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Vivian Slattery

New Year’s Resolution

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I am sitting writing this article just before Christmas. Last week we had the General Election and whether we are happy or not with the result I am sure most would agree that the people of this country sent a clear message that they wanted the Government to sort things out so that we can move forward.

As we enter a new year it’s a time when we consider our New Year’s resolutions. What are yours going to be this year? If you’re having difficulties deciding what they should be and need some help, here’s our advice.

I always think there should be something that we could do to improve our lives or position in life. There are certainly ways in which as individuals we can move forward. So what do I feel is a good starting point? This would be to look back at last year and ask yourself whether you were happy with the way it went, and if not what could you do to improve it. Then try to make your resolution based upon how to improve. For example if you believe you worked too hard and you should have more downtime make it your resolution and include how much downtime you should have.

This will be more meaningful than just saying I am going to give up chocolate for example, and I believe the more meaningful the resolutions, the more likely you will achieve them and hopefully next year when you complete the same exercise you will be more prepared.

As an adviser, I always feel you should include a financial resolution. This should not be just what you are going to improve upon but should also outline exactly what you want to achieve. With our clients we hold annual reviews and this is what we try to do as part of this review.

Also, I believe that any goal or resolution needs to be written down and clear about how it can be achieved. So don’t leave them to the last minute, take the time to sit down and really think about what you want and if you feel this is too much to expect to achieve in one year, consider what steps you can take to make it happen.

We do offer a free, without obligation consultation so if you need a hand give us a call and hopefully we can hold your hand through the process and help you to reach your goal.

Allowances, limits and thresholds correct at the time of writing, but are subject to change in the future. Please confirm the current position before taking any action

Can you afford your care?

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Are you paying to have care, either in a care home or in your own home? How confident are you that your money won’t run out? Will you have to sell your own home to pay for care?

At this time of year families tend to get together, and it’s then we may realise a family member isn’t managing as well as we thought they were.

So often, the need for care comes suddenly and the first priority has to be where and how to provide care. However, don’t overlook the need to plan finances. If you are self-funding your savings may go down fast.

Too many people approach us for advice when the money is already running out, by which time it’s too late to do anything about it.

As soon as the right care is in place, that’s the time to make sure the ability to pay for it is guaranteed. If you can plan ahead, that’s even better. You may be eligible for Local Authority financial support, but if you’re not paying the bills, you may have less choice about where you are cared for. If you start out paying for your care, you risk that if the Local Authority step in later, they may not be prepared to pay the fees for where you are. What happens then?

This is a worry for some people, but with the right advice from a specialist financial adviser, you can plan your financial affairs so that your money will last as long as possible. It’s even possible in many cases to buy a guaranteed income for the rest of your life, which could remove the risk of the money running out.

Your adviser will consider the options, make sure you’re claiming the state funding you’re entitled to, and help you to understand how the care funding system works. Not all financial advisers are qualified in this area, so check your adviser is qualified to advise on Long Term Care planning, and preferably accredited by the Society of Later Life Advisers* (SOLLA).

Whether you are facing the prospect of needing care, have a loved one in hospital needing to sort out their next steps, or you’ve been settled in a care home for some time, make sure your money will last as long as possible. If you would like to discuss the above we do offer a free, without obligation consultation to discuss our advice process with you.

Allowances, limits and thresholds correct at the time of writing, but are subject to change in the future. Please confirm the current position before taking any action

 

Cashflow planning

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Well, the holiday period is over for most and it’s back to school. While thinking about what topics are seasonal, Christmas came to mind. My initial reaction was it’s far too early to start thinking about that, but after spending a little time researching it, I decided my views were different to others. In fact it has been reported that Selfridges opened its Christmas Store in Oxford Street on Monday the 29th July. I was quite shocked, but apparently it was only 2 days earlier than last year. *1

After one major chain went under it was remarked that the only time it made a profit was at Christmas. The reason for the store going under was that it didn’t do so that year. Whether this is true or not I am sure that most, if not all of us, would agree that we spend more at Christmas than at any other time of the year. I have to say I am always amazed at the madness in the shops.

But is the high street shop also a thing of the past?
According to another source, 87% of retail goods (not including food) are now bought online, with us using laptops in the evening, smartphones and tablets during the day. *2

Having said that it has been reported that last Black Friday Argos had over a million customers visit the store. Even so 71% of customers visited via a mobile device. *3

So what would my advice be?

Well, before all the hype of Christmas begins, plan whom you are going to buy for and set yourself a budget. Make use of things like Black Friday, which has come over from the states and is always the Friday that follows Thanksgiving, when many great offers can be found.

Over the years as a Financial Adviser I have noticed that the clients who budget and know how much they are spending seem to have a lot more to show for their money. If you do want some help with this you may find that Cashflow Planning can really help.

If you haven’t heard about Cashflow Planning please utilise our free without obligation consultation. We can run through this with you and show you the virtues. Contact us now to book your session.

*1Independent, 29th July 2019
*2 Ecommerce News, 7th September 2018
*3 Telegraph, 12th September 2019

Allowances, limits and thresholds correct at the time of writing, but are subject to change in the future. Please confirm the current position before taking any action

 

Where have the last 3 years gone?

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Although this is a subject I have written about before, as Brexit still enters many of our conversations I thought an update would be good. Like many I can remember thinking at the beginning of this year that finally by the end of March we will all know what’s happening. I don’t think that there were many people who believed that in August we would still be in the dark.

But what impact is this having?
It has been reported that a leading estate agent which sells and manages commercial and residential property around the world, stated that “fewer houses were sold in the UK in the first half of 2019 than at any point since the first half of 2009”. *1

But I don’t think it’s right to blame Brexit totally for this as there were major changes regarding ‘Buy to let’ properties just prior to the famous ‘Leave’ vote. I think this is a major contributing factor.

Rental amounts are also reported to have taken a hit. The biggest falls in rent have been in south-east England, where average rent has dropped from £879 to £854 over the past year. It has been reported that comments have been made, “With rents generally falling, and average wage growth above inflation, this is positive news for renters concerned about affordability,” *2

 

So what about the stock market?

Well, when I last recapped back in December 2018 the FTSE 100 was at 6,721.54 *3, and opened today at 7250.90 (14/08/2019), this is still down from 21 May 2018, when it reached over 7800.

The news of the pound isn’t so good as this month it did go down to a ten year low, which isn’t good for holiday makers in the middle of the prime season.

As the political situation is still largely unresolved, I have to say that I do hope that by the end of October we will have some certainty.

If you would like to discuss the above we do offer a free, without obligation consultation to discuss our advice process with you. This is so important if you are worried about the impact that the current climate may have on your savings, it’s always a good idea to air your concerns.

*1 Guardian newspaper 8th August 2019
*2 Guardian newspaper 11th April 2019
*3 Opened 11th December 2018 at 6,721.54

Allowances, limits and thresholds correct at the time of writing, but are subject to change in the future. Please confirm the current position before taking any action

 

How much will I need in retirement?

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One of our first questions when discussing individuals’ retirement plans is “How much income do you want when you retire?” Often this is met with a blank face. So where would we start?

The first question to ask yourself is when do you expect to retire? Retirement is one period of your life that needs to be planned for. You may need to prepare for 30 years or more without a working income, and this is a period of life that should be enjoyed.

After this you need to work out how much income you will need. A starting point is to look at your current expenses and subtract any payments that should cease in retirement. This should include your debts and work expenses. Everyone’s goal should be to make sure any debts are repaid before retirement. To ensure this you need to plan for it. On numerous occasions people have come to us just before their retirement with mortgages still outstanding, asking us to help them plan how to repay these. I always wish they had come in earlier. It’s too easy to put it off, but the earlier you seek help the easier the solution. Another reason is that the longer the repayment period the less the monthly payment.

It is likely that in the early years of retirement you will probably do more as generally you are fitter and healthier and this should also be factored in.

Once you have an idea of what your expenses will be, the next stage is to look at how much income you will have coming in. It’s quite simple to obtain a state pension forecast of when and how much your projected state pension will be. Then you need to look at all the other income you will have including Pension income. Individuals often seek our advice armed with a number of different Personal Pensions asking if we can consolidate these. Care needs to be taken and each pension plan needs to be assessed, as there could be valuable benefits within the individual policies.

For your peace of mind we do offer a free, without obligation consultation to discuss our advice process with you. Contact us now to book your free consultation.

Allowances, limits and thresholds correct at the time of writing, but are subject to change in the future. Please confirm the current position before taking any action

 

The criteria we used when selecting funds

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In the last week or so there has been a lot of talk about Neil Woodford, but who is he and what criteria should we use when selecting funds?

Neil Woodford ran the Invesco Perpetual Income and High Income Fund. He gained a reputation for being one of Britain’s best fund managers
during his 25 years at Invesco. This was achieved following his management of the funds during the 1990’s dot-com bubble and the 2008 financial crisis. In 2014 he left Invesco Perpetual (now known as Invesco) to set up Woodford Investment Management LLP. In recent weeks some large investors have withdrawn their money from his flagship fund, resulting in its temporary closure, and preventing any further withdrawals from the remaining investors.

So what criteria do we use when selecting funds?
My own personal preference (I may be wrong), is always try to select funds with a proven track record (ideally a 3/5 year track record). We also look at their Crown ratings.

What are Crown ratings?
Reviewed twice a year in January and July, the rating considers three key measurements to derive a fund’s performance: alpha, volatility and consistently strong performance.

The top 10% of funds will be awarded five FE Crowns, the next 15% receiving four Crowns and each of the remaining three
quartiles will be given three, two and one Crown(s) respectively.

When we are choosing and reviewing funds we would look closely at the funds with Crown ratings that had substantially changed and question whether to keep them in our portfolios.

The question you should be asking yourself is do you know the Crown rating of your current holdings?
So, I believe in the importance of reviewing holdings and ensuring that any investment is invested over a range of sectors and funds. This means you will minimise your exposure to any one fund.

Allowances, limits and thresholds correct at the time of writing, but are subject to change in the future. Please confirm the current position before taking any action

 

Lifetime Allowance

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I have said many times that it’s so important to have all your cards on the table for financial planning. Recently, I’ve seen a couple of clients who are making contributions to their pension and do not seem aware that due to the size of their pension pots, they could end up paying a Lifetime Allowance tax charge when they take their benefits.

I’m not necessarily saying that this is an issue, but it is wise to understand the tax charge and plan for it. So what is the Lifetime Allowance tax charge? Currently when you take pension benefits in excess of £1,055,000, and you do not have any form of protection, you have to pay a tax charge of 55% if you take the benefits in the form of a lump sum, or 25% if you take the benefits in the form of an income.

When it was introduced in 2006, the Lifetime Allowance was set at £1.5m, and I know as an adviser I didn’t feel that many clients would be affected. However, having reached its highest level of £1.8m in 2010/11 it was later reduced again to £1m by 2016/17, and it’s slowly increasing again.

Many of you may think that this figure is high but as previously mentioned I have spoken to
individuals who are unaware that they have an issue. When you look at how it is calculated you may understand why. For example, individuals with a defined benefits scheme would multiply their annual pension by 20 and add the lump sum entitlement.

You may think that you could try to avoid this by not taking all the benefits, but any benefits which have not been taken will still be assessed at age 75 and the excess above the Lifetime Allowance will be taxed.

Also, there are other situations where pension benefits are measured against the Lifetime Allowance. So if you want to know more about Lifetime Allowance, the Lifetime Allowance charge, any solutions and whether you could apply for protection please do give us a call.

Disclaimer: Allowances, limits and thresholds correct at the time of writing, but are subject to change in the future. Please confirm the current position before taking any action.

Allowances, limits and thresholds correct at the time of writing, but are subject to change in the future. Please confirm the current position before taking any action

 

Providing advice and personal solutions to your financial challenges

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Over the years as an adviser I have seen many changes in our industry and have noted the change in focus from products to outcome, but there still seems be a lot of mystery around what we do.

Here’s a breakdown of some of the things we do:

  • Personal advice A financial adviser will find a solution that’s tailor-made for you. We will ask you questions about yourself to get a full picture of who you are and what you need.
  • Knowledge of the market We are not tied to any particular bank or provider and because of this we are able to research the market place to access products that are suitable for you.
  • Extra benefits For example, with protection policies e.g Critical Illness, the cover does vary from one provider to another and we can help you decipher the most suitable product for your needs.
  • Peace of mind We can look into the policies you already have and report on any shortfalls, taking your employers’ and state benefits into consideration, ensuring that you only have policies you need. We can also make sure they are set up as efficiently as possible, for example in a trust if this is beneficial to do so.
  • The buck stops with us We take away the worry of you getting it wrong. We keep you up to date and take full responsibility for all the advice we provide.
  • Practical help For example, if you need to make a withdrawal or a claim we can hold your hand through the process researching the paperwork that needs completing. Often this is during emotionally challenging times.
  • Proactive Support If you opt for an ongoing service we will go on providing support, making sure the policies you have are still suitable for you.

These are just some of the areas we can help with, if you would like some help please call us on
020 8655 8488.

Allowances, limits and thresholds correct at the time of writing, but are subject to change in the future. Please confirm the current position before taking any action

 

What if something happened to you?

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I have often described our service as a sounding board. When we meet a client for the first time, we spend time discovering everything there is to know about their current financial situation. This includes what protection policies they have, if any.

Clients often say they are unlikely to die before the age of 50. But you can’t deny that it does sometimes happen. What would be the financial impact if you died before your time? What would happen to your loved ones if you became ill or injured and unable to generate income?

The evidence below shows the likelihood of making a claim on your protection policies.

Figures from the ABI show that the number of individual protection policies taken out in 2016 had decreased, although the number of group policies had increased. I have heard people say that these policies never pay out. But statistics also show that in 2016, 98% of all Life, Critical Illness and Income Protection insurance claims were paid.*

Legal & General reported that in 2017 the average age of a Critical Illness claimant was 47, and here are the top five conditions where Critical Illness claims were paid:

  • Cancer 63.8%
  • Heart attack 10.1%
  • Stroke 6.4%
  • Multiple sclerosis 5.1%
  • Total permanent disability 3.6%**

The number of claims are also on the increase. AIG paid a total of £69m in claims for life and Critical Illness insurance in 2016 – that’s more than 49% more than the year before.***

Whether you have a financial adviser or not, it is important to audit your affairs every year. Ask yourself this question: “If anything had happened to you yesterday, where would you or your loved ones be today?”

Why not have a look at your cover today? Have a quick tally up of your assets and liabilities and the term of these, and work out if they would be cleared if something happened to you. Then consider any dependents who are financially dependent on you.

Or why not book an appointment? It’s the equivalent of a financial MOT. There are many different products on the market and we can go through the advantages and disadvantages of each with you.

At Monetary Solutions Ltd, you can book a free initial consultation about any financial matters, so please call us on 020 8655 8488.

*Association of British Insurers
**LegalAndGeneral.com
***FT adviser 28 March 2017

Allowances, limits and thresholds correct at the time of writing, but are subject to change in the future. Please confirm the current position before taking any action

 

Are annuities a thing of the past?

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Last week, I used the word “annuity”. When I saw the look on my client’s face, I realised that it had become a dirty word!

As you may know, the Government announced new pension freedoms in the 2014 Budget, that started in the 2015/16 tax year. This means anyone aged 55 and over can now take the whole of their pension as a lump sum. There is no tax to pay on the first 25% and the rest will be taxed at their income tax rate, as if it were a salary payment.

The announcement was a surprise to many. As a child, my mum told me she could remember exactly where she was when she heard about the assassination of J F Kennedy. The impact on me and my financial adviser colleagues was similar when we first heard about pension freedom!

One of the reasons the Government introduced pension freedom was due to the drop in annuity rates. To put it simply, in 2000 the income from a £100,000 joint life annuity at age 65 was about £7,000, But by 2016, the same annuity would pay only about £4,200.*

Because of the new pension freedoms, many of my clients seem to think annuities are now a thing of the past – but they could still be a valuable part of their pension planning.

An article in March 2017 in FT Adviser quotes figures from the Association of British Insurers (ABI) that show annuity sales have declined by around 80% since the announcement of pension freedom in 2014, and have remained around that level since then.

However, annuities are not something that should just be ruled out.

Today, a joint life annuity of £100,000 paying 50% to the spouse on first death and guaranteed for 10 years would give an income of around £5,000 where the applicant and spouse are 65. On the other hand, a drawdown pension would need to grow at 5% to maintain its capital value and give this level of income after charges.

I still think it is important to consider annuities – it doesn’t need to be all or nothing, and it doesn’t have to die with you.

Annuities come in many forms today. Most of us think that an annuity is for life, but you can get fixed-term annuities. There are also enhanced annuities, which is when annuity companies offer an enhancement due to an individual’s medical history. It could just be because someone is overweight, so it’s important to look into this.

Obviously there are advantages and disadvantages of both annuities and pension drawdowns, and retirement planning has become even more complex. It’s therefore more important than ever to seek advice and look at all your options.

At Monetary Solutions Ltd, you can book a free initial consultation about any financial matters, so please call us on 020 8655 8488.

* Money Marketing 29 Nov 2016
Pension income can 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.

Photo by Andre Guerra on Unsplash

Allowances, limits and thresholds correct at the time of writing, but are subject to change in the future. Please confirm the current position before taking any action

 

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