cards on a regular basis as the best deals tend to be reserved for new customers.

If you are going abroad, consider taking out a Nationwide or Post Office credit card, as these don’t make the hefty foreign exchange charges on overseas transactions that almost all other cards do.

Buildings and contents insurance

Shop around online for the best deals, but remember that some online deals sometimes involve a high excess. Paying premiums by monthly direct debit can also add considerably to the premium, so try to pay the whole amount upfront on a zero interest credit card.

Make sure that when you receive the policy schedule in the post, it matches what you signed up to online.

Discounts can sometimes be obtained by buying buildings and contents insurance together from the same insurer, by joining a Neighbourhood Watch scheme, having a burglar alarm, agreeing to a higher excess, or if you are over a certain age (usually 50).

Current accounts

There’s no excuse for allowing your hard earned cash to languish in a current account earning a paltry 0.1 per cent interest. Some high street banks will pay interest of more than the base rate (currently 5.25 per cent) providing you meet certain conditions, such as banking online, having your salary paid in each month, or paying a minimum amount, typically £1,000, into the account every month.

Halifax is paying 6.17 per cent gross AER on deposits of £1 on its High Interest Current Account and Nationwide 4.25 per cent on its Flex Account. Alliance & Leicester pays 6.5 per cent on its Premier Direct Account, but this includes a bonus applicable for a limited period only. The high rates on the latter two accounts are only paid on balances up to £2,500 or £3,000.

If you know you need to go overdrawn, make sure you agree an authorised overdraft limit with your provider well beforehand in order to avoid any penalty charges.

Term assurance

Term assurance - life assurance that pays out for a set number of years only (after which there is no payout) - is remarkably cheap because of rising life expectancy and a highly competitive market.

If you are a smoker, you can almost halve your premiums by giving up. Sainsbury’s Bank charges £7.90 a month for £100,000 of term assurance for a 35 year old, non smoking male, but this jumps to £13.40 pm for a male smoker of the same age.

Savings accounts

If you have savings, check that every account you have is still paying competitive interest rates and think about consolidating your balances if a larger amount will give you a better rate.

If you have funds to invest, consider putting these into a cash ISA as this will generally earn a better than average interest rate and will pay a tax-free income if this is required. Remember that from April 2008, you will be able to transfer the proceeds of a cash ISA into an equity ISA (although not vice versa) without affecting that year’s ISA allowance.

Kate Marsden, Marketing Director of Find.co.uk says: “Most people fail to make the most of their hard earned cash out of ignorance or inertia. But with the wealth of easily accessible information available online, this should no longer be an excuse. On Find.co.uk, users can find directories of providers, savings and investment guides and even download information straight to their iPod.”