Make 2020 the year to get the protection you need

As part of your new year resolutions for 2020, don’t overlook the importance of having the most suitable protection plans in place to protect yourself, your family, your valuables and your home, in case an unexpected event should happen.

Changing needs

Your protection needs will change as you reach different stages in life, such as getting married, having children or buying a home. You also need to take into account any protection policies you might have through workplace schemes, as you might find that your workplace benefits already include some income protection, private medical insurance or other protection cover. 

Regular reviews

Once protection is in place, it should be reviewed regularly to ensure you have the most suitable cover as your circumstances change over the years. A 2019 survey8 reveals that just 27% of consumers are confident that the protection policies they have in place are suitable for their needs. 

Perceptions can be wrong

The survey also found that people’s perception of certain events happening is often wrong. For example, people tend to overlook potential health issues, instead thinking that an early death is more likely than a serious health condition. Participants to the survey also believed they were twice as likely to die during their working life than have an accident that could stop them from working.  

Peace of mind 

Financial pressures caused by unexpected events can cause huge strain. If you had to stop working, how would you keep a roof over your head? More than 50%8 of 18 to 35- year- olds say they would cope for less than three months on their savings or investments, if they couldn’t work due to illness or injury. 

Insurance cover isn’t just about a pay out when you die. It can also give you peace of mind in knowing that you would be able to cope financially if you were ill, have an accident, lose valued possession or suffer damage to your home. 

We can help

We can review your existing plans, help you understand your risks throughout life and arrange the most suitable products and level of cover, all within your budget. Get in touch to see how we can help.

10 ways to refresh your financial habits in 2020

Have you made new year resolutions for 2020? Perhaps to get fit or take up a new hobby? The start of a new year is also the perfect opportunity to review your finances and ensure your goals and existing policies remain relevant to your current needs and future plans.

  1. Consider your goals

It’s a good idea to review your short and long-term goals and consider how much money is required for each of them. This could be taking your family on the holiday of a lifetime, moving to a new home, planning your retirement or passing capital on to your family. 

  1. Save More

The end of the tax year is 5 April 2020 and the annual ISA allowance is a generous £20,000, allowing you a tax efficient way to build your savings.

  1. Check your State Pension position

The State Pension rules have changed, so check your retirement date and the amount you’ll receive by going to www.gov.uk/check-state-pension 

  1. Review your pension planning

To ensure you’re on track for a comfortable retirement, you should keep your pension planning under regular review.   

  1. Refresh your investment portfolio

You should review your investments on a regular basis to ensure these still match your risk profile and your life plans.

  1. Consider your Inheritance Tax (IHT) position

You don’t have to be particularly wealthy to find your estate could be liable to IHT. Taking advice about IHT planning could save your heirs from paying too much tax.

  1. Revisit your mortgage 

If it’s been a while since you took out your existing mortgage, there could be a better, more cost-effective deal out there for you. We research the market regularly and can recommend the right product for your needs.

  1. Have a Will in place

If you haven’t made a Will, writing one should be at the top of your 2020 to do list. If you have a Will but your family circumstances have changed, then it makes sense to ensure those you wish to benefit are included.

  1. Think about a Lasting Power of Attorney (LPA)

Think about arranging an LPA so that a trusted friend or relative could look after your affairs if you lost capacity.

  1. Review your protection policies

Life insurance and other forms of protection should form a vital part of everyone’s financial planning. So, if you’ve had an addition to the family, moved house, retired or changed jobs and you want to provide for your spouse, partner or family, then ask us to recommend the right plans for you.

A successful financial strategy involves regular reviews, so why not contact your financial adviser. Regular reviews are an important step in helping to grow and protect your wealth and an opportunity to ensure that you’re on course to meet your goals.

The value of your investments can go down as well as up, so you could get back less than you invested. 

A pension is a long-term investment. 

Tax advice which contains no investment element is not regulated by the Financial Conduct Authority.

Retirement planning top tips

It’s never too early or too late to start planning 

The earlier you can start to plan for your retirement, the better. If you contribute from an early age, you have longer for your pension fund to grow. However, if you start to pay into a pension later in life, you can still contribute up to either 100% of your earnings or a gross contribution of £3,600 (whichever is greater) and receive tax relief. 

The state pension is just a safety net

Even if you qualify for a full state pension, on its own it may not be enough to give you a financially comfortable retirement. The age at which it becomes payable is rising too.

Maximise contributions to workplace schemes

Employers are now legally obliged to automatically enrol their employees (subject to age and earnings criteria) into a qualifying pension scheme, where employees and employers make monthly contributions. If you save into a workplace pension, your employer should match some, or all, of your contributions, providing a welcome boost to your pension. However, in order to ensure you’re saving enough, you should consider topping up your contributions or contributing to a personal pension as well. 

Clear your debts before you retire

It makes sense to focus on clearing all your credit card and loan debt before retirement. Many homeowners over 65 are still paying off their mortgage and in retirement, a large monthly mortgage repayment may become more of a burden.

Think about inheritance and Inheritance Tax (IHT) planning

You may want to help other family members by passing some of your wealth on to them during your lifetime, rather than after you’ve gone. If so, you need to make sure you have sufficient money for your own needs and be aware of the IHT implications of gifting. Professional advice is essential. The individual threshold for IHT has remained at £325,000 since 2009, so many more families now face having to pay this tax.

Get help navigating the tax system

When considering how much to take out of your pension, you need to be mindful of the likely effects on your tax position. Taking professional advice will help minimise the tax you pay and ensure your money lasts as long as you do.

Get good advice 

It pays to take professional advice to ensure that you make the right decisions concerning how your pension is invested, whether it’s advisable to take money out of your pension and what level of income you can take, without eating into the capital, and that you’re doing this in the most tax-efficient way possible. 

The value of your pension investments can go down as well as up, so you could get back less than you invested

Income from a pension could go down as well as up.

Taking income or withdrawals in excess of fund growth may result in the fund running out quicker than expected.

Inflation will reduce how much your income is worth over the years.

A pension is a long-term investment.

Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation.

Tax treatment depends on the individual circumstances of each client and may be subject to change in future.

Tax advice which contains no investment element is not regulated by the Financial Conduct Authority.

 

Tips for avoiding mortgage stress

Moving home is often cited as one of life’s most stressful events. In fact, a survey1 from earlier this year, found it to be more stressful than other major life events, including getting married, having a baby, starting a new job or getting divorced.

Many people find the mortgage process adds to the stress of moving home, so we have put together a few tips to help you navigate the process as smoothly as possible.

An expert mortgage adviser can help 

The mortgage process involves a number of stages and we can help you to understand each of these, including how affordability checks work, the paperwork needed by your lender and the fees and costs you need to include in your budget. If you are a first-time buyer you will need to have saved a deposit, and in most cases, the bigger the deposit you can put down, the lower your interest rate is likely to be. 

Our qualified mortgage advisers are here to support you in all aspects of the home-buying process and can save you time, money and stress. We understand the mortgage industry and process, allowing us to find the most appropriate lender and mortgage deal to suit your individual circumstances. An important stage we can help with is getting an ‘agreement in principle’ from a lender, which confirms to sellers that you are a serious purchaser.

Get your finances in order 

Lenders will check your credit score to make sure it is healthy. A higher score usually means you are a lower risk and as such you will normally be offered a wider choice of deals, with better interest rates. 

You will need to show that you have considered your income and outgoings and can comfortably afford your expected monthly mortgage payments. It’s a good idea, if you have time to plan ahead, to cut out any unnecessary expenditure. Being under time pressure can add to your stress levels, so it pays to have your finances in order before you start looking for a property and a mortgage.

Chose a good estate agent

Ask around for recommendations for a reputable estate agent. If your agent understands your circumstances fully, they can pass on relevant information to sellers. Don’t forget, if you are a first-time buyer with a mortgage offer in place, you are in a strong position as you can proceed quicker than buyers who have to sell their current home.

A survey is important 

It makes sense to carry out a survey on any property you plan to buy – understanding any repairs that may need doing before you commit to buy, can save you thousands of punds as well as saving you from a lot of stress in the future. There are different types of survey available and we can help with advice on choosing the type you need.

Your home may be repossessed if you do not keep up repayments on your mortgage

1https://www.yopa.co.uk/blog/yopas-new-study-how-stressful-is-moving-home/

https://www.benenden.co.uk/be-healthy/lifestyle/mental-health-moving-house-7-ways-to-reduce-the-stress-of-moving-home/

When will you be mortgage free? Working towards this goal

Becoming mortgage free is a common ambition for millions of homeowners up and down the country. Paying off your mortgage as early as possible is a major step on the way to a financially secure retirement.

For most of us, our mortgage is a huge debt that we carry with us for most of our adult lives. It may feel like a distant dream but paying off your mortgage early can be achievable.

Keeping an eye on the pennies

Setting goals and keeping a note of where your money goes each month are important in helping to set a budget and allow you to consider whether specific purchases are necessary. Shopping around to get the best deal on things is a good discipline to adopt. Simple things like switching energy supplier, never letting your insurance policies auto-renew and shopping down a brand, will all make a difference. If you receive a pay rise, consider increasing your monthly repayments. Frugality can help you save the pounds and deflect this money to paying extra on your mortgage. 

Even small overpayments have an impact

Mortgage overpayments can help you pay off your mortgage sooner and can reduce the amount of interest you pay over the course of your loan. The amount you overpay goes towards repaying the mortgage itself, not on any interest you owe. Research1 shows that if a borrower took out a £200,000 mortgage over a 25-year term, they could save £1,146 in interest (based on current rates) by making a monthly £10 overpayment, and they’d become mortgage-free four months earlier.

Those who can afford to make a £100 overpayment each month on a £200,000 mortgage could save £9,948 in interest and reduce their mortgage term by three years in the process. A combination of paying off capital and the consequent reduction in interest, result in the time saving.

Rules may apply

Most mortgage deals have a limit on how much you can overpay. There may also be fees associated with overpayments, so make sure you check that first to avoid incurring a fee. 

Some mortgages restrict the amount you can overpay to a percentage of the amount owed. If you’re paying your lender’s standard variable rate (SVR) you can usually overpay as much as you want. However, SVRs can be expensive, so you may want to consider remortgaging to a better rate instead.

Prioritise

Whilst paying less interest and being mortgage free earlier is an attractive prospect, it’s important not to overlook the need to keep some emergency funds set aside for unexpected bills and expenses. In addition, if you have other more expensive debts, you should consider paying those off first. 

If you have savings you could opt for an offset mortgage, which allows you to balance your savings against the amount you owe on your mortgage. This reduces the amount of interest you pay and could allow you to pay more off the mortgage balance. 

Reviewing your mortgage regularly will ensure you are on the best deal. Get in touch, we’re here to help.

1Santander, 2018

Sources 

 https://www.moneywise.co.uk/home-mortgage/mortgages/we-cleared-our-mortgage-early-and-saved-thousands-pounds-heres-how-you

https://hoa.org.uk/advice/guides-for-homeowners/i-am-managing-2/how-to-live-mortgage-free/

https://www.mortgagestrategy.co.uk/santander-data-shows-impact-of-humble-overpayment/

https://www.mortgagestrategy.co.uk/santander-data-shows-impact-of-humble-overpayment/

https://www.santander.co.uk/uk/infodetail?p_p_id=W000_hidden_WAR_W000_hiddenportlet&p_p_lifecycle=1&p_p_state=normal&p_p_mode=view&p_p_col_id=column-2&p_p_col_pos=1&p_p_col_count=3&_W000_hidden_WAR_W000_hiddenportlet_javax.portlet.action=hiddenAction&_W000_hidden_WAR_W000_hiddenportlet_base.portlet.view=ILBDInitialView&_W000_hidden_WAR_W000_hiddenportlet_cid=1324584484386&_W000_hidden_WAR_W000_hiddenportlet_tipo=SANContent

Tax year half-time review

Now we’re in the second half of the 2019-20 tax year, it’s a good time to review your finances and ensure you are on track to maximise your tax allowances before the strike of midnight on 5 April 2020.

Whilst we may agree that paying tax for the important services we all rely on, such as education and healthcare, is the right thing to do, no one needs to end up paying more than their fair share.

Each year, the government announces the tax allowances and exemptions that we are entitled to and it makes sense to maximise their use in meeting our individual financial goals. 

How advice can help

Most of us face being taxed on our income, our capital gains and in some circumstances, the value of our estate when we die. Taxation can be complicated, and the rules, reliefs, exemptions and allowances often change, so it is worth seeking advice to be clear how taxes work and the most efficient way to arrange your finances.

Many people can easily find themselves paying too much tax. That’s why it’s important that your financial position is regularly reviewed to ensure that you don’t miss out on opportunities that could reduce your tax liability. Here are a few areas not to overlook as the tax year ticks by:

Your pension

It’s important to review your pension contributions to make sure you stay on track to achieve your retirement objectives. One of the key attractions of paying into a pension is the valuable tax relief available, but pensions can be complex. We can help ensure that you maximise your allowable contribution limits and to ensure that when the time comes to take your pension, you do so in as tax-efficient a way as possible.

Tax-efficient options

ISAs make good financial sense, which is why around 42% of adults in England have one1. They represent a tax-efficient way of saving or investing, with cash, and stocks and shares options available. Junior ISAs are available too.

Instead of investing lump sums into their ISA, some people choose to invest smaller amounts regularly, when affordable. If you’re planning to save into your ISA this tax year, don’t leave it too late and miss out; remember you can’t carry any unused allowance over to the next tax year, so timing is important.

Keep an eye on your investments

A good discipline is to factor in regular portfolio reviews to see how your investments have performed over the last six months or so – are your investments aligned with your objectives and risk profile, have your circumstances changed?

We will always consider your tax position when deciding where you should put any money that you want to invest for the future. We can explain how Capital Gains Tax (CGT) works, and how best to use your annual personal exemption. We will also take into consideration the tax-free Dividend Allowance and be able to explain how dividend income over that level is taxed. 

Inheritance Tax

Many people are concerned that on their death, their families will be faced with a sizeable bill for Inheritance Tax (IHT). However, with careful planning it’s possible to reduce the level of tax payable. We can explain how you can use your annual IHT allowances to make gifts each year. If you wish to give away more substantial sums during your lifetime, we will be able to explain how you can do this tax efficiently. If you survive for seven years after making the gift, it will be outside of your estate for IHT.

Planning your wealth for the future

Tax planning involves taking sensible steps to reduce the amount of tax you pay, whilst still achieving your core financial goals. Working with us can help you put in place the right plans for your future to safeguard your wealth. If you have any questions or would like to discuss the best options for your individual circumstances, please do get in touch.

The value of your investments can go down as well as up, so you could get back less than you invested. A pension is a long-term investment. Tax advice which contains no investment element is not regulated by the Financial Conduct Authority.

1HMRC April 2019

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/797786/Full_ISA_Statistics_Release_April_2019.pdf

Turned 60 and worried about your pension?

The good news is that you still have time to sort things out Here is a check list of what you need to do to ensure you get as much income in retirement as you can.

Check your retirement age

When you first started work you probably expected to retire at 60. Now you are unlikely to get your state pension until you turn 66. Why not use the government’s online facility at www.gov.uk/state-pension-age to find when you will be entitled to receive the state pension?

Will you get the full state pension?

Have you had a career break, for instance to raise a family or maybe you were out of work for a while, or worked abroad? Were you one of the many people who opted out of SERPs in the 1980s and 1990s? If so, you should check whether or not you will get the full state pension. The pension is based on your National Insurance contributions and in some cases it is possible to top these up. Go to the check your state pension website at www.gov.uk/check-state-pension to find out how much you will get.

Do you have pensions from previous employers?

Have you worked for more than one employer? If you have, then you are likely to be a member of more than one pension scheme. Dig out the paperwork and contact the pension scheme to find out how much you are likely to be entitled to and when. It is worthwhile also finding out what the transfer value is.

Do all your pensions give you a guaranteed amount?

Public sector pensions generally give you a guaranteed income for the rest of your life when you retire. These are known as defined benefits pensions. Private sector pensions generally provide you with a pot of money and it is up to you how you use it to generate the income you need for the rest of your life. These are known as defined contribution pensions as they are based on the amount that has accumulated in the pot over time.

Will your pension income be enough?

If you have had a career break for whatever reason, or if you have not made additional contributions into your pension, you may find that the total amount of income you will receive from your various pensions is not enough for you to live the life you envisage once you stop work.

How to get more income

Well, you could consider working longer, and delay taking your pensions. Maybe you have savings you can use to generate more income. What about your home? If you have a spare room you could rent that out, but that may not be the kind of retirement you envisaged. Maybe you could downsize, but moving home is expensive and you need to be sure that it would give you the extra cash you need. If you own your home you may be eligible for what is known as a lifetime mortgage.

Consult a professional financial adviser

If all this sounds a bit complicated, then talk to a professional financial adviser. 

The value of your investments, and the income you receive from them, can go down as well as up. A pension is a long-term investment and inflation will reduce how much your income is worth over the years. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation.

 

How to make your savings work harder

Whatever you are saving for – the deposit on your first home, your wedding or to help your children through university – it is important to put your money in a plan that gives it the potential to grow.

It’s all very well putting money aside, but where precisely are you going to put it? A standard deposit account may seem like the safe option, but with interest rates at all-time lows, your money will grow painfully slowly and could end up being worth less in real terms once you take inflation into account. Here we explain how you can make your savings work harder for you.

The whole point of saving money is to make it work hard, so that even a small amount each month has the chance to grow into a sizeable amount over time, so you can make your dream come true.

With money on standard cash accounts still lower than inflation, unless you take action your savings will end up shrinking in real terms. Assuming this trend continues, you will be able to buy less with your savings in, say, seven years’ time than you can now.

Giving your savings the potential to grow

Putting your savings into stock market investments is more likely to be a sensible choice if you are saving for the longer term, for instance five or more years, and gives you the potential for capital growth and income or interest. However, unless you have plenty of spare time and the detailed knowledge required to research appropriate investments, you should ask a professional financial adviser to recommend suitable funds. 

Reducing risk

Stock market investments are inherently risky – the value of stocks, shares and funds can go down as well as up – but there are ways of reducing risk.

One is by not buying individual stocks, shares, bonds or other types of investments directly. Most people put their money into one or more investment funds that then invest the pool of investors’ money across a broad range of types of investments. This ensures that you do not have all your eggs in one basket.

Another is by choosing investment funds that are managed in a way that suits your attitude to risk. Some people are more willing or can afford to take more risk than others. Your financial adviser will help you work out your risk profile and can then recommend investment funds that match it. Your risk profile may change with your age and circumstances. Your financial adviser will review it with you regularly.

How much might you have missed out on?

if you had stashed away £50,000 in a savings account earning the UK base rate in 2009 today you would have £52,510. With inflation higher than the base rate for most of that time, you would have become poorer in real terms. 

If instead you had put your £50,000 in UK equities, you would now have something in the region of £133,553.

Give your savings the potential to grow

You may decide that the market looks too risky to invest. But in a world where inflation is higher than savings rates, taking no risk is risky too. The best thing to do is to consult a professional financial adviser who can recommend funds that match your attitude to risk while giving your money the potential to work harder for you.

The value of your investments, and the income you receive from them, can go down as well as up and you may get back less than you put in. 

Source: FE Analytics 27 August 2019.

Time to give your personal finances a mid-life MOT?

As you get older your priorities change, and the way your personal finances are organised needs to change too. It’s time to give your financial planning an MOT.

Do you know how many pensions you have? And how much they are worth? Maybe you would like to help your children buy their first home but are not sure of the best way of doing this. And, with retirement just over the horizon, you may be worried that you won’t have enough income when you retire. 

Giving your personal finances a thorough overhaul can help you resolve these and other concerns and the best way of doing this is to consult a professional financial adviser. 

How we helped Mr Johnson get back on track

Mr Johnson*, an engineer in his early 50s, is divorced with two children. Last May he decided to book an appointment with one of our advisers. “Although I enjoy my job and want to continue working for as long as I can, I wanted to know that when I do eventually retire I will be OK financially. I wasn’t sure when I would get my state pension and had pensions from previous employers I had neglected, in addition to my pension from the utility company where I now work. Plus, I had a few random savings accounts that I had opened years ago and which didn’t seem to have increased in value.”

Jane, his financial adviser, asked Mr Johnson about his income and expenditure now, whether he was likely to inherit any money, plans for his retirement and other things, including whether he would like to help his children financially. 

“Mr Johnson is fortunate in that he will have paid off his mortgage in five years’ time. However, he has agreed to help his son with the cost of going through medical school and his outgoings will increase. I started by tracing Mr Johnson’s previous pensions. It turned out that he had three small pension pots from employers early on in his career, in addition to that of his current employer. It made sense to put them into a single fund, with the money invested for long-term growth in line with Mr Johnson’s risk profile.

Using savings to boost income

“His savings accounts were cash ISAs earning next-to-no interest, despite it being paid tax-free. We decided to keep three months’ worth of expenditure in the account paying the most interest as emergency money. We transferred the balance to a fund that generates regular tax-free income, in order to help pay for his son’s training. He can stop taking the income if he no longer needs it, for instance when he finishes paying off his mortgage, or if he inherits money from his parents.”

Ways of paying for long-term care for Mr Johnson’s parents

“I also asked Mr Johnson whether he would like me to review his parents’ finances and explain how they may be able to pay for long-term care (if it is needed) without having to sell their home or deplete their modest savings. He hadn’t realised that this might be possible. He mentioned this to his brother and parents who agreed that it would be a good idea at least to understand the options.”

I now know I can manage

Mr Johnson is happy that his finances are now arranged in a way that suits him. “Jane was fantastic. She listened and understood my concerns. I now know I can manage to help my son through his long training. And looking further ahead, my pensions should give me enough to live on without having to worry. Anything I end up getting from my parents will be a bonus.”

* We have changed real names to preserve anonymity. All financial details reflect the circumstances of the client.

The value of your investments, and the income you receive from them, can go down as well as up, so you could get back less than you put in. A pension is a long-term investment and inflation will reduce how much your income is worth over the years. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation.

Life-changing events and your finances

We know it’s a cliché but life is a journey and your circumstances and priorities change. Major changes tend to have financial consequences. Here we highlight some of them.

You will probably go through a number of life-changing events over the years, hopefully mostly for the better, although few of us get through without some unhappy ones. We inevitably get caught up in the emotions and practical issues these events throw at us. But major changes tend to have financial consequences. So when something significant happens, make sure you check your finances and make any adjustments required.

Getting married or living together

The good news is that living together is generally cheaper than living alone. Things to review at this exciting time include your Will, pensions and investments, together with life and critical illness insurance. Review your joint income and expenditure and agree a plan. You may find that jointly you have more spare cash. Time to start planning to make your dreams happen! 

Bringing up children

Your income may fall and your outgoings will certainly increase – for around 18 years or so. You will want to provide your family with financial security so it is important to review your Will, make sure you have enough life assurance to protect the family’s finances, particularly important if you are taking a career break and losing valuable benefits) and maybe start saving for school or university fees.

Death of a partner or parent

This is a difficult time, when it is important to consider the financial impact of the death on remaining family members, ensuring they are financially secure and that money is invested appropriately and tax-efficiently.

Promotion or changing jobs

If your salary has increased, do you now have surplus income? If so what would you like to use it for? Saving towards a deposit on your first home (or helping your children on to the property ladder)? Paying for your (or your children’s) wedding? Boosting your pension provision? Making overpayments in your mortgage? The amount going into your pension each month will also have increased. Could you be in danger of exceeding your Lifetime Allowance, the maximum amount that you can hold in your pension without having to pay additional tax when you access it?

If you have changed employer, what are the implications for your pension scheme and other employee benefits? Does your new employer offer the same (or better) benefits as your previous one? If not, consider whether you should replace them.

Divorce or separation

Making sensible financial decisions during this highly emotional time can help you get back on a sound financial footing and protect the interests of any children. Should you sell the family home or buy out your partner and take out a new mortgage? Can you split or share your pensions or do you need to set up a new pension? What about any joint investments? Do you need to protect your new lifestyle and that of your children?

Talk to a professional financial adviser

When something in your life changes financial issues are often the last thing on your mind. Yet consulting a professional financial adviser can help ensure that you make the most of your money, whatever the change to your circumstances.

The value of your investments, and the income you receive from them, can go down as well as up, so you could get back less than you put in. Tax advice which contains no investment element is not regulated by the Financial Conduct Authority.