E smartmoney january_february_2013_singlesper

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  1. 1. Your business logo (printed in full-colour), photograph (if required) & business name here. (0845) 686 0055 To place an order, or to find out more information, call our sales team on: or email sales@goldminemedia.co.ukTax-saving ideas Autumnto beat the end Statementof tax year 2012 Key announcements from theNow is the time you should be Chancellor at a glancereviewing your financial affairs Do you needKEEPING A growth, IncomeWATCHFUL EYE or both?ON YOUR MONEY Preparing forTaxing times for the whatever economicaverage 50-year old ups and downs might be aheadWhatchallengeslie aheadfor investorsin 2013?Navigating your way arounda wide range of investmentproducts and strategies Your contact details & regulator details here.
  2. 2. Financialplanning isour business.We’re passionate about making sureyour finances are in good shape.Our range of personal financial planning services isextensive, covering areas from pensions to inheritancematters and tax-efficient investments.Contact us to discuss your current situation, and we’llprovide you with a complete financial wealth check.
  3. 3. IN THIS ISSUE To yo u r d i s c u s s 07 fin p l a n na n c ia l requ ing i o r t or e m e n t s o b ta iIn this fu n i n f o rrt h e r m at i oissue 09 pl n, c o n te a s e ac t u s05 Happy ISA tax year Don’t get bitten - talk to us 14 Tax-saving ideas to beat the end of tax year Now is the time you should be05 Inheritance tax, one of life’s unpleasant facts reviewing your financial affairs 15 Helping you to protect and preserve your estate 16 Developing an investment strategy What do you want to achieve06 Autumn Statement 2012 Key announcements from the from your investments? Chancellor at a glance 19 Avoid facing financial uncertainty in old age06 Outlook for the New Centenarians Financial pressures to snowball for Nearly half of women rely on joint savings to fund retirement 20 12 future generation Protection when you may need it more than anything else08 Would you be vulnerable in the event of a financial catastrophe? The right peace of mind when faced with the difficulty of dealing with a critical illness New figures reveal families aren’t prepared financially for when the worst happens 22 Taxation matters Different investments have different tax treatment09 FLEXIBLE RETIREMENT PLANNING SOLUTIONS 25 Could your pension income rise Take the legwork out of your by as much as 33 per cent? retirement planning Women need to be aware of their options to 13 ensure they benefit from this opportunity10 What challenges lie ahead 26 for investors in 2013? Will you be able to Navigating your way around a wide range of enjoy your retirement? investment products and strategies More over-55s are increasingly working past retirement age as living costs hit savings12 Bad news can impact on any 28 one of us at any time Do you need growth, Safeguarding and protecting your family’s income or both? standard of living Preparing for whatever economic ups and downs might be ahead13 KEEPING A WATCHFUL EYE 28 ON YOUR MONEY Taxing times for the average 50-year old13 Could you be short-changed from your future pension income? Reaching retirement is the catalyst for seeking professional financial advice 03
  4. 4. CONTENTS Editorial 08 Although making resolutions to improve your financial situation is good whatever the time of year, many people find it easier at the beginning of a New Year. Regardless of when you begin, the basics remain the same. So it’s with this in mind that we have provided a number of ideas inside this issue to get you ahead financially. In a period of slow global growth, aggressive central bank actions and near paralysis on the part of many fiscal policy makers, investors enter 2013 facing a plethora of challenges. On page 10 we look at the three main hot topics that are likely to impact on making investment decisions over the next 12 months: China, the US and the Eurozone. With the end of the tax year rapidly approaching on 5 April, now is the time to focus on ways to mitigate any tax liability. 10 To make the most of the opportunities available, if you’ve not already done so, you should start putting plans in place now. On page 14 we consider some of the areas you may need to review to minimise a potential tax liability. 16 This tax year 2012/13, you can shelter up to £11,280 from tax by investing in an Individual Savings Account (ISA), and the good news is that the Chancellor, George Osborne, announced during his Autumn Statement last December plans to increase the ISA limit to £11,520 from 6 April this year. To make the most of the current tax year’s allowance, you need to act before the fast-approaching deadline. Read the full article on the opposite page. A full list of all the articles featured in 25 22 this edition appears on page 3. n The content of the articles featured in this publication is for your general information 28 and use only and is not intended to address your particular requirements. Articles should not be relied upon in their entirety and shall not be deemed to be, or constitute, advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the 26 date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts. Levels and bases of, and reliefs from taxation are subject to change and their value depends on the individual circumstances of the investor. The value of your investments can go down as well as up and you may get back less than you invested.04
  5. 5. Wealth creationHappy ISAtax yearDon’t get bitten - talk to usThis tax year you can shelter up to £11,280 from tax by investing inan Individual Savings Account (ISA). During his Autumn Statementlast December, the Chancellor, George Osborne, announced plans toincrease the ISA limit to £11,520 from 6 April this year.ISA allowanceEach tax year you have an ISA allowance. Forthe tax year 2012/2013 (6 April 2012 until 5 April The value of investments and2013) you can save up to £5,640 in a Cash ISA with the income from them can gothe remainder in a Stocks & Shares ISA, or you can down as well as up, and youinvest your full allowance in a Stocks & Shares ISA. may not get back the fullYou’re only permitted to invest with one Cash ISA amount invested. The taxprovider in each tax year and the same, or another, benefits and liabilities willStocks & Shares ISA provider. depend on individual circumstances and mayMake up any unused shortfall change in the future. PastIf you haven’t already used up your full ISA allowance performance is not a guideyou can’t retrospectively make up any unused shortfall to the future.later – it’s lost forever. UK residents aged 16 and overcan choose to save in a Cash ISA or, if they are 18 orover, a Stocks & Shares ISA or a combination of both.Parents or guardians can also open a Junior ISA for Discuss yourchildren under 18. ISA options - don’t delay The interest on a Cash ISA isn’t taxed, so all the Whether you’re new to investing or lookinginterest you earn you keep. With a Stocks & Shares ISA, to grow your portfolio, we can help – pleaseall gains are free from Capital Gains Tax and you don’t contact us to find out more.need to declare your ISA investments to the taxman. n Inheritance tax, one of life’s unpleasant facts Reducing the size of your estate through increased spending or gifting Inheritance tax (IHT) is generally payable upon as debt is being paid off. Over the IHT tax-free Swapping certain assets that attract IHT to assets n death and during the life of someone where they give allowance band, IHT is paid at 40 per cent and so that can be free of IHT after two years away assets. IHT can be reduced significantly by tax it is a significant tax charge levied on your assets. n Giving to charity planning in advance. n Making sure your wills are drafted properly Everyone is entitled to an IHT-free allowance of Reducing a potential IHT bill n aking sure your holiday letting meets the M £325,000 in the current 2012/13 tax year. A married IHT needs to be considered by everyone. These trading tests couple or registered civil partnership would are some areas you may wish to discuss with us to therefore generally have no IHT to pay if their mitigate a potential IHT bill: Don’t leave your family estate on second death is less than £650,000. The n Giving allowable amounts of money with a tax bill IHT allowance threshold which has been frozen at regularly to your children or others each If you have significant wealth you need to £325,000 since 2009 is set to increase to year out of income consider IHT at an early stage. To discuss the £329,000 in 2015/16. n Passing wealth down to the next generation options available to you, please contact us n While net estate values might be less than seven years before death £650,000 now because of a mortgage or some n Using family trusts to hold capital The Financial Services Authority does not regulate other liability or loan, it is possible that at the n aking sure your business qualifies for full M estate planning, wills or trusts. time of death the estate will be worth much more IHT relief 05
  6. 6. AUTUMN STATEMENT 2012AUTUMNSTATEMENT2012 Outlook Key announcements from the Chancellor at a glance for the NewEconomic Growthn Forecasts for the next few years are: 1.2% in 2013, 2% in 2014, 2.3% in 2015, 2.7% in 2016 and 2.8% in 2017. CentenariansPensions and Benefits Financial pressures to snowball for future generationn Most working-age benefits to rise by 1% for each of the next three years. A generation of ‘New Centenarians’ will be forced to work well into their 70s to stay afloat, according ton From 2014/15 lifetime pension relief new research from Scottish Widows. In addition to working longer, they will face a hat-trick of financial allowance to fall from £1.5m to pressures as early as their mid-twenties, with the stresses of saving for their first home, paying back their £1.25m – annual allowance cut from £50,000 to £40,000. student loans and starting a retirement fund impacting on them much earlier than other generations. Tn Capped drawdown limit increased for pensioners of all ages with these he Office for National Statistics believes New Centenarians who complete higher education arrangements from 100% to 120% of that one in three babies born in 2012 could be paying off their student debts of £73,000 until the value of an equivalent annuity. in the United Kingdom will live to they are 52 years old.n Basic state pension to rise by be 100. This unsurpassed average life Couples will increasingly delay having their first child 2.5% to £110.15 a week. expectancy, combined with the rising costs of living, until they are in their early 30s, compared to their laten Child benefit to rise by 1% for two education and housing, means that our children and 20s now. An increasing proportion of people will either years from April 2014. grandchildren will need to plan much earlier for their have no children or just one child. After the purchase future and work for longer of their home, consideringTaxes and Allowances than ever before. the financial burden of havingn ersonal basic income tax allowance for P The Scottish Widows children is probably the most those aged under 65 increasing by survey of 1,000 parents with important financial decision they £1,335 in cash terms to £9,440 in 2013/14. children under the age of The Office for National will face in their lives.n igher rate threshold to rise to H five reveals that nearly Statistics believes that one in Financial products are likely £41,450 in 2013/14, to £41,865 in 2014/15, 78 per cent are concerned three babies born in 2012 in to change to allow for mortgages and in 2015/16 it will be £42,285. that their children may need the United Kingdom will live to be paid over a longer periodn Main rate of corporation tax to be cut to work well into their 70s. to be 100. This unsurpassed of time due to people working by extra 1% to 21% from April 2014.n Capital gains annual exempt will Leading economist and trend forecaster Steve Lucas average life expectancy, longer and increased life expectancy. New Centenarians increase to £11,000 in 2014/15 and of Development Economics combined with rising costs of are likely to be paying off their £11,100 in 2015/16. analysed the financial and lifeliving, education and housing, mortgage until they are at leastn Temporary doubling of small business milestones that babies born means that our children and 61, four years later than their rate relief scheme to be extended by in 2012 will reach before grandchildren will need to parents and seven years later further year to April 2014. they turn 100. Looking plan much earlier for their than their grandparents.n Inheritance tax threshold to be increased to £329,000 in 2015/16. backwards from 2112, the research paints a picture of future and work for longer In order for New Centenarians to provide ann Bank levy rate to be increased what life might look like for than ever before. acceptable standard of living for to 0.130%. these babies and examines themselves in old age, a pensionn £5bn over six years expected from the steps an average pot of £2.4m in retirement treaty with Switzerland to deal with New Centenarian will have taken throughout life in savings will need to start sooner. undisclosed bank accounts. comparison to his or her parents and grandparents. The cost of social care is likely to be anothern ISA contribution limit to be raised to major concern for this future generation. Many New £11,520 from 6 April. The personal financial landscape Centenarians will need to contribute financially to then Prosecutions for tax evasions up 100 years in the future care costs of their parents’ generation, as well as try to 80%, with anti-abuse rule to come in. Changes to ways that student loans (and, for many put some funds aside for their own care costs in their people, high tuition fees) are provided mean that those final years.06
  7. 7. Financial planningNature of work is likely to change cent are pleased to think their children will commencement of working lives and ages ofThe state retirement age will be at least 70 by accomplish more in life because they will be retirement. ONS data was also used to estimatethe turn of the next century and an increasing healthier longer. n expected future trends for financial mattersproportion of people will continue working well including earnings, rents, house prices, mortgageinto their 70s, either because they can’t afford to costs and retirement incomes. A range of otherretire or because they feel it is in their best interest Saving enough information sources – published and unpublishedto continue working. for a retirement – were utilised to obtain insights into recent and However, the nature of their work is likely to of 30 years or more expected future social trends.change. According to Lucas, ‘In the future, older The dramatic speed at which life expectancyworkers – especially in the professional and business is increasing means we need to radically Estimates of future financial costs – includingservices sector – are likely to stay working longer rethink our perceptions of life, especially for earnings, housing costs, student debt and retirementinto their 70s, but the nature of this work will our children. Most workers today expect their savings – were calculated using bespoke economicbecome more flexible and probably more part- pension to fund a retirement of up to 20 years and financial models developed by the authors of the but increased life expectancy means Newtime. Workers in manual or vocational careers are research. These figures were estimated by projected- Centenarians may have to save enough for aalso likely to look to extend their working lives by retirement of 30 years or more. To discuss how forward underlying trends evident in existingundertaking a less strenuous, more part-time role.’ we could help you plan for your children’s and datasets, coupled as appropriate with trend-based However, this means that New Centenarians could be grandchildren’s future, please contact us for inflation assumptions.supporting themselves with a potentially limited income further information. Don’t leave it to chance.for up to 30 years of retirement. In order to properly The main exception is in the area of futureprepare for prolonged retirement and counter the effects This research was undertaken based on past student debt, where a new system is currentlyof the collision of financial pressures, Lucas explains that and expected future demographic trends using being introduced and for which current dataNew Centenarians will need to begin saving for their published research and data from the Office for cannot be used to construct forward estimates.retirement from at least age 25 and that parents should National Statistics (ONS); this included trend In this case future estimates were based on aencourage their children to start understanding finances data on life expectancy, healthy life expectancy, literature review of estimated future student debtand the importance of saving from a young age. fertility, marriage, divorce, having children, liabilities, using sources including the Department for Education, the National Union of Students andIt isn’t all doom and student loan companies.gloom for this generationAlmost 45 per cent are concerned that theirchildren will not be able to save enough moneyfor a longer retirement. Yet almost 40 per cent ofparents are not considering their child’s long-termfuture as part of their financial planning and halfof all parents would not consider starting a pensionfor their child on their first birthday. However, it isn’t all doom and gloom forthis generation, as 41 per cent of parents areexcited about the potential for long-lastingfamily relationships and a further 37 per 2.4m The pe nsion p Centen ot New ar i an s to prov will ne i d e an ed s t an d a accepta rd of li ble t h e ms e v i n g fo lves in r old age . 07
  8. 8. Protection Cutting back on saving and buying insurance may save some money in the short term. However, if the worst happens, the situation for many families could well be extremely worrying.Would you be vulnerable in theevent of a financial catastrophe?New figures reveal families aren’t prepared financially for when the worst happensLegal General’s first ‘Deadline to the Breadline Report’ published in December last year has revealed that the averageBritish family has just 19 days before its savings would run out if the main breadwinner is unable to work for anyreason. This ‘’deadline to the breadline’ - the length of time the average household could last on savings following asudden loss of income due to long term sickness, injury, critical illness or death.Families aren’t prepared financially Key findings of this first report include: right now impossible. Cutting back on savingThe aim of Legal Generals Deadline to the Families in the South East of England have the and buying insurance may save some money inBreadline Report is to shed a light on the financial longest Deadline to the Breadline, but would still the short term. However, if the worst happens,health of the average British household and to on average last just over a month - 37 days - before the situation for many families could well bestimulate debate in the industry about what we their savings would be used up; extremely worrying. At times like this it is evencan do to help consumers better understand the This is two weeks more than the next two more important that people consider how bestdangers of failing to protect themselves against regions with the North West at 22 days and the they can plan for a financial catastrophe.financial disaster. It’s concerning to see that the South West at 21 days; Please note this does not includeaverage UK family has a ‘deadline to the breadline’ Households in the West Midlands came out as Northern Ireland. nof just 19 days. Clearly, families aren’t prepared the least prepared with a deadline to the breadlinefinancially for when the worst happens - loss of of just seven days. Protect yourincome, critical illness or death- and the sad realityis that they need to be ready. ‘Muddling through’ approach standard of living Legal Generals Deadline to the Breadline We all know how tough it is for families at There are a range of insurance productsReport is the first of a series of publications that the moment. For many, simply making ends designed to help protect your standard ofwill track the financial health of the nations meet and staying in regular employment living. To discuss affordable ways that wehouseholds and provide a means of tracking that is a daily challenge. But the loss of regular can help you make sure your family’s life“health” as the economy changes over the next income would render the ‘muddling through’ goes on even if you’re not around, don’t delay – please contact us today.few years. approach that many households are taking08
  9. 9. RetirementFLEXIBLE retirement The SIPP wrapper is separate from the contents and, as such, has distinct, often fixed charges.PLANNING SOLUTIONS Because you can now accumulate a number of pensions over your working life, consolidating them all into a SIPP means that you have one company carrying out your pension administration.Take the legwork out of your retirement planning This could reduce your reporting and paperwork; however, you should ensure that the additional investment options a SIPP provides are required,People are living longer and the number of retirees is growing. Longevity should as it can cost more to administer than a normalbe a blessing but many investors are worried they will outlive their savings. So it is personal pension plan.essential to consider saving for retirement as early as possible and to decide where SIPPs are appropriate for people comfortable with making their own investment decisions andbest to invest for your requirements. are not a risk-free product. The capital may be at risk due to the investments held within thisDeciding how to plan Investment choice pension arrangement; the value of investmentsThere is a bewildering choice when deciding how You can invest in a wide range of investments and can go down as well as up and you could getto plan for your retirement, and it is important this includes any number of approved funds. Most back less than you invested. Tax reliefs will alsoto weigh up the cost and complexity against the SIPP providers allow you to select from a range of depend on your personal circumstances and thepotential returns. If appropriate, one option to assets, including: pension and tax rules are subject to change byconsider is a Self-Invested Personal Pension the government. n(SIPP). Originally designed for people with n stocks and shares quoted on a recognised UK or higher-value pension funds, they’ve become more overseas stock exchangeprevalent since the UK pension simplification n government securities BUILDING A BIGGER PENSIONlegislation of 2006. n unit trusts Before applying for a SIPP, you should seek SIPPs are tax-efficient wrappers within which you n investment companies professional financial advice. To find outcan select your own pension investments from a wide n insurance company funds how much you should be saving to helpvariety of sources and choose how to spread your n traded endowment policies achieve your desired retirement income,money among a whole range of different investment n deposit accounts with banks and building societies contact us for further information.types subject to both HM Revenue Customs rules n National Savings products and any limits set by the SIPP provider. n commercial property (such as offices, shops or factory premises) Information is based on our current understandingTax-efficiency of taxation legislation and regulations. A SIPP isA SIPP offers the same tax benefits as other Retirement FLEXIBILITY a long-term investment, and the fund value maypersonal pension plans, with personal A SIPP allows you to choose from the full range fluctuate and can go down. Your eventual incomecontributions eligible for Income Tax relief and of options at retirement, from purchasing an may depend upon the size of the fund at retirement,investments within the SIPP able to grow free of annuity to taking a managed income withdrawal future interest rates and tax legislation.Capital Gains Tax. from your fund. SIPPs are tax-efficient wrappers within which you can select your own pension investments from a wide variety of sources and choose how to spread your money among a whole range of different investment types . 09
  10. 10. Wealth creationWhat challengeslie ahead forinvestors in 2013?Navigating your way around a wide range of investment products and strategiesIn a period of slow global growth, aggressive central bank actions and near paralysis on the partof many fiscal policy makers, investors enter 2013 facing a plethora of challenges.T here are three main hot topics that are view and see their capital fluctuate in value could banking crisis of 2008 and the technology crash of likely to impact on making investment consider taking more risk to try and achieve an 2000 – many investors who were over-exposed to decisions over the next 12 months: inflation-beating return. these areas suffered heavy losses. Diversification China, the US and the Eurozone. Shares are different from most goods in that mitigates risk, as different areas perform well at Chinese monetary policy-making by demand often increases as prices rise. If an different times. Paradoxically, though, it’s alsothe new leadership needs to tread a fine line between investment area is fashionable, it could be a sign that important not to be too diversified.slowing economic growth, which could cause social it is overvalued. Traditional areas, such as blue chip One of the biggest dilemmas investors face isunrest, and creating asset bubbles. A US debt ceiling companies, often generate the best long-term returns, market timing. Jumping in and out of markets on abreach around March 2013 could lead to draconian so it makes sense for most investors to avoid the latest regular basis not only requires constant monitoringconsequences if an agreement is not reached. Finally, fad. However, it is important to remember that all stock of daily events but also requires the skill to act onthe on-going Eurozone sovereign debt crisis – although market investments will fluctuate in value, so you could such events. The return from a lump sum investmentsteps have been taken in the right direction, Europe is get back less than you invest. can depend heavily on the entry point. One way tostill not fixed. achieve this is to spread or drip-feed a lump sum Maximum use of tax shelters into the market as opposed to investing it all in oneGood financial planning Investors also need to make the maximum use of tax go. In fact, during volatile times this strategy allowsNavigating your way around the plethora of shelters as tax can eat away at your returns. These can you to benefit from what is known as ‘pound costinvestment options out there can be very daunting include pensions and Individual Savings Accounts averaging’. Regular investing provides an alternativeand requires professional financial advice. Before (ISAs) at one end of the spectrum to Enterprise method of building positions over time. ninvesting, you need to ask yourself a basic question. Investment Schemes and Venture Capital Trusts atWhat are you investing for? Good investmentrequires good financial planning first of all. You must the other, higher-risk end. Even following the proposals announced by the Improved returnsdecide what your objectives are, what return you need Chancellor, George Osborne, concerning pension tax within yourto achieve that objective and what risk you are willing relief in his Autumn Statement, pensions still offer investment strategyto take to achieve that return. very attractive tax benefits through the income tax Our services cover a wide range of Deciding how much to invest in equities, fixed relief you receive on the contributions. investment products and strategies. Ourinterest (gilts and corporate bonds), property and In the current 2012/13 tax year, there is no tax dedication to flexibility and innovationcash is the first step in constructing a portfolio. Many to pay within an ISA on any capital gains and no ensures we are able to secure new andinvestors are understandably nervous about taking further tax to pay on any income and you can shelter tactical opportunities for improvedrisks with their hard-earned capital during this up to £11,280, which is set to rise to £11,520 from 6 returns within your investment strategy.current period but not taking enough risk can be just April this year. To discuss what you need to do next,as damaging as taking too much. Having said this, making an investment please contact us for further information. decision based on a tax saving alone should notTaking a long-term view be the main consideration at the expense of the Information is based on our current understandingAll asset classes carry risk – including cash, which other rules of investing. of taxation legislation and regulations. Levels andcan lose its spending power over time because of bases of and reliefs from taxation are subject toinflation. Most investors see risk as the risk of short- Different areas perform legislative change and their value depends on theterm price falls but fail to consider the risk that their well at different times individual circumstances of the investor. The value ofinvestments will not grow fast enough to meet their An undiversified portfolio will only perform well your investments can go down as well as up and youobjectives. Those who can afford to take a long-term some of the time. Good examples of this are the may get back less than you invested.10
  11. 11. You’veprotectedyour mostvaluable assets.But how financially secure areyour dependents?Timely decisions on how jointly owned assets are held,the mitigation of inheritance tax, the preparation of awill and the creation of trusts, can all help ensure yourdependents are financially secure.Contact us to discuss how to safeguard yourdependents, wealth and assets, don’t leave it untilit’s too late.
  12. 12. ProtectionBad news can impacton any one of us at any timeSafeguarding and protecting your family’s standard of livingBad news can impact on any one of us at any time, in the form of an illness or sudden death. We don’t like to think aboutit but we do have to plan for it. So having the correct protection strategy in place will enable you to protect your family’slifestyle if your income suddenly changes due to premature death or illness. However, choosing the right options can bedifficult without obtaining professional advice to ensure you protect your family from financial hardship.O btaining advice is essential to Your life assurance premiums will vary according to a The other type of protection available is a making an informed decision number of different factors, including the sum assured whole-of-life assurance policy designed to about the most suitable sum and the length of your policy (its ‘term’), plus individual provide you with cover throughout your entire assured, premium, terms and lifestyle factors such as your age, occupation, gender, lifetime. The policy only pays out once the payment provisions. We work state of health and whether or not you smoke. policyholder dies, providing the policyholder’swith our clients to create tailored protection If you have a spouse, partner or children, you dependants with a lump sum, usually tax-strategies that meet their financial goals and needs should have sufficient protection to pay off your free. Depending on the individual policy,and we’re committed to ensuring that our clients mortgage and any other liabilities. After that, you policyholders may have to continue contributingenjoy the best financial planning service available. may need life assurance to replace at least some of right up until they die, or they may be able to Whether you’re wanting to provide a financial your income. How much money a family needs will stop paying in once they reach a stated age, evensafety net for your loved ones, moving house or a vary from household to household so, ultimately, it’s though the cover continues until they die. nfirst-time buyer looking to arrange your mortgage up to you to decide how much money you wouldlife insurance – or simply wishing to add some like to leave your family that would enable them tocover to what you’ve already got – you’ll want to maintain their current standard of living. ADDED PEACE OF MINDmake sure you choose the right type of cover. That’s There are two basic types of life assurance, ‘term’ We can help make sure you and yourwhy obtaining the right advice and knowing which and ‘whole-of-life’, but within those categories there family is financially protected, which means added peace of mind for youproducts to choose is essential. are different variations. and protection for them. Contact us Life assurance helps your dependants to cope The cheapest, simplest form of life assurance is today to discuss your requirements.financially in the event of your premature term assurance. It is straightforward protection,death. When you take out life assurance, you there is no investment element and it pays out aset the amount you want the policy to pay out lump sum if you die within a specified period. Thereshould you die – this is called the ‘sum assured’. are several types of term assurance.Even if you consider that currently you havesufficient life assurance, you’ll probably needmore later on if your circumstances change.If you don’t update your policy as key eventshappen throughout your life, you may risk beingseriously under-insured. As you reach different stages in your life, theneed for protection will inevitably change. Theseare typical events when you should review your lifeassurance requirements:n Buying your first home with a partnern Having other debts and dependantsn Getting married or entering into a registered civil partnershipn Starting a familyn Becoming a stay-at-home parentn Having more childrenn Moving to a bigger propertyn Salary increasesn Changing your jobn Reaching retirementn Relying on someone else to support youn Personal guarantee for business loans12
  13. 13. Taxation Retirement Could you be short-changed from your future pension income? Reaching retirement is the catalyst for seeking professional financial advice There is a world of choices and decisions to be made when reaching retirement, and that’s before you even look at whether you should take an enhanced annuity. For many individuals, reaching retirement is the catalyst for seeking professional financial advice. Suddenly you can be faced with a pension pot – be it large with myriad options, or small and needing to be stretched as far as possible. According to the National Association of Pension Funds (NAPF), nearly two- thirds of us could be eligible for higher pensions when we retire. Thousands of people are missing out because they do not realise that having certain medical or lifestyle conditions could significantly boost their retirement incomes whenKEEPING A WATCHFUL buying an annuity or annual pension. The NAPF estimates that about half aEYE ON YOUR MONEY million people retiring each year are being short-changed by up to £1bn from their total future pension income. If you or your partner suffers fromTaxing times for the average 50-year-old medical and/or lifestyle conditions, you may qualify for enhanced terms on your annuity option, which could increase yourThe average 50-year-old has paid £190,400 in direct taxes by the time they retirement income. Enhanced annuities take into consideration detailed informationcelebrate their 50th birthday – equivalent to around three-and-a-half times more about your health and lifestyle to providethan they’ve invested in their pension, new analysis from MetLife [1] shows. you with a more personal annuity.T Typically, when an annuity his study of the finances of 50-year-olds last 16 years of their working lives when their focus provider quotes for an enhanced annuity, shows they have an average of will be on retirement planning. they will pay close attention to all the factors £54,300 saved in pension funds but have Men working from 21 to 66 will pay a total of that will affect your life expectancy. This paid out more than three-and-a-half times £316,950 in tax and National Insurance during their includes where you live, whether you smokethat in tax and National Insurance. working lives, while women will pay £247,350, the and drink, your lifestyle and your medical People on median earnings starting work at 21 will figures show. n history. They can then build a more accuratehave paid out £114,148 in income tax with the other picture of your life expectancy, on which£76,000 going on National Insurance during the course of they base their calculations. ntheir working lives, figures show. For men the total direct Concerned about yourtax bill by 50 comes in at £205,000, while women pay anaverage £167,370 in income tax and National Insurance. retirement provision? Securing a bigger The amount paid in tax is another illustration of If you are concerned about your retirement retirement incomethe financial pressures on the group born between provision, please contact us to review your You need to bear in mind that once current situation – it’s always better to do you commit to an annuity, you1961 and 1981. While the tax bill appears high, the something rather than nothing. The problem will will be stuck with it for life, so itgood news is that pension saving continues to attract not go away and over time will only get worse. is essential to obtain professionalsignificant tax relief and is a good way to maximise taxefficiency while planning for retirement. financial advice. Contact us today According to the analysis, people working on to [1] MetLife analysis of HMRC and ASHE data to discuss how you could secure a bigger retirement income.66 from age 50 on median earnings will find their total published 07/11/12.tax bill rising to £290,560 – another £100,000 in the 13
  14. 14. Wealth protectionTax-saving ideas tobeat the end of tax yearNow is the time you should be reviewing your financial affairsWith the end of the tax year rapidly approaching on 5 April, now is the Tax credits on dividends are not repayable so non- taxpayers should ensure that they have other sourcestime to focus on ways to mitigate any tax liability. To make the most of of income to utilise their personal allowances.the opportunities available, if you’ve not already done so, you should startputting plans in place now. Here we look at some of the areas you may need Pension contributionsto consider to minimise a potential tax liability. There are many opportunities for pension planningI but the rules can be complicated. f your partner pays a lower rate of tax than Children also have their own Capital Gains Tax The rules include a single lifetime limit, currently you, you could consider transferring assets (CGT) annual exemption of £10,600 (2012/13). If £1.5m in 2012/13 but reducing to £1.25m in 2014/15, into their name. This makes particular appropriate, it may be more effective for parents to on the amount of pension saving that can benefit sense if one of you is a non-taxpayer, as invest for capital growth rather than income. from tax relief. There is also an annual limit on theyour taxable income will be lower than your tax The government introduced the Child Trust maximum level of pension contributions, currentlyallowances, which means you won’t have to pay any Fund (CTF) for children born on or after £50,000 for 2012/13 reducing to £40,000 in 2014/15.tax on savings interest. Interest on savings accounts 1 September 2002. The idea was to promote tax- The annual limit includes employer pensionis usually paid after 20 per cent has been deducted efficient savings by family and friends and included contributions as well as contributions by the individual.by the provider. Higher rate tax payers pay 40 per government contributions as an incentive. All Any contributions in excess of the annual limit arecent interest. government contributions have now ceased and taxable on the individual. To receive your interest paid tax free, you will need children born on or after 3 January 2011 no longer This year and in the next tax year, carry-to complete form R85. This is available from banks, qualify for a CTF account. forward provision allows investors to contributebuilding societies or the HM Revenue and Customs Existing CTF accounts continue alongside a new up to a maximum of £200,000. You can carry(HMRC) website. If you are a non-taxpayer, but have Junior Individual Savings Account (Junior ISA) which forward any unused annual allowance from thepaid tax on your savings, make sure you claim it back. has been introduced for those children who are not previous three years, which will give peopleYou need form R40 from HMRC. eligible for a CTF account. This includes children some scope to catch up on contributions they Income from jointly owned assets is generally born before 1 September 2002 as well as children have missed. You could potentially invest up toshared equally for tax purposes. This applies born from 3 January 2011. Both CTF and Junior ISA £200,000 (assuming a £50,000 allowance from theeven where the asset is owned in unequal shares accounts allow parents, other family members or current year and an assumed £50,000 allowanceunless an election is made to split the income friends to invest up to £3,600 (2012/13) annually in a from the previous three). If these are personalin proportion to the ownership of the asset. tax-efficient fund for a child. There are no government contributions they cannot exceed your earningsThe exception is dividend income from jointly contributions and no access to the funds until the in the current tax year.owned shares in ‘close’ companies, which is split child reaches 18. Directors of family companies could, as anaccording to the actual ownership of the shares. alternative, consider the advantages of setting upClose companies are broadly those owned by the Taxpayers a company pension scheme or arrange for thedirectors or five or fewer people. The 50 per cent additional rate of income tax on company to make employer pension contributions. taxable incomes above £150,000 reduces to 45 per If a spouse is employed by the company, considerChildren cent on 6 April this year. This means that those including them in the scheme or arranging forChildren have their own allowances and tax bands. who are able to defer income from 2012/13 to the company to make reasonable contributions onTherefore it may be possible for tax savings to be 2013/14 could benefit from a 5 per cent or more their behalf.achieved by the transfer of income-producing reduction in the tax charged on the amount deferred.assets to a child. Generally this is ineffective if Employer-provided cars and fuelthe source of the asset is a parent and the child is Non-taxpayers If applicable, you should also check that anunder 18. In this case the income remains taxable Children or any other person whose personal employer-provided car is still a worthwhile benefit.on the parent unless the income arising amounts to allowances exceed their income are not liable to It may be better to receive a tax-free mileageno more than £100 gross per annum. tax. Where income has suffered a tax deduction allowance of 45p per mile (up to 10,000 miles) You could consider transferring assets from at source a repayment claim should be made. for business travel in your own vehicle. If another relatives, for example, grandparents and/or In the case of bank or building society interest, employer-provided car is still preferred, consideremploying teenage children in the family business to a declaration can be made by non-taxpayers to the acquisition of a lower CO2 emission vehicle onuse personal allowances and the basic rate tax band. enable interest to be paid gross (form R85). replacement to minimise the tax cost.14
  15. 15. Wealth protection Where private fuel is provided, the benefit always consider the differing levels of risk and your shares at a profit will be CGT-free (a reduction ofcharge is also based on CO2 emissions. You should requirements for income and capital in both the the current rate of 28 per cent to 0 per cent).review any such arrangements to ensure no long and short term. An investment strategy based Any size of capital gain made on the disposalunnecessary tax charges arise. purely on saving tax is not advisable. of any kind of asset can be ‘deferred’ by re- investment into EIS-compliant companies. TheCapital Gains Tax (CGT) Individual Savings Accounts deferred gain is then due on the sale of the EISWith 5 April fast approaching, it is a good idea to be Individual Savings Accounts (ISAs) provide an shares unless the sale is to a spouse or on thethinking about using up your CGT exempt amount to Income Tax and Capital Gains Tax investment death of the shareholder.make the best use of tax advantages. For wrapper. The maximum investment limits are set Investments in EIS-compliant shares can attract2012/13 every individual has a CGT exempt amount of for each tax year. Therefore to take advantage of Inheritance Tax business property relief (BPR)£10,600 where no CGT is payable. Any capital gains the limits available for 2012/13 the investment(s) equal to 100 per cent of the investment value onon disposal of assets or investments are added to must be made by 5 April 2013 (this tax year you gifting or on death.income and taxed at 18 per cent over this exempt can shelter up to £11,280). A Venture Capital Trust (VCT) invests in theamount to the basic rate limit of £34,370 for An individual aged 18 or over may invest in one shares of unquoted trading companies. An investor2012/13 and then at 28 per cent for any gains over this. Cash ISA and one Stocks Shares ISA per tax year in the shares of a VCT will be exempt from tax Depending on your income from capital but limits apply. A Cash ISA allows you to invest on dividends (although the tax credits are notgains, timing can become an important issue. up to £5,640 (2012/13) with one provider only, in repayable) and on any capital gains arising fromIf appropriate, you should aim to use up your any one tax year. disposal of shares in the VCT.personal exemption before 5 April but if your A Stocks Shares ISA allows you the option to Income Tax relief, currently at 30 per cent, isincome from capital gains is high enough then you invest up to £11,280 in the current tax year with available on subscriptions for VCT shares up tocould wait until the 2013/14 tax year to possibly one provider. £200,000 per tax year so long as the shares are heldavoid paying tax at 28 per cent unnecessarily. If you want to invest in both a Cash ISA and a for at least five years. CGT liabilities are calculated with your Self- Stocks Shares ISA, the overall amount is capped Finally, review your borrowings. Full tax relief isAssessment Tax Return and tax payable is due by and you cannot exceed the £11,280 limit (2012/13). given on funds borrowed for business purposes. n31 January 2013 for the tax year ending 5 April 16 to 17-year-olds are able to open an adult2012. Therefore part of your planning may be to Cash ISA in 2012/13 and can also have a newleave disposals until after the year end to give you Junior ISA account. This means that a combined Isn’t it time youanother 12 months to pay the tax liability. maximum investment of £9,240 (£5,640 Cash ISA took advantage of If you have two homes you could consider + £3,600 Junior ISA) is possible for 2012/13. any tax breaks?making an election, so that future gains on your It’s important to take advantage of‘main residence’ are exempt from CGT. Other investments timely tax breaks. To investigate the A capital gain can also be deferred if the National Savings Investment bank (NSI) opportunities available to you, pleasegain is reinvested in the shares of a qualifying products are taxed in a variety of ways. Some, such contact us today.unquoted trading company through the Enterprise as National Savings Certificates, are tax-free.Investment Scheme. Single premium life assurance bonds and ‘roll No CGT planning should be undertaken in up’ funds can provide a useful means of deferring The value of investments can go down as wellisolation. Other tax and non-tax factors may be income into a subsequent period when it may be as up and you may not get back your originalrelevant, particularly Inheritance Tax, in relation to taxed at a lower rate. investment. Past performance is not an indicationcapital assets. The Enterprise Investment Scheme (EIS) allows of future performance. Tax benefits may vary as income tax relief at 30 per cent on new equity a result of statutory change and their value willInvestments investment (in qualifying unquoted trading depend on individual circumstances. Thresholds,There is a wide range of investments with varying companies) of up to £1m in 2012/13. As long as percentage rates and tax legislation may change intax treatments. When choosing investments, shares held for at least three years, the sale of the subsequent Finance Acts. 15
  16. 16. Investment Developing an investment strategy What do you want to achieve from your investments? Whatever your needs, we can help. You may wish to entrust the entire wealth management process to us, or make the investment decisions yourself and still leverage our extensive services and expertise.16
  17. 17. InvestmentDeveloping an investment strategy requires that n hat are the tax benefit implications, what tax W Generally, the longer it is before you needyou clearly define the short, medium and long term will you pay and can you reduce it? your money, the greater the amount of risk yourational for your portfolio. are able to take in the expectation of greater Investment objectives reward. The value of shares goes up and downQuestions that should be considered are: You may be looking for an investment to provide in the short term and this can be very difficult money for a specific purpose in the future. to predict, but long term they can be expectedQ: What are the investment objectives of Alternatively, you might want an investment to to deliver higher returns. The same is true to ayour portfolio? provide extra income. So having decided that you lesser extent of bonds. Only cash offers certaintyQ: What appropriate investment strategies will are in a position to invest, the next thing to think in the short term.achieve these objectives? about is: ‘What am I investing for?’ Your answer Broadly speaking, you can invest in shares forQ: What is your attitude to risk tolerance relative will help you to choose the most suitable type of the long term, fixed interest securities for theto your objectives? investment for you. If you have a particular goal, medium term and cash for the short term.Q: What is your time horizon for achieving your you will need to think about how much you canobjectives? afford and how long it might take you to achieve ‘Lifestyle’ your investments your goal. As the length of time you have shortens, you canA clear road map You may have a lump sum to invest that you change your total risk by adjusting the ‘asset mix’ ofDefining your investment objectives will provide a would like to see grow or from which you wish to your investments – for example, by gradually movingclear road map for developing the proper investment draw an income. Equally, you may decide to invest from share investments into bonds and cash. It isstrategy, with the correct balance of risk. in instalments (for example, on a monthly basis) often possible to choose an option to ‘lifestyle’ your There are different types of risk involved with with a view to building up a lump sum. investments, which is where your mix of assets is risk-investing, so it’s important to find out what they adjusted to reflect your age and the time you haveare and think about how much risk you’re willing Risk return trade-off before you want to spend your money.to take. It all depends on your attitude to risk (how Through a balancing process of the potential risk Income can be in the form of interest or sharemuch risk you are prepared to take) and what you return trade-off, your portfolio objectives can be dividends. If you take and spend this income,are trying to achieve with your investments. achieved. All investment strategies used to achieve your investments will grow more slowly than if the objectives must focus on these two important you let it build up by reinvesting it. By not takingInvestment considerations portfolio elements, ‘risk and return’. income you will earn interest on interest and theIt is important for you to establish the general The best investment strategy is the one that reinvested dividends should increase the size ofpurpose for creating the investment portfolio. achieves your objectives with the correct balance your investment, which may then generate further of the risk return trade-off, viewed over the growth. This is called ‘compounding’. nSuch analysis should be undertaken: proper duration or time horizon. The asset class,n How much can you afford to invest?n long can you afford to be without the How which has historically provided higher returns over the long term risk adjusted, is equities, Professional financial money you’ve invested (most investment followed by bonds. Equities contain the highest advice is essential products should be held for at least five years)? degree of risk volatility. However, the longer the The performance of your investmentsn hat do you want your investment to provide W duration or time horizon for equities, the lower could make a critical difference to – capital growth (your original investment to the potential for volatility. your financial wellbeing in the future, increase), income or both? Investors typically hedge against volatility so receiving reliable and professionaln much risk and what sort of risk are you How through an asset allocation across a diverse range financial advice is essential. Please contact prepared to take? of asset classes and strategies. A combination of us to discuss your particular situation.n you want to share costs and risks with Do these different asset classes and strategies should other investors (by using a pooled investment, achieve the investment returns for investors Information is based on our current understanding for example)? relative to their objectives. of taxation legislation and regulations. Levels andn you decide to invest using pooled If bases of and reliefs from taxation are subject to investments, consider which type would be Delivering higher returns legislative change and their value depends on the most suitable for you. The main differences Your investment goals should determine your individual circumstances of the investor. The value of between pooled investments are the way they investment strategy and the time question ‘How your investments can go down as well as up and you pay tax and the risks they involve (especially long have I got before I need to spend the money?’ may get back less than you invested. investment trusts and with-profit funds). is crucial. 17
  18. 18. Isn’t it timeyou had afinancial review?We’ll make sure you get the rightadvice for your individual needs.We provide professional financial advice coveringmost areas of financial planning, including, tax-efficientsavings, investment advice, retirement planning, estate inheritance tax planning, life protection, critical illnesscover and income protection.To discuss your options, please contact us.
  19. 19. RetirementAvoid facing financialuncertainty in old ageNearly half of women rely on joint savings to fund retirementNearly half (43 per cent) of women are relying on joint savings with theirpartners to fund their retirement, according to the eighth annual Scottish Achieving yourWidows Women and Pensions Report. However, with one in three marriages retirement goalsin the UK now ending in divorce by the fifteenth anniversary [1], experts The earlier you start saving for aare urging women to make extra provisions for retirement, to avoid facing pension, the better chance you’ll have offinancial uncertainty in old age. achieving your retirement goals. To find out how putting off the decision to startBased on a sample of 5,200 adults, the report found Unforeseen events a pension could affect your potentialthat less than one in five (17 per cent) of women trust We know that the pressure on household budgets and retirement income, please contact us totheir own savings to see them through retirement, the challenge of managing childcare and wider family discuss your requirements.compared to nearly a third (30 per cent) of men. responsibilities whilst balancing work, can all make it more difficult for women to save for retirement.Precarious plans For many older or divorced women, this can meanDespite many women being dependent on their relying on a partner or other family members topartners for their income in old age, the report finds provide support or additional income in later life.that these precarious plans are often left unsaid. The However, unforeseen events can have a stark impactvast majority (79 per cent) of married women say on retirement plans, and it is important for womenthat retirement was not discussed with their partner to make sure they know what they are entitled to andbefore they walked down the aisle and 78 per cent how much they can expect to receive in retirement.said they did not know what they would be entitled For this group of women, it is important toto from their partner’s pension if they divorced. act now. Making a commitment to save a set amount each month, could mean the differenceLosing out between a comfortable retirement and one full ofFurthermore, out of the divorced women surveyed, financial difficulties. njust 15 per cent said pensions were discussed aspart of their settlement. This is in spite of it beinga legal requirement that pensions are taken into Enjoy youraccount in divorce settlements, through methods retirement yearssuch as offsetting, earmarking and sharing. This We can work with you to develop strategiesis especially significant, as women are more likely to accumulate wealth in order for you toto work part-time or have caring responsibilities enjoy your retirement years, by evaluatingfor family members, meaning that they are at your goals, personal circumstances andgreater risk than men of losing out on important projected living costs - please contact us toretirement income. discuss your requirements.Exposed to hardshipThe impact of divorce on women’s retirement is [1] Office of Nationalespecially concerning considering that almost one Statistic’s Divorces inin ten (8 per cent) of women over 50 are wholly England and Wales 2009/10.dependent on their partner’s savings to fund them All figures, unless otherwisein retirement. This report uncovered that this stated, are from YouGovgroup of older women are particularly vulnerable Plc. Total sample size wasin terms of lack of retirement provision, with the 5,200 adults. Fieldwork wasnumber of women over 50 without a pension undertaken between 4th - 11thnearly double that of men of the same age (28 per March 2012. The survey wascent versus 15 per cent). As the divorce rate in the carried out online. The figures haveUK continues to rise, this group of women could been weighted and are representativebe exposed to hardship in retirement should they of all UK adults (agedseparate from their partners. 18 years plus). 19

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