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How to approach later life care

National Insurance contributions go towards things like your State Pension but they don’t count towards the costs of social care. This type of care is managed by your local authority and generally comes at a price. That is why you have to apply directly to them if you need help with paying for long-term care. Your local authority (or Health and Social Care Trust in Northern Ireland) will first carry out a Care Needs Assessment to find out what support you need.

The next step is to work out who is going to pay. Your local authority might pay for all of it, part of it or nothing at all. Your contribution to the cost of your care is decided following a financial assessment. This Means Test looks at:

  • your regular income – such as pensions, benefits or earnings
  • your capital – such as cash savings and investments, land and property (including overseas property) and business assets

If your income and capital are above a certain amount, you will have to pay towards the costs of your care.

If you own your home, the value of it may be counted as capital after 12 weeks if you move permanently into a residential care or nursing home. However, your home won’t be counted as capital if certain people still live there. They include:

  • your husband, wife, partner or civil partner
  • a close relative who is 60 or over, or incapacitated
  • a close relative under the age of 16 who you’re legally liable to support
  • your ex-husband, ex-wife, ex-civil partner or ex-partner if they are a lone parent.

Your local authority or trust might choose not to count your home as capital in other circumstances, for example if your carer lives there.

The maximum amount you have to pay towards your care is different, depending on where you live in the UK. The cost of living in residential care can be split into:

  • your ‘hotel’ costs, including the cost of accommodation and food
  • your personal care costs.

The cost of care differs around the United Kingdom, and this cost is usually higher where employment costs and housing are more expensive. In England and Wales you can find out how your local authority charges for the care services by first visiting the local authority website. In Scotland, the personal care you receive in a care home is free, if you’re over 65. If you’re in Northern Ireland, you can find your local Health and Social Care Trust on the nidirect website.

The one certainty of care is that, should you need it (and many of us will), you will be in a better position to receive exactly the sort of care you would like if you have some of your own funds set aside to cover the cost. Like the relationship between your state pension and your private pension, the former will only support you to one level. We save into additional pensions to ensure we have the retirement that we want. The same rules could really apply to our approach to care funding.


Sources: www.moneyadviceservice.org.uk (Published information)

 

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Car sharing deserves better tax incentives

A recent report, ‘On the Move’, published by Policy Exchange Think-Tank researchers, explores ideas and policy proposals on how to create a more mobile workforce. One of the key policy ideas in the Report is about offering tax benefits to commuters who use ride-sharing schemes and free parking in city centres for care sharing. Drivers who offer fellow commuters a lift should be given a tax break as part of plans to increase workers’ mobility, the think-tank has recommended. The Report identified a ‘strong case’ for the Government to encourage the growth of car-sharing.

The On the Move report, says that in a third of local authorities that make up the eight city regions no major employment sites (defined by having 5,000 or more jobs) are within a twenty minute commute by public transport and 80% of these Local Authorities have an unemployment rate above the national average. The think-tank says making it easier for people to travel an extra 20 minutes to a workplace would dramatically increase the job opportunities available.

Having access to a car for an extra 20 minutes of commuting time would give even more options, and the report said:

“Car-sharing, mediated by an app, is lowering the cost of travel for consumers, giving people on low-incomes access to car travel and reducing congestion on the roads. There is a strong case for the Government to incentivise its growth through commuter tax benefits.”

The report suggested such a policy would have a particular benefit in Birmingham, Leeds, Hull and Blackpool where there was already a higher than average number of car sharers.

The think-tank suggested either allowing employers to give workers travel vouchers to pay for ride-sharing which could be issued before tax, or allowing drivers to keep a portion of their earnings tax-free if they offer people a lift.


Sources: www.policyexchange.org.uk (Report published: 2015/08/17

The end of (some) £50 notes: time to unstuff the mattress?

Hopefully you don’t keep all of your savings stuffed in or under the mattress of your bed but if you do happen to keep a ‘rainy day’ store of £50 notes, you had better check your bed linen, otherwise you may find that the value of your assets suddenly goes down in the not too distant future!

The Bank of England has announced that the £50 banknote carrying the portrait of Sir John Houblon, the first Governor of the Bank of England, will be withdrawn from circulation on 30 April 2014. From that time, only the £50 notes featuring Matthew Boulton and James Watt, which was introduced in November 2011, will hold legal tender status. Members of the public who have Houblon £50 notes can continue to use them up to and including 30 April.

After 30 April, retailers are unlikely to accept the Houblon notes as payment. However, most banks and building societies will continue to accept them for deposit to customer accounts. Agreeing to exchange the notes after 30 April is at the discretion of individual institutions. Barclays, NatWest, RBS, Ulster Bank and the Post Office have all agreed to exchange Houblon £50 notes for members of the public – up to the value of £200, but only until 30 October 2014.

The Bank of England will continue to exchange Houblon £50 notes after 30 April, as it would for any other Bank of England note which no longer has legal tender status. So if you forget to check your mattress, you can still pack your £50 Houblon notes in a case and take a trip to the Bank of England!


Sources: www.bankofengland.co.uk

 

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Annuity review highlights importance of advice and shopping around

The startling headline finding from The Financial Conduct Authority’s (FCA) recent review of the annuities market proved to be the fact that some 80% of people who purchased an annuity from their pension provider could have received a better deal from an alternative source.

The report found that the annuities market was not working as it could for consumers, with many reporting that they found it difficult to review the suitability of the annuity offered by their pension provider, when compared to the alternatives available.

In monetary terms, the FCA found that, on average, retirees who buy an annuity from their pension provider miss out on around £71 per year. With the average length of retirement being around 19 years, that figure works out to meaning retirees are over £1,300 worse off: a figure that could represent a very nice holiday for many, an investment on behalf of the grandchildren or one of several other very rewarding ways to spend a retirement income.

As part of their findings, the FCA have launched a more in-depth review of competition within the annuities marketplace to assess how it could be better organised with consumers in mind.

The message though is clear: shopping around when purchasing your annuity can really benefit you in your retirement years and, if you find the marketplace too complex to navigate on your own, a financial planner may well be able to assist.

Taking account of your retirement goals and your current financial situation, we’ll look at your various options for living your desired lifestyle in retirement, including whether purchasing an annuity would be a suitable solution and, of course, then assessing which annuity would be best for you.

We’ll also be keeping a close eye on the FCA’s further review of the market, to see how it will impact annuities in the future and how that would work for consumers.


Sources: fca.org.uk

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The Year of Hard Truths – A Look Ahead to the 2014 Budget

Chancellor of the Exchequer, George Osborne, will deliver the 2014 Budget on Wednesday, 19th March – little more than three months after he delivered the Autumn Statement.

When Osborne delivered his Budget in March 2013, the news for the UK economy wasn’t particularly good – in fact, many commentators were worrying about the UK slipping back into a ‘triple-dip recession.’ Since then, the forecasts and figures are much improved and in December, the Chancellor was able to predict growth of 1.4% in 2013 and 2.4% in 2014.

These figures have since been confirmed by the IMF, which recently gave a very positive assessment of the outlook for the UK. The anticipated growth of 2.4% is higher than for any other European country, and the economy is now growing at its fastest rate since 2007. Inflation was down to 2% in December and the latest figures show that unemployment has fallen sharply to 7.1% (much lower than most economists were anticipating).

So with the Chancellor surely in buoyant mood when he stands up to deliver his speech, can we look forward to some Budget handouts? After all, there is a General Election only 15 months away and the European elections are in May of this year, at which the Conservatives risk coming a poor third behind UKIP and Labour. After four years of pain, it must surely be time for the Chancellor to place less emphasis on austerity…

Sadly, the answer is ‘no’.

In a speech on January 6th, George Osborne warned that 2014 would be “a year of hard truths.” He stressed that the UK economy “still had a long way to go” and that difficult decisions would have to be made. Significantly, he still requires another £25bn of savings (or ‘cuts’ depending on your political standpoint) and is looking to the welfare budget for the majority of this, particularly targeting young people of working age.

The Budget speech will be one that George Osborne will enjoy giving – he will claim the credit for the improvement in the economy and a further fall in the UK budget deficit. But the mood will remain sombre and the message simple: the UK economy has come a long way and is doing better than a great many of its competitors – but we cannot relax now.

The Budget Deficit

The UK’s budget deficit narrowed sharply in December, when there was a net deficit of £1.03bn compared to the £3.58bn in the previous month. Historically (taking the period 1995 to 2013), the budget deficit has averaged £1.23bn per month. George Osborne will welcome the reduction and look ahead to further falls in the deficit, but to many right-wing commentators it will remain far too large for comfort.

Welfare Spending

As noted above, this is the area where the Chancellor will look for the bulk of his savings. He will argue that it is absurd not to target the huge welfare budget, given that savings would otherwise have to come from more (politically sensitive) areas such as schools. However, Osborne is likely to resist calls from some of his backbenchers to make cuts in NHS budgets. That money is likely to remain ring fenced.

Housing

Figures released by the Bank of England revealed that £12.4bn in new mortgage loans was approved in December, putting mortgage lending at a six year high. The housing market rose by between 8% and 10% in 2013 (depending on which survey you use) but this included some notable ‘hot-spots’ such as London and the South East, and Manchester.

When George Osborne announced his help-to-buy scheme in the last Budget many commentators worried that it would create a ‘housing bubble’ and these latest figures will have done nothing to calm those fears. The Chancellor – backed by a recent study from the Institute for Fiscal Studies – will refute them and claim the help-to-buy scheme as a resounding success.

Unemployment

As above, unemployment came down significantly in December. Most economists were expecting a fall to 7.3%: instead unemployment came in at 7.1%. The Chancellor will anticipate further falls in 2014 and don’t be surprised to see further measures to encourage employers to take on staff, particularly in sectors like manufacturing and engineering.

Interest rates

An unemployment rate of 7% is the Bank of England’s ‘forward guidance threshold’ at which it was theoretically going to consider interest rate rises. However, no sooner had the figures been announced than Governor Mark Carney was declaring that rate rises were unlikely at the current moment, the UK economy being “well short of escape velocity.” Expect to hear the Chancellor use a phrase like, ‘this Government has overseen the longest period of sustained low interest rates since…’

That then is the background to the March Budget and a look ahead to some of the points we expect to see in it.

As usual, we will be writing our own Budget Summary on March 19th and we’ll aim to have this with our clients the following day.

Should you have any questions on how the planned changes in the Budget – or the outlook for the UK economy – might impact on your financial planning then as always, don’t hesitate to contact us.

 

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Hints and Tips for the Tax Year End

As always, the end of the tax year is an important date in anyone’s financial planning calendar. In most cases, tax allowances end with the tax year: making the best use of them while they are available can mean a big difference to the eventual returns from your savings and investments.

We have therefore put together some hints and tips which will hopefully guide your financial planning as the end of the tax year approaches – but as always, if you have any questions on any of the points below don’t hesitate to get in touch with us.

  • First and foremost make full use of your Individual Savings Account (ISA) allowance. The limit for 2013/14 is £11,520 but if you don’t use it by April 5th it is lost. Husbands and wives both have an allowance, and from April 6th the limit will rise to £11,880. If you are saving for children don’t forget to make use of Junior ISAs.
  • An often overlooked allowance is your annual Capital Gains Tax allowance. The amount for the current year is £10,900 (rising to £11,000 in 2014/15) and again both husband and wife have the allowance – so there is scope for transferring assets between you in order to reduce your tax bill.
  • If you believe that your estate might be liable for Inheritance Tax (the current limit is £325,000, which is frozen until 2017/18) then it makes sense to do something about it. Inheritance tax is an area where a little planning can go a long way. First of all you can make annual gifts of £3,000 free of any tax liability and also use any unused allowance from the previous year. You can also make gifts from regular income, providing they don’t reduce your ‘normal’ standard of living. It’s also possible to make IHT–free investments, although that is probably outside the scope of these relatively basic notes.
  • An increasing number of employers now offer arrangements whereby employees can sacrifice salary for approved share options or pension contributions. It may be worth talking to your employer to see if this is possible, as it can be very tax efficient for both the employer and the employee.
  • Irrespective of the position with your employer it always makes sense to review your pension arrangements, particularly with the Government reducing the Pension Lifetime Allowance from 6th April 2014. The reduction to £1.25m has potentially serious implications for many people and if you feel that you may be affected you should get in touch with us.
  • You can also start pension contributions for your children, even if they do not have any earnings. A net contribution of £2,880 will be grossed up to £3,600 with tax relief – a generous donation from the taxman!
  • If your spouse doesn’t work – or earns less than the annual personal allowance – you should consider moving assets into his or her name. This is a perfectly legal and perfectly sensible tax planning move: again, we will be happy to give you advice on how to do this.
  • Remember that interest paid on bank and building society deposits will have tax deducted at 20%. If you do not pay tax then you can sign a form to have the interest paid without the deduction of tax. Alternatively, you can submit a repayment claim to HMRC.
  • Finally, make a will. Over half the UK adult population do not have a valid will and dying without one (dying ‘intestate’) can have serious implications for your financial affairs. Don’t assume everything will go to your spouse – it may not! A good will can minimise tax and give your family security and protection. We will discuss the points that you need to consider and we’ll work with your solicitor to make sure that your will accurately and clearly reflects your financial planning.

Hopefully the above points will help you plan for the end of the tax year and make the most of the allowances that are available.

Remember, they largely disappear at midnight on April 5th (which is a Saturday this year, so for practical purposes the last day of the financial year is Friday April 4th.)

As above, if you have any questions on any of these points or suggestions then we are only a phone call or an email away

 

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Eastbourne the Sunshine Coast !

My First Week in Eastbourne – by Adrian Elliott – ISO Certified Financial Planner

Finally the paint has dried on the walls and the office is now open!

So how has my first week been?

We had a number of client meetings organised for this week and the reaction and feedback has been brilliant, they all loved the new office, especially the corporate colour chairs.  Oh and yes, the chocolate helped!

There have been a few teething problems, like deciding on cups, hence our company colour paper cups! Eco friendly of course, provided by Tidmas Townsend – shameless plug ! but thank you Mark !

Normally our business is generated from referrals, however, this week we were surprised that we had a couple of potential clients just walk in and ask for advice after seeing our signs courtesy of X-treme Print – yes I know another plug – but thank you Kerry

We’re all delighted with the response, mainly through social media and the people who have seen the project unfold and the journey I have been on leading from Reigate to Eastbourne – we always had the plan that Concept would have a new office in Eastbourne (who says planning does not work!)  Can I just take this opportunity to thank all those involved in making this happen – especially the team – without the team there is no dream !!

Finally ……..The commute to work now takes me 9 minutes as opposed to 90 minutes! Albeit I’ve now started canoeing to work!  Who says Eastbourne is the sunshine coast !!

We are looking forward to welcoming more people in to our new office and introducing our ‘Award Winning Firm, Concept Financial Planning.’

Adrian

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Inflation Rates: What’s Pushing our Prices Up or Down?

The ONS (Office of National Statistics) revealed recently that the UK inflation rate had dropped to 2% in December 2013, but what actually contributes to influencing our inflation rate, moving the prices of the goods we use up or down?

Over the last five years, the three main contributors to the 12-month inflation rate were food & non-alcoholic beverages, housing, water, electricity, gas & other fuels, and transport (including motor fuels). Combined, these three sectors have, on average, accounted for over half of the 12 month inflation rate each month.

The largest downward contributions to the change in the CPI 12-month rate between November and December 2013 came from food & non-alcoholic beverages. Prices overall rose between November and December 2013 as they do between these months in most years. The rate of the rise was smaller than between the same two months in 2012 and was the smallest it has been since 2006. The downward contribution came from price movements for most foodstuffs and non-alcoholic beverages, with the largest contributions coming from price movements for fruit and meat.

These downward contributions were partially offset by an upward contribution from prices for bread and cereals where the rate of price increases has accelerated. Looking over the longer term, inflation for food and non-alcoholic beverages has grown at a faster rate than overall inflation in each of the last eight years.

Overall, the cost of recreation and culture fell at a quicker rate between November and December 2013 than between the same two months in 2012. The downward contribution came from across the sector, with the largest contribution coming from prices for games, toys and hobbies – notably computer games, where there were reports of sales and lower priced games on older platforms.

The largest (though relatively small compared to many months) upward contribution to the change in the CPI 12 month rate between November and December 2013, came from transport, where prices overall rose at a quicker rate between November and December 2013 than between the same two months in 2012.

The majority of the upward contribution came from prices for petrol and diesel. Petrol prices rose by 0.5 pence per litre between November and December 2013 compared with a fall of 2.8 pence per litre between the same two months in 2012, to stand at 130.4 pence. Diesel prices rose by 0.8 pence per litre between November and December 2013 compared with a fall of 1.4 pence per litre between the same two months in 2013, to stand at 138.3 pence. The upward contribution was partially offset by air fares where prices increased between November and December 2013 as usual, but at a slower rate than in 2012.


Sources: www.ons.gov.uk

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Why Directors and Business Owners Fail to Plan their Retirement

Company directors and owners of SMEs make plans and do forecasts all the time. Cash flow forecasts, SWOT analyses, plans for renewals and refurbishment; there’s hardly a day when they’re not eyeball to eyeball with a spreadsheet.

So why do so many of them fail to plan their own retirements? With studies suggesting that only 1 in 3 directors and business owners has a comprehensive retirement plan in place – and that only 1 in 2 of those with a plan see that plan succeed – there is clearly a need for more directors to plan properly. Why do so many of them fail to do so?

Over the years we’ve probably been given half a dozen answers when we’ve asked that question. As you’ll see, none of them really hold water…

“I haven’t got time.” The simple fact is that no one ever has time. And yet planning your retirement is one of the most important jobs you’ll ever do. As the old saying goes, a director or owner of a small business will either walk out of his business or be carried out of it. Assuming your preferred course of action is the former, then there needs to be enough money waiting when you do eventually walk out – and the only way you can make sure of that is to plan for it.

“It’s too early/too late.” It’s not too early if you’re in your twenties or thirties and it isn’t too late if you’re in your fifties or sixties. We know that in your twenties and thirties you’re working all the hours in the day to build your business: but trust me, you will get older – rather more quickly than you think. And yes, of course it’s easier to achieve savings targets if you have more time but the simple fact is that there is need for financial planning at all ages, as personal circumstances and financial planning goals are always changing.

“I’m going to keep working.” There seems to be a trend amongst some business owners and directors at the moment to declare that they’ll never stop working, that nothing is as satisfying as working so why would you ever want to stop? Unfortunately your health, your family and your competitors may eventually play a part in this decision. In our experience, there comes a time for every entrepreneur and director when ‘enough is enough’ and when that time comes it needs to have been planned for.

“It’s boring/not worth it.” In some ways this is one of the easiest objections to understand. Many directors and entrepreneurs – especially younger ones – have seen their own parents dutifully save for retirement and then not be very well off when they do finish work. Unfortunately, everyone now working faces a very simple fact: the population is getting older and the Government simply won’t be able to fund the retirement you want.

“The numbers are too big/too frightening.” Sadly, this is a reflection of proper financial planning. If we’re going to plan for the retirement you really want then the numbers will be big – and they will be challenging. But there is no point in us preparing a financial plan which provides less than you want – and it’s surprising what can be achieved if you save consistently and keep your savings and investments under regular review.

“My business is my pension.” Despite the fact that virtually no businesses are sold at exactly the right time for exactly the right amount of money, many directors and business owners still say this. Of course the answer is to build your business but you also need to build cash outside your business as well. That’s what gives you choice and control and, ultimately, that’s what allows you to dictate the timing and the quality of your retirement.

We’re always happy to talk about a client’s retirement planning. Directors and business owners can plan for their retirement very tax efficiently – and they enjoy flexibility which certainly isn’t available to normal employees. It makes sense to explore the options: we promise you that it isn’t too late and if there is one thing we will guarantee you – it won’t be boring … !!

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Will the State Pension really fund your post-retirement leisure?

Too many people are going to rely on the state pension in retirement to provide for all their needs and wants, including their leisure activities, a Nationwide survey has found. Nearly half of the 2,400 surveyed rely on or plan to rely on the state pension for their post-retirement holidays and other leisure activities. Going on a cruise or lazing on an exotic beach somewhere might turn out to be a bit beyond the state pension pocket!

The Nationwide findings also indicate that more than a quarter of all UK adults who say they plan to retire have not started planning for it yet. When it comes to planning financially for retirement, women appear to be less prudent than men. Nearly a third of women planning to retire admit they have not yet started putting money aside to finance their retirement, compared to 24% of men. The survey indicated that while it is not surprising that nearly two thirds of 18 to 24 year olds have yet to start thinking about their retirement plans, astonishingly nearly one in four UK adults aged between 45 and 54 have still not made any financial provision for their retirement years.

53% of men rely or plan to rely on their basic state pension compared to 44% of women. Reliance on the basic state pension also generally appears to increase with age. Whereas only 39% of those aged between 25 and 34 plan to use the basic state pension to fund post-retirement leisure activities, this rises to 58% of people aged over 55. Is this a sad but inevitable outcome of not planning to save earlier for retirement?

The study reveals that seeing the Northern Lights is one of the most popular aspirations with more than two in five UK adults not yet retired admitting they would like to visit Northern Norway. A seven-night Northern Lights break to Lapland is likely to cost around £1,000 per person half board, inclusive of activities such as a snowmobile ride and a husky safari. If this trip was to be funded purely from the basic state pension, it would require someone to save up their entire state pension for a minimum of nine weeks.

In the Nationwide survey, people were asked how else they expected to fund their post-retirement leisure. The main responses were:

  • money in a current account or savings account, including ISAs (44%)
  • the cash lump sum claimed from a private pension (31%)
  • an annuity (26%)
  • money from property, such as rent from properties or downsizing (17%)
  • inheritance from other people, such as family and friends (15%)

In addition, more than one in five (22%) of the survey respondents stated that they plan to continue working part-time during retirement in order to fund any leisure activities.

Without one or more of these additional income sources planned for, retired people are unlikely to have enough to achieve the lifestyle that they hope for. There is little doubt that the longer retirement savings planning is ignored, the more disastrous the outcomes for people’s post-retirement finances, and the tougher those later years are likely to become.

 

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