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The 8 most important points from the 2014 Budget

The Chancellor may have gone for the popular phrase from Chancellors of yore by taking ‘a penny off a pint’, but what were the real big announcements during The Budget 2014? We summarise the 8 main points:

1. Changes to pensions mean many more options than just buying an annuity

In measures to be introduced in April 2015, pensioners will have complete flexibility on how much of their pension they want to take at retirement, effectively eliminating the need to buy an annuity. This opens up many more options for what to do with your pension in your retirement years.

2. ISA revisions are great for savers

The ISA limit was increased to £15,000 a year and it was announced that Stocks & Shares ISAs and Cash ISAs would be merged into a New ISA. Again, this gives savers much more flexibility and potentially allows more of their income to be shielded within the tax free accounts.

3. New additions to the bonds market

A new Pensioners Bond will be introduced at the start of 2015 with what were described as ‘market leading rates’, thus giving pensioners another option for what to do with their newly released pension savings! There were also changes to Premium Bonds, with an increase in winners promised.

4. Personal tax allowance increase

The personal tax allowance was confirmed as increasing to £10,500 in April 2015, with the increase at the start of the tax year in April going to £10,000. Good news in that a little more of our money is saved away from taxation!

5. Small pension limits increased

For any small pension pots currently held, there was an increase in the total amount of individual pot that can be taken as a lump sum to £10,000. The Chancellor also announced an increase in the total number of pots, up to this size, that could be taken to three, meaning £30,000 could be taken in total.

6. Flexible drawdown limits reduced

In yet another pensions related matter for what was a busy Budget for the industry, savers now only need to have £12,000 (as opposed to £20,000) in their pot in order to access flexible drawdown.

7. Small measures for individuals and businesses; fuel duty, minimum wage and apprenticeships

Whilst these might not be the headline grabbers in overall cost terms, they will have an impact for many individuals and business owners. Fuel duty has been frozen in another attempt to get the current high costs down, whilst both the minimum wage and the number of apprenticeships were increased, with the Chancellor promising to ‘double’ the latter.

8. The new pound coin!

Perhaps it’s not actually one of the most important points from The Budget (though the Chancellor would point to the increased percentage of forged pound coins, which cost the economy) but it will certainly be one of the more visible ones when the new coin starts to enter circulation at some point around 2017.

Sources: gov.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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I’m not a Magician !

Blog by Adrian Elliott

Would you visit you Doctor and say the following?

Patient: “Doctor I don’t feel well, please make me feel better”
Doctor: “What are your symptoms?”
Patient: “I’m afraid I can’t tell you that.”
Doctor: “May I ask why?”
Patient: “I am not prepared to disclose any of my personal details to you.”
Doctor: “OK??…………!!! ”

What would your Doctor Say?

Recently the same scenario happened to myself (‘No, I wasn’t giving any Medical advice before you start getting concerned!’).

A perspective client called and wanted us to provide advice. Prior to any appointment we send our clients a ‘welcome pack’ with a covering letter confirming their appointment. Within the welcome pack we include a fact find and we kindly ask our clients to complete this prior to their introduction meeting and give a rationale why this is important.
The new clients I was due to meet, prior to their appointment rang to inform us that they found the fact find intrusive and they would not be completing it.
When I met the clients, they asked me for advice on investing a lump sum of money.
When we ask them for details about themselves they weren’t prepared to disclose anything as they did not believe that this was relevant.
Now with the best will in the world, I am not a magician ….. There are some many factors that need to be considered;

  • Tax circumstances – income tax / inheritance tax to name but 2 !
  • Used allowances for the tax year?
  • Risk they are willing to take
  • Their capacity to loss
  • Do they have any debts?

So many things that need to be answered and facts revealed

The doctor would never prescribe any tablets or drugs without all the information and a full examination and nor would I be willing to give professional advice without knowing all the facts – it’s dangerous for your wealth !

Take a look at our past blog ‘The trouble with facts is that there are so many of them!’

Adrian Elliott

Certified Financial Planner

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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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We are a nation of worriers but are we worrying about the right things ?

Britons spend more time planning their next holiday, haircut and shopping excursions than they do making preparations for their financial future, according to a new study by Scottish Widows, examining the long-term worries of the nation. The survey of 2,000 people conducted by One-Poll in December 2013 and January 2014, indicates that we may be trapped in a vicious circle of our own making, as the things we worry about most are also the things we tend to put off planning for.

The UK is revealed to be a nation of procrastinators with only (5%) delaying plans for a weekend food shop compared to (22%) who delay planning for retirement. 90% of people questioned in the survey think it is important to have a plan in place for retirement, yet more than one in three (36%) have no plans at all. Health is the number one worry for over half (57%) of the nation, but is also the area in which people are most likely to avoid taking action, with 28% of people putting off visiting the doctor or dentist.

The Top Ten Worries:
1.Our own health.
2.How much money we have to spend on an everyday basis.
3.The health of our kids.
4.Whether we’ll have enough to live on after retirement.
5.The health of our partner and relatives.
6.How much we weigh and losing weight.
7.How well our kids are doing at school and their later education.
8.Relationship with our partners and clearing debts (equal).
9.Employment including redundancy and our next job.
10.Whether you have locked the door to your home or car.

The Top Ten Delayed Plans:
1.Going to the doctor or dentist.
2.Saving for retirement and losing weight (equal).
3.Getting a haircut.
4.Having a plan in place for our financial future and getting a new job (equal).
5.Buying a new house.
6.‘I don’t put off planning anything’.
7.My physical and aesthetic appearance.
8.Saving for a holiday and planning an outfit for an occasion (equal).
9.Saving for a property.
10.Buying gifts for an occasion.

When asked how far in advance people start planning their financial future, 39% of people admit to worrying about whether they’ll have enough to live on after retirement, but only one in five (20%) worry about whether they should actually be contributing to a pension.

Alarmingly, only a quarter (26%) would start planning for retirement 20 years ahead of time, evidence that financial planning for the majority of working people is not as high up the priority list as it needs to be!

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Sources: www.scottishwidows.co.uk

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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An ISA millionaire shows the real power of tax free saving

Lord Lee, hailed as Britain’s first ISA millionaire, tells a compelling tale about how a sensible approach to investment, which includes the prevalent use of the tax free accounts, can pay huge dividends.

Writing in The Telegraph, Lord Lee describes how, after 16 years of investing a total of £126,000 into ISAs, his pot had grown to a hugely impressive £1 million.

Of course, not everyone who invests in ISAs will reach the level of return achieved by Lord Lee, but as we approach the April deadline for using your 2013/2014 annual ISA allowance, his examples proves a potent reminder of just how valuable ISAs can be to your investment portfolio.

Using mainly Stocks and Shares ISAs, Lee preaches patience to ISA investors and revealed that his own biggest investing flaw was a lack of it. Certainly Lee now seems to have little reason to worry, but with one holding sold early for between £4.88 and £11 now worth north of £20, the investor still clearly has some regrets.

For any investors who are not currently following Lord Lee’s example, April 5th is a key date. The end of the current tax year marks your last chance to invest up to the government imposed maximum ISA limit. This year the limit has been set at £11,520, with no more than £5,760 able to be held in a Cash ISA.

Lee ends his article by hailing British business and by saying that we, as a nation, should be encouraging responsible savings and investments. Certainly, using your ISA allowance is one very sensible way of starting to do just that.

Sources: http://www.telegraph.co.uk

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