Articles

Preparing Yourself For Retirement

Admin : November 4, 2019 7:12 pm : Articles, Blog, Financial Advice, Financial Planning, Pensions, Retirement
If you are aiming to retire within the next five years, its time to get into the mindset of considering the practicalities of fulfilling your desired lifestyle and making plans.

You now have just 60 pay packets left until you retire. This is a time when you’ll need to obtain up-to-date pension forecasts and obtain professional financial advice to make sure your retirement plans are on track.

Are you ready to retire?
The first step is to ask yourself if you are ready to retire. There are many factors to consider. Your financial affairs is the big factor to begin with. Your ability to afford retirement depends on your lifestyle, your family situation, and home ownership. If you have dependent children, or have 15 years left on your mortgage, the time might not be quite right.

You have to ensure retirement is the right move for you. Work can be stressful, but it can be rewarding and give you a sense of achievement. People may miss the routine of working life, and the day-to-day interaction with people.

Taking a different path
What you need might not be retirement, it could be change. A chance to get out from behind your desk to do something meaningful. Perhaps retirement is your ticket to achieving this. Taking a different path where money is no longer the prime motivation.
If you are afraid about having time on your hands after retirement, explore options for filling it well before you take the leap.

Major change in lifestyle
Retirement means a major change in lifestyle. You need a clear mind of what you want your life to look like and how to spend your time. Then you can work on arranging your finances to suit.

Decide on your priorities for retired life. Do you want to travel, or split your time between home and somewhere hot and exotic? Is there a particular hobby you want to immerse yourself in? What kind of leisure and social activities matter to you?

Later years in your retirement
Try not to get caught up in what happens right after you end work – also consider the later years in your retirement. Will long-term travel continue to be feasible as you get older? Will you need such a large house, or will it become a burden? And what about in the latter stages of life, should you need to fund care?

You must also have a clear picture of what kind of life you would like to lead in retirement and what it will cost. Then you can start to dig a little deeper into what you might be able to afford. This means getting to grips with your sources of income once your earnings stop.

Request up-to-date forecasts
Your first port of call is your pension – or pensions. Contact previous pension trustees to request up-to-date forecasts. If you’ve lost details of a pension scheme and need help, the Pension Tracing Service (0800 731 0193) may be able to help.

You should also find out what your likely state pension entitlement would be – you can do this by completing a BR19 form or by visiting www.direct.gov.uk.

Consolidate existing pensions
If you have personal pensions, you need to find out where they are invested and how they have performed. Also check if there are any valuable guarantees built into the contracts. It may make sense to consolidate existing pensions, making it easier for you to keep track of everything and reduce the amount of correspondence you receive.

With investments in general, it is important to review your strategy before you take the leap into retirement. You don’t need to suddenly become an ultra-conservative investor – you still want your portfolio to grow over the next few decades. Should the investment markets make a correction, you may want to limit your downside. Don’t forget, there may be another 30 years ahead.

Don’t put off confronting the truth
If your investments don’t look on course to give you the income you’d hoped for in retirement, don’t put off confronting the truth. You may need to revise your projected living costs. Alternatively, there’s still time to change your investments and you could also cut back on spending while you are still earning to generate more savings.

Your income can be used in other ways besides topping up your savings as you prepare for retirement. Clearing debts, including your mortgage, should be a priority before you retire. Whatever you owe on credit cards and loans, focus on paying off the debt that charges the most interest first. Debt will be the biggest burden once you do not have a regular working income.

Consider re-adjusting your finances
Having no mortgage to pay is a major step towards re-adjusting your finances for a post-salary life. You might also decide you want to sell up, whether to downsize, to give you a lump sum of cash to live off, or to fund your dreams of moving abroad. Either way, use your working income while you can to improve your home, maximising potential revenue when you come to sell it.

Finally, retirement is a huge change, both personally and financially – so big it might be too much to take in all at once. It makes good sense to practice at being retired before it becomes a reality, especially if you will have to make certain adjustments and sacrifices to compensate for a reduced income. You might even consider a phased retirement, cutting back on your hours gradually. This will not only soften the financial effect, it will also get you used to having more spare time to fill.

A PENSION IS A LONG-TERM INVESTMENT.

THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

PENSIONS ARE NOT NORMALLY ACCESSIBLE UNTIL AGE 55. YOUR PENSION INCOME COULD ALSO BE AFFECTED BY INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS. THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION, WHICH ARE SUBJECT TO CHANGE IN THE FUTURE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

Leave a response »

The Bank of Mum and Dad

Admin : October 26, 2019 12:23 pm : Articles, Blog, Financial Advice, Financial Planning, Homes and Property, Parents
The Building Societies Association (BSA) have recently published a raft of recommendations as to how the mortgage industry can support the Bank of Mum and Dad in their endeavours to help first-time buyers onto the property ladder.

They have called for more innovative products to be created to enable parents and grandparents to loan or gift money to family members who are would-be home owners. The BSA also wants building societies to provide clearer communication to help explain all the options, and it wants regulatory and tax barriers to be broken down.

Helping younger homebuyers climb onto the housing ladder
The BSA’s report recognises the contributions of the Bank of Mum and Dad to date, highlighting the billions of pounds that have been gifted and lent to help younger homebuyers climb onto the housing ladder.

They also confirmed that 90% of all building societies expect this form of financing to play an increasing role in helping first-time buyers over the next five to ten years. Their priority now is to help create an environment whereby the financial well-being of the older generation is not put at jeopardy due to their generosity in helping younger family members achieve their housing objectives.

86% of people surveyed wanted to own their own home, but the financial challenges facing first-time buyers meant many thought they would never achieve this aspiration.

In 2017 there were 360,000 first time buyers – but the minimum should be nearer 450,000. The ability to buy was increasingly concentrated on dual-earning households and those with higher incomes.

More than half of aspiring first-time buyers expected the Bank of Mum and Dad to support them onto the housing ladder.

Support between generations remains a fundamental ambition
The report also highlighted how the Bank of Mum and Dad wasn’t just about family members handing over cash in the form of gifts and loans – many customers wanted support between generations through guarantees or using their property or savings as security. Indeed, it also identified Equity Release or downsizing from larger properties as ways to support the younger generation.

Robin Fieth, Chief Executive of the BSA said: “Home ownership remains a fundamental ambition for the majority of people…against the challenging backdrop of high prices, a woefully inadequate supply of homes and a growing intergenerational divide, new ideas and strong debate are essential. Family help – the so-called ‘Bank of Mum and Dad’ – is great for those fortunate enough to have this option, but innovations in underwriting could help all potential first-time buyers.”

Mums and Dads – are you planning to lend money to your children?
It goes without saying that lending money to your loved ones shouldn’t endanger your own financial status. But if this is your plan then it requires professional financial advice to assess all of your options. If you would like to discuss this subject with us, please contact us here at Evolution Financial Planning.

YOUR HOME MAY BE REPOSSESSED
IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

APPLICATIONS ARE SUBJECT TO STATUS AND LENDING CRITERIA.

Leave a response »

Stocks and Shares ISA

Admin : October 6, 2019 7:23 pm : Articles, Blog, Financial Advice, Financial Planning, Saving and Investing, Working Women

Helping you realise your long-term financial goals

So you’re looking to accumulate a sum of money by investing. You may have a specific amount in mind. This could be to go towards helping to fund your child’s university fees or to pay for a trip of a lifetime.

When you invest in stocks and shares through an Individual Savings Account (ISA), you can choose to invest a lump sum or set up regular savings that suit your circumstances and your financial goals.

But before you start, here are some considerations before you begin saving towards your goal.

Firstly, do you have any existing debts outside of a mortgage, and do you have any current savings in case of an emergency?
You should also pay off any credit card or store card debts before you start saving. This is because the interest rate on this debt may exceed any returns you achieve by saving, certainly in the short term.

Having an emergency fund you can access quickly before you start saving towards your particular goal will help cover any unforeseeable expenses that may occur, when life throws a curve ball at you unexpectedly.

An ISA is a ‘tax-efficient investment wrapper’ that can be used to help save you both income and Capital Gains Tax. The total amount you can invest in a Stocks & Shares ISA during the current 2019/20 tax year is £20,000. This is known as your ISA allowance. Don’t forget this also applies to a spouse or partner, so combined you could currently save £40,000 during each tax year.

If you’re planning to save over a period of five years or even longer, we’ve provided some reasons why you might want to consider investing some, or more, of your money in a Stocks & Shares ISA, to help you realise your long-term financial goals.

Don’t overlook the impact of inflation
One of the appeals of cash savings is that you can access them when you want. Your interest is also generally fixed, so their value won’t swing up and down like share prices can. It’s sensible to keep enough cash to cover any short-term needs, but keeping too much of your savings in cash can carry a cost.

When the price of goods and services, or inflation, is rising faster than the rate of interest you receive on, say, your cash savings in a UK bank or building society, the ‘real’ value of the amount is eroded, which could leave you worse off.

By accepting some level of calculated risk and investing your money in assets such as company shares, bonds and property, you could potentially achieve higher returns than cash alone can offer. Returns from investing can never be guaranteed, however, and you should remember that past performance is no guide to future performance.

Holding the right blend of assets
Relying on any one asset could expose you to an unnecessary risk of losing money. The key to managing risk over the long run is holding the right blend of assets that can collectively perform in different circumstances.

There is the option to hold a wide range of investments in a Stocks & Shares ISA. As well as individual company shares and bonds – both government and corporate – you can also invest in funds that feature several assets. Some funds focus on one type of asset, and sometimes even one region, while others hold a mix of assets from around the world. A broad and diversified portfolio will help spread the risk of individual assets failing to deliver returns or falling in value.

Saving a significant amount of tax
When you invest through a Stocks & Shares ISA, any income you receive, and any capital gains from a rise in value of your investments, will be free from personal taxation irrespective of any other earnings you have.

Investing in this way could save you a significant amount of tax. It’s important to remember that ISA tax rules may change in the future. The tax advantages of investing through an ISA will also depend on your personal circumstances.

ISA portfolios can be flexible
Your circumstances – and attitude towards investment risks – are likely to evolve, meaning different types of assets will become more or less appropriate over time. So if you are using ISAs as part of your retirement planning, when you approach retirement you may want to reduce the level of risk in your portfolio, or move towards income-generating assets. It’s sensible to review your investments regularly – even as a long-term investor.

Within an ISA, you can reallocate your portfolio according to your outlook and needs at any time without losing any of the tax benefits. You can also move money from your Cash ISA to your Stocks & Shares ISA, or vice versa, as your short-term cash needs change.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS.

ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

THE VALUE OF INVESTMENTS
AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

Leave a response »

Are you paying too much tax on your state pension?

Admin : September 28, 2019 12:17 pm : Articles, Blog, Pensions, Working Women

Half a million workers past pension age could be paying unnecessary tax

A significant number of people working past the state pension age could be paying unnecessary tax on their state pension, according to new research[1]. This is because they failed to take up the option of deferring their state pension until they stopped work. As a result, their entire state pension is being taxed, in some cases at 40%.

If they deferred taking their state pension they would also receive a higher pension when they do eventually retire, and their personal tax allowance would then cover all or most of their state pension, dramatically reducing the amount of tax they have to pay on their pension.

Those who defer their state pension can receive an extra 5.8% per year on their pension for the rest of their life for each year that they defer. Comparing someone who draws their state pension immediately whilst going on working, with someone who waits for a year until they have retired before drawing their state pension.

The research finds
A man who defers for a year and has an average life expectancy at 65 of 86 will be around £3,000 better off over retirement than someone who takes his state pension immediately and pays more tax.

A woman who defers for a year and has an average life expectancy at 65 of 88 will be around £4,000 better off, as well as the tax advantage, she also enjoys two extra years of pension at the higher rate.

All is not lost for those who have started to draw their state pension as they have the option of ‘un-retiring’ – they can tell the DWP to stop paying their state pension and then resume receiving it at a higher rate when they stop work.

There has been a significant increase in the number of people working past the age of 65, and the research identified that most of these people are claiming their state pension as soon as it is available. For around half a million workers, this means every penny of their state pension is being taxed, in some cases at the higher rate.

If an individuals earnings are enough to support them, it could make sense to consider deferring taking a state pension so that less of their pension disappears in tax. A typical woman could be around £4,000 better off over the course of her retirement by deferring for a year until she has stopped work, and a typical man could be £3,000 better off.

Source data:
[1] Royal London Policy Paper 33 – ‘Are half a million people paying unnecessary tax on their state pension?’ is available from www.royallondon.com/policy-papers. The analysis is based on the Family Resources Survey for 2016/17 which is a representative sample of nearly 20,000 households from across the United Kingdom.

Leave a response »

Why do you want to invest?

Admin : September 21, 2019 3:13 pm : Articles, Entrepreneur, Saving and Investing, Working Women

Reaching specific life goals requires planning

If you don’t know where you want to go, you’ll find it tricky getting there! Investment goals cover everything from the old adage of saving for a rainy day to planning for a comfortable retirement.

Goal-based investing, which emphasises investing with the objective of reaching specific life goals – such as buying a house, saving for your child’s education, or building a nest egg for retirement – instead of comparing returns to a benchmark.

Whatever your personal investment goals may be, it is important to consider the time horizon at the outset, as this will impact the type of investments you should consider to help achieve your goals. It also makes sense to revisit your goals at regular intervals to account for any changes to your personal circumstances, for example the arrival of a new member to the family or salary increases.

Investment strategies should often include a combination of various fund types in order to obtain a balanced approach to investment risk. And maintaining a balanced approach is usually key to the chances of achieving your investment goals, while bearing in mind that at some point you will want access to your money.

Short Term
Lifestyle planning

Knowing you’re prepared for life’s surprises can take a burden off your mind – and your bank balance. An emergency fund is a pot of money set aside to help you cover the financial surprises that life throws at you. Surprises such as losing your job, needing to make unexpected home repairs, replacing your car or unplanned emergency travel. These events can be stressful and costly, but preparing in advance can be a big help.

Medium Term
School and university fees planning

School and university fees planning may involve the same idea of buying a mix of equities, bonds and other investments in order to build enough capital to pay for future fees. Most are geared to begin paying out after a fixed-term horizon, usually 10 years, with withdrawals allowed incrementally after that to meet the fees. In this way they need to be more flexible than pension plans that pay out on retirement.

For this reason, many parents and grand parents often start planning when a baby is born, which provides a better way to pay fees in monthly payments, making the cost of an independent education or university education more manageable.

Long Term
Retirement planning

The importance of shifting goals can be seen in pension plans, where it is quite common for funds to be more geared towards equities in it’s early stages to try to build capital growth. As the individual grows closer to retirement age, the pension plan will tend to lean more towards bonds to reduce volatility. Exposure to other riskier sectors may also be gradually reduced as the individual ages.

Factors to help you develop your investment goals
Your goal

What are you investing for and how much are you hoping to get back?

Your attitude to risk
How comfortable are you with taking risk with your money, as you may get back less than you invested?

Your time horizon
How long are you prepared to put your money away for?

Income, growth or both
Do you want to look at funds that aim to make regular payments through dividends or interest (like an income), or at those that aim to increase in value over time?

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS.

ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

Leave a response »

Visualise Your Future

Admin : September 4, 2019 10:18 am : Articles, Blog, Financial Advice, Financial Planning, Saving and Investing, Working Women

Reaching a state of complete financial well-being

Financial well-being ultimately comes from achieving financial security and independence. When you’ve reached a state of financial well-being, you’ve got to a point where you have a sufficient level of income for your lifestyle needs, enough capital to give you peace of mind, and the knowledge that whatever happens you, your family and business are fully protected.
Most people have lifestyle goals that are directly related to their finances. So why is it then that some people have the ability to live the life of dreams and pass on their wealth successfully to the next generation, but others face the prospect of selling their home or worry about health and care fee costs, and leave behind a tax bill for their loved ones to deal with?

Tangible and realistic goals
Regardless of what life stage you are in, you are likely to have some short, medium and long-term financial and lifestyle goals. Setting tangible and realistic goals, following them, and tracking and reviewing your progress is the key to success in achieving them.

If you are married, it makes sense for you and your spouse to both share the same financial and lifestyle goals. Otherwise, achieving them will be almost impossible. It’s important to develop your financial and lifestyle plans together, and review your progress together to make sure both of you are contributing to the same outcomes.

How much money will I need?
Determining what your short-term, mid-term, and long-term financial and lifestyle goals are is the first step. This may include planning for that dream holiday, buying a new property, university savings for your children or grandchildren and retirement savings. Once you’ve both agreed your financial and lifestyle goals, the next step is to determine a good estimate for how much money you’ll need for each of them.

Determining an accurate amount will involve clearly identifying each of them. So for example, do you want to pay for your children or grandchildren to have a private education? If you are saving to pay towards your children’s or grandchildren’s university fees, what percentage do you want to pay? Your retirement savings needs will depend greatly on the lifestyle you plan to lead once you are retired, as well as when you plan to retire.

What savings goals should I set?
It’s important to prioritise each of your financial and lifestyle goals in order of importance, and then determine how long you have to save or invest for each of them. Retirement could be many years away, but your short-term goals could be in a year or two. Next, estimate how much interest or capital gains you’ll expect to see from saving and investing your money. While capital gains or growth are never guaranteed, an estimated average can be used for these purposes.

When you set your financial and lifestyle goals, don’t just pick an ambiguous number. Look at how much you’re earning, what your expenses are, and determine how much you could realistically save or invest each month. You should have both a monthly and yearly savings and investment goal, and ideally they should align based on your overall total wealth solution.

Do I have a sufficient emergency fund in place?
It’s no surprise that when life presents an emergency, it threatens your financial well-being and can cause tremendous stress. Are you currently living without a financial safety net? How would you hope to get by financially without running into a short-term crisis? If you don’t already have a rainy day fund in place, this should be the first savings goal on your list. Your emergency fund should be sufficient to cover at least six months of your outgoings. This should include all of your living expenses, and the expenses of any dependents you have.

Where should you keep your emergency savings? If you already have an emergency fund, how does it fit in with your goals? Being prepared with an emergency fund gives you confidence that you can tackle any of life’s unexpected events without adding money worries to your list.

Do I know where my money is going?
Are you tracking your expenses? If you don’t know how much you spend in a month, that will seriously hinder your ability to budget. That’s why tracking your expenses is so crucial. Make a budget plan you can stick to. But making a budget plan and making a budget plan you can follow are two entirely different things. This is why tracking your expenses is important, and it can inform your budgeting choices.

How would I cope with unexpected car problems or medical bills? Do I know where my money is going? Am I in control of my spending? Have I prepared a budget plan? Provided you stick to it, a budget plan will help you keep on top of your spending and make sure you can identify wasteful expenditure.

Is my family protected if the unexpected were to happen to me?
We can’t predict the future. However, we can help our loved ones by planning for it. It’s not just you that your financial planning has an impact on. We all intend that our plans will come good. But making sure that your family – or your business – can cope if you fall ill or were to die unexpectedly is something we can too easily put to one side.

Would your family or business find themselves unable to pay the bills if something were to happen to you? This is why it’s essential that your financial and lifestyle goals are fully protected to ensure that an outstanding mortgage and any liabilities would be paid off, and your family would continue to receive an ongoing income if the worst were to happen. Should an unforeseen event occur today, are you adequately protected? If not, take action now.

What do I need to invest for? What do I want to invest in?
When it comes to building an investment portfolio, you should have specific goals that reflect your risk tolerance, time horizon or asset class preferences based on your financial and lifestyle goals. Do you have plans to buy another property or to invest in a new project or business venture?

Knowing how much of a role you want to play in selecting and managing your investments can help you choose the approach that aligns with your investment goals.

Your investing preference can also impact the investment products and offerings you might choose. If you feel you don’t have the time or experience to monitor your portfolio balances so they stay true to your original target goal allocations, you should look to choosing fund types that take on some of that work. Ask yourself: how experienced am I with investing? How much assistance do I need? How much control do I want over my investments? Do I prefer to be in charge or do I want my investments managed for me?

How can I further grow my wealth?
Whatever the origins of your wealth, it now provides for even greater growth opportunities. An effective total wealth solution focuses on long-term goals while managing risk along the way. The old adage ‘Don’t put all your eggs in one basket’ applies when you are looking to further grow your wealth. An appropriate diversified asset mix is key to investing wisely.

To further grow your wealth by investing, this involves buying financial assets such as shares, government and corporate bonds, and property. The main reason for investing and taking on additional risk you wouldn’t have if you kept your money in cash is the hope of making a higher return. The aim of investing for growth is that the investments you put your money into will increase in value over time. Ask yourself: am I prepared to accept a higher level of investment risk? Have I set my investment goals based on my financial and lifestyle goals?

What will my children’s future hold?
What action do I need to take to provide my children with an independent education? The thought of paying school fees for five, ten or even fifteen years can look like an insurmountable mountain to climb. Which schools should I apply to for my children? Do I want my children to board or not?
Also, no matter how harmonious you may want your family life to be, some disruptions and disturbances are inevitable. When they occur, they may not only be stressful, but they can also lead to financial worries and difficulties. How would my family cope financially if I were no longer around? Have I made provision for every possibility? If your family could end up becoming financially vulnerable, you need to make provision sooner rather than later.

How can I support my children and parents?
With longer life expectancies and people starting families later than ever, many of us can expect to become part of the ‘sandwich generation’ at some point. Will I be faced with the task of caring for my elderly parents alongside my dependent children? Finding yourself squeezed between – and often by – these two generations can be very stressful. As well as facing time pressures, chances are your finances will become very stretched too.

Do I expect to have to financially support my parents in later life? Do I have plans in place if I need to care for my parents while also trying to make financial provision for my children as they enter adulthood? Balancing the demands of raising and supporting your children and worrying about your parents’ independence and well-being without planning is difficult. The trouble with being stuck in the middle is that you run the risk of neglecting your own self-care while attempting to help everyone else. It’s essential to have a plan of action in place to care not only for your ageing parents and children, but yourself too.

How do I talk to my grown children about how to handle the money they will inherit? How can I ensure the wealth will last for them and beyond?
You may have accumulated wealth after many years in a successful career, from the sale of a business or received a substantial inheritance. But when children inherit wealth, it can pose plenty of questions, particularly around how they should best invest, manage and preserve these assets. There is also a common concern that children who are set to inherit wealth lose their motivation if they are aware of the scope of the family’s wealth and a likely inheritance.

While access to and knowledge of this wealth can be a positive thing, there’s always the risk that the security provided by the money might lead to complacency and entitlement. Do I have concerns about how best to prepare my children for their inheritance? Are my children prepared to receive such wealth? Have I had an honest conversation about money with them before they inherit these assets?

Do I have the right plans in place to retire when I want?
What should I be saving for retirement to live the life I want? Do I know my exact number? The reality is that there are countless factors that will impact on how much you will need in retirement. Therefore, determining your target goal for retirement savings can be more challenging than it may seem. So what is the solution? Instead of thinking of your retirement savings goal as one big number, look at breaking this number down in connection to your life goals.

For instance, if you have any idea about where you might want to live or in what type of property you want to live in the future, that can go a long way towards long-term retirement planning. Setting a retirement goal doesn’t necessarily mean sticking to one large monetary goal. Instead, aim to incorporate retirement savings into your goals for today. How much money will I need to save in advance to deliver the income I want in retirement? How will I spend my time in retirement? How much will my leisure and travel pursuits in retirement cost me?

Time to get motivated to reach your personal and financial goals?
Setting personal and financial goals makes it more likely that you’ll save and invest for – and achieve – every financial and lifestyle goal. You’ll be more motivated to reach each of them since you can gauge their progress. And you can consider the time horizon and risk level separately for each goal and invest accordingly to ensure they form part of your overall total wealth solution.

Leave a response »

Protecting your wealth: identifying your investment objectives is a lifelong process

Admin : August 23, 2019 11:41 am : Articles, Blog, Financial Advice, Financial Planning, Working Women
A total wealth solution has no value unless it is properly implemented through an appropriate investment strategy.
If you’ve got a sufficient amount of money in your cash savings account – enough to cover you for at least six months – and you want to see your money grow over the long term, then you should consider investing some of it.

Investing is a lifelong process, and the sooner you start, the better off you may be in the long run. Regardless of the financial stage of life you are in, you will need to consider what your investment objectives are, how long you have to pursue each objective and how comfortable you are with risk.

Current finances and future goals
The right savings or investments for you will depend on how happy you are taking risks and on your current finances and future goals. Investing is different to simply saving money, as both your potential returns and losses are greater.

If you’re retiring in the next one to two years, for example, it might not be the right time to put all of your savings into a high-risk investment. You may be better off choosing something like a cash account or bonds that will protect the bulk of your money, while putting just a small sum into a more growth-focused option such as shares.

Choosing your savings and investments
You may be a few months away from putting down a deposit on your first property purchase. In this case, you might be considering cash or term deposits. You might also choose a more conservative investment that keeps your savings safe in the short term.

On the other hand, if you have just recently started working and saving, you may be happy to invest a larger sum of your money into a higher-risk investment with higher potential returns, knowing you won’t need to access it in the immediate future.

Different types of investment options
If appropriate, you should consider a range of different investment options. A diverse portfolio can help protect your wealth from market corrections. There are four main types of investment, also called ‘asset classes’, each with their own benefits and risks.

These are:
Shares – investors buy a stake in a company
Cash – savings put in a bank or building society account
Property – investors invest in a physical building, whether commercial or residential
Fixed interest securities (also called ‘bonds’) – investors loan their money to a company or government

Defensive investments
Defensive investments focus on generating regular income as opposed to growing in value over time. The two most common
types of defensive investments are cash and fixed interest.

Cash investments include:

High interest savings accounts
The main benefit of a cash investment is that it provides stable, regular income through interest payments. Although it is the least risky type of investment, it is possible the value of your cash could decrease over time, even though its pound figure remains the same. This may happen if the cost of goods and services rises too quickly (also known as ‘inflation’), meaning your money buys less than it used to.

Fixed interest investments include:

Term deposits, government bonds, corporate bonds
A term deposit lets you earn interest on your savings at a similar, or slightly higher, rate than a cash account (depending on the amount and term you invest for), but it also locks up your money for the duration of the ‘term’ so you can’t be tempted to spend it.

Bonds, on the other hand, basically function as loans to governments or companies, who sell them to investors for a fixed period of time and pay them a regular rate of interest. At the end of that period, the price of the bond is repaid to the investor.

Although bonds are considered a low-risk investment, certain types can decrease in value over time, so you could potentially get back less money than you initially paid.

Growth investments
Growth investments aim to increase in value over time, as well as potentially paying out income. Because their prices can rise and fall significantly, growth investments may deliver higher returns than defensive investments. However, you also have a stronger chance of losing money.
The two most common types of growth investments are shares and property.

Shares
At its simplest, a single share represents a single unit of ownership in a company. Shares are generally bought and sold on a stock exchange.
Shares are considered growth investments because their value can rise. You may be able to make money by selling shares for a higher price than you initially pay for them.

If you own shares, you may also receive income from dividends, which are effectively a portion of a company’s profit paid out to
its shareholders.

The value of shares may also fall below
the price you pay for them. Prices can be volatile from day to day, and shares are generally best suited to long-term investors, who are comfortable withstanding these ups and downs.

Although they have historically delivered better returns than other assets, shares are considered one of the riskiest types of investment.

Property investments include:
Residential property such as houses and units
Commercial property such as individual offices or office blocks
Retail premises such as shops or hotels
Industrial property such as warehouses

Similarly to shares, the value of a property may rise, and you may be able to make money over the medium- to long-term by selling a property for more than you paid for it.

Prices are not guaranteed to rise though, and property can also be more difficult than other investment types to sell quickly, so it may not suit you if you need to be able to access your money easily.

Returns
Returns are the profit you earn from your investments.

Depending on where you put your money, it could be paid in a number of different ways:
Dividends (from shares)
Rent (from properties)
Interest (from cash deposits and fixed interest securities)

The difference between the price you pay and the price you sell for – capital gains or losses.

Leave a response »

Plan for the life YOU want by asking questions that will shape your future

Admin : August 20, 2019 7:36 pm : Articles, Blog, Financial Advice, Financial Planning, Returning To Work, Starting Out, Working Women
No two people have identical financial circumstances, which is why it’s essential you have your own total wealth solution that meets your individual needs and goals. Planning for financial success can be complicated in today’s world. A broad knowledge of everything from complex retirement and investment products to risk management strategies and tax laws is required.

Your total wealth solution is a financial roadmap that will provide you with clarity about your future. It should detail every aspect of your vision – your hopes, fears, dreams and goals. It should also describe exactly how your future will look and help you to know exactly where you are headed and when you are likely to arrive.

Take some time and ask yourself these questions:

Q: Can I sleep comfortably knowing I’ll have enough money for my future?
Q: Do I have the security of knowing where I’m heading financially?
Q: Am I ready for life beyond work?
Q: Am I going to be able to maintain my current lifestyle once I stop working?
Q: Do I feel empowered financially to live the life I want today and tomorrow?
Q: Have I made sufficient financial plans to live the life I want and not run out of money?
Q: Do I have a complete understanding of my financial position?
Q: What is ‘my number’ to make my current and future lifestyle secure?
Q: What will my children’s future hold?
Q: How can I pass on my wealth to the next generation?
Q: Is now the right time to sell my business?

Creating your financial roadmap
Part of this process is to understand your total wealth solution ‘number’ – in other words, the amount of money you’ll ultimately need to ensure complete peace of mind in knowing your future lifestyle is secure and making sure you don’t run out of money before you run out of life.
By getting to know you and what you want to achieve, we’ll be able to provide you with a detailed action plan that is focused on you. By creating a total wealth solution for you, we can get a clear understanding of your current lifestyle, your future and the life you want to live.

Initially, creating a financial roadmap will enable you to make the right financial choices and achieve the right balance between current responsibilities and future aspirations. All of this should enable you to achieve your desired lifestyle goals and objectives over time.

Liquidity needs
This is important to fund expenditures and meet liabilities for the next two to five years. Investments should be held in stable assets with low volatility, such as cash and/or a high quality bond ladder. Failure to plan adequately for your liquidity needs could mean you have to sell assets at discount prices.

By assessing your cash flow needs over the next two to five years and setting aside funds to meet them, you are creating a buffer between cash needs and market returns, thus reducing the risk of being forced to sell assets with high return potential at the wrong time. This strategy generally involves low-volatility assets such as short-term fixed income and cash, as well as borrowing facilities.

Lifetime balance
This will enable you to meet your financial goals for the balance of your lifetime and is characteristically well-diversified across asset classes with a growth orientation. The exact composition depends on your situation, goals, financial personality and values.

These assets are designed to satisfy lifetime needs. With short-term cash needs met by your liquidity strategy, these assets can be focused on long-term growth, with an asset allocation tailored to your risk appetite and the family’s aspirations.

Future generations
These are assets in excess of what you need to meet your lifetime objectives. Your approach to your legacy strategy investment portfolio could be more aggressive and less liquid than those investments in your liquidity or longevity strategies, given that the time horizon is much longer term.
This strategy is assigned to improve the lives of others, both within your family and in society. In many cases, this will include cash flows lasting beyond your lifetime, including philanthropic goals and assets earmarked for future generations.

Given the opportunity to focus over a very long investment time horizon, this strategy has the capacity to invest in asset classes that offer an illiquidity premium, such as private equity, or investment themes that seek to profit from long-term trends in society or technology.

Leave a response »

Protecting what matters to you: those dearest to us, and those financially dependent upon us

Admin : August 16, 2019 2:29 pm : Articles, Blog, Estate Planning & Wills, Financial Advice, Financial Planning, Parents, Protecting What Counts, Working Women
If something should happen to you, the last thing you want is for you or your family to be worrying about money. One of the most important aspects of your financial planning should be to ensure that you’ve made provision for your family and any dependants in the event of a serious illness, injury or untimely death.

Financial planning is not only about fulfilling our needs and aspirations, but it is also about protecting those dearest to us, and those financially dependent upon us. Of course, illnesses and deaths are not things that we like to think about, but failing to protect against such eventualities can have severe consequences for our loved ones, from struggling to pay the mortgage to a potential Inheritance Tax bill.
Here are just some of the policies that need to be considered.

Life assurance
Generally speaking, anybody with dependants or an outstanding mortgage should look at taking out a life assurance policy. At the very least, this should cover any borrowing and ensure the family can keep their home, but preferably it should provide an additional sum to help cushion the shock to your family finances at such a difficult time.

The level of cover should match your specific circumstances, which means it’s crucial to choose the right term and sum to insure. And by putting the benefits paid on death into an appropriate trust, this can be a very useful way of ensuring they are passed on to the intended beneficiaries at the right time. The proceeds also won’t form a part of your estate when considering any Inheritance Tax liabilities.

Income protection
Being unable to work can quickly turn your world upside down. These policies typically pay out between 50% and 60% of your salary, tax-free, if you are unable to work due to illness or injury. They are an essential form of cover for those with dependants, but the terms and conditions vary – some pay out until retirement or death, others until you return to work. Almost all will only pay out once a pre-agreed period has passed, ranging from three months to a year.

Some policies will also only pay out if you cannot return to your own occupation. Others pay out only if you are incapable of doing any job. So it’s important that you obtain professional financial advice to make sure the right policy is put in place for your needs.

These plans typically have no cash-in value at any time, and cover will cease at the end of the term. If premiums stop, then cover will lapse.

Critical illness
This cover gives you the comfort that, should you face a terminal diagnosis or a specified critical illness, your policy pays out a tax-free lump sum as opposed to an income. Critical conditions include suffering a heart attack, stroke and certain types of cancer – but each policy will have its own definitive list.

Typically, the proceeds are used to fund paying off a mortgage and any other debts, or they could be used to pay off school fees that are no longer affordable or to provide a financial legacy.

IF THE PLAN HAS NO INVESTMENT ELEMENT, IT WILL HAVE NO CASH-IN VALUE AT ANY TIME AND WILL CEASE AT THE END OF THE TERM. IF PREMIUMS ARE NOT MAINTAINED, THEN COVER WILL LAPSE.

CRITICAL ILLNESS PLANS MAY NOT COVER ALL THE DEFINITIONS OF A CRITICAL ILLNESS. THE DEFINITIONS VARY BETWEEN PRODUCT PROVIDERS AND WILL BE DESCRIBED IN THE KEY FEATURES AND POLICY DOCUMENT IF YOU GO AHEAD WITH A PLAN.

Leave a response »

Should I invest into a pension or an ISA?

Admin : August 13, 2019 9:03 am : Articles, Blog, Financial Advice, Financial Planning, Pensions, Retirement, Retiring, Saving and Investing
Investors looking for tax-efficient ways to build a nest egg for retirement often look to both Individual Savings Accounts (ISAs) and pensions. Tax-efficiency is a key consideration when investing because it can make a considerable difference to your wealth and quality of life.
However, the type of investment and tax-efficiency is a common dilemma faced by many people. Which is better – an ISA or a pension? In truth, there’s a place for both, and it’s easy to argue the case for each of them.

ISAs allow you to invest in the current 2019/20 tax year up to £20,000 each year, providing tax-efficient growth and income. Withdrawals are tax-free because the money paid in was from after-tax income.

Pensions are also very tax-efficient. All contributions within allowance limits receive tax relief from the Government payable at up to your highest rate of tax. For example, it would only cost a basic-rate taxpayer £80 to contribute £100 into their pension because they would receive tax relief at 20%. This is added to the £80, representing the 20% tax they would have paid if they had earned that £100.

For higher earners, it is even better, with higher-rate taxpayers only needing to contribute £60 in order to boost their pension fund by £100, and additional-rate taxpayers only needing to pay £25 (assuming they have at least £100 of income taxed at those rates).

Tax relief is given on personal contributions up to 100% of your earnings (or £3,600 if greater). If total contributions from all sources, including your employer if applicable, exceed the annual allowance (£40,000 for most people but can be less for higher earners or those who have flexibly accessed a pension), you will suffer a tax charge on the excess funding if it can’t be covered by unused allowances from the previous three years.
So, pensions give you tax relief on money going in, but when it comes to drawing on your pension, tax will be payable at your marginal rate apart from the tax-free lump sum (normally 25% of your benefits).

ISA investments don’t allow for tax relief on the money being invested, but they do give you total tax exemption on any gains made within the ISA. So with an ISA, when you come to withdraw funds, you will not pay a penny of income or Capital Gains Tax.

Put simply, the right option will be different for different people. There will be some for whom the right answer is a pension, others for whom the right answer is an ISA. If it was clearly one or the other, it would be far simpler.

An important point to remember is that you cannot normally access your pension until age 55, whereas your ISA is accessible any time.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS.

ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

A PENSION IS A LONG-TERM INVESTMENT.

THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

YOUR PENSION INCOME COULD BE AFFECTED BY INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS. THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION, WHICH ARE SUBJECT TO CHANGE IN THE FUTURE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

INVESTORS DO NOT PAY ANY PERSONAL TAX ON INCOME OR GAINS, BUT ISAS DO PAY UNRECOVERABLE TAX ON INCOME FROM STOCKS AND SHARES RECEIVED BY THE ISA.

Leave a response »