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Clarke Nicklin Financial Planning

'protecting your wealth and helping your investments grow'

Smooth out your investment planning

If you are looking for a sustainable medium to long term investment approach then a smoothed investment plan may be worth exploring.

Scott Herbert Partner and Independent Financial Planner, Clarke Nicklin Financial Planning discusses the benefits of smoothed funds.

He comments ‘Put simply it is investing in a range of assets such as equities, bonds, cash and property. When the returns are particularly good a portion is put aside for when they take a downturn and when markets are down then growth from years of upside are added giving a potential smoothed investment growth.

‘We all know that stock markets and other investments can go up and down. These movements can be quite extreme and understandably this can deter some people from investing. Smoothed investing can provide cautious/balanced investors an opportunity to invest without the volatility normally linked to UK and overseas stock markets.

Ensure you speak to a qualified Independent Financial Advisor who will ensue you are informed fully of any risks before you make the decision to invest.

Our team are offering a free hour consultation for anyone interested to offer practical advice on the subject. If you would like further information, please contact Katha@cnfp.co.uk or call 0161 495 4700.

Whilst smoothed investments are designed to provide a smooth growth rate, the value of investments and income from them may go down and you may not get back the original amount invested. Past performance is not a reliable indicator of future performance.

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Who will be opening a new ISA in 2017?

5 million over-50s looking to make their money work harder

Savers have had it extremely tough over many years now, and yet many still feel uncertain about making the switch to investing. This is largely because people don’t know quite where to start, and they are wary of the risk. However, people need to make their money work harder for them – not just to give them a higher level of income, but also simply to stop their money losing value in real terms.

Investing should be a long-term plan

Ultimately, holding cash which earns less interest than the rate of inflation means that people are losing spending power. And the compounded effect of this over a number of months or years could be much bigger than they realise. If people have a good cushion of cash savings – say, enough to cover 6-12 months’ worth of living expenses – then it may make sense to try investing with some of their additional cash savings. Investing should be a long-term plan, we suggest 3–5 years as a minimum to help even out the rises and falls in the market.

Savers continue to be punished by ultra-low interest rates

Many people look to their savings to boost their income as they move towards retirement or retire completely, but even though savers continue to be punished by ultra-low interest rates, the over-50s continue to believe that cash is king when it comes to their Individual Savings Account (ISA) allowance, according to new research by Saga.

Taking advantage of a tax-efficient account

When asked about their ISA plans, a quarter say they plan to open a new ISA in 2017. Amongst those who plan to take advantage of a tax-efficient account, a third say they will look at a Stocks & Shares ISA, but almost half say they will be opting for a Cash ISA. One in five say they will be looking to open both a Cash and a Stocks & Shares ISA.

Choosing between cash and investing

There are big differences between the sexes when it comes to choosing between cash and investing, with women strongly favouring cash over shares ISAs (58% vs 27%). There is a more balanced view amongst men, with 41% wanting cash and 38% shares ISAs.

Taking out a Stocks & Shares ISA

Regionally, there are also big differences in opinion: more than twice as many Londoners are willing to take out a Stocks & Shares ISA (39%) than those in the North East (24%), While those in the north east (61%), Yorkshire and the West Midlands (53%) are the most likely to opt for cash ISAs.

Reason behind the decision to invest

Just 2% of over-50s say they will be looking to open a Stocks & Shares ISA for the first time. For more than three quarters of these people, low interest rates are the reason behind their decision, while one in ten say they have inherited some money which they would like to invest.

Want to look at the options available to you?

When it comes to making important financial decisions, obtaining professional advice is essential. If you would like to look at the options available, please contact us.

Source data:

Populus interviewed 9,128 people aged 50 over, online between 13th and 19th December2016. Populus is a member of the British Polling Council and abides by its rules.

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.

Pension booster – set goals for your retirement

Those who set tangible goals for the future could be £30,000 better off in retirement, according to new research.

The Set the Right Goals study from Zurich UK found that those that set specific goals for when they are aged 65 or over are more likely to save, and put aside approximately 7% of their salary into their pension, compared to 5% for those without.

Goal-setting and saving

The findings uncovered a definitive link between goal-setting and saving when it comes to pensions. Those of working age with a workplace or private pension who set goals for life when they are aged 65 or over – such as travelling, taking up new hobbies or being in a position to financially support children and grandchildren – save 7.25% of their salary into their pension, while those who don’t know what their aspirations are for the same period save just 5.36%.

Difference in pension pots

Given that an employee with 5–9 years’ experience typically earns £30,708, a ‘goalless’ saver earning at this level would put away just £1,646 per year into their pension, compared with £2,226 per year for those with set goals. This does not include any contributions from employers, who can sometimes match the employee’s pension contribution, meaning that the difference in pension pots could be far greater.

Most emotionally motivated

The results found that certain goals have a greater impact on savings behaviour than others. Where people have an emotional attachment to a goal (for example, saving to support elderly relatives, have children or go on holiday), they are more likely to take positive saving action to achieve them. Saving towards retirement was identified as respondents’ most important saving goal, as well as one of the most emotionally motivated.

Realise your ambitions

For most of us, managing our money day to day occupies most of our attention particularly when rising inflation puts family budgets under ever greater strain. But this research demonstrates that thinking about what you aspire to and having goals for the immediate and long term will inspire people not only to save, but save more. This is why it is so critical to take time out, and visualise your future so that you can then take action to financially prepare and realise your ambitions.

Will you make your goals achievable?

Small steps taken early on can make a huge difference. Saving regularly into your pension or drip-feeding amounts of money into the right investments can generate an income that will make your goals achievable.

All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2,073 adults. Fieldwork was undertaken between 25 and 26 October 2016. The survey was carried out online. The figures have been weighted and are representative of all UK adults (aged 18+).

Government to assist with the bank of Mum and Dad!

A new ISA is to become available from 6 April 2017, the new Lifetime ISA is aimed at young adults to start saving. This might be an ideal opportunity for parents wanting to assist their children in saving for a first time home. Or, it might indeed alleviate the need of the bank of Mum and Dad!

What is it?

Lifetime ISAs (also known as LISAs) are a new type of ISA designed to help people aged between 18 and 40 save up for their first home, or retirement. A LISA lets you save up to £4,000 per year. At the end of the tax year the Government will top up your ISA with a 25% bonus. You will be able to earn a 25% bonus on your LISA contributions up until the age of 50.

This means that if the full sum were to be contributed each year for the full term (until the age of 50) you would receive a bonus of £32,000.

There are rules that apply and withdrawals can be made at any time for other purposes but a 25% government withdrawal charge will be applied.

It could be an ideal way of saving for a first home and or retirement, as the account has to stay open with the hope that savers will continue to contribute to encourage a good saving attitude.

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

Cash ISA at new low – but keep saving!

The average rate of a Cash ISA has fallen to a record low of 0.82% according to Moneyfacts, ten years ago the rate averaged at 5.06%.

‘Don’t let that put you off investing though’ comments Scott Herbert, Partner & IFA, Clarke Nicklin Financial Planning.

‘It’s vital for savers to consider their options. It highlights the need to research and source the best rates possible and to continually keep a track of how your investment is performing.

‘ISAs are a great way of putting cash aside. You don’t pay tax on interest or on income or capital gains from your investments; also the ISA limit for 2016/17 is increasing to £20,000 up from the existing £15,240.

‘There are other options available for you to consider though’, he adds. ‘Whilst ISAs are an integral part of financial planning its worth looking at alternatives such as Smoothed Investment returns, cash and having an equity portfolio.

‘Whichever investment route you are suited to will ultimately depend on your attitude to risk, higher risk means higher return but for the more cautious there is less chance of losing it.’

Scott has a mass of experience and deals with many high net worth individuals. If you wish to discuss any investment strategies then please contact katha@cnfp.co.uk or call 0161 495 4700 for a free no obligation appointment.

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.

 

Tax free pension advice allowance

From 6 April 2017 many will be able to withdraw £500 up to three occasions (but once in a tax year) from their pension pots tax free for pension and retirement advice.

The government want to encourage individuals to make good financial decisions to save for their future. Many at present are unable to afford fees of a Financial Advisor upfront and then may not continuously review their finances. They now have the opportunity to do so without the financial burden upfront.

The allowance:

  • can be used a total of three times, only once in a tax year, allowing people to access retirement advice at different stages of their lives, for example when first choosing pension or just prior to retirement
  • will be available at any age, allowing people of all ages to engage with retirement planning
  • can be redeemed against the cost of regulated financial advice, including ‘robo advice’ as well as traditional face-to-face advice
  • will be available to holders of “defined contribution” pensions and hybrid pensions with a defined contribution element, not “defined benefit” or final salary type schemes

Economic Secretary to the Treasury, Simon Kirby said ‘Pensions and savings decisions are some of the most important a person will make during their lifetime. This allowance will help people get the vital financial help they need to plan for their retirement.’

Don’t miss the ISA deadline

Take control over where your money is invested tax-efficiently

Each tax year, we are each given an annual Individual Savings Account (ISA) allowance. The deadline to add to the tax-efficient accounts is at midnight on Tuesday 5 April 2017. It is a ‘use it or lose it’ allowance, meaning that if you don’t use all or part of it in one tax year, and you cannot take that allowance over to the next year.

The ISA limit for 2016/17 is £15,240, increasing to £20,000 in 2017/18.

Withdrawals to increase your income

Income from an ISA doesn’t affect your personal allowance or age-related allowance, and there’s no Capital Gains Tax (CGT) payable on any growth you may achieve. This means you could use withdrawals to increase your income when necessary.

Withdrawals from an ISA are tax-efficient

ISAs can give you control over your retirement income, as you can take as much money out as you like, whenever you want. Savings in an ISA and withdrawals from an ISA are tax-free. If you are a pension saver, you can generally also take out as much money as you like, whenever you want from age 55. Currently up to 25% of the pension pot can be withdrawn tax-efficient with additional withdrawals taxed at the applicable marginal rate of Income Tax.

Types of ISAs and allowances

Cash ISA – Anyone over the age of 16 can put their cash savings into a Cash ISA. Accounts can be either instant access, have notice periods or have fixed terms.

Stocks & Shares ISA – Anyone over the age of 18 can put individual shares or managed funds into a Stocks & Shares ISA.

Innovative Finance ISA – This ISA is for investments in peer-to-peer lending platforms. You must be over the age of 18 to invest.

Help to Buy ISA – To help first-time buyers over the age of 18 get on the property ladder.  You can start with a lump sum deposit of up to £1,200. You can then save up to £200 a month.

For every £200 you save, the Government will add 25% up to a maximum bonus of £3,000. It’s available per buyer, not household, so if you are saving with a partner, the bonus potential is up to £6,000 towards your house deposit.

Junior ISA – Cash or investments can be wrapped in this ISA on behalf of children under the age of 18. The Junior ISA has an annual allowance of £4,080. You must be a UK resident or crown employee to invest in any type of ISA.

Sheltering your money from tax

ISAs are becoming an integral part of financial planning. However, it is important to remember that an ISA is just a way of sheltering your money from tax. It’s not an investment in its own right although they offer a unique range of benefits.

It’s worth considering other investments strategies too, such as:-

Smoothed Investment returns

Cash – Safe liquid, FSOS protection

Equity portfolio

Expert professional investment advice

Choosing how you invest will depend on the level of risk you are comfortable taking with your money, as well as factors such as how soon you will need to access your money. If you require individual expert professional advice to beat the ISA deadline on 5 April, please contact us to review the most appropriate options for your particular situation.

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.

 

‘Mid-life savings crisis’ – start looking at realistic options

Retirement planning is simply about how you look at your future. However, more than a million Britons are facing a ‘mid-life savings crisis’ as they near the age of 40 with no retirement savings, according to research from Zurich. A third of British adults aged 35 to 39 say they have no money saved into a pension, despite approaching the mid-point of their working lives.

Among ‘millennials’ (born between 1980 and 1999), the picture is equally bleak with almost two in five adults aged 25 to 34 not saving into a pension.

The findings highlight how financial pressures could be forcing some to start saving later, while others are struggling to save at all. Rising rents and house prices, combined with years of low wage growth, have made it harder than ever for people to save.

Wiping off tens of thousands of pounds

Delaying saving for a few years can wipe tens of thousands of pounds off the future value of your pot. The earlier you start investing into a pension, the more your savings will benefit from the compounded benefit of growth on growth.

It is important to maximise employer contributions and take advantage of pension tax relief. The good news is that your employer and the Government can help to boost your savings.

If you save into a workplace scheme, it is likely that your employer will pay into your pot – with many matching your contribution.

Under auto enrolment, all employers are obliged to pay into a workplace pension for their employees. If you decide to opt out of the scheme, you will miss out on employer contributions and tax relief, which is free money by any other name.

Regardless of whether or not you have started to save, these four tips can help get your pension on track:

  • Take advantage of tax relief

Any money you pay into your pension receives a rebate from the Government at the same rate as you pay Income Tax – 20%, 40% or 45%. This means it costs a basic rate taxpayer 80p to put £1 into their pension, a higher rate taxpayer 60p and a top rate taxpayer 55p.

  • Maximise employer contributions

Make the most of your workplace pension scheme. Some employers will match your pension contribution, which can turbo-charge your savings. For example, if you increase your current contribution by 3%, your employer may pay in an extra 3% too.

  • Taking risk can work to your benefit in the long term

It’s not too late. Even if you’re starting to save from 40, it’s likely you’ll have another 25 years before retirement.

To build up a healthy investment plan firstly consider your attitude to risk. The higher levels of return have a higher risk factor due to the more volatile sectors and regions that are targeted   whereas the more cautious have a lower return.

  • Plan ahead

Know how much you need to invest each month to achieve your ideal retirement, and don’t forget to factor in inflation. Everyone’s different. And it’s likely the things you spend your money on now will change when you stop working.

Source data: Total sample size was 1,018 adults aged 18 to 39. Fieldwork was undertaken from 10–13 June 2016. The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18 to 39).

A PENSION IS A LONG-TERM INVESTMENT. THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

YOUR PENSION INCOME COULD ALSO BE AFFECTED BY 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.

LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION MAY BE SUBJECT TO CHANGE, AND THEIR VALUE DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF THE INVESTOR.

Positive planning for old age – Making provision in a way that meets your needs and wishes

As a population we are living longer, and with an ageing population the need for care is growing, with the time spent in care increasing. However, a fifth of the UK have no idea who will look after them if they have care needs in old age, according to research released from Bupa. Nearly three quarters think they will have care needs in older age, but only around half expect their family to care for them.

Recognising needs and desires

 

The survey reveals that old age is a regular consideration. Professor Graham Stokes, Global Director of Dementia Care, Bupa says: ‘The perception that older people aren’t valued by society is concerning and needs to be addressed. The proportion of people over 80 is expected to increase almost fourfold over the next 50 years.

 

Living a fulfilling life

 

Despite concerns about getting older, people are optimistic that they can still live a fulfilling life, with the majority of people believing old age will not stop them living life to the fullest. As we age, our preferences and personalities remain individual, which is why, if care is required, it should be provided in a way that meets our needs and wishes.

 

Covering the cost of assistance

 

Long-term care insurance provides the financial support you need if you have to pay for care assistance for yourself or a loved one. It can cover the cost of assistance for those who need help to perform the basic activities of daily life at home or in residential or nursing homes. 

 

Level of state support

 

Government state benefits can provide some help but may not be enough or may not pay for the full cost of long-term care. The level of state support you receive can be different depending on where you live in the UK.

 

There are many options for funding long-term care, and they can often be complicated to understand. So if you or a loved one needs to pay for care at home or in a care home, it’s important to know the options available.

 

Enhanced annuities – you can use your pension to buy an enhanced annuity (also known as an ‘impaired life annuity’) if you have a health problem, a long-term illness, if you are overweight or if you smoke. Annuity providers use full medical underwriting to get a more accurate individual price. People with medical conditions including Parkinson’s disease and multiple sclerosis, or those who have had a major organ transplant are likely to be eligible for an enhanced annuity.

 

Thinking about the options in advance

 

Some people may find they have to make quick and difficult decisions about their own or a loved one’s care needs. Thinking about the options in advance will help in the long run.

 

If you would like to discuss your particular situation, please speak to Jon Neild who holds the Long term care and equity release qualification from the Chartered Insurance Institute on 0161 495 4700.

 

Source data:

 

All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2,139 adults. Fieldwork was undertaken from 26–29 February 2016. The survey was carried out online. The figures have been weighted and are representative of all UK adults (aged 18+).

 

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