Topic: Uncategorised

CREATING A ROADMAP FOR YOUR FUTURE FINANCIAL SUCCESS

It’s always a good time to consider financial planning, but at the start of a new tax year, when you have a fresh set of annual allowances to take advantage of, you have the perfect opportunity to get your financial affairs in order and align them with your goals.

Able to mitigate some of the adverse effects. Taxes on savings, investments and earnings all come with bands, reliefs, allowances and exemptions.

Financial planning ensures that you take advantage of these by organising your finances to make the most of your money and avoid situations you may not have anticipated. Taxation can affect net investment returns, and maximising your net return will help you meet your financial objectives. There are a number of potential financial planning solutions to help you meet your goals in a tax-efficient way.

MITIGATING THE COVID-19 ECONOMIC IMPACT

The UK government has accumulated massive deficits while trying to mitigate the economic impact of the coronavirus (COVID-19) pandemic on individuals and businesses.

Essentially, they have three options to try and reduce their debt burdens:

• Implement austerity, including higher taxes, so that the borrowing can be repaid;
• Deliver economic growth so that the debt burden to GDP falls;
• Or allow inflation to erode the real value of the debt.

MEET YOUR GOALS IN A TAX-EFFICIENT WAY

The good news is that if you start considering the recent and potential tax changes now, you should be able to mitigate some of the adverse effects. Taxes on savings, investments and earnings all come with bands, reliefs, allowances and exemptions.

Financial planning ensures that you take advantage of these by organising your finances to make the most of your money and avoid situations you may not have anticipated. Taxation can affect net investment returns, and maximising your net return will help you meet your financial objectives. There are a number of potential financial planning solutions to help you meet your goals in a tax-efficient way.

MARCH BUDGET 2021 CHANGES ANNOUNCED

These involve making use of tax allowances each year, assessing investments that suit your tax profile and considering long-term plans for you and your family. This might necessitate some financial restructuring. Business owners will also need to prepare and plan for the changes announced in the March budget.

The Chancellor of the Exchequer, Rishi Sunak, delivered Budget 2021 to Parliament on 3 March. Here are some of the key announcements around tax and financial planning.

PENSIONS

Despite predictions that the many tax advantages of pensions could be cut back, they were left untouched. The most significant change was the decision to freeze the lifetime allowance (the amount you can hold in pensions without paying a tax charge) at its current level of £1,073,100 until April 2026.

Pensions still remain one of the most tax- efficient ways to invest, particularly for higher and additional rate taxpayers. In addition to tax relief on what you pay in, any growth is free of UK Income Tax and Capital Gains Tax and any remaining funds in your pension on death are usually free of Inheritance Tax after your death.

INDIVIDUAL SAVINGS ACCOUNTS (ISAS)

The Chancellor left ISA allowances unchanged. Any proceeds from an ISA remain free of UK Income Tax and Capital Gains Tax and, therefore, this is a key consideration in financial planning. As soon as the new tax year started on 6 April, your annual ISA allowance limit was reset.

For the current tax year, savers can contribute up to £20,000 each across the four main types of ISA, which include Cash, Stocks & Shares, Innovative Finance and Lifetime accounts.

CAPITAL GAINS TAX (CGT)

Despite proposals to increase CGT, there were no new announcements, other than the decision to freeze the annual tax-free allowance at its previous level of £12,300 until April 2026.

As part of financial planning, it still makes sense to make as much use as possible of the valuable ISA and pension allowances, to ensure your funds are held in the most tax-efficient manner.

INHERITANCE TAX (IHT)

Again, no changes were made to the standard nil-rate band of £325,000 and the residence nil- rate band of £175,000, both of which have been proposed to remain frozen until April 2026.

If you’re thinking about how you can reduce the Inheritance Tax your beneficiaries have to pay when you die, there are various options you should consider.

ACHIEVE YOUR GOALS AND FUTURE WELLBEING
The purpose of creating a financial plan is to help you understand where you stand now and where you could be in the future if you take the right steps. It’s about creating a roadmap for your money to help you achieve your goals and future wellbeing.

Putting in place a comprehensive financial plan and keeping it updated will be amongst the most important decisions you ever make. It should include details about your cash flow, savings, debt, investments, insurance and any other elements of your financial life and wellbeing.

Even if you’re in a good position financially, there are various ways that financial planning could help improve your current situation, for example by:

• Improving the growth rate your investments are achieving
• Introducing new streams of income
• Minimising the tax you pay
• Recommending solutions and products you might not be aware of

AVOID COSTLY FINANCIAL MISSTEPS

Designed to help secure your financial future, a financial plan seeks to identify your financial goals, prioritise them and then outline the exact steps that you need to take to achieve these goals.

It can also help you avoid costly financial missteps, such as making a risky investment, being subject to an unexpected tax charge or underestimating the liquidity you need, resulting in the forced sale of your assets. But the value of financial planning isn’t just limited to the returns you get from it.

There are also practical and emotional benefits to receiving professional financial advice, for example by:

• Freeing up time spent managing your finances n reducing the administrative burden on you n removing financial stress, which could impact on your health.
• Giving you peace of mind that you’re moving in the right direction

HELPING YOU ACHIEVE YOUR GOALS AT EVERY STAGE OF YOUR LIFE

Creating a financial plan isn’t a static process. It’s important to adjust your plan as your life and situation evolve. It’s helpful to reevaluate your financial plan after major life milestones, like getting married, starting a new job, having a child, planning for their education, losing a loved one and retirement planning. Everyone has different priorities. To discuss your options, please contact us today to find out more.

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.

THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE TAXATION & TRUST ADVICE.

IMPACT ON PEOPLE OPTING FOR EARLY RETIREMENT AS A RESULT OF THE PANDEMIC

An increasing number of people have been forced into early retirement due to the economic impact of the coronavirus (COVID-19), with many worried about how they’ll make ends meet in the future. Because of the pandemic, we are currently in a challenging economic period. The global economy has taken over ten years to recover from the shock of the last financial crisis.

CAN YOU AFFORD TO RETIRE EARLY?

We know that you work hard for your money, so you should be able to enjoy it as much as possible. When planning for retirement, there are now more choices available than ever before. By understanding precisely what you’ll need to get to where you want to be, you can ensure you’re prepared for the future.

So when working out if you can afford to retire early, your starting point should be to think about whether your savings and investments will be enough to cover all your outgoings, as well as all your essential living costs and any regular debt repayments you may have to make.

ANSWERING ALL THOSE BIG QUESTIONS:

We can give you more information on any of these options and help you to choose the ones that are best for you.

We’ll answer all those big questions you might have: When can I retire? How can I make my money last? Should I take a lump sum? To find out more and discuss your options – please contact us.

In a recent survey, the findings showed that 3% of people in the 55-64 age group have taken early retirement due to the coronavirus pandemic. And 4% of people in this age group have had to access some of their pension savings to cover living costs because their income has dropped due to redundancy or reduced pay. These percentages may seem small, but they represent hundreds of thousands of people.

RISKS OF EARLY RETIREMENT

While early retirement may sound like a dream come true, for those with insufficient pension savings it can be a ticking time bomb. Every year of early retirement will have an impact on your pension, in that it represents both a year lost for saving and a year added for spending. Simply put, you’ll need to make less money last longer.

Unless you’ve budgeted carefully and are sure you have enough savings, you could run the risk of your pension running out in your later years. This is an expensive time for many people, due to the cost of financing care, and that can result in unexpected hardship.

PLANNING FOR EARLY RETIREMENT

• 1. Track down any lost pensions from previous employers and add these to your total.
• 2. Check how much of the State Pension you can expect to receive, and from what age.
• 3. Create a budget for your retirement spending, making sure to include any additional future costs you’re aware of and a little extra for future costs you’re unaware of. Be honest about how much you’ll need.
• 4. Make sure that the total you have in pension savings, when combined with the State Pension you’ll receive, is sufficient to cover all your future costs.
• 5. Calculate all your savings in different pension pots to find out what your total is.

ALTERNATIVES TO EARLY RETIREMENT

If your financial situation is forcing you to withdraw from your pension but you’re not ready yet to stop saving, there are ways to access your pension that do not affect your annual allowance and therefore allow you to continue contributing at the same rate in the future.

These include:

• Taking up to 25% of your savings as a tax-free lump sum (from a defined contribution pension)
• Accessing a defined benefit pension (if you have one)
• Withdrawing a pension pot worth under £10,000 in its entirety under ‘small pots’ rules
• Buying certain types of annuity

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.

PLANNING TO ACHIEVE YOUR RETIREMENT GOALS SOONER

Are you ‘mid or late career’ or planning to retire within ten years? If the answer’s ‘yes’, then you probably want to know the answers to these questions: Will I be able to retire when I want to? Will I run out of money? How can I guarantee the kind of retirement I want?

some people may overlook the pension they had with their last employer. As a result, many people have pensions with previous employers that they’ve lost track of – and rediscovering them can give a huge boost to your retirement savings.

You can trace old pensions by getting in touch with the provider. Look through any documentation you still have from your past employers to see if you can find your pension or policy number. If you can’t, you can contact the provider anyway and they should be able to find your pension by using other details, such as your date of birth and National Insurance number.

If you’re not sure who the provider is, start by asking your previous employer.n

But, for many different reasons, planning for retirement is a commonly overlooked aspect of personal financial planning

and this can often lead to anxiety as your age
of retirement approaches. We’ve provided four ways to boost your pension savings and help you achieve your retirement goals sooner.

REVIEW YOUR CONTRIBUTIONS

Sometimes the simplest solutions are the most effective. If you want to boost your retirement savings, the simplest solution is to increase your contributions. You may think you can’t afford to, but even a slight increase can make a big difference.

For those lucky enough to receive a pay rise in line with inflation every year, increasing your pension contributions by just 1% could add thousands to your eventual pension pot. The reason why a relatively small increase in pension contributions can result in such a large increase in the value of your pension pot is because of the power of compounding.
The earlier you invest your money, the more you benefit from the effects of compounding. Adding more money to your pension pot by increasing your contributions just makes the compounding effect even better.

REVIEW YOUR STRATEGY

A missed opportunity for many pension holders is failing to choose how their pension is invested. Some people leave this decision in the hands of their workplace or pension provider.

Firstly, you should know that you don’t have to hold a pension with the provider your employer has chosen. You can ask them to pay into a different

pension, allowing you to choose the provider while considering the type of funds they offer and the fees they charge.

Secondly, many pension providers will give you several options for investment strategies. If you’re in the default option, you could achieve higher returns with a different strategy (though this will usually mean taking on more investment risk). Note that this may not be appropriate in all circumstances, particularly if you are close to retirement.

KNOW YOUR ALLOWANCES

When you save in a pension for your retirement, the government adds tax relief on top of the money you contribute, helping you to grow your savings faster. However, there’s a limit to the amount of contributions you can claim tax relief on each year, which is called your ‘annual allowance’. It’s currently £40,000 (tax year 2021/22), and in some cases may be lower.

If you want to contribute more than your annual allowance into your pension in one tax year (for example, if you’ve received a windfall and want to put it aside for the future), it’s worth knowing that you can use any unused allowance from up to three previous years.

So, if you have £10,000 of unused allowance
in each of the past three years, that’s another £30,000 you can claim tax relief on this year. The tax relief on this amount would be at least £7,500, depending on your tax band.

TRACE LOST PENSIONS

Usually, starting a job with a new employer means starting a new pension. And, when that happens,

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.

How much of your wealth do your currently hold in cash?

One paradox of the coronavirus (COVID-19) pandemic is that even as businesses have shut down and jobs have disappeared, some British households have on average been saving more money than they usually do, due to lower spending, according to new research[1].

But the choice between holding large amounts of cash long term in a savings account versus investing could have a big impact on your future wealth. Prior to the COVID-19 outbreak, data also highlighted the fact that a considerable number of people already had substantial amounts of money in cash, including those with £250k or more in investable assets.

More money to invest than usual

The research reveals that 18% of those with £250k or more in investable assets have 40-60% of these assets in cash, or at least £100k. This group have also benefitted from the lockdown as 35.5% have said they have more money to invest than usual.

During periods of stock market volatility, which we’ve seen over the past year, it’s totally understandable that cash feels safe, and can be looked upon as a security blanket of sorts. But in the long run, it can do more harm than good to your financial wellbeing.

Below the rate of inflation
By leaving large amounts of money sitting in cash you could be losing out on substantial returns over the long run. The rates of return on cash accounts are extremely low and have plummeted further still since the COVID-19 outbreak, with the average currently below the rate of inflation.

The research also reveals this group are aware of the opportunities, as 42%, the largest of any wealth group, think there are good opportunities in the current market. Indeed, 29% would like to move their cash to investment but don’t know what to do, and 37% plan to be more active with their investments overall.

Long-term return for specific goals
Every investor needs a cash buffer in case of emergencies, but too much can negatively impact on returns. A good rule of thumb is to save six months of your salary in cash and then invest in a spread of different assets that can deliver a long-term return for your specific goals.

It’s important to do this in the most tax-efficient way, by making sure you fully utilise your allowances, including the Individual Savings Account (ISA) allowance and the pension allowance.

Purchasing power over time
You might choose to invest because you are looking to achieve potentially higher returns on your money than you might get from holding cash and are comfortable with the idea of setting your money aside for the long term (at least five years or more).

Whether you’re concerned that you’ll lose your money or just don’t know where to begin investing, it’s common for some people to hold large cash balances in deposit accounts, especially in times of market uncertainty. But historically cash has not been a good store of value for individuals due to the corrosive nature of inflation eating into its purchasing power over time.

Well-structured and WELL-DIVERSIFIED portfolio
This is particularly acute in the current environment where deposit rates on cash are low and in the event inflation starts to accelerate. If you have excess cash balances you should consider how to protect and grow your capital to meet your specific needs.

Investing does, of course, carry its own risks but a well-structured and well-diversified portfolio, tailored to an individual’s requirements and managed sensibly, ought to protect capital from inflation and the decline in purchasing power over time. Diversifying your investment portfolio is one of the best ways to reduce risk, and thus promote growth.

Source data:
[1] Quilter research of 2,005 UK adults aged 40+ carried out by Toluna. According to ONS figures over-40s hold 90% of the UK’s savings.

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.

EQUITY INVESTMENTS DO NOT AFFORD THE SAME CAPITAL SECURITY AS DEPOSIT ACCOUNTS.

Content of the articles featured in this publication is for your general information and use only and is not intended to address your particular requirements or constitute a full and authoritative statement of the law. They should not be relied upon in their entirety and shall not be deemed to be, or constitute advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles.

Achieving your financial goals through investing, and one size does not fit all

Even as we hope to put the coronavirus (COVID-19) pandemic in the rearview mirror in 2021, uncertainty regarding both the virus and Brexit is likely to continue to weigh on the UK and global economies as well as on our personal finances during this year.

While we hope volatility is less elevated this year, financial markets and the economy could still remain at the mercy of COVID-19 developments.

Setting specific investment goals is key
Understandably investment volatility can make it easy to focus on the short term and those temporary peaks and troughs. Setting your specific investment goals is important to keep you focused when you need it and will enable you to build a portfolio to get you where you want to be. Investment strategies should include a combination of various investment and fund types in order to obtain a balanced approach to risk and return. Maintaining a balanced approach is usually key to the chances of achieving your investment goals, while bearing in mind that at some point you will want access to your money.

Market factors that determine volatility
Market volatility can be nerve-racking, even for the most seasoned investors. Many different factors can impact market volatility, sending values of investments in either direction. Some of the most common factors that determine the volatility of the market include investor concern, political events, natural disasters and major events in foreign markets. But it’s important to keep matters in perspective. Avoid making rash decisions and focus on your long-term goals. Keep investing as you normally would. Also don’t attempt to pick the market bottom or the turnaround to jump in. Fight the impulse to think you can.

Riding out the market ups and downs
Investments don’t always go in a straight line – they have the potential to react and recover from short-term market events. Rather than looking at short-term volatility, it pays to look at the bigger picture. Over the long term, investments will usually deliver returns that allow you to grow your wealth. Looking at a twelve-month snapshot of your investment portfolio may show that investments have underperformed but look back over the last five or ten years, and you’ll hopefully be on track.

TOLERANCE FOR RISK
One of the first steps in developing an investment strategy is to identify your tolerance for risk as an investor, referred to as your ‘risk profile’.

Every investor has a different risk tolerance with regard to their investment selections. Making investment decisions can depend on your personality as well as the goals you are investing towards. Weighing up the level of risk you’re willing to be exposed to can be challenging. Whether you’re reviewing your pension or building a personal investment portfolio, balancing risk is a crucial part of the process.

Well-allocated investment portfolio asset classes
During volatile times, asset classes such as stocks tend to fluctuate more, while lower-risk assets such as bonds or cash tend to be more stable. By allocating your investments among these different asset classes, you can help smooth out the short-term ups and downs. Portfolio diversification may reduce the amount of volatility you experience by simultaneously spreading market risk across many different asset classes. By investing in several asset classes, you may improve your chances of participating in market gains and lessen the impact of poorly performing asset categories on your overall portfolio returns.

Diversification to protect and grow investments
Diversify, diversify, diversify – in other words, ’don’t put all your eggs in one basket’ – is sage investing advice. In addition to diversifying your portfolio by asset class, you should also diversify by sector, size (market cap) and style (for example, growth versus value). Why? Because different sectors, sizes and styles take turns outperforming one another. By diversifying your holdings according to these parameters, you can smooth out short-term performance fluctuations and mitigate the impact of shifting economic conditions on your portfolio.

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 YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, AND YOU MAY NOT GET BACK THE FULL AMOUNT YOU INVESTED.

INVESTMENTS SHOULD BE CONSIDERED OVER THE LONGER TERM AND SHOULD FIT IN WITH YOUR OVERALL ATTITUDE TO RISK AND FINANCIAL CIRCUMSTANCES.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE

Content of the articles featured in this publication is for your general information and use only and is not intended to address your particular requirements or constitute a full and authoritative statement of the law. They should not be relied upon in their entirety and shall not be deemed to be, or constitute advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles