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  • Last week my fellow director, Gill Forrester, and I headed to London to attend a reception at the Houses of Parliament, hosted by Metlife. The reception was to launch a report commissioned by Metlife on Flexibility in Retirement, written by Dr Ros Altmann CBE, following the major changes to pensions announced by the Government in this year’s Budget.

    One of the special guests at the event was Andrea Leadsom MP, Economic Secretary to the Treasury. Also in attendance were the Pensions Minister, Steve Webb MP and MP for Cardiff North, Jonathan Evans. These MPs are all directly involved in changing and drafting new legislation that will have a huge impact on our clients and their retirements.

    The messages from the speakers painted a very positive picture - they believe Government is working hard with the Financial Services Industry to make sure the new legislation has a positive effect for consumers. However, whilst flexibility in pensions is a step in the right direction, extreme care still needs to be taken. The need for proper bespoke advice remains extremely important.

    It’s not just about recommending a pension product – people need to be asked the “right questions” in order that they can be given the “right answer”. Every single person has different hopes and dreams. We all look forward to our retirement as a time when we are free to be able to enjoy life without the constraints of having a day job to go to, but the detail looks very different from person to person. Good advice involves a discussion about goals and objectives, how much retirement will cost and how will it be paid for. What is the pension solution, how much risk will/can be taken and most importantly – will they run out of money?

    This is something the Government desperately needs to get right, not just for consumers but for the Country as a whole. For many, their pensions are the only source of income in retirement, so making sure this lasts a lifetime is the top priority or the government could be picking up some very large bills in the future.

  • 10 July 2014

    The new NISA

    Pink piggy bank on a pile of coins

    The Government likes to keep us on our toes, and yet again there are major changes in the financial industry.

    From 1st July the Individual Savings Account (ISA) will become known as the New Individual Savings Account (NISA).

    As well as the name change, you’ll also be able to put more of your savings into an account where the taxman can’t get his hands on your interest! The increase is from £11,880 per person, per tax year, to £15,000.

    You can put the whole amount into a cash product or a stocks and shares product if you want to or alternatively you can split the allowance however you like between a cash NISA or a stocks and shares NISA.

    The potential returns that you can receive from investing in a stocks and shares NISA are much higher than with a cash NISA, as shown below, however it is important to remember that there is also additional risk.

    Value today of £5,000 invested 10 years ago in cash at an interest rate of 4%Value today of £5,000 invested 10 years ago in a stocks and shares ISA in a UK mid cap fund

    £7,401

    £19,970

    Source Moneycomms.co.uk

    Stock markets can be volatile and impact the value of your investment. This is much less of an issue for younger investors as over time there’s a good chance that the market will recover and they will get their money back.

    However, if you are nearing retirement, may not wish to risk taking a big hit on your savings at a time when your potential to earn money by working is coming to an end.

    What this highlights, is that it’s essential you get good financial advice to ensure that you are investing in the right products and funds for the long-term.

    Contact FMB today. Call: 01539 725855

  • Emotive sunset image

    We seem to have had a spate of ill health and death amongst my family and friends recently and it certainly focuses the mind. After an evening reminiscing with old friends over a couple of glasses of red, there was definitely a sense of Carpe Diem. I’m constantly bombarded with messages shared on social media that are jazzed up with pictures of lakes and sunsets and the basic message is “live for today, be happy - life’s too short”.

    And then I watch the news…

    A still-fragile economy, certainly a reduced state pension by the time I retire, slow-growing wage inflation…… Mmm, that feeling of needing to “seize the day” might not be such a good idea after all. And it can cost quite a bit to seize the day, in case you hadn’t noticed! The wetsuit and bike I’ve just bought so I can do a triathlon, tickets to a concert by that 60’s supergroup that have come out of retirement (small mortgage!) and of course life is too short to drink cheap wine. But that little voice is still there – “Am I living my life now at the expense of my retirement?”

    You might think that financial planning is for people who are older, have more assets and need to manage their money. Well actually I need it just as much. Starting now, we can develop a plan using cashflow modelling software (rather like a business accounting tool) to predict my future assets and retirement income based on facts about what I already have, predictions about what I might earn and what I might spend, and assumptions about growth and interest rates in the future.

    Then I can see if what I am spending on enjoying my life now is impinging too much on my future plans. It would be good to enjoy my holiday or a nice meal out without that nagging feeling that today me is spending tomorrow me’s inheritance (never mind the kids’!).

    Then again, what is the alternative? Scrimping and scraping every penny for a retirement there is no guarantee I will reach? There has to be a balance, and good financial planning can help you achieve that balance we are all looking for.

  • Distressed footballer with head in hands

    This is a quote that could be applied to many instances in life.

    I mention this of course just as we crash out of the World Cup in Brazil! In comparison to previous years there does not seem to be much of the carnival atmosphere we might have expected. A wallchart appeared in the office at work and I have seen the odd “charismatic” driver with plastic flags on the car but it’s not been much of a frenzy!

    As it turned out we were right to have low expectations! But let’s not sink into despair just yet, it looks like there are some excellent young players coming through so maybe there is hope for the future? But what do I know about football! I played a little when I was younger but that is about it. However, I am an expert in Financial Planning so let’s talk about that!

    Since 2009 in the UK we have had historically low bank of England base rate paying just 0.50%. As a result of this most savings accounts including ISA’s have returned minimal returns. This no matter how you dress it up is near zero. The politicians and central bankers can sugar coat it all they like and arguably it has benefitted a lot of people over the past few years, particularly borrowers. It has certainly not benefitted the sensible members of society who have prepared well, lived within their means and relied on savings to either top up their income or just simply to have the knowledge that there was a nest egg in the background that was building for the future.

    You may be forgiven for thinking why bother using my ISA allowance? Why bother seeking out the best rate, after all they are all as bad as each other! But use your ISA allowances today as you will then have the tax efficiency “wrapper” around the money for the rest of your life. After all interest rates will not stay low forever, if you continue to expect not a lot you may be pleasantly surprised.

    As for England…. If they were one of my clients’ holdings right now I would definitely be advising to be sold at the earliest opportunity.

    No doubt when the next big game comes round I’ll be shouting at the TV in despair. Once again I shall expect failure and anything else will be a success!

  • Logo for TV's

    Here's an interesting fact...

    If you had taken advantage of tax free investments (Personal Equity Plans (PEPs) and Individual Savings Accounts ( ISAs)) and maximised your investment by using each tax year’s allowance since they were introduced in 1987, you would have invested £212,080 over that time. If you had received an average growth rate of 7% per annum since 1987, then your investment would now be worth around £578,473. If you are married, or in a Civil Partnership and have both ‘maxed out’, then the total would be £1,159,460 which would make you...

    ISA Millionaires!

    Good news indeed, but let’s just explore ‘Tax Free’. It is absolutely true that monies accumulated within an ISA wrapper are free of Income Tax and Capital Gains Tax, which make them an excellent planning tool whilst you are accumulating your wealth. Withdrawals, whether regular or ad hoc, are tax free also. Unfortunately there is a tax that ISA’s do not escape; Inheritance Tax (IHT), as the value of any monies held in ISA’s are potentially subject to IHT at a rate of 40% on death, a fact that not everyone is aware of.

    If you are a regular reader of our Blogs, you will know that if you are single, IHT is potentially payable at 40% on assets in excess of £325,000, on death, called the Nil Rate Band. If you are married or in a Civil Partnership, you can utilise a Joint Nil Rate Band of £650,000.

    If we assume that your joint ISA holding is valued at £1,159,460 you own your own home, and it is valued at the recently published average value of £186,512, then not taking any other asset into account, your joint Estate would be valued at circa £1,345,972. If we then utilise a Joint Nil Rate Band of £650,000, then the tax payable on the balance would equate to £278,388 had you both died yesterday, yes, £278,388.

    If the prospect of your Estate paying a sizeable tax charge, on what you anticipated were tax free monies concerns you, or you would like to talk to us about any other area of Financial Planning, please feel free to contact us.

    To read about Martin and Sally's case study on inheritance tax click here

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