Monthly Archives: December 2023

ARE YOU SURE YOUR TARGET RETIREMENT AGE ALIGNS WITH YOUR FINANCIAL STATUS?

In today’s fast-paced world, the concept of retirement often takes a back seat. For many, it remains a distant reality, mired by uncertainties and apprehensions. However, planning for retirement is an essential aspect of financial planning, which warrants attention from an early age.

Retirement is a phase many of us eagerly anticipate, dreaming of the day when we
can step away from the grind and immerse ourselves in activities that bring us joy. Yet, the reality of retiring often hinges on financial preparedness.

Let’s delve into four critical considerations to help you evaluate your readiness for retirement.

ENVISIONING YOUR IDEAL RETIREMENT

The first crucial step towards planning for retirement is identifying what you want your post-retirement life to look like. Remember, there’s no universal blueprint for retirement – everyone’s aspirations differ.

Some might fancy the idea of relocating abroad, embarking on globetrotting adventures or pursuing new hobbies. Others might prefer spending more time with their loved ones.
A growing trend is the ‘phased’ or gradual transition to retirement, which involves reducing work hours or shifting to part-time roles or consultancy.

THE COST OF RETIRING

Once you have a clear vision of your retirement lifestyle, it’s time to estimate the associated costs. Broadly, your expenses will fall into two categories: essentials and non-essentials.

Essentials encompass mortgage payments, rent, utility bills, insurance, groceries and gifts for occasions like birthdays and Christmas. Non-essential expenses revolve around entertainment, leisure activities and holidays – the extras that add zest to life.

Financial advice can assist you in calculating these expenses and estimating the retirement income required to cover them. We can also help you understand how your income needs may fluctuate over time, starting high during the early retirement years, gradually decreasing and possibly increasing again later due to care- related costs.

DETERMINING YOUR PENSION SIZE

Once you have a clear understanding of your post-retirement income requirements, the next step is to calculate the size of the pension that can generate that income. This involves considering factors like life expectancy, investment growth, tax and inflation.

We can help you with these calculations and demonstrate the impact of various scenarios or choices, such as adjusting your retirement income, weighing the advantages and pitfalls of taking your tax-free cash lump sum or changing your retirement age.

EVALUATING YOUR CURRENT SAVINGS

Finally, compare your retirement needs with your current savings. If your savings are on track to meet your goals, it’s time to strategise how to access your money during retirement. If there’s a shortfall in your savings, don’t panic. There are several strategies to boost your pension. You could consider increasing your pension contributions, extending your working years or leveraging other savings and investments.

Combining additional pension contributions, tax relief and investment growth can bolster your pension pot significantly. Additionally, don’t overlook other sources of retirement income, such as Individual Savings Accounts (ISAs) and the State Pension. We can provide a comprehensive view of your assets and potential income sources, helping you make informed decisions.

GETTING READY FOR RETIREMENT

Retirement readiness involves grappling with complex questions and making critical financial decisions. Seeking professional advice can be invaluable in this journey. By understanding your aspirations and financial status, we can guide you towards realistic retirement goals and suggest ways to augment your savings if needed.

A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS THE PLAN HAS A PROTECTED PENSION AGE).

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.

INTRODUCTION TO INVESTING FOR BEGINNERS

Embarking on the journey of investing can seem intimidating initially, but with a long- term perspective, it can significantly accelerate the achievement of your financial goals.

It’s normal to feel a mix of excitement and apprehension as a first-time investor. There’s a lot to navigate – stocks, bonds, mutual funds, market trends and a sea of unfamiliar jargon. Remember, every successful investor started right where you are now.

The stock market is known for its fluctuations, with dips and rises being part and parcel of the game. However, history evidences that shares often outperform cash over extended periods and stay ahead of inflation.

Here are five essential tips to help you take the first step and beyond.

1. AIM HIGH, AIM RIGHT

The first step of your investment journey involves setting concrete goals. A relatively long- term target helps your investments weather market volatility. Your goal could be anything from saving for retirement to securing your children’s future.

During temporary market downturns, keeping your eyes on the prize reduces the likelihood of selling out and incurring losses.

2. CONSISTENT INVESTMENTS: THE KEY TO STABILITY

Contrary to popular belief, you don’t need a mountain of money to begin investing. Regularly investing manageable amounts each month or gradually investing a lump sum can prove beneficial, especially during times of economic uncertainty and stock market turmoil.

Your money purchases more shares when the market is down and fewer when it’s up. This strategy averages out your investment cost and may contribute to smoother portfolio performance over time.

3. MAXIMISE YOUR TAX ALLOWANCES

Remember your Individual Savings Account (ISA) allowance, which resets annually on 6 April. For the current 2023/24 tax year, this is £20,000. An ISA allows your investments to grow tax-efficiently, enabling more of your money to contribute towards your future.

4. EMOTIONAL INTELLIGENCE IN INVESTING

Allowing emotions to guide your investment decisions is not a wise strategy. It’s natural to feel nervous when the stock market dips, especially for novice investors. However, maintaining your composure and staying in the market once you’ve entered can be crucial.

5. THE ART OF DIVERSIFICATION

A well-rounded investment portfolio will typically include a mix of equities, bonds and cash. Diversification is beneficial, as different assets react differently under varying market conditions. This can help balance returns and lessen the impact of a specific asset’s value decline.

For beginners, diversification can be a challenging task. That’s where expert professional financial advice is crucial. We can help you distribute your money across various investments tailored to your unique needs and risk tolerance. We can also ensure you’re making the most of your tax allowances and reliefs, giving you confidence that your money is working as hard as it should.

READY TO NAVIGATE THE WORLD OF INVESTING?
If you require further information or have any questions, don’t hesitate to get in touch. We will demystify the complex concepts, simplify the terminology and provide practical steps to getting started. Together, we can navigate the world of investing. Contact us to discuss your future goals.

THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH.

THE VALUE OF YOUR INVESTMENTS CAN GO DOWN AS WELL AS UP AND YOU MAY GET BACK LESS THAN YOU INVESTED.

THE TAX TREATMENT IS DEPENDENT ON INDIVIDUAL CIRCUMSTANCES AND MAY BE SUBJECT TO CHANGE IN FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.

Will your loved ones be provided for in the way that you want?

We often avoid thinking about the inevitable, but planning ahead is crucial, especially when it comes
to securing your loved ones’ futures. Writing a Will isn’t just a legal formality; it’s a way to ensure
your assets are distributed per your wishes and your family is cared for even when you’re not around.

Understanding how to secure your assets and possessions after you pass away is essential. It’s crucial
to ensure that your estate (the sum of your assets and possessions) will be distributed according to your wishes among your chosen beneficiaries, who could be family members, friends or charitable organisations.

The importance of a Will
Your estate can include personal possessions, property (both in the UK and overseas), savings, investments, insurance funds and pension funds. A Will lets you determine what happens to these assets
after your death.

The reasons to make a Will
A Will clarifies who will benefit from your property and possessions (your estate) after your death.

There are numerous reasons to make a Will:

• You can decide how your assets are shared.
• You can ensure your partner is provided for if you’re an unmarried couple.
• You can decide whether to leave anything to your former partner if you’re divorced.
• You can ensure you don’t pay more Inheritance Tax than necessary.
• You can protect your estate if several people claim it because they depend on you financially.
• You can include a trust in your Will to provide for young children or a disabled person, save tax or protect your assets in some way after you die.
• You can ensure your wishes are followed if your permanent home is not in the UK, you are not a British citizen, you live here but have overseas property or you own all or part of a business.

The risks of not having a Will
Without a valid Will in England or Wales, the law will dictate the distribution of your assets. If you have no living family members, the Crown will claim all your possessions and property. By creating a Will, you can ensure you don’t pay more Inheritance Tax than necessary.
It’s an integral part of financial planning, allowing you to stipulate your wishes. Without a Will, your estate will generally be divided according to intestacy rules, which may not align with your preferences.

Considerations for unmarried and same-sex partners
Creating a Will becomes even more critical if you’re unmarried or in a registered civil partnership. The law doesn’t automatically recognise cohabitants (partners who live together) as having the same rights as married couples or registered civil partners. Therefore, your long-term cohabitant might be left with nothing if you have yet to make a Will.

Safeguarding children and dependents
A Will is also crucial if you have children or dependents who may not be capable of caring for themselves. Without a Will, there could be uncertainty about their care and provision if you pass away.

Peace of mind through planning
Death is the one certainty we all face. Planning ahead provides peace of mind that your loved ones can cope financially without you. It also helps to alleviate the stress of monetary worries during a difficult time. Planning your finances in advance ensures that your estate goes where you want it to. Making a Will is the first step in this process.

Inheritance Tax and exempt beneficiaries
If you leave everything to your spouse or registered civil partner, there’ll be no Inheritance Tax to pay, as they are classed as an exempt beneficiary. You can use your tax-free allowance to give part of your estate to someone else or a family trust. However, Scottish law on inheritance differs from English law.

Choosing executors and distributing your estate
Executors are the individuals named in your Will to carry out your wishes after you die. They are responsible for all aspects of settling your affairs after your death. This includes arranging your funeral,
notifying relevant parties of your death, collating information about your assets and liabilities, dealing with any tax bills, paying debts and distributing your estate to your chosen beneficiaries.

Reviewing your Will
It’s advisable to review your Will every five years and after any significant change in your life, such as getting separated, married or divorced, having a child or moving house. Any changes must be made by Codicil (an addition, amendment or supplement to a Will) or by making a new Will.

READY TO ENSURE YOUR WISHES ARE CARRIED OUT AND YOU MAKE IT EASIER ON THOSE LEFT BEHIND?
If you’re considering writing or updating your Will and need further guidance, don’t hesitate to reach out. We are here to provide the necessary information and support to help you protect your legacy and ensure your wishes are respected.

THIS DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.

SIMPLIFYING FINANCIAL MANAGEMENT, LOWERING CHARGES AND INCREASING FUTURE FUNDS

You may have worked with several employers throughout your career, accumulating multiple pension plans. This can also apply if you’ve been self-employed or a contractor, resulting in personal pensions.

While multiple pensions can be administratively challenging to manage, they could also be financially draining due to high fees or subpar investment performance. What is a potential solution? Pension consolidation.

This strategy can simplify financial management, lower charges and increase future funds. However, it has potential pitfalls, so seeking professional financial advice is crucial. Let’s delve into pension consolidation and what needs to be considered.

THE UPSIDE OF PENSION CONSOLIDATION

Managing multiple pensions can be a daunting task. Imagine tracking the investment performance, charges and annual statements for five different pensions. This can be overwhelming and time-consuming for many. Therefore, transferring pensions to a single provider can significantly simplify your financial administration.

Moreover, you’re likely paying administrative fees for each pension. This might not be the most cost-effective approach, especially when dealing with providers who have outdated and uncompetitive charging structures.

These fees can affect your investment returns, eventually reducing your retirement funds. By consolidating your pensions, you could save on these charges.

However, pay attention to the performance of each pension fund while focusing on fees. Some of your pensions might be underperforming, and shifting to a different scheme could offer better growth potential.Assessing charges and performance is more complicated, so we’re here to help. We can thoroughly evaluate your pensions and guide you on the best course of action.

POTENTIAL PITFALLS OF PENSION CONSOLIDATION

Consolidating your pensions may have downsides if it means giving up valuable benefits and guarantees. Here are some key features you should consider. One of the most significant risks associated with pension consolidation is the potential loss of defined benefits. These benefits often come with older pension schemes, including guaranteed annuity rates and spouse or dependents’ pensions. Consolidating pensions could mean giving up these benefits, potentially resulting in lower income during retirement.

Before consolidating, checking whether your existing pensions carry exit fees is crucial. These charges can sometimes outweigh the benefits of consolidating, particularly if they are substantial.

Additionally, while having all your pensions in one place might make them easier to manage, it could also lead to a need for more diversification. If all your pension savings are invested in the same funds, you could put your retirement savings at a higher risk.

SECURING A MORE COMFORTABLE FUTURE FOR YOU AND YOUR FAMILY
The funds you’ve accumulated over the years could be substantial, and a simple decision could jeopardise your future financial security. Conversely, making the right decision could secure a more comfortable future for you and your family. We’re here to guide you, ensuring you make informed decisions with your money.

THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.

A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS THE PLAN HAS A PROTECTED PENSION AGE).

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.