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How to prepare to meet an IFA

How to prepare to meet an IFA
Before preparing to meet an IFA, it is a good idea to take stock of finances. The more detailed the budget or finance plan is, the better able the IFA will be to give specific advice. Using a spreadsheet to list income, and costs or outgoings in one place; can help individuals to see how much disposable income they have. When drawing up a finance plan it is important not to forget finance and insurance costs.
Useful information to include in a finance plan about loans, credit card debt and mortgages is detailed below:

  • The loan or mortgage term – when the loan or mortgage ends
  • Any penalties for paying off the loan or mortgage early
  • The loan or mortgage monthly payments
  • The loan or mortgage interest rate
  • What the outstanding loan or mortgage amount is (include a date)
  • Any existing credit card debt (include a date)
  • And – if you are planning around a mortgage – what the approximate value of the property is.

Judging property value can be tricky. A local estate agent should be able to provide a market valuation, or if a more general figure is sought comparing prices online via a property listing site such as Rightmove or Zoopla may be sufficient.
Life assurance, savings, investments and pension valuations including death benefits should all be listed as assets. Though if an amount is paid monthly for a pension, investment, ISA or for insurance; it should be listed above as an outgoing.
As with loans or mortgages for any investments, ISAs, insurances (including any life, critical illness, income protection and buildings and contents insurance) and/or pension; You should include:

  • Term – when payment/final sum value is due
  • Current valuation (include a date)
  • Value to a spouse (if different to value to investment holder)

all monthly premiums/contributions should all be detailed.

All the above information is very useful to have prior to meeting with an IFA or when seeking a consultation with an IFA for the first time. It helps the advisor to properly assess and fully understand the current situation of the person, or people seeking advice. Knowing more about goals, aspirations and future objectives also allows the IFA to give you more ‘holistic’ advice, that is in keeping with lifestyle choices. The IFA’s approach when making their recommendations will be influenced by the individual’s thinking about what they want from their current or next life stage.
For targeted and tailor-made specialist advice we would recommend that people specify as best they can what they actually need.

When looking to maximise disposable income many people can cost save; even though changing the cost of living or increasing earnings may not be possible.

Cost saving tips
Many people regularly save hundreds of pounds per year on utility bills, household and car insurance, media streaming and television viewing deals, internet and mobile phone network and device costs; by checking the price to renew contracts with an existing supplier. A lot of businesses want to attract new customers. This means that though the first-year deal may be good value, often by year two or three the costs are higher than they would be with another provider. It might be worth diarizing anniversaries for the range of services as listed above. Companies such as Which? and uSwitch can help with reminders about service costs and renewals.

Although most advisors cannot give guidance on utility bills and TV deals they may be able to help with reducing monthly costs for protection assurances such as life, critical illness and income protection policies. Cash ISAs often attract an initial fixed interest rate and then after a pre-set term fall back on the providers’ variable rate, which can be quite low.
As well as reviewing household bills we would recommend reviewing: Cash ISAs, and protection assurances including life, critical illness and income protection policies.

The cost of living and earnings – what to expect
Despite enjoying economic growth and record-high employment figures, earnings in the UK are only just beginning to increase since 2008. In fact, in the three months to April earnings fell slightly by 0.1%, but they are just starting to recover.
According to the Office for National Statistics (ONS) average weekly earnings have increased throughout the second quarter of 2018 by 0.4%; when compared to the same period in 2017.
Mortgages and rent absorb the majority of debt for households. Currently the Bank of England has been able to maintain low interest rates, which means that predictions for the rising cost of servicing debts remain low. However; the finance media is speculating that interest rates may rise in August from 0.5% to 0.75% which will put more pressure on mortgage and rent payers alike.
But it is not all bad news; London used to top the bill as one of the most expensive cities to live in globally, but recent changes to the value of the dollar and pound have seen Paris, Zurich and Oslo topple London from a top 10 position. New York has fallen to 13th place on the ‘most expensive cities to live in’ list.

Though the UK economy is stable; the financial needs of the individual change depending on the life stage that they are in. A change to a life stage is very often what motivates someone to seek independent financial advice.

Please call our team of Chichester-based IFAs on 01243 532 635 to arrange a consultation.

To discuss pensions, retirement and investment plans (including ISA’s) with us please ask to speak to Richard Smith.

To discuss Life, serious illness, equity release (to provide for retirement income) and income protection insurances please ask to speak to Hamish Gairns.

To discuss mortgages and insurances please ask to speak to James Mayne.

One in four consider lifetime mortgages

One in four consider lifetime mortgages

Leading mortgage lender Legal and General surveyed Britain’s homeowners and found that one in four are interested in lifetime mortgages. In 2017 the Equity Release Council (ERC) report that £3 billion was released by homeowners in the form of lifetime mortgages to fund improvements to later life.

Lifetime mortgages explained

Lifetime mortgages are designed to help homeowner retirees or those nearing retirement to release property value to fund later life. Lifetime mortgage eligibility can vary but applicants must be homeowners and must usually be a minimum of 55 or 60 years’ old.

Lifetime mortgages enable homeowners to take out loans secured against their homes. The loans do not need to be repaid until the homeowner dies or goes into long-term care. The Equity Release Council (ERC) regulates lifetime mortgages.

Lifetime mortgages can help homeowners to release house value from their homes, while still living in their homes; but also enable homeowners to ring-fence home value so that family inheritance is not compromised.

There are two types of lifetime mortgages

Interest roll-up mortgages – the homeowner gets a lump sum or can take an initial lump-sum and then regular payments. The interest on this loan is rolled up and paid when the home is sold. If the mortgage has a ‘no-negative guarantee’ this means that the final home value will never be less than what is owed on the lifetime mortgage. This stipulation is regulated by the ERC, lifetime mortgage advisors are aware of it.

Interest-paying mortgages – the homeowner gets a lump sum and makes either monthly or ad-hoc payments to pay off the interest and/or the capital on their mortgage. The amount borrowed is paid off when the property is sold or when the lifetime mortgage term ends.

How homeowners use equity release

The most popular use of house wealth was to fund refurbishments, renovations and home improvements. The good news about this reinvestment is that it is spent within the UK in the construction and manufacturing sectors. Legal and General Assurance Company has calculated that every £1.00 of house value released is worth £2.34 to the economy.

  1. Some later life homeowners use equity release to provide a Living Inheritance. By placing a debt on the house and gifting the money to their children, later life homeowners enable their children to receive part of their inheritance early. And subject to UK Inheritance Tax (IHT) regulations, can potentially reduce IHT liability for both the estate and for their offspring.
  2. In other cases house wealth can fund domiciliary care in the mortgagee’s own home. More people in need of care are now choosing to stay in their own home, rather than selling their house and moving into a care home.
  3. House equity can be used for home improvements. Homeowners in later life do not always have the means to carry out extensive repairs to their home. This is because they may not have the capital as a lump sum, or they may not have sufficient income to secure a loan. By using equity released from their homes they can afford home improvements.
  4. There is a need for some retired people to supplement their pension income due to low annuity rates. By releasing equity in a property, pension income can be supplemented through pre-planned staged payments, or drawdowns via a lifetime mortgage product.

Here is our tips list when considering a lifetime mortgage

  • Draw up a quick budget planner. It should cover later life finances but also what you wish to do and how you can plan for it.
  • Always discuss your options with an Independent Financial Advisor or mortgage adviser that is properly qualified to give advice in this area.

Retirement planning is complex and you may need specialist advice to achieve your retirement dream.

  • You may also want to discuss your plans with your family.
  • Do not discount local authority funding and help, particularly regarding wheelchair access, disabilities or any other medical help or support.

To book a consultation with MarchwoodIFA equity release expert Hamish Gairns, please call 01243 532 635.

To discuss pensions, retirement and investment plans, please ask to speak to Richard Smith.

To discuss mortgages and insurances, please ask to speak to James Mayne.

Update last chance to use 2017-18 allowances

Update last chance to use 2017-18 allowances

On 13th March Chancellor Philip Hammond announced the Spring Statement in just 26 minutes. Hammond claimed that growth is forecast higher this year at 1.5% (not 1.4% as predicted); and that debt, as a proportion of GDP, would fall from 2018-19. This is the first debt decline in 17 years. The slight upturn in fortune is attributed to an increase in tax collected from self-employed people which was £2.9bn higher than predicted. However, the OCED recently said that the UK economy will grow at a slower rate than any other advanced or emerging economy this year.

Though the Spring statement was not a mini-budget Mr. Hammond did detail consultations on future policies as follows:

  • A new Tech tax looking at how technology giants such as Google and Facebook are taxed;
  • The future of cash and digital payments – will we still need 1p and 2p coins?
  • Evidence on whether the use of non-agricultural red diesel tax relief contributes to poor air quality in urban areas;
  • A possible tax on single use plastic;
  • A reduction in tax for least polluting vans.

There will be an additional £1.7bn to deliver 26,000 affordable homes in London.

There will be a revaluation of business rates – brought forward to 2021, and thereafter, evaluations every three years.

Broadly speaking the opposition expressed concerns that additional NHS funding is not being considered now; the Autumn budget being too late. The same concerns where expressed about austerity measures in general – where an increase in public spending was called for.

Here is a quick recap on allowances available in the 2017-18 Tax year.

The 2017-18 Tax year closes very soon. It is important that you don’t lose out on any allowances. Here is what you are able to save and invest:

  1. ISAs are tax-free savings accounts for cash or equity-based investment savings such as Unit Trusts or OEICS. The total ISA allowance for 2017-18 is £20,000. The ISA can be a blend of a Help-to-buy ISA, an innovative finance ISA, cash or stocks and shares ISAs, or the new Lifetime ISA. But the total amount saved must not exceed £20,000 in this tax year.
  2. More on Lifetime ISAs – launched in 2017 savers can invest up to £4,000 pa in a Lifetime ISA. The state will add a 25% bonus on top, which is paid until you reach 50 years of age. The maximum bonus is £32,000. To qualify savers would have to open an account on their 18th birthday and save £4,000 per annum.
  3. More on Help-to-Buy ISAs – designed to help first time buyers save for a deposit for a first home, these ISAs can be grouped by individuals to fund a house purchase. Individual savers can deposit £1,200 in the first month and then £200 per month thereafter. The state will top up 25% up to the value of £3,000 when the ISA is used to fund a house deposit. If the total Help-to-Buy ISA value exceeds £12,000 the state will still only top up a maximum of £3,000.
  4. We shouldn’t forget Junior ISAs which; replaced Child Trust Funds in 2011. Parent or Grandparents can save up to £4,128 per annum on behalf of a child. The savings can be a blend of cash and stocks and shares ISAs, however cash JISAs can be held with one provider only. Children are able to take control of JISAs aged 16 but cannot access the JISA until they are 18 years’ old.
  5. The Lifetime allowance on pension contributions is still set at £1m; however, from April 2018 it will be increased by £30,000 to £1,030,000. This is the first rise since 2010. The value of savings is tested when pension pots are accessed, on death, or at the age of 75. Tax penalties are incurred if pension savers exceed their lifetime allowance.

With ever-changing predictions for the UK economy, it is clear that individuals would be well-advised to consult a local Independent Financial Advisor.

Please call our team of Chichester-based IFAs on 01243 532 635 to arrange a consultation.

To discuss pensions, retirement and investment plans with us please ask to speak to Richard Smith.

To discuss Life, serious illness, equity release (to provide for retirement income) and income protection insurances please ask to speak to Hamish Gairns.

To discuss mortgages and insurances please ask to speak to James Mayne.

Don’t lose out on 2017 allowances

Don’t lose out on 2017 allowances

The 2017-18 Tax year closes in just over a month, and it is important that you don’t loose out on any allowances. Here is a quick recap on what you are able to save:

  1. The Lifetime allowance on pension contributions is still set at £1m; however, from April 2018 it will be increased by £30,000 to £1,030,000. This is the first rise since 2010. The value of savings is tested when pension pots are accessed, on death, or at the age of 75. Tax penalties are incurred if pension savers exceed their lifetime allowance.
  2. ISAs are tax-free savings accounts for cash or stocks and shares investment savings. The total ISA allowance for 2017-18 is £20,000. The ISA can be a blend of a Help-to-buy ISA, an innovative finance ISA, cash or stocks and shares ISAs, or a the new Lifetime ISA. But the total amount saved must not exceed £20,000 in this tax year.
  3. More on Lifetime ISAs – launched in 2017 savers can invest up to £4,000 pa in a Lifetime ISA. The state will add a 25% bonus on top, which is paid until you reach 50 years of age. The maximum bonus is £32,000. To qualify savers would have to open an account on their 18th birthday and save £4,000 per annum.
  4. More on Help-to-Buy ISAs – designed to help first time buyers save for a deposit for a first home, these ISAs can be grouped by individuals to fund a house purchase. Individual savers can deposit £1,200 in the first month and then £200 per month thereafter. The state will top up 25% up to the value of £3,000 when the ISA is used to fund a house deposit. If the total Help-to-Buy ISA value exceeds £12,000 the state will still only top up a maximum of £3,000.
  5. We shouldn’t forget Junior ISAs which; replaced Child Trust Funds in 2011. Parent or Grandparents can save up to £4,128 per annum on behalf of a child. The savings can be a blend of cash and stocks and shares ISAs, however cash JISAs can be held with one provider only. Children are able to take control of JISAs aged 16 but cannot access the JISA until they are 18 years’ old.

What to expect in the Spring Budget 2018

The Treasury has moved to play down the Chancellor’s budget which; is to be delivered on 13 March. The purpose of the budget is to update the economic forecast for the UK, and the speech should take no longer than 15-20 minutes. Apparently there will be no red box, no official documents, no tax changes and no spending increases.

Relieved perhaps at this news will be landlords and landladies who have seen profit margins slimmed considerably with recent changes to property tax, and property finance tax breaks.  According to UK Finance there were 20% more buy-to-let mortgages in significant arrears in the last quarter of 2017, as compared to the last quarter of 2016. Coupled with this the biggest decline in homeownership is amongst 25-34 year old middle-income earners. The Institute of Fiscal Studies site the reason for homeownership shortage is that house prices have risen seven times faster than income growth for this group.

Good news for pensioners however, who come April 6, will have greater control over where and how they invest their pensions.

It is clear, with the fast changing UK economy, that individuals would be well-advised to consult a local Independent Financial Advisor about any financial concerns or queries that they have.

Please call our team of Chichester-based IFAs on 01243 532 635 to arrange a consultation.

To discuss pensions, retirement and investment plans with us please ask to speak to Richard Smith.

To discuss Life, serious illness, equity release (to provide for retirement income) and income protection insurances please ask to speak to Hamish Gairns.

To discuss mortgages and insurances please ask to speak to James Mayne.

Charitable giving; Snowdrop gives hope

Charitable giving

According to the World Giving Index the UK is a charitable country. The Charities Aid Foundation index rates 140 countries against three indices: helping a stranger, volunteering time and donating money. The UK takes eleventh place behind the Netherlands in tenth position, Ireland in eight position, Canada in seventh position and the US in fifth position.

Myanmar (Burma) is in first position, 51% of residents saying that they had volunteered, 53% claimed to have helped a stranger and 91% donating to charity. The Charities Aid Foundation believes that: as Theravada Buddhism is practiced by the majority of Myanmar residents Sangha Dana – the practice of supporting Buddhist monks – may contribute to this giving lifestyle.  In the UK 28% volunteered, 64% helped somebody and 58% donated money to charity. Below the UK’s position eleven on the World Giving Index, in all of the other Western countries giving was in decline during 2017 compared to 2016.

Snowdrop gives hope

In keeping with the UK’s giving nature here at MarchwoodIFA we support local Chichester-based sick children’s charity Snowdrop.

Help and care is provided by Snowdrop to sick children and their families in the home. In many cases families want to learn how to use medical equipment, such as nasal gastric tubes for feeding, and need the support of a qualified nurse. Having a sick child can also put a strain on the family’s time; medical carers are able to give parents, guardians and siblings a much-needed break. As much as 70% of Snowdrop donations go directly to sick children and to their families. Very often a family member may have to give up work to free up time to care for a sick child, which means that financial help is needed. Caring for a sick child and getting to hospital can be very costly. By way of example a return taxi fare to Great Ormond Street for a bone marrow or a kidney transplant costs over £160. Parents travel thousands of miles to take their children to hospital; Snowdrop has Family Volunteers who take families to and from appointments in their own cars to ease this burden. Snowdrop has bereavement counselors and continues to grow expertise in this area. Recently Snowdrop founder Di Levantine and counselor Phil Portway have worked with trainee-teachers from Chichester University to develop a bereavement-counseling guide for teachers.  Currently bereavement is not included in the teacher-training curriculum. The Snowdrop resource is proving invaluable for schools and teachers where a pupil is diagnosed with a life threatening, or a terminal illness.

If you would like to make a donation to Snowdrop please click here.

If you would like any advice on critical or serious illness policies, many of which offer automatic children’s cover payable as a lump sum, please contact MarchwoodIFA on 01243 532 635 to arrange a consultation.

As ever we would advise you to speak to an Independent Financial Advisor about your finances. We have specialists that are able to discuss specific options with you.

To discuss Life, serious illness and income protection insurances (to protect a debt such as a mortgage or to make sure that your family is well looked after financially after the death of a parent/partner) or equity release to help you plan for income in retirement please ask to speak to Hamish Gairns.

To discuss mortgages & insurances please ask to speak to James Mayne.

To discuss retirement and investment plans with us please ask to speak to Richard Smith.

Staying healthy for a longer working life

Staying healthy for a longer working life

At least half of the babies born in 2000 in the UK are expected to live into their hundreds. The average life expectancy of 50% of babies born in 2007 in the UK is 103, and in Japan it is 107. Current retirees, those aged 65 plus, are enjoying relatively good health and also, despite retiring earlier, frequently are not ready to stop working altogether. The current life expectancy for pensioners is 85. Though some suffer chronic illnesses, they are diagnosed and treated sooner; meaning that (thankfully) the survival rate and life expectancy of this generation has steadily increased since the 1950’s.

Many retirees currently choose to draw a pension before they are 65 however often they continue to work. In fact, degree educated 65-69 year olds in the UK are more likely to be in employment and also earn more than unqualified 16-24 year olds.

Though longevity is something that we are all grateful for it is also an economic dilemma. This is because the burden on the young (work force) to support an ever aging one is increasing. And though, to ease this burden, the government plans to increase the retirement age to 75 by 2040…

…Our noughties (2000+) children will be in their forties and facing at least another 30 years of work by 2040.

How do we stay healthy to support a longer working life; and a happy later life?

We have asked Ben Hanton, Elitas gym founder and owner to provide some health advice for working age and later life people. As we age there are a number of important health markers that decline every year, here are some of the main ones:

  • Physical strength;
  • Bone mineral density;
  • Muscle mass;
  • Insulin sensitivity.

Though the decline of these health markers is part of a natural ageing process, we can reduce the decline by making lifestyle changes to exercise, diet and physical activity.

As regards physical activity, the recommended daily amount of steps to be taken is: 10,000 – dog (or grand children) walking could help to achieve this target.

Weekly moderate aerobic exercise of 150 minutes (around 20-25 minutes per day) is also recommended. This could include fast walking/slow jogging, dancing, tennis, kickboxing, participating in or coaching team sports, and swimming.

Two bouts of strength training; which includes using light weights or your own body weight – calisthenics, is enough to dramatically reduce the risk of almost all forms of disease.

As regards nutrition:

Refined carbohydrates – found in cakes, processed foods, biscuits are to be avoided, as are sugary drinks and also alcohol.

Whereas vegetables, fruit and protein should be consumed regularly.

The most effective way to remain healthy into later life is to choose exercises that the individual finds productive and enjoyable. Avoid high impact activities eg road-running and activities that are overly repetitive. Think too about posture when exercising. Posture should be symmetrical and activities should be undertaken whilst standing up or lying down, not whilst seated in an office chair. To get the most benefit from activities make the exercise intense and do exercise or activities in short bursts.

If you are finding this fitness advice a little complex speak to a local personal trainer, they should be able to create a fitness regime with you that meets your needs. Making big lifestyle changes all at once is a big task. It is advisable to choose one small change rather than trying to do everything at once.

So How do we plan for a longer working life?

Whether you are of working age or enjoying later life we at Marchwood IFA would advise you to regularly consult your Financial Advisor as your lifestyle and finance goals and income needs change.

To arrange a consultation with Marchwood IFA please call 01243 532 635. We have specialists that are able to discuss specific options with you.

To discuss retirement and investment plans with us please ask to speak to Richard Smith.

To discuss Life, serious illness and income protection insurances (to protect a debt such as a mortgage or to make sure that your family is well looked after financially after the death of a parent/partner) or equity release to help you plan for income in retirement please ask to speak to Hamish Gairns.

To discuss mortgages and insurances please ask to speak to James Mayne.

Falling income; budget and savings planner

Falling income
Here in the UK though we have enjoyed strong economic growth and low unemployment figures, earnings are still low. In fact inflation-adjusted average earnings are 4% lower than they were before the financial crisis in 2008.

This is despite the introduction of a national minimum wage in 1999. Currently the National Living Wage (NLW) for 25 year olds and above is £7.50 per hour. The government plans to raise the NLW to £9.00 per hour by 2020. This is a measure to help the lowest paid. Recent finance news has highlighted the growing gap between rich and poor; and how globalisation has exacerbated this situation. By 2020 it is projected that around 3m people will be paid at a higher rate because of the NLW. It is also expected that the NLW will make up 60% of median earnings by then. When the minimum wage was introduced in 1999 it made up 45% of median earnings. But, though the NLW is generally thought to increase productivity, it does not necessarily close the wealth gap.

And a net result of increasing wages bills for business owners; particularly small and medium size businesses, is that they make less hires. This also pushes companies towards automisation, and outsourcing to save UK labour costs.

The rising cost of living
Throw into our stretched income melting pot the rising cost of living: fuel and groceries growing prices pushed inflation to 2.3% in April of this year; the highest rate for more than three years. And it’s not just icebergs that have got pricier (67.2% more costly from Jan-Feb) it’s also business equipment such as laptops. Computers increased in price by 2.3%, from Jan-Feb, having been 5.1% cheaper throughout 2016. It is fair to say that both households and businesses are feeling the pinch.

How to reduce costs
There are economies to be made with some living costs such as: mobile phones, computers, internet, streaming media, landline phones and also utilities. Some reputable providers of ‘better deal’ information and services include: Which? YouSwitch and (part of the Curry’s retail chain) KnowHow. All of this can help to save domestic and company overhead costs.

Why a savings pot is handy
In March of this year the Office for National Statistics (ONS) warned that the household savings ratio had fallen to a record low since records began in 1963; at below 4%.
Perhaps, this is not surprising given falling wages and the rising cost of living but; having money put by in case of essential repairs (your boiler, your car) is a good idea. The recommended amount to have in your savings pot is enough to cover three months’ living costs, which would include a mortgage (if you have one) and any other regular financial out goings. So, the start for calculating how much you need in a savings pot is a finance plan.

How to do a finance plan
Simply put, a finance plan is a table where in the first column (A) you list income, and in the second column (B) you list costs or out goings. It is hoped that when you take B from A there is money leftover. This ‘spare’ income can be saved and invested. When drawing up a finance plan do not forget finance and insurance costs, if you do have loans including a mortgage or mortgages it is useful to detail:

  • When the loan ends
  • What the monthly payments are
  • What the interest rate is
  • Whether there are any penalties for early redemption
  • And – if you are planning around a mortgage – what the approximate value of the property is.

If you are unsure of a property value a check of (the post code + similar property type) on a property sales site such as Right Move or Zoopla; should give you a well-educated guesstimate of the value.
All of this information is very useful to have prior to meeting with your IFA, or if you are considering seeing an IFA for the first time.

Where to invest savings
When you are ready we would advise you to talk to a local independent financial advisor (IFA). Finance advisors have expertise in savings schemes including;

  • Stocks and shares ISAs
  • Cash ISAs
  • Lifetime ISAs

Also if you own your own home, or have more than one property your IFA can advise you on mortgages, re-mortgages and lifetime mortgages which can free up house wealth. If you draw a pension and this is your income; IFAs can advise you on retirement income, and living inheritance planning also.

In our fast-changing economy it helps to talk to an expert.

Contact Marchwood IFA to arrange a consultation with a financial services expert: 01243 532 635.

Protecting nest eggs

Protecting nest eggs be they a pension, property, savings or other investments is of interest to most people that are in their 40’s and beyond. For one, the middle-aged are likely to have earned more than younger people which; means that they should have some investments that need protecting.

In the last 17 years the rate of pay (the number of people in work, divided by the number of hours that they work, and the income that they earn) has fallen from three to one. In addition the cost of living and inflation have both risen whilst interest rates on savings have fallen from 17% in the 1980’s to 0.25% now. This in turn has meant that young people have not had as much disposable income, and even if they did, putting savings in a bank account now yields a low return. The savings pinch has been felt in pension contributions, savings and investments and also in rising rent costs; as first-time buyers have struggled to save for a deposit and mortgage for a home.

The story for occupational or workplace and private pension enrolment is rather similar. Though private sector pension enrolment peaked in the 1960’s at around 8.1m, pension membership was at its lowest level in 2001 at 2.7m. The number of self-employed people has grown from 3.4m to 4.8m in the last 20 years, but private pension contribution has declined to 1:10 from 3:10 amongst this group. The age of guaranteed ‘final salary’ pensions which; was experienced by those born in the 60s and 70s is now over.

For those who are not yet retired private pensions are worth considering to top-up pension pots, here are some key points:

  • Contributions made into a pension are subject to tax relief.
  • A quarter of the pension fund value is available as a tax-free lump sum from the age of 55.
  • There is flexibility at retirement as to how you wish to draw your pension eg as an ‘income for life’ or perhaps as a ‘flexible drawdown’.
  • Flexibility with death benefits.

And for those who are drawing near to taking a retirement income, consideration could be given to protecting pension pots my making use of ‘Life styling’ options available on certain pension schemes. This allows the member to effectively de-risk their pension fund the closer they get to their nominated retirement age. This is done by moving parts of the fund over a period of time into more cautious investment areas such as fixed interest securities, gilts and cash.

The housing market has recently been described as static, by mortgage lender the Halifax and also by the Royal Institute of Chartered Surveyors (Rics). Average house prices have increased exponentially over time having been at £3,465 in 1966 and now being at £313,655 (Apr 2017). Though the government has launched first-time-buyer ISAs for homeowners, and the popularity of mortgages for the over 55’s is growing, there are still financial challenges for ‘rich retirees’ regarding insurances and protecting their inheritance whilst also enjoying later life.

There are a range of insurances to be considered:

  • Whole of life policies to protect investments until the end of life.
  • Convertible term policies for example to cover investments including mortgage final payments for a period of time.

And for would-be homeowners the help-to-buy or maybe a Lifetime ISA might suit.

  • To be eligible for a help-to-buy ISA the applicant must be saving up for a first home. The government will contribute up to 25% on top of savings up to the value of £3,000 on top of individual ISA savings totalling £12,000.
  • To be eligible for a lifetime ISA the applicant must be a UK resident aged between 18-39 years’ old. One lifetime ISA per person per tax year may be opened with a maximum investment of £4,000 per tax year. The government will top up savings by £1,000 tax-free, per tax year (25%); if you have saved £4,000.

Whatever your circumstances we would advise you to contact your IFA to obtain expert tailor-made advice. The fast paced changes of government and policy post Brexit means that the UK economy is a shifting landscape.

We are here to advise and help you on finance matters. Please contact one of our independent finance experts to discuss insurances, equity release, mortgages, ISAs, investments and pensions.

Why lifetime mortgages are growing in popularity

Why lifetime mortgages are growing in popularity…

Stagnant wage increases, jumps in property values and an aging working population have all contributed to a rise in popularity of lifetime mortgages; that is mortgages for the over 55’s.

Lifetime mortgages explained…

In the last quarter of 2016 lifetime mortgage applications, also known as equity release applications, hit a record high in total lending of £571.6m. It is expected by the Equity Release Council (ERC) that total lending for the 2016 tax year will finish at £2bn – the highest on record. Lifetime mortgages can be used by over 55’s to unlock house wealth. There are three plan types that can be used to release equity to over 55 mortgagees:

  1. Drawdown plans allow mortgagees to release house wealth in installments which; can help to fund smaller costs and to boost retirement income. Drawdowns remain the most popular plans accounting for 62% of all new lifetime mortgage plans in the last quarter of 2016.
  2. Lump sum plans are often used to liberate large sums of money to eg clear an outstanding mortgage or other debt; or to fund home improvements, living inheritance, or travel. These plans have increased in popularity and reached 2008 demand levels in the last quarter of 2016.
  3. Home reversion plans are where the mortgagee sells all or part of their property at less than its market value in return for a tax-free lump sum, a regular income, or both. The mortgagee remains in his or her own home as a tenant, without having to pay rent. These are the least popular equity release plans, according to the ERC, accounting for less than 1% of all lifetime mortgages agreed in the last quarter of 2016.

The first industry Standards were introduced for equity release 25 years’ ago. The recent lifetime mortgage record lending figures, highlight the appeal of using housing wealth to partly fund later life.

According to the Chairman of the Equity Release Council Nigel Waterson: “Product innovation has played a huge role in the growing appeal of equity release to a range of customers, including the growing number of homeowners with interest-only mortgages due for repayment. The range of features available now give people the option to choose inheritance protection, downsizing protection, monthly interest repayments or voluntary capital repayments when they opt for a lifetime mortgage.”

Lifetime mortgages have also benefited from low interest rates a typical mortgage rate having fallen from 6.15% to 5.66% since the Bank of England cut rates in August 2016.

How lifetime mortgage equity release funds can be used

  1. House equity can be used for home improvements. Homeowners in later life do not always have the means to carry out extensive repairs to their home. This is because they may not have the capital as a lump sum, or they may not have sufficient income to secure a loan. By using equity released from their homes they can afford home improvements.
  2. There is a need for some retired people to supplement their pension income due to low annuity rates. By releasing equity in a property, pension income can be supplemented through pre-planned staged payments, or drawdowns via a lifetime mortgage product.
  3. Some later life homeowners use equity release to provide a Living Inheritance. By placing a debt on the house and gifting the money to their children, later life homeowners enable their children to receive part of their inheritance early. And subject to UK Inheritance Tax (IHT) regulations, can potentially reduce IHT liability for both the estate and for their offspring.
  4. In other cases house wealth can fund domiciliary care in the mortgagee’s own home. More people in need of care are now choosing to stay in their own home, rather than selling their house and moving into a care home.

Increased competition in the lifetime mortgage market place has meant that over 55’s can benefit from low interest rates, or cash back offers. There are now 75 different lifetime mortgage equity release deals available, which cover a range of options and loan-to-values (LTVs). Also, if we take a closer look at inheritance tax and probate fees we can see that rising house wealth is driving changes in legislation with the introduction of…

  1. Higher probate fees for properties valued at over £2million – from £215 to £20,000 and
  2. Significant increases in Inheritance Tax payments – up 21% from £3.8billion (tax year 2014/15) to £4.6 billion (tax year 2015/16)

Growing numbers of retirees are planning for high housing value and protecting their nest and its eggs through inheritance tax planning, and also investment products such as Investment Savings Accounts (ISAs) and Enterprise Investments Schemes (EISs).

There has been a 63% increase in available equity release schemes over the past three years; we would urge anyone considering a lifetime mortgage to consult their IFA. In our experience, obtaining specialist independent financial advice including an illustration of the finance plan enables the client to make the best long-term decision. Please remember that equity release may not be the most suitable finance option for you.

For expert equity release, retirement income, inheritance tax planning, pension and investment advice contact Marchwood IFA.

2016 roundup and what to expect in 2017

2016 was an interesting year for UK residents. Starting with former Chancellor George Osborne’s spring budget in April, through to the EU referendum leave vote in June and to the current Chancellor’s Autumn Statement; major changes to the British economy are underfoot.

In the spring budget of 2016 efforts were made to prepare for stormy conditions ahead. Osborne increased personal allowances and tax year savings limits on ISAs from April 2017 as follows:

  • A new Lifetime ISA was made available for adults under the age of 40. They will be able to contribute up to £4,000 per year, and receive a top up bonus of 25% from the Government. Funds, including the Government bonus, from the Lifetime ISA can be used to buy a first home at any time from 12 months after the account is opened, and can also be withdrawn from 60 years of age to help with retirement.
  • The total ISA annual limit will increase from £15,240 to £20,000.

He also introduced the following changes to income and capital gains tax.
Income Tax:

  • For tax year 2016/17 the personal allowance was increased to £11,000 and for 2017/18 it will increase to £11,500. Philip Hammond, in his autumn statement, has further increased personal allowance by £1,000 from £11,500 to £12,500 for tax year 2017/18.
  • For tax year 2016/17 the higher rate threshold, the level after which taxpayers begin to pay 40% tax, will increase to £43,000 and for 2017/18 it will increase to £45,000. The increased threshold is expected to reduce the numbers of individuals paying higher rate tax.

Capital Gains tax changes effective in this current tax year from April 2016:

  • For disposals on or after 6 April 2016 the highest rate of capital gains tax for individuals will reduce from 28% to 20%, and the basic rate will be reduced from 18% to 10%

Existing Chancellor Philip Hammond in his autumn statement honed in on boosting business and commerce, whilst spreading money into lower income working families or those that the government terms Jams (just about managing). As well as increasing the personal allowance threshold from the proposed £11,500 to £12,500, Hammond also increased the National Living Wage from £7.20 to £7.50 again effective from April 2017.
Corporation tax is to be reduced from 20% to 17%; the previous Chancellor had proposed this but to be effective from 2020.
Start up funding for businesses is to be made available and more accessible through a funding pledge of £400m for venture capital funds which; will unlock £1bn of finance.
As workers migrate to cities where there is greater availability of jobs; increased budgetary control and funding is being given to elected mayors and city-based Local Enterprise Partnerships (LEPs).

Taking £1.8bn from Local Growth Fund for English regions: £556m is given over to LEPs in the North of England, £542m to the Midlands and East of England, and £683m to LEPs in the South West, South East and London.
London will receive £3.15bn of the total £3.7bn National Housing Infrastructure and affordable homes fund to deliver more than 90,000 homes. London will also be awarded full control over its adult education budget.
Unaffordable housing, which is fuelled in part by the housing lag, has impacted both Chancellors’ budgets. As well as increasing investment in National Housing Infrastructure and affordable housing both Chancellors have changed tax and legislation for landlords and second homeowners.
In Hammond’s autumn statement tenants are no longer to be charged fees for rented accommodation, the fees often encompassed credit checks and inventory check-ins.

In Osborne’s autumn statement of 2015 two measures were taken to curb rising house prices and the private rental market, effective from April 2016.

  1. Tax relief on mortgage interest rates that finance second homes, was to be restricted to the basic rate of tax over four years commencing April 2016.
  2. Stamp Duty for buy-to-let properties was to be paid at the standard rate with an increase of 3% points on each Stamp Duty band.

At the same time new Help to Buy ISAs were launched in April 2016 to help first time buyers save for a mortgage deposit. The Help to Buy ISAs differed from other ISAs because the government will add a 25% cash bonus on savings between £1,600 and £12,000 to help first time buyers save more.

Help to buy ISAs explained:

  • First time buyer definition: A UK resident aged 16 or over who has never owned or had an interest in a residential property, either inside or outside of the UK, whether it was bought or inherited
  • First time buyers can save up to £1,200 in the first month, and then £200 per month after that
  • The £200 per month saving investment can be topped up if missed, but cannot equal more than £2,200 in the remaining 11 months
  • The State adds 25% tax free to whatever is in the ISA when you use it for a deposit. There are two exceptions to this: there must be a minimum of £1,600 in the ISA, and, the maximum the State would add would be £3,000 tax-free on a £12,000 ISA. If the ISA is worth more than £12,000 it can be kept as a savings account
  • The current scheme will pay out as described until December 2030 and is available as described until the end of this tax year.

Both Chancellors have been keen to move generation rent from rented housing into homeownership, and provide more housing for working families.

In the autumn statement of 2016 further inducements were made to encourage saving:
A new savings bond, with an interest rate of about 2.2% will be launched through National Savings and Investments. The bond will be available to those aged 16 and over, where a minimum investment of £100 and a maximum investment of £3,000 has been set. Savers must invest for three years. The new product will be available for 12 months from spring 2017.

However retirees are being restricted. New limits are to be placed on the reinvestment of pension pot savings. The new tax-free allowance falls from £10,000 to £4,000 in April 2017, affecting all of those who would wish to take money from their defined contribution pension pot.

In summary both Chancellors have delivered major changes to pensions, ISAs, capital gains and corporation tax, and second property investments. As always we would advise you to contact your IFA for expert financial advice and planning.

If we manage your finance planning for you please do give us a call regarding these changes on 01243 532 635, or drop into our offices.

We wish you a very merry Christmas and a prosperous New Year.

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