Category: General Interest

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Expert Advice: Diversify your ‘life Portfolio’ for a happy retirement

It goes without saying that being in a strong financial position in later life is important for a happy retirement. After all, it’s hard to be truly happy if you’re constantly worrying about money and having to devise new ways to make ends meet.

However, money isn’t everything. Even if you have your finances under control and adequate resources, a happy retirement isn’t a given. This means when retirement planning it might be worth coming up with a strong ‘Life Portfolio’, as well as a financial one. Looking at your ‘Life Portfolio’ can help guide you through the important decisions you must take in the run up to retirement, as you’ll have made a record of the key things you want from later life.

What makes a ‘Life Portfolio’?

For the purpose of the Life Portfolio, it makes sense to break down your lifestyle planning into four areas:

Health

This refers to activities that help you remain in good health. Health here shouldn’t be limited to just physical health. It’s also important to think about activities that keep you happy and mentally active.

People

Existing family and friends aren’t the only things that make up the ‘People’ category. You should also think about community organisations you could get involved in to make new friends.

Places

Where do you see yourself living in retirement? Do you have any travel plans or dream holidays? Will you be close enough to see your loved ones?

Pursuits

What will you do in your retirement? What hobbies or interests do you have which you’d like to pursue in retirement? Does volunteering appeal to you? This also relates to whether you’d like to retire fully or stay professionally active in some capacity.

In the run up to retirement, it’s important you think about the meaningful activities that will keep the zest in your post-retirement life. Retirement is a big change, and despite the prospect of much more free time, it’s not always a seamless transition. Many experience a feeling of lacking the direction they once had through their careers.

If you develop a ‘Life Portfolio’ with a partner, you need to think about what goals you share and what goals are individual. Coming up with a set of shared goals for retirement while meeting your individual needs is important to ensure a happy retirement together. Whether you choose to write a formal ‘Life Portfolio’ or not, devising and working towards goals outside of work is key to being happy after you leave full time work.

Sources
https://www.kitces.com/blog/anna-rappaport-phased-retirement-life-portfolio-health-people-pursuits-places/

Going Dutch: Could this new type of pension be the answer to the pension problem

Work and Pensions Secretary Amber Rudd has given the go-ahead for Dutch-style pension schemes to be offered to UK employees. These schemes, known as CDC, are a ‘halfway house’ between defined contribution and ‘gold-plated’ defined benefit schemes.

CDC stands for collective defined contribution schemes. They are similar to defined contribution pensions in that employer and employee make a regular contribution to a savings pot. Unlike defined contribution schemes, however, savers pool their money into a collective fund, rather than having their individual accounts. The idea behind this being that risks are shared evenly by all.

What’s more, CDC pensions give their members a ‘target’ income for life. Instead of a guaranteed income, CDC pensions say they’ll pay out a ‘target’ amount, based on a long-term mixed-risk investment strategy. This amount can change – it can fall in the event of circumstances like adverse economic conditions – or rise if the assets are particularly well invested.

Risk is shared by employers making changes to the amount they put in. When markets are down, pension payments can be reduced and contributions may be increased. Also, CDC funds can take a more balanced approach to investment risk rather than moving an individual pot into low-risk bonds as the retirement date approaches, as can happen with ordinary defined contribution pensions.

Critics argue that CDC pensions will be too hard to marry with the high level of control we have after the introduction of pensions freedoms in the UK. You wouldn’t be able to transfer out and buy an enhanced annuity if you had a low life-expectancy, as you would in a defined contribution scheme.

This scheme will be offered to Royal Mail workers first. They have strong support from the Communications Workers Union to go ahead with the scheme for its 140,000 members, though getting the scheme up and running might take a long time.

Sources
https://www.personneltoday.com/hr/cdc-pensions-collective-defined-contribution-pensions-cdc-dutch-style-defined-ambition-pensions/
https://moneyweek.com/498182/cdc-pensions-a-third-way/

After Carillion: Accountancy and auditing gets a shake-up

Following widespread criticism from a government review, the accounting regulator Financial Reporting Council (FRC) is to be abolished and replaced by a new regulator. The FRC will be replaced by the Audit, Reporting and Governance Authority in a move to boost the quality of a sector which forms a crucial part of the British economy.

The FRC, which currently employs around 200 people, is under substantial pressure after a number of high profile corporate accounting scandals. The collapses of Carillion and BHS, as well as the discovery of alleged accounting fraud at high street café chain Patisserie Valerie, have led many to question the effectiveness of firms operating in the audit sector. Doubts have been cast over the practices of the “big four” firms KPMG, PwC, Deloitte and EY in particular.

KPMG has come under scrutiny for its oversight of Carillion which went under with debts of over £5 billion, while PwC has attracted negative attention for its audit work at BHS.

Having a “tough and robust regulator”, capable of ensuring best practice at UK firms, is important for the British economy. Audit and accountancy services provide a £59 billion annual boost to Britain’s gross domestic product, according to a study by Oxford Economics Ltd released in November last year.

The new Audit, Reporting and Governance Authority will operate very differently to the FRC, which the report condemned for being too cosy in the way it regulated auditors. A new chair will oversee the transition to the Audit, Reporting and Governance Authority and the existing head, Sir Win Bischoff, will step down.

The new regulator will have enhanced powers. It will be able to intervene directly and make changes in company accounts without having to go to court first. What’s more, it will have powers to regulate the biggest audit firms directly.

The Audit, Reporting and Governance Authority will also be able to implement greater sanctions in the event of corporate collapses and, in serious cases, publish a report on them.

Overall, 48 of the report’s recommendations will be implemented in an attempt to increase confidence in British auditing.

Sources
https://www.gov.uk/government/news/audit-regime-in-the-uk-to-be-transformed-with-new-regulator
https://news.sky.com/story/accounting-regulator-to-be-scrapped-after-damning-review-11662454

Why cruise holidays are booming for retirees

The cruise market offering has changed enormously in recent years, where once it was purely the domain of cabaret cheese and bad karaoke, now there’s something on offer for everyone (don’t worry, though, if you love cabaret and karaoke, that’s still an option). Whatever your tastes and priorities, you won’t be hard pressed to find a cruise to suit your needs.

Cruises have always been a popular choice for retirees but with the new potential for personalisation, they’re more popular than ever, with over 26 million passengers carried worldwide in 2018 alone. So what is it that makes taking to the seas such an attractive prospect?

1) Flexibility

Cruises have the potential to be a catch-all for whatever kind of holiday you’re looking for. Whether you’re after a romantic getaway, a family break over the school holidays, or a round-the-world trip that ticks off everything that’s left on your bucket list; it’s all possible when you’re on a cruise liner.

2) Activities

There really is a cruise out there for everyone. Some people want to lay on the deck and bathe in the sun, some people want to hone their rock-climbing skills, while others want to kayak alongside breaching whales. The possibilities are endless: if your priority is trying the food of critically acclaimed chefs, or even having a go at cooking the dishes yourself, fine dining can now be found onboard in some of the most remote corners of the world’s oceans.

3) Modern life can be stressful

Taking a cruise is not just about the food and entertainment available on board and the chance to see some fantastic locations. It’s also about taking the hassle of too much planning away from the holiday goer. Being able to relax and take a breather while you’re travelling the world is becoming a bigger priority for people and this has been reflected in the incredible attention and investment given to spa and wellness facilities on cruise ships. Plus it’s a great chance to unplug and really experience the world around you.

4) Value

Despite historically being a pursuit of the highest luxury with the pricetag to match, there are plenty of choices available for more budget conscious passengers. All-inclusive cruise holidays are a smart way to enjoy all the bells and whistles whilst remaining price savvy. Pick the right vessel and you can experience entertainment of broadway quality included in your price.

If you want to enjoy your retirement to its fullest but can’t decide on the best way to do that, considering a cruise trip is a great place to start.

Sources
https://www.lonelyplanet.com/amp/travel-tips-and-articles/getting-on-board-10-reasons-to-consider-a-cruise-trip/40625c8c-8a11-5710-a052-1479d27561cd?_t_witter_impression=true
https://cruisemarketwatch.com/growth/

Rupert Grint case sheds light on changing accounting dates

Actor Rupert Grint saw some unbelievable and mind boggling things over the years whilst working in the wizarding world of Harry Potter… but his biggest shock yet may have come to him in the more mundane world of muggles, thanks to discrepancies in accounting dates.

Grint made an attempt to change his accounting date from 31st July 2009 to 5th April 2010, as a result of the introduction of an additional tax rate of 50% in 2010/11. Had this change been approved, eight months worth of profits would have fallen back into 2009/10, allowing Grint to avoid the tax rate that wasn’t in place during that year.

Unfortunately for Grint, however, the change was not approved. Well, sort of. After filing his 2009/10 tax return in 2011 with two sets of pages (a 2009 schedule and a 2010 schedule), his first change of accounting date was accepted by HMRC. That was until a VAT visit brought light to a new set of accounts which covered a 20 month period from 1 August 2008 to 5 April 2010.

The FTT concluded that the two schedules which were originally filed were derived from the 20 month period “long accounts”, just being time apportioned versions of the broader figures. To establish a basis period for 2009/10, and for the intended change of accounting date to be successful, he needed to meet an 18 month test for a period of account. However, as only the 20 month long accounts could be considered as accurate accounts, they failed the 18 month test.

A brand new version of accounts miraculously appeared in 2012, covering the same two periods that were initially filed. Where these were different is that they were written up on an accruals basis, rather than the previous time apportioned schedules. The FTT were happy to accept that these did in fact meet the definitions of “accounts”, however where they faltered is that they had materialised after the original 2009/10 return was filed – and so, they were discounted.

For most businesses, a change of accounting date isn’t necessary. There are, however, some who could access transitional overlap relief through the process. The simplest way to avoid the pitfalls that Grint came across? Signing off accounts before your tax return is filed. Not only are accurate accounts helpful to measure business performance, they’re also essential for determining any tax for which you’re liable.

Sources
https://www.accountingweb.co.uk/tax/personal-tax/change-of-accounting-date-spells-disaster-for-harry-potter-actor

Revealed – the top 5 destinations for British pensions

Many British pensioners choose to move abroad, often in search of warmer climes and a more comfortable retirement.

The stereotypical idea of retiring abroad often involves moving to a mediterranean country. However, only one mediterranean country featured among the top 5 countries from which British expat pensioners claimed their state pension. This indicates that things might be changing…

Here are the top 5, in descending order:

5) Spain – 106,420 retirees

The Iberian nation has long been a retirement favourite for Brits, so we were surprised when it only came in fifth. The amount of British pensioners who spend much of the year in Spain is likely to be much higher, with many owning second homes whilst drawing their pension from the UK. Overall 16.7% of registered Spanish property belongs to UK citizens.

Spain is the only non-English speaking nation among the top 5. However, English is widely spoken in major cities and areas with a large number of tourists and expats, like the Costa Brava and Costa Del Sol.

4) Republic of Ireland – 132,650 retirees

Lush rolling scenery and cheap house prices outside of Dublin make the ‘Emerald Isle’ an attractive destination for British retirees. Although the weather may be a little on the damp side, its scenic countryside, dotted with stone castles and slower way of life have encouraged many to retire across the Irish sea.

The large quantity of Irish people living in the UK is also likely to be a factor, with many moving closer to their family after retiring.

3) Canada – 133,310 retirees

Great scenery, kind people and a low crime rate make Canada an ideal retirement destination. Canadians are famously welcoming, meaning settling in is very easy for retirees.

What’s more, Canada has excellent healthcare. There are no fees for medical treatment, doctors’ appointments and dental visits. Even eye tests come free of charge. It’s unsurprising that it’s just a hair behind it’s much more populous neighbour when it comes to the number British retirees settled here.

2) USA – 134,130 retirees

Despite coming in at second on our list, retiring in the US for non-citizens is tough. If you don’t have a job Stateside or a family member to sponsor you, your only option is the Green Card lottery. This is a lengthy and costly process.

All this said, the USA offers some great retirement options. Warm climates in southern areas, wild scenery and the allure of the American lifestyle can prompt Brits to retire across the pond.

1) Australia – 234,880 retirees

Warm weather, barbies on the beach and a high standard of living. It’s easy to see why Australia is the number one destination for British retirees.

However, retiring here does mean having a sizeable pension pot. Australia is a relatively expensive country, reflecting the much higher salaries people generally earn Down Under. House prices are expensive and food bills can leave you reeling.

Sources
https://www.independent.co.uk/news/business/news/brits-are-behind-one-fifth-of-properties-sold-to-foreigners-in-spain-as-sky-high-uk-prices-push-a6681296.html
https://www.thisismoney.co.uk/money/expat/article-6606883/Australia-number-one-destination-retired-British-expats.html
https://www.investopedia.com/articles/personal-finance/031115/how-retire-us-visas-process.asp

A snapshot of average weekly household spending

In January, the Office for National Statistics (ONS) released their latest Family Spending Survey, revealing the intimate details of British spending habits. In its 61st year, the report provides an insight into family spending habits, as well as showing how they differ between areas of the country.

The average British household spent £572.60 per week in the financial year ending March 2018. After adjustments for inflation, this was the highest weekly expenditure since 2005. Increases in transport and housing costs were chiefly responsible for this rise in expenditure.

Households are spending £18.40 more than they did a year ago, despite splashing out less on dining out and buying fewer clothes than they did 12 months ago.

Transport was the category with the highest average weekly spend. Brits spent £80.80 a week on transport, 14% of their total expenditure. This was followed by spending on fuel, power and housing, which came to £76.80 per week.

Other expenditures have fallen. As a nation, we are drinking far less than we did in the past. This is reflected in our expenditure. 10 years ago, the average amount we spent on alcoholic drinks “away from home” was £10.90 a week. Adjusted for inflation, this has fallen to £8 a week.

Good news for our liver, bad news for pubs. In fact, more than a quarter of British pubs have closed their doors since 2001.

Younger people tend to spend far more on takeaways than the elderly. Households headed by someone under 30 spend on average £7.80 a week on takeaways. By contrast, over 75s spend just £1.80 on takeaways a week.

Northern Irish families, however, spent the most on takeaways. An average of £8.60 per household. Analysts suggest that this is likely to be because families in Northern Ireland are larger than elsewhere in the UK.

Overall spending, too, varies regionally. The average weekly household spending was highest in London, at £658.30, while in the North East of England it was more than £200 less at £457.50. In Wales, the average weekly spend was £470.40 and the Scots spent an average £492.20. The ONS survey paints a diverse picture of the UK’s spending habits that are just as varied as its people.

Sources
https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/expenditure/bulletins/familyspendingintheuk/financialyearending2018
https://www.theguardian.com/business/2019/jan/24/spending-by-uk-households-rises-to-13-year-high

The demise (and potential rebirth) of Patisserie Valerie

The prominent cafe chain Patisserie Valerie collapsed into administration after ‘significant fraud’ emerged in its past accounts.

Already, 71 of its nearly 200 cafes have been closed and a further 122 are up for sale, leaving the future of the prominent chain hanging in the balance. Accounting giant KPMG have been appointed as administrators to the company and its various subsidiaries throughout the process.

Thousands of false entries in the company’s ledgers, among other irregularities, led the firm to overstate its profits and cash flow for several years.

Companies have two primary motivations to manipulate their profits. Firstly, the pay of some executives is directly tied to financial performance. And secondly, it’s unlikely that financial manipulation will be detected by investors because of the nature of the relationship between independent auditors and their corporate clients.

The motivations in Patisserie Valerie’s case have not yet been established.

When the accounting ‘black hole’ emerged, the company was valued at £450 million. The company’s finance director was arrested by the police, bailed and resigned. Shares have since been suspended and are yet to restart trading.

An array of investigations have been opened into the company. The Serious Fraud Office are running an investigation of an unnamed individual linked to the company, while the Financial Reporting Council is meanwhile investigating accountancy firm Grant Thornton for its role as auditor to Patisserie Valerie. As it stands, only two members of the original board remain.

By any standards, it could be described as an accounting nightmare.

You might think all looks set for the company to join the likes of Woolworth’s in the cemetery of former British high street chains… However, the company’s story has recently taken a turn for the better.

On the 8th of February, sportswear tycoon Mike Ashley made a surprising bid to add the chain to his empire. The billionaire has been on something of a buying spree over the last year, adding struggling retailers House of Fraser and Evans Cycles to his high street portfolio. There are rumours that Ashley is trying to assemble a portfolio of brands to sell in his House of Fraser stores.

Whether or not his bid is successful remains to be seen. It will also be interesting to see what emerges from the ongoing investigations into accounting malpractice in the firm.

Sources
https://www.bbc.com/news/business-47094831
https://www.accountingweb.co.uk/business/finance-strategy/baking-bad-patisserie-valerie-collapses-into-administration?utm_medium=email&utm_campaign=AWUKBUS240119&utm_content=AWUKBUS240119+CID_ee7370ae83bca130e50bcc401c04136d&utm_
https://www.theguardian.com/business/2019/feb/08/mike-ashley-bid-patisserie-valerie-sports-direct