Category Archive Retirement Planning

Bymapfinancesadmin

Tax Year-End Tips

Planning can save you moneyPart of any planning is to take the relevant steps at the right time. We don’t intend to give you lots of words on each and every thing you need to look out for, although we do list them below.

The main thing is that if you don’t plan, it could cost you a lot of money. A survey done recently by a firm – Dunstan Thomas – found that those who had professional help with retirement planning were £13k better off than those who went alone. So on that basis, let us put some other planning issues to you.

  • ISAs: If you regularly save through ISAs, you are unlikely to have any Capital Gains Tax issues. After the first £11,300 of gains are counted, it is then taxed at 18% if you are liable at 20% income tax, and 28% if you are liable at 40% income tax.
  • Pensions: When affordable, always pay into a pension, but don’t exceed the annual allowance of £40k or the lifetime allowance of £1m. Under the new pension freedom rules though, when you reach the age of 55, you can take out up to 25% of your total pension fund tax-free. This could be worth a lot of money and is not to be ignored; you could use it to repay a mortgage or at least put a big dent in one, for example.
  • In Retirement: If you planned your retirement using both pensions and ISAs, you could have the best of both worlds. Admittedly you don’t get tax relief when paying into an ISA, but you don’t get taxed when withdrawing from it either. In retirement, you could take out £11,500 a year from your pension fund, and you could take £13,500 from your ISA. This would leave you with £25,000 income per year with no tax to pay. Now that’s planning!
  • Married Couple’s Allowance: If you plan things between spouses, you can utilise everyone’s tax-free allowance and so could withdraw £11,500 x2 = £23,000, meaning you would only need to take out £2,000 per year from ISAs to have the same income as in the above scenario.
  • Marriage: The marriage allowance is worth £200 a year; as a well-known actor said, “Not a lot of people know that”.

The bottom line is that you need to plan things out – failing to plan is planning to fail after all. Planning can save you money or make you money; failure to plan on the other hand can cost you money. So do even a small bit of planning as every little bit helps.

If you would like some advice on planning, then why not contact Money Advice & Planning. Visit us at www.mapfinances.co.uk and use the contact form. Alternatively, call your local MAP adviser at a time which suits you.

The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Links to external sites are for information only and do not constitute endorsement. Always obtain independent professional advice for your own particular situation. Money Advice & Planning Ltd is authorised and regulated by the Financial Conduct Authority.

Bymapfinancesadmin

Why getting the right advice is so important

Speak to a financial adviser who can help youEstablishing a relationship with an Independent Financial Adviser (IFA) you can trust to handle all of your financial needs is critical to achieving your financial goals. Not all Financial Advisers are the same, so you must beware!

The two main types of financial adviser are those who are independent and those who are not. All advisers must tell you what services they offer from the outset. To be called an Independent Financial Adviser, they must be able to offer a broad range of retail investment products, and give consumers unbiased advice based on a comprehensive analysis of the market.

Restricted or tied advisers on the other hand can only recommend certain types of investment products or products from a limited number of providers (possibly only one if tied). It is important to establish at the outset what type of advice an adviser can offer, to ensure you get the best investment(s) to suit your needs and requirements.

All advisers must be properly qualified to give financial advice and hold the Diploma in Financial Planning, or an equivalent qualification. Advisers must also prove that their knowledge is up-to -date through continual professional development (CPD).

Some types of advice require an adviser to have specialist qualifications – pension transfers and equity release for example. Any companies offering these services should have advisers within their ranks who are suitably qualified to provide advice in these areas.

Advisers must also be transparent in the fees they charge for both initial and ongoing advice and services.

As a valued client of Money Advice & Planning Ltd you can rest assured in the services we offer:

  • Non-restricted advice and planning – no matter what financial advice and products you need, we can help.
  • Face-to-face advice from UK-wide trusted advisers – irrespective of where you are in the UK, one of our advisers will be happy to meet you and discuss matters face-to-face.
  • Fees structured to suit requirements – financial advice should never take on a ‘one size fits all’ approach and our fees will be structured and mutually agreed to suit your needs.
  • Tailored service packages – we don’t believe in one-off financial advice and have several service packages available, so your financial affairs are reviewed throughout your journey with MAP.
  • Whole of market non-discretionary investments – our bespoke investment strategy will cater for your needs and requirements, and give you an investment right for you.
  • Quarterly investment reviews – our proactive analysis of fund performance ensures you are always invested in the best areas to suit your attitudes to risk.
  • Recommended funds – we invest using recommended fund lists, which have been tried and tested to deliver successful returns for our clients.
  • Transparency and peace of mind – clients have 24/7 access to their investments through the MAP portal, so they always know how their investment is performing.

Perhaps most importantly of all, we come tried and tested. Read the reviews of just one of our advisers and see for yourself.

The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Links to external sites are for information only and do not constitute endorsement. Always obtain independent professional advice for your own particular situation. Money Advice & Planning Ltd is authorised and regulated by the Financial Conduct Authority.

Bymapfinancesadmin

Defined Benefit Transfers and Pension Freedoms

Obey pension and tax rules and be logicalOne item to make the headlines recently, for all the wrong reasons, was the transfer out of British Steel pensions (a defined benefit or DB scheme) into Personal Pensions (PPs) or Self-Invested Personal Pensions (SIPPs). The reason they hit the headlines was because the regulator – the Financial Conduct Authority (FCA) – said that a lot of these transfers were not compliant; or at least the paperwork wasn’t.

When an adviser transfers any pension today, he must specify why it is being transferred, based on factual information. The adviser needs to show the client has a need to move the money and that this need can only be satisfied by transferring the pension to a different provider. Now this can cover a whole raft of scenarios, but it will never include transferring a pension because the client thinks it might be helpful, even when a client gives their approval.

Death benefits is a good example. Let’s say someone has £250k in a DB scheme, and would like to ensure their children benefit from this when he/she is dead. If this pension was transferred solely for this reason, it would be the adviser who would get into bother, as there is no need to move it; it would only be a “nice thing to have”. If in the same scenario, the person had a critical illness and perhaps didn’t have long to live, there is then a need to transfer it sooner rather than later, before it dies with the individual.

The problem here is that a lot of DB schemes have such big transfer values, they are turning people’s heads and not making them think logically. That’s where an adviser comes in – to provide logic (hopefully). People fail to realise that such pension funds are meant to last a lifetime, and in a lot of cases might fritter this away very quickly, long before they should. The adviser should be the voice of reason.

Someone may in all eventuality be far better off taking the pension over their lifetime as it was intended, and not transferring it, only to blow their 25% tax-free cash on luxuries that they otherwise wouldn’t have bought, and then taking out more each year than is logical. Think twice when transferring a DB scheme, as you will need to be able to afford a long and healthy retirement.

You should also think twice about what you do with your pension when you retire, as you can only spend your money once. When you reach the age of 55, you can take out 25% of your fund as tax-free cash, and anything withdrawn thereafter is liable to tax at the highest rate applicable.

So if for example you earn £30k p/annum and are thinking of taking £40k out of your pension fund, you might need to think again – the first £11,500 is tax-free, the next £33,500 is taxed at 20%, and the remaining £25,000 is taxable at 40%. If you only got tax relief at 20% when you paid it in, it is daft (to say the least) to take it out and pay 40%. You need to watch what tax rate is applicable when you take money out. You can take out what you like when you like but you must pay the tax that goes with it.

If you would like some advice on your pensions, whether DB (defined benefits) or DC (defined contribution), then why not contact Money Advice & Planning. Visit us at www.mapfinances.co.uk and use the contact form. Alternatively, call your local MAP adviser at a time which suits you.

The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Links to external sites are for information only and do not constitute endorsement. Always obtain independent professional advice for your own particular situation. Money Advice & Planning Ltd is authorised and regulated by the Financial Conduct Authority.

Bymapfinancesadmin

The Markets

The Stock MarketsWhen we were about to start writing this piece about the stock markets, we were going to talk about how placid they had been for some time, and had been showing good growth.

Then they fell…a lot! On January 15th, the FTSE100 reached a high of 7,777, and now at the time of writing this (February 8th) it has fallen to 7,195; a whopping 7% reduction in a matter of days.

From what we can see, there appears to be no logical conclusion for this, but there were some bad economic factors coming from the US, so people have basically panicked.

The overall outlook isn’t bad. Some emerging nations like Brazil (for example) are doing well and coming out of quite a long recession. Japan and the US are doing well, Europe is doing OK, and the UK is doing OK, albeit not as good as the rest of Europe.

We categorise investment funds by risk, and the three main levels are low, middle and high. There is also very low and very high risk, but none of our clients tend to want to use them.

Low Risk Funds

There are quite a few global funds that we recommend; two of the most consistent ones are Royal London Sustainable World Trust, achieving 20.5% over the last year, and Premier Multi Asset Growth & Income, achieving 14.3%.

Middle Risk Funds

There are more global funds in this category than any other, e.g. Old Mutual Global Equity, giving 18.5% growth, which is the most consistent one. One of our long-running excellent performers is Lindsell Train UK Equity, giving 20.7%.

High Risk Funds

The most consistent fund in this category is AXA Framlington Japan, giving 23.4%, but Unicorn UK Growth, giving 36.1%, has done very well recently. High risk is the category where you get a wider variety of funds, and is currently populated mainly by Asian (in particular Japanese) and Technology funds. UK Mid Cap also seems to be making a comeback here as well. As you might guess, there is less consistency with these high risk funds as opposed to middle and low risk, but that is the nature of the beast, so to speak.

When you do any investment, you need a good spread of funds to invest in, and you need to watch them regularly. Funds are like children – you can’t take your eyes off them!!! At MAP, this is what we do. It’s in our nature and our investment process to keep our eyes on your client’s money and try to make it grow.

For any enquiries or just an initial chat, contact Andrew Singleton on 0345 241 1808 or e-mail us at enquiries@mapfinances.co.uk.

The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Links to external sites are for information only and do not constitute endorsement. Always obtain independent professional advice for your own particular situation. Money Advice & Planning Ltd is authorised and regulated by the Financial Conduct Authority.

Bymapfinancesadmin

Pension Cashflow Forecasting

Discovering Pension WorthWe always find that when we ask a client what he or she is likely to get from their pension, they have no idea. People can tell you what they would like, but whether they have enough or not is another thing…until now.

The Pensions Dashboard is a government initiative which has started recently, albeit it is not yet working. It is an attempt to show people what they might get from all of their pensions; primarily personal pensions, but it also includes the State pension.

What we do for our clients now, that is working, is our Pensions Guesstimate:

Example pension cash flow

The above would be the situation where a client has a personal pension and is contributing to it. If they weren’t, it is easy enough to remove that line, with other values recalculating to show an accurate likely outcome.

This example shows someone taking out their tax free cash at age 55, which is the earliest it can be taken. It can however be taken out at any time thereafter; either as a lump sum or in regular withdrawals.

We have built in withdrawals thereafter at 6% of the value of the pot from age 65 onwards, which is certainly not unreasonable. In the age of Pensions Freedoms, by and large this can be literally anything though.

In terms of growth, the Financial Conduct Authority expects us to be pessimistic so as not to get someone’s hopes up. We therefore use 3% growth if the client is a low-risk investor, 5% if they are a middle-risk investor and 7% if they are a high-risk investor.

Finally, under pension income, this example show the person retiring at age 65, although with pensions freedoms, anyone can retire from age 55. The State pension might be paid at age 65 with the standard amount being £8,100 per annum. We do ask clients to get their DWP forecast, which tells them how much they will get and when they can get it.

The end result, as I am sure you will agree, is a very simplified guess on what a person might expect at retirement. This then allows them to do their planning, potentially with plenty of time left to improve things. The whole purpose of this is simplification, although there are a number of factors where advisers need to keep watching. Pensions Guesstimates are specific to each individual, and if you have any clients who would like one done, please feel free to ask us.

For any enquiries or just an initial chat, contact Andrew Singleton on 0345 241 1808 or e-mail us at enquiries@mapfinances.co.uk.

The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Links to external sites are for information only and do not constitute endorsement. Always obtain independent professional advice for your own particular situation. Money Advice & Planning Ltd is authorised and regulated by the Financial Conduct Authority.

Bymapfinancesadmin

Adding value to your clients through Proactive Investing

Adding value to clientsIf your clients can maximise their investments – whether this be pensions, ISAs, bonds or general investments – they will be a lot better off. We know that’s a fairly obvious comment but not many people put this into practice.

Let’s say one of your clients has a pension pot of £500k and they have it invested in a Managed fund, or even worse, a With Profits fund; annual growth will likely be no more than 5%. If that client is aged 45 and plans to retire at 65, they can expect a final value in the region of £1.393m. Whilst that is a big sum, if they were to invest in a good spread of funds, including some consistently good performers, and get around 8%, the final sum could be around £2,517m. What a difference!

Calculations show that for every 1% you can improve returns in this example, you improve the end value by roughly £300k. That is a significant difference and would no doubt be greatly appreciated by most, if not all clients.

This is what we attempt to do at MAP – maximise end returns for clients’ investments – which we do through our well-tested investment process. When we take on any new clients and establish their new pensions and/or investments, yes we get an initial fee for setting everything up, but our work only starts there.

It is our job to monitor all funds used within a client’s investment on a regular, quarterly basis. We then make fund switches within an investment as and when needed, in an attempt to maximise end returns. That is the true value of a professional investment adviser.

All investments need to be worked; if not, they probably won’t go perform at all well. At MAP, we attempt to make them work hard, within a person’s attitude to risk, to maximise the end return. As you can imagine, there are no guarantees, especially when you think of the way global markets react to anything and everything. We believe that if you pick consistently well performing funds time and time again, that is half the battle. That is exactly what we do.

At the last time of looking one of our investment advisers had 51 client reviews on VouchedFor, with a score of 4.8 out of 5…not bad at all! We believe this is not only for our investing skills, but also for continually working investments to better their performance. Our advice is both initial and ongoing because that is what is needed with every investment.

For any enquiries or just an initial chat, contact Andrew Singleton on 0345 241 1808 or e-mail us at enquiries@mapfinances.co.uk.

The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Links to external sites are for information only and do not constitute endorsement. Always obtain independent professional advice for your own particular situation. Money Advice & Planning Ltd is authorised and regulated by the Financial Conduct Authority.

Bymapfinancesadmin

Splitting Pensions in Divorce

Splitting Pensions due to DivorceWhen spouses separate and then divorce, there will be a need to split up pensions if one party’s pension is significantly better than the other. Usually, that is the case since most couples do not follow the general plan of splitting pensions 50/50.

Admittedly, there is very little that can be done when you are talking about Defined Benefit (DB) schemes, because people need to work to the rules of their schemes; there is no alternative. Defined Contribution (DC) schemes though are very different.

What we try and do for all of our clients (where possible) is ensure their pension planning is as even as possible. This kind of planning maximises the use of personal tax allowances in retirement, and it can also keep any tax liability at 20% instead of somebody wandering into 40%.

Splitting DB schemes can be a bit of a nightmare, as you need to get a definitive valuation as at the date of separation. This is not always easy, and it may be necessary to involve an actuary who understands the scheme rules and also how any valuation could be worked out. Valuers will need to use some assumptions along the way.

Splitting DC schemes though is much easier – all you need to do is get a valuation of the assets concerned as at the appropriate date, and that’s it.

It’s down to the solicitors acting on behalf of the spouses to decide who gets what. They can only work with correct figures however, and that’s where IFAs can come in, with their understanding of scheme rules and assumptions, plus compliance aspects. Accountants dealing with such clients will then need to take such splits into account when planning out future strategies for their clients, but IFAs can also help in this respect.

When we do pension planning for clients, we much prefer to use what is called our Pensions Guesstimate, which lets an individual see projected future pension income, thus allowing them to plan accordingly.

Notes:

  • The State pension is £8,110 at age 65, and what we are showing here is annual accruals up to 65.
  • If someone has a DWP forecast, we would put that forecast into the Guesstimate too.
  • Maximum Tax-Free Cash is taken out after separation, as client aged over 55.
  • The average growth figures we work to are 3% for low-risk investors, 5% for middle-risk investors and 7% for high-risk investors.

For any enquiries or just an initial chat, contact Andrew Singleton on 0345 241 1808 or e-mail us at enquiries@mapfinances.co.uk.

The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Links to external sites are for information only and do not constitute endorsement. Always obtain independent professional advice for your own particular situation. Money Advice & Planning Ltd is authorised and regulated by the Financial Conduct Authority.

Bymapfinancesadmin

How we invest money

How we invest money puts risk at the heart of the discussion.Here at MAP, we invest our client’s money as if it was our own. Our investment process has been refined over many years, and we make our client’s money work harder for them – to help them achieve their long-term goals – through the ongoing monitoring of their investments.

Once we understand a client’s needs and attitude(s) to risk, we invest their money in a spread of funds from our Recommended Fund List (RFL). These funds will vary in type and also in geographical area (of where they are invested), in an attempt to maximise returns, and more importantly, lessen potential over-exposure in any one area.

A typical spread could be an investment made up of UK equities, interest-based funds, global funds, Asian funds, emerging markets and technology funds. It all depends on what is performing well at any given time.

Where we add real value is in the ongoing and regular monitoring of the funds chosen. This ensures returns are maximised for our client’s. Here is how the process works:

  • Select – Based on a client’s requirements and attitude(s) to risk, we select a range of funds from our RFL to make up their investment(s).
  • Review – We review the performance of all available funds every quarter and remove those which have underperformed from our RFL.
  • Switch – Client investments that are using any underperforming funds, which have since been removed from our RFL, are interrogated with a view to switching the poorer funds with those which are better performing and are on our RFL.

We always keep our client’s informed of any proposed change of funds, and we will never move their money without their prior permission. It also means client money is not shifted about from policy to policy, unless there is a change in circumstances or requirements. That can be an expensive way of doing things and can lead to a client eventually not even knowing where there money is invested any more.

With the investment providers we normally recommend, our client’s have 24/7 online access to see how their funds are performing. This also provides complete transparency on any fees which may apply; either from MAP or the investment provider.

Investments done through MAP offer true value and are bespoke to you.

Investing client’s money to maximise returns and helping them achieve their financial goals is our business, and we have many very happy clients who rely on our investment process to do just that for them (see proof below). Why not contact us today to see how we can help you.

VouchedFor-Certificate-04-2018
 

To see what our clients say about just one of our advisers, read their reviews here.

Bymapfinancesadmin

Trends in Investing

Getting growth from your moneyThe one thing you always need to look out for when investing are the trends…and there are quite a few!

First of all, you have to keep in mind the areas which are available to invest in. Over the years, we have seen funds for Technology, Financials, Healthcare, etc. but they all tend to have a start point and an end point. The last thing you want to do is invest when an area is getting near its end point and is about to fall; you could lose big in that respect.

You also need to look at geographical areas as well, as they too follow trends. For example, Emerging Markets can do well for a period and then fall away terribly as their economies stutter.

At the present time, when we have been preparing our new Recommended Fund Lists, we have noticed there are more and more Global funds performing well enough to be included. This includes a variety of options, like Global Alpha, Global Smaller Companies, or the simple but effective Global Growth.

What this means is that these funds have a pretty wide remit and so can look for investments (to make them grow) just about anywhere. Therefore, they may represent a better approach to investing than most. However, do bear in mind that they could possibly be a jack of all trades, and master of none. They might have a bigger area to work in, but they have to do a lot more homework before finalising their investments, i.e. decisions are made too late either to get involved with good investments and/or to offload bad investments.

What we find the best indicator of all is the trend of performance of funds; we always look at that over 1–5 years. It is far better investing in a reasonably consistent fund, taking into account its economic background, than merely looking out for high flyers which may be the big drops of tomorrow. Consistency in our opinion is key, and is what we have watched at MAP over the years. You can get good performance in 1-2 years, but bad performance is more possible at any moment. Good performance over 5+ years is special and should be looked out for.

We make up our recommended list of funds based primarily on consistency, as long as it has half-decent performance throughout. When we invest client money therefore, we are looking for that performance to continue for a reasonable time at least, and we continue to monitor it, to ensure it achieves that.

When you are looking to invest, you too should be looking for that consistency of performance. It will allow you to plan investments a lot better and should require less ongoing maintenance and less stress too!

If you would like to benefit from our hands-on approach to investing, why not contact us on 0345 241 1808 or email us at: enquiries@mapfinances.co.uk.

The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Links to external sites are for information only and do not constitute endorsement.  Always obtain independent professional advice for your own particular situation.  Money Advice & Planning Ltd is authorised and regulated by the Financial Conduct Authority.

Bymapfinancesadmin

Achieving a future pension

Calculating to get a good pension in retirementOne of the big challenges people have is trying to figure out what size of a pension they “might” come out with when they retire. The problem is that this can be over a long time, hence the confusion.

MAP has developed a simplified cash flow model, shown below, which is not difficult to understand and use, so long as you use reasonable parameters:

  • Annual Growth: We keep this as a simple 6% p/annum and if we see actual rates going down, we would reduce this accordingly. The rate of growth used should always be a pessimistic one that “should” be achievable; otherwise returns will never reach anywhere near their targets.
  • Withdrawals: We always work on the basis that people will want to withdraw their 25% tax-free cash from their pension. This can easily be invested rather than placed in a bank account (or spent) and withdrawals can then be made from it when required. It is tax-free, so it provides a cushion if required, on top of the remaining pension.
  • State Pension: We work to the basic State pension of £8,100 per year at age 65, but suggest everyone contacts DWP and gets their actual pension forecast based on their own contribution levels.

Example pension cash flow

This is an example of our cash flow model, and used properly, it can:

  1. Help you plan;
  2. Monitor your progress to achieve your target/goal; and
  3. Be adapted to changing circumstances.

The name of our company is Money Advice & Planning, because we give money advice with planning. Just like the love and marriage, you can’t have one without the other.

If you are going to plan for something, like a comfortable retirement, you cannot just do this exercise as a one-off and hope everything will work out ok. You need to work at it over a long period, otherwise it will falter at some point. Alternatively, call MAP and we can work it for you.

For further information on any aspect of financial advice and how MAP may be able to assist you, please contact us on 0345 241 1808 or email us at: enquiries@mapfinances.co.uk.

The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Links to external sites are for information only and do not constitute endorsement.  Always obtain independent professional advice for your own particular situation.  Money Advice & Planning Ltd is authorised and regulated by the Financial Conduct Authority.