Malcolm Streatfield talks to DirectorsTalk: “Affinity business progressing exceptionally well”

Lighthouse group Plc (LON:LGT) CEO Malcolm Streatfield talks to DirectorsTalk about its new agreement with The Public and Commercial Services Union. Malcolm explains what will be provided for these type of organisations, how well this side of the business is progressing, how they plan to grow further and how trading has been so far this year for the company.

Gifts with added benefits

Did you know that when you help your family financially you could also be reducing the inheritance tax that may be payable when you pass away?

With the inheritance tax threshold, which includes the value of your home, currently £650,000 for married couples and £325,000 for single people, many families are now finding that there is inheritance tax to pay when their loved ones pass away. However, it is possible to reduce the likely bill.

The annual gift allowance

You can give away cash and items worth up to a total of £3,000 a year and the amount will immediately be exempt from inheritance tax. You can carry forward up to £3,000 of unused allowances from the previous year. If you give away more than £3,000 a year, the excess amount will only be exempt from inheritance tax if you live for a further seven years.

Other gifts that are exempt:

  • Gifts of up to £250 to as many people as you want, although not to anyone to whom you have given the £3,000 gift allowance in that year.
  • Wedding gifts to your child worth £5,000 or less, to your grandchild or great-grandchild worth £2,500 or less, or to another relative or friend worth £1,000 or less.
  • Money that pays the living costs of an ex-spouse, elderly dependant or a child under 18 or in full-time education.
  • Excess income, over and above your normal outgoings, that you give away.

Find out more

There are many ways you may be able to reduce the amount of inheritance payable when you pass away. This is a complex area and it is easy to get things wrong. If you are concerned that you may leave your loved ones with an unnecessary tax bill you should talk to one of our professional financial advisers.

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

Inflation and the £ in your pocket or savings account

Between Jan 2015 and Jan 2018 average inflation was 2.44% per year. This means that, on average, prices are 7.5% higher now than they were in January 2015*.

Therefore, for your savings to have maintained their value they need to have grown by 7.5% since January 2015 and for their value to have increased they need to have grown by more than 7.5%. To have achieved this you need to have been getting at least 2.44% interest or growth on your savings each year.

If you have savings in cash accounts, even if they are in cash ISAs, they will have fallen in value in recent years, as average interest rates on such accounts have been well below 2%, with some paying less than 1%. The rate of inflation in January 2018 was 3.10%*.

If you have savings of more than three month’s expenditure (“rainy day” money) in cash accounts, irrespective of whether or not it is in an ISA, you should talk to one of our professional financial advisers as soon as possible to discuss whether you should move your hard-earned savings to a more suitable home.

If you have savings in cash accounts or want to make additional savings you should talk to one of our professional financial advisers as soon as possible.

*“£1 in 2015 → 2018 | UK Inflation Calculator.” FinanceRef Inflation Calculator, Alioth Finance, 29 Jan. 2018, http://www.in2013dollars.com/2015-GBP-in-2018?amount=1.

Finding a “nISA” home for your savings

ISAs are an increasingly popular form of savings plan, because they give your money the potential to grow more or less free of tax and there is no tax to pay when you take money out. But it is important to choose an ISA that offers the potential for real growth and suits your particular circumstances.

If you have savings you should consider holding them in an ISA – there is no tax to pay on any income or interest you receive from them or on any gains you have made when you cash them in. This makes them an attractive way of saving for the future – whether to pay for your children or grandchildren’s education, or to boost your income later in life. Plus, you can take money out whenever you want.

Which type of ISA?

There are ISAs to suit most people – cash, investment funds (known as stocks and shares), or a mixture. Cash ISAs are like savings accounts but with the tax advantages of an ISA. However, with interest rates still very low and inflation relatively high, the value of your savings is likely to fall. In the past, investments in stocks and shares ISAs have provided a better way of achieving growth that outstrips inflation over the longer term.

An ISA designed to help you achieve your financial goals

There is, of course, a risk attached to investing, but choosing a suitable fund and investing for the longer term gives your money more chance to perform as you expect. Funds which invest in a diverse selection of investments have the advantage of giving you instant access to a wide range of holdings within a single fund. It is also important to consider funds that are specifically designed to help you achieve your financial goals.

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

Malcolm Streatfield talks to DirectorsTalk: 2017 Results

Lighthouse Group Plc (LON:LGT) CEO Malcolm Streatfield talks to DirectorsTalk about the strong set of results for 2017 issued. Malcolm talks us through the highlights, explains the sunset clause arrangements introduced by the FCA and what this means for Lighthouse and tells us where the focus will be for 2018 and what we can expect from Lighthouse this year.

Lighthouse Group Ahead of market expectations from DirectorsTalk on Vimeo.

Are you losing money in cash ISAs?

A recent report reveals the true scale of losses people who keep their long-term savings in cash ISAs have suffered, compared with those taking a more diversified investment approach.

A recent report by Royal London highlights the fact that many people are using cash ISAs for their long-term savings, building up significant cash sums by adding to them year-on-year. And, the report suggests, they could be losing out substantially as a result. This highlights the dangers of holding long-term savings in cash.

£1,000 now worth just £910

The problem stems from the fact that although inflation has been low for some time, the cost of goods and services is still rising faster than the very low returns being paid on cash accounts (on average less than 1% each year since 2010). This means that although cash does slowly grow in these accounts, its buying power has been – and continues to be – gradually eroded. The report estimates that funds in cash ISAs have lost more than 9% of their purchasing power over the last 10 years. In other words, if £1,000 had been deposited in a cash ISA ten years ago it would now be worth less than £910 in real terms.

What are the alternatives?

People are often reluctant to put their savings into more complex investments like stocks and shares, seeing this as too risky. However, the report specifically compares investment in a cash ISA with investment in a ‘multi-asset fund’, which spreads your savings across a broad range of investments. The idea is that while some of your investments may drop in value during a particular period, others may do well, balancing out the overall returns over time. So while the value of multi-asset funds can fluctuate, they don’t tend to experience the very high volatility that can hit riskier investments. The research shows that multi-asset funds have consistently outperformed cash deposits since 2008, making them more attractive for long-term savings.

£1,000 could now be worth £1,300

The report estimates that if the £1,000 mentioned earlier had been placed in a multi-asset fund rather than a cash ISA, its purchasing power could have increased by more than 30% in real terms. In other words, if you had invested your £1,000 in a multi-asset investment fund ten years ago, it could be worth more than £1,300 in today’s values.

So, while it may still be wise to maintain some emergency savings in a cash account, you might consider placing your long-term savings in a well-managed and diversified multi-asset fund. There is a wide range of funds from which to choose, but not all are expected to deliver better returns than cash ISAs.

You could consider multi-asset funds that are constructed and managed to deliver consistent and anticipated customer outcomes within an entirely appropriate risk framework, thereby delivering customer expectations over the long term without causing sleepless nights along the way. To ensure that any funds you invest in reflect a suitable level of risk, and that they are aligned to your individual needs and circumstances, it’s important to seek professional financial advice before investing.

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