Monthly Archives: June 2021

GROW, PROTECT AND TRANSFER YOUR WEALTH

Financial planning is a step-by-step approach to ensure you meet your life goals. Your financial plan should act as a guide as you move through life’s journey. Essentially, it should help you remain in control of your income, expenses and investments so you can manage your money and achieve your goals

Life rearly stands still, priorities shift, circumstances change, opportunities come and go and plans need to adapt. But regular discussion and reviews are the key to keeping on top of things. This means adapting your plans when things change, to keep you on course.

1. WHAT ARE MY FINANCIAL GOALS?

Generally, people’s financial goals change as they progress through different life stages. Here are some themes which might help you consider your own goals:

• In your twenties, you may want to focus on saving for large purchases, such as a car, wedding or your first home
• In your thirties, you may be planning for your family, perhaps school fees or your children’s future
• In your forties, your focus may move to retirement planning and growing your wealth
• In your fifties, paying off your mortgage and feeling financially free is likely to be a priority n In your sixties, it is usually about making sure
• You have enough money to retire successfully
• In your seventies, your attention may turn to inheritance planning and later-life care

Other plans may also include starting your own business, buying a second home or travelling the world. Of course, everyone is different, so you might have a goal in mind we haven’t mentioned.

2. ARE MY GOALS SHORT, MEDIUM OR LONG TERM?

You are likely to have a mixture of short-term (less than three years), medium-term (three to ten years) and long-term (more than ten years) goals. Moving to a larger property might be a short-term goal, while saving for your children’s university fees might be a medium-term goal and retirement planning a long-term goal (depending on your life stage).

You’ll need different strategies, and different saving and investment risk levels, for each of these goals.

3. HOW HARD IS MY MONEY CURRENTLY WORKING?

If your cash is currently in a savings deposit account, the interest rate you’ll likely be receiving is probably not going to be sufficient to keep your money growing as quickly as inflation is rising over the longer term. So your savings could eventually lose buying power in real terms over the years ahead.

If you want your money to grow faster, you might want to consider allocating a portion of your savings towards investments. This may involve more risk than a savings account, but the amount of risk involved will be dependent on you and what you are looking to achieve, so you decide. Obtaining professional advice will ensure you choose investments at a risk level that suits your preferences.

4. HAVE I PAID OFF MY DEBTS?

It’s not always wise to start investing if you have debts that you need to pay off (excluding long- term debts like student loans and mortgages). That’s because overdrafts, credit cards and other short-term debts can charge you more in interest than you could expect to gain in investment returns. In most instances, it will benefit you more in the future to become debt-free before you start to grow your wealth.

5. AM I MAKING THE MOST OF MY TAX-EFFICIENT ALLOWANCES?

All UK taxpayers receive certain allowances to help with saving and investing. For example, you may already have an Individual Savings Account (ISA) and be taking advantage of your annual allowance. You also have a capital gains allowance, a dividends allowance and a pension annual allowance. All of these will help you to grow your wealth faster, if you know how to use them.

Tax allowances can be complex though, and they can change without much
notice, so if you’re not careful you risk an unexpected tax charge. If in doubt, talk us to review your options.

6. WHAT ARE MY RETIREMENT PLANS?

A key factor in any financial plan is the date you plan to retire, as that typically marks a turning point from accumulation of wealth built up throughout your working life, to the reduction of wealth as you start to spend your savings and pass your assets on to loved ones. Ensuring that those two elements of your life are well balanced is an important part of the financial planning process.

ARE YOU PLANNING WITH PURPOSE?
Once you’ve answered these six questions for yourself, your financial plan will start to take shape. But you might still have more questions about how to reach a particular goal, how to reduce a potential tax bill, how to invest without taking on too much risk, how to pay off your debts or how much money you’ll need to retire successfully, in which case we can help. Please speak to us – we look forward to hearing from you.

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.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

AGE CHANGE TO WHEN PEOPLE CAN START TAKING PENSION SAVINGS

A MEMBER’S PROTECTED PENSION AGE WILL BE THE AGE FROM WHICH THEY CURRENTLY HAVE THE RIGHT TO TAKE THEIR BENEFITS. THE PROTECTED PENSION AGE WILL BE SPECIFIC TO AN INDIVIDUAL AS A MEMBER OF A PARTICULAR SCHEME.

The government has confirmed that it plans to increase the minimum pension age at which benefits under registered pension schemes can generally be accessed, without a tax penalty, from age 55 to age 57 commencing 6 April 2028.

The Treasury is consulting on how best to apply its decision to increase the age when people can start taking their private pension savings. The Normal Minimum Pension Age (NMPA) will increase in line with increases to the State Pension age.

UNQUALIFIED BENEFITS RIGHT

Members who currently have an ‘unqualified right’ to access their benefits under a registered pension scheme before age 57 and members of the armed forces, firefighters or police pension schemes will be permitted to retain their existing minimum pension age.

The government is planning to introduce a protection regime which would mean that an individual member of any registered pension scheme (occupational or non-occupational) who has an unqualified right – for example, without needing the consent of their employer or the trustees – under the scheme rules at the date of the consultation to take pension benefits at an age below 57 will be protected from the increase in 2028.

PROTECTED PENSION AGE

A member’s protected pension age will be the age from which they currently have the right to take their benefits. The protected pension age
will be specific to an individual as a member of a particular scheme. So an individual could have a protected pension age in one scheme where they have a right to take pension benefits at an age below 57, but for schemes where no such right exists the new NMPA of 57 will apply from 2028.

It will also apply to all the member’s benefits under the relevant scheme, not just those benefits built up before April 2028. Individuals with an existing protected pension age under the 2006 or 2010 regimes will see no change in their current protections.

ASSOCIATED PENSION SCHEMES

In recognition of the special position of members of the armed forces, police and fire services, the government is proposing that, where members of the associated pension schemes do not already have a protected pension age, the increase in the NMPA will not apply to them.

Individuals who do not have a protected pension age who access their pension benefits before age 57 after 5 April 2028 would be subject to unauthorised payments tax charges.

PENSION TAX RULES ON ILL-HEALTH

There will be no need for individuals or schemes to apply for a protected pension age. This is in line with the approach taken under the existing protected pension age regimes. The government is not proposing to make any changes to the current pension tax rules on ill-health as part of this NMPA increase.

Unlike the protection regime introduced in 2006, where individuals are entitled to a protected pension age in relation to the increase in NMPA from 2028, they will be able to draw benefits under their scheme even if they are still working.

SCHEME BENEFITS CRYSTALLISED

In addition, currently, if an individual wants to use their protected pension age, then all their benefits under the scheme must be taken (crystallised) on the same date. However, considering the pension flexibilities introduced in 2015, the government proposes that this requirement will not be a condition of the 2028 protected pension age regime.

This would mean, for example, that an individual with a defined contribution pension with a protected pension age of 55 would be able to allocate some of their pension to a drawdown fund, and at a later date use the remainder to purchase an annuity, without losing their protected pension age.

NORMAL MINIMUM PENSION AGE

The government’s position remains that it is, in principle, appropriate for the NMPA to remain around ten years under State Pension age, although the government does not intend to link NMPA rises automatically to State Pension age increases at this time.

The announcement means that there is the potential for some people to be caught in the middle, being able to access their pension at 55 prior to April 2028, but having to wait until they turn 57 to access any untouched pension funds after this date where they don’t qualify for protection

PLANNING FOR THE RETIREMENT YOU WANT
This announcement may, in particular, have an impact on the timing for taking your pension benefits. It’s never too early to be planning ahead. To discuss how we can help you plan for the retirement you want, please contact us.

A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028). THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE. YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE 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. YOU SHOULD SEEK ADVICE TO UNDERSTAND YOUR OPTIONS AT RETIREMENT.

ACCESSING PENSION BENEFITS EARLY MAY IMPACT ON LEVELS OF RETIREMENT INCOME AND YOUR ENTITLEMENT TO CERTAIN MEANS TESTED BENEFITS AND IS NOT SUITABLE FOR EVERYONE. YOU SHOULD SEEK ADVICE TO UNDERSTAND YOUR OPTIONS AT RETIREMENT.

GETTING FINANCIAL HELP DURING THE CORONAVIRUS (COVID-19) PANDEMIC

The coronavirus (COVID-19) pandemic has not only dealt a blow to the UK economy, many people and families have unfortunately experienced financial hardship. According to a recent survey, 31% of the population say they are struggling with their finances due to the effects of the pandemic.

With the pandemic causing many workers to lose working hours or their jobs, it’s more important than ever to know what financial options you have.

UNDER-35’S ARE MOST LIKELY TO BORROW

But the survey shows that the impact is not spread evenly. It appears that people aged 18-35 have experienced the most financial difficulty and are most likely to seek help from others.

During the pandemic, 18-35s have been four times more likely than any other age group to receive financial support from their family or friends. They’ve also been twice as likely as other age groups to take out a loan to make ends meet.

PEOPLE AGED 35-55 HAVE BEEN IMPACTED LESS

Those in the 35-55 age group have been less likely to need to borrow than the under-35s, and also less likely to report a worsening of their financial situation than those aged 55-65, But that’s not to say that they have it easy. Nearly one in three people in this age group say their finances are worse now.

PEOPLE AGED 55-65 HAVE THEIR RETIREMENT PLANS DISRUPTED

Many people in the 55-64 age group have had to change their retirement plans. Income from work for one in four of these people has fallen 40%.
A rise in unemployment has led to increasing numbers of people taking early retirement, with some relying on their property wealth to fund this.

OVER-65S ARE SUPPORTING THEIR FAMILIES

Over-65s have been less affected than the general population, with 17% reporting that they are struggling financially. This is likely due to their pension income, which, in a lot of cases, will have remained level. More than one in ten of those aged over 65 say they have offered financial support to family members, which is the highest of any age group.

Before providing help to younger family members, it’s important to make sure that you can afford to without affecting your standard of living. Consider how your costs might rise later in life and ensure that you retain enough wealth to cover these additional expenses.

SUPPORT IS STILL AVAILABLE IF YOU, YOUR FAMILY OR YOUR BUSINESS NEED IT

In response to the impact of coronavirus, the government agreed a raft of measures with providers across a range of sectors to ensure struggling consumers are treated fairly. For those still worried about paying utility bills or repaying credit cards, loans or mortgages due to the impact of coronavirus, support is still available. Visit www.gov.uk.

People struggling to pay essential bills are encouraged to:

• Contactproviders:ifyouthinkyoumighthave a problem paying bills, contact your providers to explain the situation and receive help
• Askforhelpifitisneeded:ifyouarestruggling with your bills or credit commitments, free advice is available. Coronavirus has affected the entire nation and many people need support now, even if they never have before
• Explore payment options: if you are struggling with bills, it is better to agree a payment plan with your provider/s and keep making regular instalments, rather than cancelling direct debits and letting debt build

Source data: https://www.lv.com/about-us/press/ coronavirus-outbreak-leaves-young-people- turning-to-bank-of-gran-and-grandad

HELP AND FINANCIAL SUPPORT:

Even though the government has relaxed some of the COVID-19 restrictions, this is still a particularly difficult time for many households across the UK, with some struggling to keep up with bills, loan payments and mortgages. If you would like to discuss your situation, please contact us for more information.

PLAN FOR A BETTER TOMORROW, TODAY

Responsible investment is a catch-all term to broadly describe funds that invest to make a positive change, either to the environment or for society. Within this umbrella term there are four broad investment approaches: ethical exclusion; responsible practice; sustainable solutions; and impact funds.

Increasingly more pension savers are asking where their funds are invested. Many are no longer just concerned about getting the best returns – they also want their money to be used in a way that helps society and the planet. The Department for Work and Pensions (DWP) is currently consulting on improving the governance, strategy and reporting of occupational pension schemes on the impact of climate change.

The growth of Environmental, Social and Governance (ESG) issues – from an increasing awareness of climate change, global responsibilities and social issues to investing in companies that act responsibly and prioritise making the economy cleaner, safer and healthier – is an important consideration for many investors.

CONSIDERATIONS WITHIN RETIREMENT PORTFOLIOS

While ESG concerns have been gaining profile in the investment world for many years, there is reason to believe that there will continue to be a big shift toward these considerations within retirement portfolios and the coming transfer of wealth to sustainability-minded Millennials.

Eight out of ten people (83%) think global warming will be a serious problem for the UK if action is not taken, and there is a lack of awareness about the extent to which pension funds are working to reduce the impact of climate change. In the survey, around half (51%) say global warming is ‘extremely’ or ‘very’ important to them.

CATEGORIES OF CRITERIA USED TO ASSESS COMPANIES

However, there remains a lack of understanding among some savers as to how pension schemes are taking action against climate change.

Three-fifths of workplace pension holders (59%) say they don’t know if schemes are taking any action; just one in seven (15%) workplace pension holders think schemes are.

ESG refers to the three categories of criteria used to assess companies when investing responsibly: ‘E’ stands for ‘environmental’ factors such as, carbon emission and water management; ’S’ stands for ‘social’ factors, such as employee welfare, diversity and inclusion; ‘G’ stands for ‘governance’ factors, such as business ethics and corruption.

PERCENTAGE OF PEOPLE’S WEALTH IN THEIR PENSIONS

The concept of ESG investing has existed for decades but has grown enormously in popularity over the last five years. While early adopters
of this practice were often driven by moral or ethical concerns, over time the financial benefits of ESG investing have become clearer, which has encouraged mass adoption.

ESG investing is becoming increasingly popular, and many investors are choosing ESG funds for their Individual Savings Accounts (ISAs) and general investment portfolios. However, these accounts usually hold a lower percentage of people’s wealth than their pensions.

GREATER TRANSPARENCY AROUND CLIMATE IMPACT

The survey also found a number of people don’t understand what pension schemes do with their money. Little more than two-thirds (68%) of the general population understand that pension schemes invest in a range of companies and other investments, and only one in five (22%) pension holders say they know the types of companies that their pension invests in.

Despite these knowledge gaps, when it comes to pensions there is still strong support for greater transparency around climate impact, in terms of the investments that are made and the way firms operate. Six in ten (62%) people think that pension schemes and other investors should hold those in charge of the companies they invest in to account for their efforts to minimise their impact on climate change.

BEHAVE IN A WAY THAT HELPS TACKLE CLIMATE CHANGE

Two-thirds (66%) think investors have a responsibility to encourage the companies they invest in to behave in a way that helps tackle climate change. A similar proportion (65%) think that financial services firms should report on the impact the companies they invest in have on climate change.

Around seven in ten people (68%) say that pension schemes should be transparent about the extent to which they invest in a climate-aware way. Seven in ten (69%) also want financial services firms to be transparent about the impact of their own operations on climate change

LOOKING FOR MORE FREEDOM OVER HOW YOUR PENSION IS INVESTED?

Pension holders now have far more freedom over how their pension is invested than many realise. If you would like to ensure your pension is invested according to your preferences, including a preference for ESG investments, contact us for more information.

Source data:

[1] Research was conducted for the Pensions and Lifetime Savings Association (PLSA) by Yonder (formally known as Populus), an independent research agency. They achieved a nationally representative online sample of 2,082 UK adults aged 18+. The fieldwork was conducted between 25-26 November 2020.

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.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.