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When loyalty costs

When loyalty costs

A super complaint launched by the Citizens Advice Bureau has found that loyalty costs UK consumers an additional £877 per annum; when compared to what new customers would pay for the same services. Their research found that five broad areas were affected by hiked renewal costs:

  • Mortgages;
  • Cash ISAs;
  • Insurances – income, sickness and protection insurances but particularly household insurance;
  • Broadband contracts;
  • Mobile phone contracts.

When loyalty costs mortgagees

A survey in late July by This is Money found that in some cases a building society was charging long-standing mortgage customers £4,020 more per year than new customers that signed up for the building society’s cheapest two-year fixed mortgage. Another building society brand was close behind charging an extra £3,156 to existing customers. Even the bank charging existing customers the least difference between charges for new customers had added an additional £1,788 in mortgage costs for loyal customers.

Many mortgage customers are getting caught-out by taking up good fixed-rate deals when they are new to a lender; only to find that standard variable rates – which are due at the end of the fixed-rate term, are much higher.

In fact; the gap between lenders best fixed-rate deals and standard variable rate has quadrupled in the past six years.

Typically banks and building societies offer fixed-rates from between two to five years. The same study found that the bigger the deposit in the first place 20%, 35% the greater the leap in cost from fixed-rates to variable rates.

We would recommend speaking to a mortgage specialist financial advisor about mortgage rates, especially if a mortgage has reached the end of its fixed-rate term.

Read our tips on how to prepare to meet an IFA.

However as regards mortgages, understanding any penalties eg early redemption fees, the mortgage terms and current property value are worth checking before booking a consultation with a mortgage specialist.

When loyalty costs cash ISA customers

Money Saving Expert found in June that banks offering loyalty reward Cash ISAs, were offering loyal customers dismal interest rates when compared to new customers. One bank was offering existing customers between 0.7% to 1.0% interest rates on a Cash ISA whereas, a competitor’s best buy instant Cash ISA was offering 1.3% interest rates to new customers.

Of course; the other benefit of ISAs is that investors do not pay tax on savings interest; or savers pay reduced tax on interest rates on investments including Capital Gains tax.

Cash ISAs are not the only Investment Savings Accounts that can be held. Investors can also save in Stocks and Shares ISAs which; provide investors with a way to invest individual company shares and money in a tax efficient way. Also; unit trusts, investment trusts, open-ended investment companies (Oeics), government bonds and corporate bonds. Can be included within these Stocks and Shares ISAs.

We would recommend speaking to an investment specialist IFA about savings and investments. Sharing financial goals with an IFA will help the investment specialist to tailor advice to help achieve a client’s financial objectives. Read our guide on how to prepare to meet an IFA here.

When loyalty costs insurances customers

Though the main findings of the super complaint launched by the Citizens Advice Bureau were against hiked home insurance prices, protection insurances also do not favour loyal customers. Many customers that purchase life insurance along with their mortgage may be paying more for their life insurance (level term life insurance) than they would if they had bought insurance from a different provider.

One such customer cancelled their existing policy, buying it again as a new customer from the same provider. In so doing they reduced their premiums to £9.00pm from £23.00pm; making an overall policy cost saving of more than £2,000.

If medical conditions have changed (for the better) after taking out protection insurances – income, sickness or medical insurances, some quite significant cost savings could be made. See our article on quitting smoking.

Again; we would advise that all life and protection insurances are reviewed regularly with an insurance specialist IFA. Preparing plan details including terms and premium costs will help the IFA to quickly see if the protection is right for the client and if any savings can be made.

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

To discuss pensions, retirement and investment plans (including ISAs) 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 mortgage insurances please ask to speak to James Mayne.

Giving up smoking is good for your health and wallet

Giving up smoking, for at least 12 months, is good for your health and wallet because – the health dangers associated with tobacco mean that smokers pay much more for the cost of life insurance and other protection insurances than non-smokers.

Insurance underwriters take the health risks posed by tobacco so seriously that a 30year old smoker’s premiums will be a third higher than those of a 30year old non-smoker and; up to twice as high when comparing 50year old smokers to non-smokers of the same age.

Shown below are insurance firm Royal London life assurance premium costs for smokers and for non-smokers which were published on 11 March 2018.

Applicant age Term of life assurance in years Monthly premium non-smoker Monthly premium smoker Non-smoker savings over 25 years
30 25 £14.00 £29.47 £4,641
40 25 £17.11 £41.06 £7,185
50 25 £23.90 £55.71 £9,543

Source Royal London 11 March 2018

The reason for the increased cost of protection insurance and life insurance premiums is that sadly, smokers are more likely to make a claim because they suffer either a critical illness or an early death, or both.

What is classed as smoking?

Insurers assess whether or not you are a smoker based on simple criteria…

…If you have smoked in the last 12 months you are a smoker.

This is an all-encompassing definition – smoking within the last 12 months includes:

The occasional cigar, vaping, e-cigarettes and other nicotine replacement products, and smoking 20-a-day.

Are there any exceptions to the smoker classification?

Yes, if the applicant has unusual circumstances, wants to insure their life for a large amount, or is elderly the policy and its cost will be tailored to the applicant.

We would advise for any protection insurances including life assurance, sickness and income protection insurances that applicants consult with a protection insurance specialist IFA.

The more information an applicant can provide about their medical history and, in many cases, their family’s medical history the better-able the protection insurance specialist is to advise the applicant. The applicant should also share their lifestyle and financial goals with the IFA, so that advice and planning can be tailored to meet the client’s needs.

See our tips on how to prepare to meet an IFA.

Medical information – how important is it?

When it comes to filling in information to apply for protection or life insurance it is critical that applicants include as much information as possible.

We would strongly advise against being tempted to leave any details out that may affect the cost of premiums. Insurance providers run random checks on around 20% of applicants where their medical history is accessed to see if it matches details on the application form.

As regards dishonesty about tobacco use, if a policy holder where to fall critically ill with an illness associated with smoking eg cancer, insurers would investigate medical records, and could either refuse to pay out, or reduce how much was paid out to policy holders.

Do premiums go down after giving up smoking?

Yes, insurance companies will check the cost of insurance premiums if the policy holder says that they have given up smoking. Insurance companies usually seek a report from the policy-holder’s GP. They may also require the policy-holder to have a chest X-ray. The value of the policy and the age of the policy-holder will also be considered.

Assessing the cost of protection insurance premiums and updating medical history is definitely worth doing. But we would advise you to do this with an Independent Financial Advisor who specialises in protection insurance.

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

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

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

How degree subject and university choice add value

How degree subject and university choice add value

Over 1.7m UK students will start a degree at a UK university in September. Many have made subject and university choices based on what they are interested in and also what they excel at. Research from the Institute for Fiscal Studies has shown how degree subject and university choice can add value; but also, that gender and social background have an impact on earnings potential.

In general women that are degree educated can expect to earn on average £250,000 more over their lifetime than non-degree educated women. For men the impact is smaller adding £170,000 to the average expected increase of lifetime earnings when compared to non-degree educated men. However, male graduates earn on average 8% more than female graduates one year after graduating, and the upward trend continues; after five years they earn on average 14% more than female graduates. The factor that is influencing earnings is not so much gender as it is subject choice. Women on the whole choose subjects that pay less, for example: psychology, nursing, creative arts, sociology; whereas men choose better paid subjects such as: computing, architecture and engineering.

When well-paid subject choice and Russell Group university choice are combined eg University of Oxford and Economics, or Imperial College and Engineering; graduates earn on average 40% more than graduates with humanities degrees (eg philosophy) from non-Russell Group universities such as The Open University.

Over time the earnings potential gap widens; male students of management studies, law, or economics that studied at the London School of Economics can expect to earn over £300,000 per annum when in their 30s.

Both male and female graduates from households where the income is over £50,000 will earn 20% and 14% more respectively than male and female graduates from households with lower incomes, by the time they are in their early thirties.

Despite ‘Love Island’ being a quicker route to wealth than Oxford or Cambridge – as reported in the Financial Times on 26 July – a degree does add value to earnings potential.

We would advise parents and grandparents that are considering funding further education for offspring to consult an Independent Financial Advisor.

Having the right level of protection assurances such as life, critical illness and income protection policies is important when considering a further education funding plan. As house value is changing fast in the current economic climate; revisiting mortgage terms including life assurance policies with a specialist IFA is recommended.

Cash ISA investments may have been made when children were young, very often they 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. All investments including Cash and Stocks and Shares ISAs should be reviewed to check that they are performing as expected or as planned for.

Planning to fund further education for family members may coincide with retirement and Inheritance Tax planning.

We would recommend speaking to a retirement planning financial expert, and having prepared a budget plan of outgoings and income for the consultation (see our tips on How to prepare to meet an IFA). It is a good idea to consider goals and ambitions for the life-stage that is being entered, this will help the IFA to give specific advice so that desired outcomes can be achieved.

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.

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.

Affordable first time buyer mortgages

Affordable first time buyer mortgages

The Department of Housing, Communities and Local Government recently said that we are seeing the highest number of first time mortgages granted in over a decade. The government and mortgage lenders have taken a pincer approach to get more people on the property ladder.

Here are some ways in which first time buyer mortgages have become more affordable:

  1. Help-to-Buy and Lifetime ISAs – saving schemes for deposits where the government tops up savings;
  2. Shared ownership – where a percentage of the property is purchased rather than all of it;
  3. Less expensive and more widely available 90% and 95% mortgages – where a 10% or 5% deposit is required;
  4. Family mortgages – where wider family assets are brought into the mortgage calculation;
  5. Acceptance by mortgage lenders of gift deposits from family members and/or loved ones.

More on Help-to-Buy and Lifetime ISAs

Both savings schemes are designed to help would-be homeowners save for a mortgage deposit.

Help-to-Buy ISAs:

  • Must be a first time buyer
  • Must be at least 18 years’ old
  • Can save as a group – Help-to-Buy ISAs are available for each first time buyer not each home
  • Savings are tax free
  • You can start off your ISA with an initial deposit of £1,000
  • The government will top up contributions by 25% up to the contribution limit of £12,000.

Lifetime ISAs:

  • Designed to help 18-39 year olds save for a first home or for retirement
  • Must be a first time buyer if using the ISA for a first home
  • Tax free savings or investments accounts
  • The government will contribute a maximum of £1,000 per tax year on £4,000 of savings, until the saver turns 50 years’ old
  • Savers can invest in either stocks or shares
  • Lifetime ISAs sit within the overall ISA limit of £20,000 (Tax Year 2018-19)
  • Up to the age of 60 cash from the ISA must be used to purchase a property
  • From 60 the money can be spent as the ISA owner sees fit
  • A spouse or civil partner can inherit the ISA value.

More on shared ownership

Part of a government scheme to assist lower-income families and first time buyers to purchase a property; shared ownership enables home buyers to take out a mortgage for 25%-75% of the property value, whilst paying rent on the other proportion.

Shared ownership:

  • Eligibility – where a household income is £60,000 pa or less and the would-be homeowner is either a first-time buyer or a previous homeowner who cannot now afford to buy. Alternatively would-be homeowners are renting either a council or a housing association property, or have a long-term disability under HOLD (government’s Home Ownership for People with Long-Term Disabilities)
  • The government offers Shared Ownership schemes under its Help-to-Buy mortgage scheme. Those living in council or housing association homes can apply for Social Home Buy where a share of the home is bought and rent is paid on the rest
  • Shared ownership schemes are not the same as shared equity schemes. Shared equity schemes offer a low-interest loan on part of the home in exchange for a share of equity in the home.

More on 90% and 95% mortgages

Mortgages where a lower deposit of 5% or 10% is required are widely available for first time buyers and some home-movers in the UK. These mortgages can make home ownership more affordable as the deposit is smaller. Deposits saved as Help-to-Buy ISAs or Lifetime ISAs or deposits that are gifted by friends and family are acceptable to mortgage lenders.

More on family mortgages

Many people struggle to save for a deposit because they are paying expensive rent. A family mortgage may be an option for them because what a family owns in savings, property and investment can be used as a replacement to a traditional deposit for first time buyers, or home movers.

Family Mortgages:

  • Benefits buyers by reducing interest on mortgages and therefore monthly payments, increasing buying power so that a higher value house can be purchased
  • Families’ benefit from avoiding gifting money outright, and instead put assets to work as buyer security.

Affordable opportunities to help people to be homeowners do exist. We would urge readers as always to speak to a mortgage specialist IFA.

Please call our team of Chichester-based IFAs on 01243 532 635 to arrange a consultation. To discuss mortgages and insurances please ask to speak to James Mayne.

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.

Your home may be repossessed if you do not keep up repayments on your mortgage.

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.

As Carillion liquidates we review workplace and private pensions

As Carillion liquidates we review workplace and private pensions

In the news recently leading construction company Carillion went into liquidation. As with British Home Stores and with Tata Steel the workplace pension fund is short; in Carillion’s case by an estimated £580m. This workplace pension deficit has placed an additional burden on the Pension Protection Fund (PPF). It is expected that the PPF will take over the pension scheme if Carillion goes into administration. Though current Carillion retirees will not see any changes to their pension terms, existing employees that are soon to retire may see their funds cut by as much as 20%; and top-earners may have some of their pensions capped.

Why some workplace pensions are in trouble

Though workplace pensions are not new, the Roman army had them from around 30 BC, struggling funds are a relatively recent phenomena. There are two main drivers of this change.

Defined Benefits (DB) pensions guarantee pensions linked to an individual’s pay. Years ago, this meant that firms could slow down pay increases for staff, but make up lower wages with increased pension funds for retirement. Funding pensions, however is a challenge. There is a growing retired population and a shrinking tax contributing working population. Effectively the pensions candle is burning at both ends.

In 1960 the average life expectancy of a British male was 75 years, and for females it was 80 years. Now the average life expectancy of a British male is 83 years, and for females it is 85 years. But also, the amount of tax available to go towards later-life living costs: healthcare and the NHS, public transport, infrastructure and state pensions is in decline.

And though the Chancellor has taken steps to buoy the Pension Protection Fund it is clear that some workplace pensions, particularly Defined Benefit ones are becoming too costly to sustain.

The appeal of private pensions

Private pensions (also known as Defined Contribution schemes) where; an individual saves from their earnings into a pension fund, can run alongside workplace pensions and state pensions, or be the main pension scheme for the saver. Contributors must be aged 18 years’ old and also be a UK resident. Tax relief is available on private pension contributions, which makes this a particularly attractive savings ‘vehicle’.

In addition to the above, contributions are invested in funds which benefit from a tax-efficient status. When choosing to draw benefits from the plan, up to 25% of the fund can be taken which is also tax-free.

Personal Pensions are extremely flexible in comparison to DB schemes. Finally, when taking benefits from the private pension fund, there are no restrictions on the amount of money that can be withdraw at any one time.

Though HMRC proposes to increase the minimum retirement age for pension schemes from 55 to 57 by 2028, the state pension retirement age will increase to 67, meaning that private pensions can fund an earlier retirement.

It is clear, with the sad demise of the likes of Tata Steel, BHS and Carillion, that both Defined Benefit and Defined Contribution pension funds can be complicated. As ever we would advise you to speak to a local Independent Financial Advisor about pensions, retirement planning or any other financial concern that you 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 & 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.

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