2011 has seen its fair share of economic drama and while many of us will try hard not to give in to those last minute splurges it’s inevitable we will financially overindulge this Christmas.

To help consumers get their finances back on track and prepare for the New Year unbiased.co.uk’s media advisers have come up with their top financial tips for 2012. 

 Karen Barrett, Chief Executive at unbiased.co.uk

“The New Year should be about looking forward and starting afresh. A complete financial review can help you to get focused and back on track.  Look at your mortgage, look at your pension; are you being tax efficient; where can you consolidate your debts or find a better savings rate?  What is your financial plan for 2012?

If you’re unsure about what to do for the best then it’s important to seek professional financial guidance from an adviser who will help you assess your current situation and advise you on the best options for your individual circumstances.  Just go to www.unbiased.co.uk and search free and confidentially for an adviser close to your chosen postcode.”

1                  Annuities

As we enter 2012, pension annuity rates are at all time low levels with little prospect of a speedy recovery.  Individuals about to draw income from their pensions must consider all of the options available to them. Alternatives such as Drawdown, Phased Retirement, Temporary Annuities, Investment Backed Annuities and the Open Market Option must all be considered before the irrevocable decision to buy an annuity is taken.  A poor decision at retirement can affect a lifetime of pension saving.

Gordon Bowden (Quainton Hills Financial Planning Ltd)

2.                  Do not ‘rate tart’ with credit cards

Do not, whatever you do, ‘rate tart’ with credit cards.  There are many well intentioned people who save their £5,000 into an interest bearing account and at the same time build up a credit card debt.  They do this with the intention of moving from 0% deal to 0% deal, paying the 2.5% set up fee and trying to get better than that from investing the £5,000 cash. 

Well 9 out of 10 times it does not work.  Savings rates are too poor to make much if any gain from investing the money borrowed and more importantly, the debt ‘hardens’, the savings get spent for whatever reason and gradually it becomes impossible to repay the debt.  The debt builds up, the 0% rates dry up and suddenly people are paying 17% on £20k of debt.

Steer well clear: the marginal benefit is heavily outweighed by the likely cost.  Cut up your credit card if you can and you will never regret it.

Dave Penny (Invest Southwest)

3.                  It's time for a financial clearout.

Check those direct debits that are going out each month.  Are they benefiting the supplier more than they are benefiting you?  You could find easy money from combing through your bank statements that could be used to pay down debt or save for the future.

Mel Kenny (Chartered Financial Planner, Radcliffe & Newlands)

4.                  Risk tolerance for 2012

We are asking clients to think about their risk tolerance for 2012 as we think it likely it will be another challenging 12 months.  We are asking what they’re prepared to lose as opposed to what they’re prepared to make in returns so they can position their assets accordingly. So it’s down to diversification and managing risks.   

Mike Horseman (Cockburn Lucas Independent Financial Consulting)

5.                  Shelter existing investments in ISA

A Bed & ISA transaction allows you to sell your shares or funds and use the proceeds to open (or top up) an ISA.  You can then immediately buy the same shares or funds back, choose another investment or hold cash.  Whether you buy your shares back or choose a different investment within an ISA all future gains will be sheltered from tax and there will be no further income tax.  You can shelter up to £10,680 of investments in ISA before midnight 5^th April 2012, or £21,360 for a couple.

A Bed & ISA transaction involves selling the share or fund and then buying back in the tax shelter.  This tax year you can sell shares and make a capital gain of up to £10,600 before capital gains tax applies, if this allowance is not used it is lost forever.  Selling shares at a loss will realise the capital loss which, once declared, you can carry forward and offset against any gains in the future, effectively increasing your future capital gains tax allowance.

Danny Cox (Hargreaves Lansdown)

6.                  Investment Portfolio Diversification

I’m seeing a lot of client portfolios at the moment that just aren’t diversified enough.  So my tip for the New Year would be to make sure your investments are well spread.  Don’t listen to anyone who tells you they know what’s going on because they most likely don’t.  Spread it around in the right way and you’ll be fine. 

Jaskarn Pawar (Investor Profile)

7.                  Reducing debt 

The biggest priority is to reduce any debt that you have.  You are now probably paying less per month for your mortgage than you did (say) five years ago.  Take this as the opportunity to pay more and reduce the debt. (Yes a mortgage is a debt).

If you are an ‘average’ person there’s not a lot of point saving and getting a return of (say) 5% which is taxed when you are paying interest of anything up to 20% (if it’s a credit card) which comes out of taxed income.  For example if you make a return of 3% on your cash you are taxed at 20% leaving 2.4%. (and inflation is over 5%).  If you pay out £5 in interest you have to earn £6.25 to cover it.

Harry Katz (Norwest Consultants)

8.                  Life expectancy and protection

Think about your life expectancy – how many people do you know have parents/relatives in their 70’s, 80’s or 90’s being cared for/supported by a younger generation.  How much money do you need to fund your retirement and who will care for you?

Think about protection – what would happen to your finances should you be unable to work through either accident or serious illness.  From close personal experience critical illness cover can be a financial lifesaver.

Jonathan Hill (Milford & Dormor Solicitors)

9.                  Protection of assets

If you have assets worth over £325,000 you may have a liability to Inheritance Tax (IHT) after your death.  This liability can be planned for and minimised if the correct advice is taken.  

Will your estate receive a lump sum from your life insurance, death in service or pension? Planning for lump sum payments and directing them to the beneficiaries of a pilot trust can mean a saving of 40% IHT on the value of the payment.

Sharon Pallagi (Clarion Solicitors)

10.              TAKE ACTION

My tip is simply to take action!  The more aspects of your finances that you can put on “autopilot”, the more time there is for you to focus on the areas where timely analysis and decision making are more likely to pay off.

Setting up investments by direct debit can help.  With the example of an ISA, if you put your full ISA allowance (currently £10,680) into “the markets” in one go, it is easy to tie yourself up in knots worrying about whether now is the right time or not.  Instead, why not invest £890 per month to take away the market timing decision?  Then, when the ISA allowance goes up in April, the decision is a small one – do you increase your direct debit to the new maximum or not?

Jason Witcombe (Evolve Financial Planning)