AUTUMN 2012 | ISSUE 1InvestmentViewpointIncreasing yourretirement incomeRecent research What is an Enhanced Annuity? Boost your retirement incomesuggests more than An Enhanced Annuity pays a higher income The amount of extra income you could earn in retirement if you have a medical condition in retirement depends on your actual statetwo-thirds of us that may reduce your life expectancy. of health, or your lifestyle.could benefit from This is because an annuity is, in essence, a ‘bet’ with the annuity provider about how If you have high blood pressure or higha higher income long you will live. cholesterol, you could receive around 9%when we retire, more income than from a ‘conventional’ How does it work?by applying for an annuity. If you are a smoker, you may get up to 13% more income. If you are veryEnhanced Annuity1. When you invest in an annuity, the provider converts your pension ‘pot’ (the total amount seriously ill, the extra income will be significantly higher. you’ve accumulated within your pension) intoContact us today income payments, which are paid for the Latest figures show the difference between theto discuss your remainder of your life. average conventional and enhanced annuityretirement options. rates is 18.7%. Over the average retirement, If you die before your predicted life with a pension pot of £50,000, this would amount expectancy, the insurance company will make to £8,912.76 for men and £10,290 for women2. a profit, which is used to pay the incomes of those who live longer than predicted. If you These significant differences highlight the live longer than your predicted life expectancy, importance of getting good quality advice you will have won the bet with the insurance before you take out an annuity.1 MGM Advantage, 2012 company – and received a higher pension2 nnuity rates are based on analysis of data from A than you would have otherwise received. Investment Life and Pensions Moneyfacts by MGM Advantage (June 2012). The analysis looked at level annuities without a guarantee and income levels are based on a pension pot of £50,000 and £50,000 Average Average Percentage Difference over Difference a retirement age of 65. To create total retirement pension pot Conventional Enhanced Difference the first five years over average income figures the Index multiplied annual annuity Annuity (per year) Annuity (per year) of retirement retirement income by 17 years in the case of men and 20 years in the case of women. Enhanced rate figures Men £2,853.34 £3,377.62 18.37% £2,621.40 £8,912.76 are from a sample of smoker rates and enhanced rates based on health conditions. Women £2,703.50 £3,218.00 19.03% £2,572.50 £10,290.00
Reducing the risk2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Property Commodities Euro equities Property Commodities Euro equities Commodities Global bonds UK equities Commodities Gilts 7.1% 11.2% 29.8% 18.9% 37.0% 20.1% 18.5% 45.1% 30.1% 27.4% 15.7% UK corp Property UK equitiess Euro equities Euro equities Property Euro equities Gilts Euro equities US equities Property bonds 10.4% 20.9% 13.8% 24.1% 18.1% 15.7% 12.8% 20.1% 20.0% 8.3% 6.1% UK corp Gilts US equities UK equities UK equities UK equities Global bonds Commodities Commodities UK equities Global bonds bonds 3.0% 15.7% 12.8% 22.0% 16.8% 9.5% 5.6% 19.8% 14.5% 7.4% 10.0% UK corp UK corp UK corpGlobal bonds Gilts Property Property US equities UK equities US equities Property bonds bonds bonds 1.8% 9.3% 11.2% 18.8% 1.6% 5.3% 12.6% 14.3% 6.7% -4.1% 6.9% UK corp UK corp UK corp US equities Global bonds Gilts US equities Gilts US equities Global bonds US equities bonds bonds bonds -9.6% 7.9% 6.6% 17.3% 5.3% -12.8% 9.8% 2.5% 5.4% 0.7% 10.8% UK corp UK corp UK equities UK equities Global bonds Global bonds Gilts US equities Property Property UK equities bonds bonds -13.3% -27.1% 4.0% 4.3% 0.7% 3.7% -22.5% 2.2% -3.5% 9.0% 8.4% UK corpCommodities Euro equities Gilts Commodities Gilts Commodities Euro equities Gilts Gilts Commodities bonds -14.1% -27.1% 2.1% 3.7% 7.9% -0.4% -24.0% -1.2% 7.2% -6.7% 1.8% Euro equities US equities Commodities US equities Global bonds Global bonds Property UK equities Global bonds Euro equities Euro equities -20.1% -29.6% -2.1% 3.4% 7.3% -4.7% -5.5% -29.9% -7.6% 5.8% -14.7%The events of the past Why does multi-asset An unpredictable picturefew years have made investing work? The table above shows how different assetinvestors more aware The principle behind this strategy is to invest classes have performed over the last 10 years. in a variety of assets, each of which reacts It’s clear that its almost impossible to predictof the risks posed by differently to changes in the economic and which asset class will generate the highestmarket volatility. market background. A drop in the value of returns in an individual year.While investing always one asset may then be offset by increasescarries risk, there are in other asset classes, leading to smoother For example, Gilts was the second worst overall performance. performing asset class in both 2009 andways to help reduce it. 2010. But, in 2011 it was the top performer. Recent market history has illustrated theOne of the most effective benefits of taking a diversified approach to Commodities went in the opposite direction,strategies is known as investing. It is a technique that has been used going from top performer in 2010 to second- to good effect by experienced investors worst performer in 2011.multi-asset investing over the years, and can add value to large– or, put simply, not and small investments alike. Putting your eggs in more than one basketputting all your eggs can help to reduce risk. Whatever your level of investment experience, you can benefit fromin one basket. professional advice. If youd like to discuss the investment options we can offer you, please get in touch.
Makingfinancialadvice clearerFrom 31 December 2012, changes arebeing made to the way you receive andpay for investment advice.These changes are happening becausethe industry regulator, the FinancialServices Authority (FSA), wants to makethe process of financial advice clearer,in what can be a very complex area ofthe market.Higher standards More controlBy the end of the year, all pensions All of these changes will culminateand investment advisers will need to in higher professional standards and,meet a higher qualification standard ultimately, a better service for you.in order to continue advising you in That’s because you’ll be morethat area. They will also need to confident in the advice you’re givenkeep their knowledge up-to-date – (thanks to the higher qualifications)a process that will be independently and you’ll know exactly what you’reassessed and verified. paying for from the outset (thanks to clearer charges).Clearer charges Importantly, you’ll also have greaterThe cost of advice will be clearer. peace of mind when it comes toInstead of receiving commission from managing your money, becauseproduct providers, the cost of the your adviser will be in touch moreadvice you receive will be agreed often to let you know how yourwith you upfront. This agreement investments are doing.will also include a description ofany ongoing services you’ll receive How will it affect you?in return. We’ve already started preparingClearer description for the changes so that we’re ready ahead of the 31 Decemberof services deadline.The way financial advisers describethe services they offer, and whether To find out what we’rethey advise across the whole of the doing, and how it will affectmarket or from a select range ofproviders, will also be clearer. you, please get in touch. You can also find out more about the changes online at www.fsa.gov.uk/advicechanges
The cost of equalityFrom 21 December, EU law changes could meanyou pay more for personal insurance1. For less than a daily coffeeIf you drive a car, you’ll probably Do I need Family Protection? With food and fuelknow that insurers take your Unlike Car Insurance, which you have to buy costs rising, its nice togender into consideration when every year, Family Protection is something find something thatquoting your premium. most people buy when they take on new or remains affordable. additional financial responsibilities. Life Insurance prices,But you may not be aware that the same logic for example, havealso applies to the pricing of other types of If you have financial responsibilities (such aspersonal insurance. This includes things like a mortgage), or a family to provide for, Family decreased steadilyLife Insurance, Critical Illness Cover and Income Protection should be considered essential. over the past decade,Protection Cover - often collectively referred as average lifeto as ‘Family Protection’. It can provide a regular income or lump sum expectancy has should you become unable to work through gone up.At the end of this year, changes to the EU illness, accident or unemployment. It canGender Directive will outlaw the use of gender also ensure a cash payout if you were to die.as a pricing factor for all personal insurance. That Prices are now at a levelmeans men and women could find themselves What can I do about where you can protectpaying more for Family Protection. the pricing changes? your loved ones for less than the price of aCounting the cost The next couple of months provide a window daily takeaway coffee1, of opportunity to secure Family ProtectionAs well as the law change detailed above, at today’s rates. meaning peace oflife insurance companies will also be forced mind is within yourto pay more tax from the start of next year. Insurers are likely to experience a flood of reach – even in theseThe combined impact of these changes applications towards the end of the yearcould mean you’ll soon pay an extra days of austerity. – some of which they may struggle to process20% – or more – for Family Protection1. before the price increases take effect. 1 30 year-old non-smoker, £200k decreasing life assurance and critical illness cover, 25 year term, Guaranteed If you want to find out how these rates. Male: £30.07 per month (£1.00Based on industry estimates from LV= (June 2012)1 price changes could affect you, per day based on 30-day month); Female: £33.50 per month (£1.17 basedand the Actuarial Profession (March 2012). please speak to us today. on 30-day month). Cost accurate at 30/8/2012.Capital Solutions T 01582 343090 (08/12) COPEN622 Exp: 1/12/201225 Springﬁeld email@example.comBushey Heath www.capital-solutions.org.ukWD23 1GL