Tag: independent financial advice

Categories

financial planning in your forties

It’s well known life begins at forty. Doesn’t it?

It should be an exciting decade, full of plans and aspirations. It’s also likely to be a time of optimum earning potential.

What’s more, it’s a crucial decade to take a step back and make sure your finances are on track to meet your goals.

There’ll be some decisions you’ll already have taken in your twenties or thirties, which will have had an impact. You may have bought your own home, for example, or put some savings away in cash, investments or pensions.

If things don’t look quite as rosy as you’d hoped, though, your forties are a good time to take stock, as there’s still time to make adjustments and give your investments time to grow.

Don’t forget, whatever savings you can make now will enable you to pursue your dreams later on.

Here are four key tips for shrewd financial planning at this important time of life.

Budget ruthlessly

Just because life may feel comfortable with regular pay rises and bonuses don’t fall into the temptation of spending more than you need. Do you really need that Costa coffee or M&S lunch every day?

Apps like Money Dashboard or Moneyhub can be helpful in showing you where your money’s going. Simple steps like cancelling subscriptions or switching bill providers can make a significant difference.

Historic studies show that investments usually outperform cash savings so any disposable income you can invest will be beneficial. If you can put money aside in a pension you’ll also be taking advantage of the tax relief available. Make sure you use your ISA allowance too for more accessible funds.

Carry out a protection audit

Think about what if the unexpected happened. Your forties are a time of life where you may find yourself part of what’s known as ‘the sandwich generation’ i.e. caring for elderly parents at the same time as looking after young children. This can put extra pressure on you. Make sure you’re protected should the worst happen by ensuring you have a good emergency fund in place. Also think about critical illness cover and life insurance.

Property plans

Your home will be a fundamental part of your financial planning at this time of life. If you feel you need a larger property, these are likely to be your peak earning years so now is the time to secure the best mortgage you can and find your dream home. On the other hand, if you’re quite happy where you are, it may be a good time to remortgage to get a better deal.

Family spending

Everyone’s situation is different. You may have children at university or you may still be having to pay for nursery fees. Whatever your position, make sure you budget accordingly and allow for inflation, especially if you’re paying private school fees. Work out the priorities for your family – the best education now or a house deposit in the future. It’s important not to derail your own life savings for the sake of your children as no one will benefit in the long run.

By doing some sound financial planning now, you’ll have more hope of continuing in the style you want to live, well beyond your forties.

Sources
https://www.telegraph.co.uk/money/smart-life-saving-for-the-future/financial-advice-in-your-forties/?utm_campaign=tmgspk_plr_2144_AqvZbbk8gXHK&plr=1&utm_content=2144&utm_source=tmgspk&WT.mc_id=tmgspk_plr_2144_AqvZbbk8gXHK&utm_medi

explaining fund charges and investment fees

If you hold any investments or already work with a financial adviser then it’s likely that you are familiar with the fees you pay to invest or receive advice.

But what are these fees and why are they so important to keep a handle on?  This video gives you information on what fees you might be charged and why  you should keep track of them.

Post-Brexit trade uncertainty: A difficult time for British exports

For British companies who rely heavily on the E.U. export market, Brexit has been a nightmare, to say the least. Until recently, though, the full effects on British exporters have been unclear.

Some versions of Brexit currently under consideration by the cabinet could potentially cut U.K. exports by as much as a third, according to a study by a team of trade experts at the University of Sussex. The study also predicted that a fall in British exports would hit ‘Leave’ voting areas such as Sunderland, Coventry and Derby the hardest.

These areas are traditional hubs for British industry and could potentially see a massive rise in unemployment in the post-Brexit landscape. What’s more, the sectors that some in the government see as replacing industries hit by Brexit – such as design, marketing and hi-tech – as of now have little presence in these areas.

These industries tend to be located around London, the M4 corridor and Cambridge – regions that voted strongly against leaving the E.U., which could, ironically, be the least affected by the separation.

Even if Britain were to sign a free-trade agreement with every other major trade partner, some British industries would still be hit hard.

Food exports, for instance, would fall by 34% and textile exports would shrink by 30%, if the EU implemented protectionist trade policies against the E.U. In this scenario, overall manufacturing output would be cut by 13%.

Already, U.K. trade has begun to suffer from Brexit uncertainty. As many as 9,000 British firms chose either not to start exporting or stopped selling abroad in 2016 because of doubt around Britain’s trade position.

In the year after Brexit, exports fell by 1%, which may not seem like an alarming figure. However, trade commentators suggest that this will grow over time. This is due to the effect of British companies that would have become major exporters, but because of Brexit will never get a chance to explore new markets. As a lag period passes, this is expected to be felt hard and could potentially see the U.K. stagnate as a trade power compared to its competitors.

However, with the final Brexit agreement still highly contestable, the full effect of Brexit on British exports is anyone’s guess.


Sources
https://www.telegraph.co.uk/business/2018/07/29/britain-loses-thousands-exporters-trade-uncertainty/
https://www.theguardian.com/politics/2018/feb/07/brexit-manufacturing-exports-leave

HMRC reveal the UK’s tax landscape

At the beginning of March 2018, HMRC published figures on personal taxation and income throughout the UK for the 2015/16 tax year. The full report offers some interesting insights into the nation’s finances.

According to the report by HMRC, the UK population collectively earned moreincome in 2015/16 than ever before. Total UK income broke the £1 trillion mark for the first time, reaching £1.040 trillion. The total income tax paid on this staggering amount was £178 billion, which is £11 billion more than the £167 billion paid in 2014/15. Perhaps unsurprisingly, therefore, income tax made up the greatest proportion of the government’s total revenue during that year. The total amount collected was enough to pay for the government’s combined investment in education, defence, policing, transport and welfare benefits, not including pensions.

Considering the hefty total income tax bill, you might be surprised to learn that 53% of the UK population (34.6 billion people) paid no income tax at all in 2015/16. Of the remaining 31 million tax payers, 25.3 million paid the basic rate of tax, 4.5 million taxpayers were liable at the higher rate and 800,000 were taxed at the “savers” rate. Only 400,000, less than 1% of all taxpayers, were taxed at the additional rate. Even though they made up just 7% of the total UK population, higher and additional rate taxpayers brought in £120.5 billion of the £178 billion collected – just over two thirds (67%) of the total income tax paid in 2015/16. The 400,000 people earning enough to be taxed at the additional rate paid 30% of the total UK tax bill.

“Income tax is critical to public spending. It represents £1 in every £4 that the government raises in tax,” said Alistair McQueen, Head of Savings & Retirement at Aviva plc. “The latest figures show that our total income rose by 6% over the latest year. At the same time, our total tax bill also rose by 6%.”

Sources
https://www.linkedin.com/pulse/new-data-5-surprising-facts-income-tax-uk-including-most-mcqueen/
https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/populationestimates/articles/overviewoftheukpopulation/july2017
https://www.ukpublicspending.co.uk/piechart_2017_UK_total
https://www.ifs.org.uk/publications/9178
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/685472/National_Statistics_T3_1_to_T3_11_publication_-_FINAL.pdf

ernie to get slimmer

Premium bonds celebrated their 60th anniversary last year; whilst they’ve remained popular throughout that time, it’s not hard to see that what they offer is closer to a lottery ticket than a viable investment opportunity. The chances of winning the jackpot is 26 million to one, and as all the interest generated in money invested goes to the prize fund you won’t see any return on your investment unless you’re one of the lucky few to bag a top prize.

However, they’re set to become even less attractive later this year, when the chances of winning the bigger prizes will become slimmer still. National Savings and Investments (NS&I) has announced that from May 2017, the estimated number of tax-free £100,000 prizes will fall from three per month to just two. The £25,000 prizes will also be reduced, going from eleven to nine each month. The amount of monthly £10,000, £5,000 and £1,000 prizes is also set to go down with the total prize fund shrinking from £69.5 million to £63.8 million.

The reductions are due to NS&I making cuts across a range of saving products to reflect market conditions. Direct ISA and Direct Saver accounts will see interest rates cut from 1% to 0.75% and 0.8% to 0.7% respectively at the same time.

Whilst a drop in the number of big prizes is undoubtedly a disappointment for savers, the changes do little to change the positives and negatives of premium bonds overall. As an investment opportunity they offer no guarantees but the fact that any money put in is backed by the treasury means your investment is fully protected.

It’s not all doom and gloom for NS&I products, however. Last November, Chancellor Philip Hammond announced a new savings bond would become available in spring 2017, offering what was described as a “market-leading” rate of approximately 2.2%. The precise rate is set to be confirmed soon, and the three-year bond will be available for anyone over 16, allowing them to invest up to £3,000.

Sources
http://www.bbc.co.uk/news/business-38893452

Financial planning in your twenties, thirties and forties …

This is the first of two articles where we look at ‘financial planning through the decades:’ how your financial planning needs change through the various stages of your life.

Clearly the average client’s planning needs are completely different in their twenties to their fifties and, while it’s true to say there’s no such thing as an ‘average’ client, this short guide will hopefully help to set most people on the right path to a well-planned and prosperous financial future.

In this article we look at financial planning in your twenties, thirties and forties – next month we’ll look at how your financial planning needs change as you move into your fifties and beyond.

In your twenties

For many people their twenties come with one huge financial planning plus – no children. If you’re what used to be known as a DINKY (dual income, no kids) then it makes sense to take advantage of it.

It may not sound much fun to think about a pension as you contemplate nights out and holidays in Ibiza, but making a start on saving for your retirement – even if the contributions are relatively low – will pay huge dividends later on in life. With the vast majority of people now set to retire at 65 or later, money invested in your twenties will have the best part of 40 years to grow and benefit from the tax advantages that pensions enjoy.

It’s also important to start saving for the deposit on your first home. Mortgage lenders have toughened up their lending criteria considerably over the past few years and the more deposit you can put down on your first home, the better mortgage rate you’ll be able to obtain.

If you are saving in your twenties, then make sure that you save tax efficiently by opening an Individual Savings Account (ISA). There’s no point paying tax on your savings when you don’t need to.

Finally, your twenties may be a good time to look to reduce debt. With university students now expecting to graduate with upwards of £30,000 of debt, the time before children and mortgages come along may be a sensible time to try and pay off some debt – and hence ease the burden of future interest charges.

In your thirties

Your thirties can be a tough time financially, especially if starting a family means that one partner isn’t working, or only working part-time. Perhaps the most sensible advice is to try and avoid debt building up in your thirties – but if it is unavoidable, keep an eye on the interest rate you’re paying and try and pay off ‘expensive’ debt (such as credit cards) first.

If you’re in a company pension then your contributions will automatically be deducted from your wages – however, if you’re not in a company scheme, or you’re self-employed, then it is vital that you start to make some pension contributions at this stage in your life.

It’s also a good idea to start working with an independent financial adviser to regularly review your finances – for example, to make sure you have the most competitive mortgage and that your pension is on track to give you the retirement you’ll ultimately want.

Even though your thirties may be difficult financially, it obviously makes sense to try and save a little. As in your twenties, remember to make sure that your savings are invested tax efficiently and don’t be afraid to take a long term view with them.

In your forties

The good news as you enter your forties is that you’ll now be approaching your peak earning years. The chances are that you’ll still have children at home and a mortgage to pay, but now is the time to be increasing your pension and savings contributions and cutting down on debt.

These are the years when good financial planning can make a tremendous difference to your long-term prosperity. It’s not that many years since you were in your twenties – and sadly, it won’t be that long until you’re retiring, so efficient and effective planning becomes ever more important.

Many people start to inherit money in their forties and it might also be the time to start thinking about the potential cost of further education for your children. A lot of clients we speak to simply don’t want their children to graduate with a huge burden of debt, and savings that are made now could help your children significantly.

As we said at the beginning of this article, there are as many ‘right’ answers to financial planning as there are clients, every client is different – but the guidelines above will hold good for most people.

If you’d like to talk to us at any time about your financial planning – irrespective of your age – then don’t hesitate to contact us. 01737 225665 or advice@conceptfp.com

 

building your financial future

Financial planning for the end of Tax Year

The nights are finally starting to get a little lighter – maybe we can start looking forward to Spring after all. In financial services, Spring means two things; the Budget (on March 20th this year) and the end of the tax year on Friday April 5th.

This article gives some suggestions on financial planning steps to take before the end of the tax year, so that you can make the most of your tax allowances and organise your affairs as tax efficiently as possible. However, the first point to make is a practical one.

Easter is early this year, with Good Friday on March 29th and Easter Monday on April 1st. With holidays bound to impact on administration at some financial institutions, our first suggestion is that if you’re going to act before the end of the financial year, don’t leave it until the last minute. If you want to make sure your transactions are processed in time, look on the week commencing March 25th as the last practical week.

Individual Savings Accounts

The overall personal limit for an Individual Savings Account (ISA) for the current tax year is £11,280 and this will increase to £11,520 for the new tax year commencing on April 6th. It’s important to note that if you are only contributing to a cash ISA then the maximum is exactly half the overall allowance – so £5,640 and £5,760 respectively. The other key point is that if you don’t use your ISA allowances for this tax year then they are lost – they can’t be ‘carried forward’ to the next tax year.

We’d always recommend making use of your ISA allowances if you can – you pay no tax on capital gains which you make within an ISA or income you take from it. For long term investment there is a huge range of funds available within an ISA ‘wrapper’ from the very cautious to the very adventurous: as always, we’d be happy to discuss all the options with you if you’d like some advice.

Capital Gains Tax

Accountants will tell you that CGT is the ‘forgotten’ tax relief – people who religiously use their full ISA allowance completely fail to utilise their CGT allowance. For the current tax year everyone has a CGT allowance of £10,600 – meaning that capital gains made on investments such as shares are free of tax if they are within this limit. Husbands and wives can gift assets to each other without incurring a CGT charge, effectively giving a married couple a limit of £21,200. Like the ISA allowance though, the CGT allowance is an annual one, and cannot be carried forward to a subsequent tax year.

Inheritance Tax

The current individual limit for Inheritance Tax is £325,000 and this will remain the same for the tax year 2013/2014. Remember though, that you can make gifts during a tax year and these will be exempt from IHT if they fall within the Revenue limits: the limit is £3,000 per person, so £6,000 for a married couple. Although these amounts are small they can still help to reduce the value of an estate.

There are, of course, far more complex and sophisticated Inheritance Tax planning measures such as the use of trusts; if you feel that you would like specialist advice in this area then we will be happy to help.

Pensions

Why have we left pensions to (almost) the end? For a simple reason – because whilst there is enormous scope to make tax efficient investments through your pension (especially for higher-rate taxpayers) the legislation and rules are complex and it is an area where specialist financial planning advice is almost always required.

The top rate of tax is shortly being reduced from 50% to 45%, so many very high earners will be motivated to make pension contributions now, and as usual there is the chance to make use of reliefs and allowances which haven’t been used from previous tax years.

Equally, those people who are self-employed or directors of companies may need to think about making sure their pensions are as tax efficient as possible, and set up to ensure that they receive the maximum benefits from the business they are running. It all adds up to an area where specialist advice is essential and we are always ready to sit down with clients and use our expertise and experience to make sure they have exactly the right pension planning.

Hopefully that’s a useful overview of the planning steps you should take before the year end. There are also other possibilities such as the Enterprise Investment Scheme and Venture Capital Trusts which we haven’t touched on due to their complexity. The key message is simple: “talk to us.” We’re never more than a phone call or an e-mail away and we’re happy to explain any of the subjects above in much greater detail.  01737 225665 or advice@conceptfp.com

*The Financial Services Authority does not regulate taxation advice or trusts.


Sources: http://www.hmrc.gov.uk/

building your financial future

Government launch date for 120% drawdown limit …

The new drawdown limit of 120% will be introduced from 26 March, the government has revealed.

Chancellor George Osborne announced plans to return the limit for capped drawdown to 120% of  GAD (the Government Actuary’s Department) rate in his Autumn Statement in December 2012, but gave no date for the change.

In April 2011 the government changed the drawdown limit from 120% of the GAD rate, reducing it to 100%.

Prior to this, individuals could take 120% of the income level set by GAD. This was reduced to 100% in order to prevent investors from depleting their savings too quickly.

The move to reinstate the 20% uplift at the end of last year followed growing pressure from pension providers and MPs, who received complaints from retirees hit by cuts of up to 50% in their income as the GAD rate tracked annuity rates downward.

How providers are going to facilitate this change we are unsure at the moment, although welcome for retirees in drawdown they still have to wait until March.

 

For further information please do not hesitate to contact us on 01737 225665 or advice@conceptfp.com

 

building your financial future

 

 

Source: Citywire NMA Alex Steger

Making sense of savings transfers to overseas pension schemes…

Transfers of pension savings to overseas pension schemes can be made free of UK tax where they do not exceed the lifetime allowance. The intention is that someone who leaves the UK and takes their pension savings with them will be in broadly the same position as someone who remains in the UK with their pension savings. It is not intended to provide a way to pay amounts that are not allowed under UK rules. Nor is it intended to provide more tax relief than would have been available in the UK.

The HMRC rules on transferring pension funds from a UK registered pension scheme to an overseas pension scheme changed on 6 April 2012, with new conditions that a pension scheme must meet to be a Qualifying Recognised Overseas Pension Scheme (QROPS). There are also new information and reporting requirements and shorter reporting time limits. These changes affect:

  • an individual transferring their pension savings
  • a UK registered pension scheme making a transfer to a QROPS
  • a QROPS that receives or has received a transfer from a UK scheme.
Within UK pensions legislation, pension scheme administrators are required to pass on information to other UK administrators about crystallised rights at the point of a transfer. However, under the specific QROPS legislation this rule does not apply to overseas administrators. It has recently been identified within the UK pensions industry that this anomaly could allow investors to take a tax-free lump, once before they transfer to a QROPS and again after their money is transferred back to the UK.

This is possible because the QROPS is not required to identify incoming crystallised funds, so when the money is transferred back to the UK, the receiving scheme may assume the funds are uncrystallised and provide a a second lump-sum payment.

HM Revenue & Customs is being urged to close this loophole in QROPS transfer rules which could allow investors to take two tax-free cash lump sums from their pension. UK pension scheme administrators typically insist on being told whether a pension has been put into draw-down when accepting all transfers, and some UK industry members believe that this should apply in relation to QROPS transfers. This would eliminate the anomaly as long as misinformation is not deliberately provided. HMRC has been made aware of the anomaly and has indicated that this will be resolved.

For more information please do not hesitate to contact us on 01737 225 665 or advice@conceptfp.com

 

**Winner** 2012 Best Retirement Planner – Good Advice Awards – Moneyfacts

 

 

 

Pension Death Benefit Changes – April 2011

Information from Her Majesty’s Revenue and Customs (HMRC) signals that there will be a number of significant changes in the pension death benefit rules from April 2011.

The main changes after April 2011, concern three aspects:

1) what pension benefits can be passed on at death

2) what the tax charges may be

3) what the implications are for Inheritance Tax liability

The last major revisions to the HMRC Pension Death Benefit rules were made in April 2006.

For deaths after 5th April 2011, pension lump sum benefits will be allowed at any age. If these benefits are paid to dependants from ‘crystallised rights’ (relevant existing pensions being paid to the individual, which can be an aggregate of several pensions) a tax charge of 55% will be made – an increase from the present 35%. A tax exemption may be allowed if this lump sum death benefit is made to a charity.

From 6th April 2011, the risk of Inheritance Tax charges on pension rights is lessened. Previously any changes to pension rights by an individual, prior to death, such as deferring taking retirement benefits (depriving an estate by an ’omission to act’) or reducing pension income, could be perceived by HMRC as an attempt to benefit others after their death.

Where HMRC perceives that an individual had deferred taking their retirement benefits or had reduced their pension income for retirement planning reasons, HMRC will not pursue a claim, particularly if the benefit is paid to a widow(er), civil partner or financial dependant.

On death, if before age 75, after 5th April 2011, any lump sum benefit will still be tax free if paid from ‘uncrystallised rights’ – funds held in respect of the member under a money purchase arrangement that have not as yet been used to provide that member with a benefit under the scheme and so have not crystallised.

Lump sum death benefits paid to charities from ‘crystallised rights’ will not be subject to the 55% tax charge. After 5th April 2011 the option to pay non-annuitised pension benefits tax free to charities, has been extended to include deaths before age 75, subject to a number of criteria, including that the deceased member or dependant has nominated a recipient charity. It will be no longer possible for a scheme administrator to nominate a recipient charity.