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News Column

Time to find a smart fund manager

By Sarah Williams

Smart phones, smart TVs, smart toasters. You put smart in front of a product and it sounds more exciting and of course you definitely want one.

Smart Brexit means absolutely nothing. It’s a bit like all the other monikers that have been used to describe one of the most complicated policy changes in British history: soft Brexit, extreme Brexit, hard Brexit, austere Brexit.

Any deal will be nuanced and complex and elongated. It won’t be boiled down to a pithy slogan. The result of these talks will have a huge impact on the UK, its economy and one’s investment strategy over the next two years and beyond.

At the moment these ludicrous definitions are being taken seriously by investors and traders appear to be trying to discount the likelihood of hard and soft Brexit’s without really having a clue what they mean.

Over the past few months, I’ve come to the conclusion that Brexit will truly mean Brexit – no deal and a complete break with the single market – or the UK will remain in the European Union (EU) as it is.

So will we see an exit deal put to the people in the form of a second referendum – will this mean the Brexit-weary electorate voting to reject such a deal and stay in after all.

Either outcome will have a huge impact on the investment landscape. Dependent upon your own investment strategy and whether your funds are actively or passively managed could have a big part to play in managing risk including volatility and managing upside with performance. Volatility can of course bring along many opportunities with the ability for an active manager to purchase value stock at discounted prices.

Is it time to find your smart investment manager?

This article does not provide individual financial advice and are the views of the columnist only. Vision Independent Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority

 

32 Days from the breadline

It may surprise you to hear that this statistic(*) relates to the length of time before many UK employees and their households could survive financially on their savings if income is lost through long term sickness, critical illness or death.

Recent research by Legal & General reviewed parent’s attitudes to financial planning, asking 1,000 families with children under the age of 18 without life insurance questions about their long term financial planning. Worryingly 51% and 61% (under the age of 35) of respondents didn’t know how their families would cover housing costs should they die unexpectedly, potentially putting many families at risk of losing the family home.

So why do we insure our cars and buildings but not our families financial security? Quite simply, these are in the main compulsory and cover for our dependants are not. Research has found there are a number of reasons: too complicated, too young, too expensive, never thought about taking out a policy or concerned the company would not pay out.

This is where an Independent Financial Adviser can help explain and understand any concerns, determine needs, priorities, review the market and obtain the most appropriate and cost effective plan yo meet the families budget. How a plan is arranged can make a difference to the family and why financial advice should be sought.

Don’t just take our word for it, here is a quote from Sir Winston Churchill

If I had my way, I would write the word “insure” upon the door of every cottage and upon the blotting nook of every public man, because I am convinced for sacrifices so small families and estates can be protected against catastrophes which would otherwise smash them up forever

(*) Source: Legal & General

This article does not provide individual financial advice and are the views of the columnist only. Vision Independent Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority

 

The Power of the ISA – are there really ISA millionaires?

by Sarah Williams

Over the years, I am often asked by new clients whether funding Individual Savings Accounts (ISA’s) are worth it?

The answer is simply “yes.” With no further tax due on capital gains or income, they are extremely  attractive tax planning tools. The strict limit on ISA contributions means that reaching ISA millionaire status typically requires a combination of dedicated saving and exceptional investment returns.

ISA allowances have become far more generous in recent years – rising to £20,000 per year from the start of April 2017, so in future the millionaire club is likely to grow.

The number of ISA millionaires are thought to be around 1,000. Such investors are likely to have invested for many years maximising annual tax allowances through ISA’s and it’s predecessors Personal Equity Plans (PEPs) and Tax Exempt Special Savings accounts (TESSAs).

They are likely to incest for growth with an appetite to risk that allows them to invest in equities. Such assets can provide very attractive returns and likely that they will have also experienced periods where investment values have significantly fallen. ISA performance would ultimately depend on the level of risk taken, concentration of assets and the level of diversification within a portfolio.

Risk and reward often go hand in hand, and getting it wrong can be very costly. We would always recommend taking professional independent advice.

Such advice will consider the various tax planning rules available including pensions and ISA’s. Pension funds can normally be accessed from age 55; maximum 25% tax free cash can generally be taken from the fund value, the remaining funds taxable at the individual highest marginal rate in the tax year that income is taken. A typical dilemma for individuals is whether to invest in ISA’s or pensions or both – the answer will ultimately depend upon individual needs, circumstances and priorities.

This article does not provide individual financial advice and are the views of the columnist only. Vision Independent Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority

 

New Main Residence Relief – Will it reduce your inheritance tax on death?

by Sarah Williams

Headlines from politicians and the media are often there to shock or impress, only when you get underneath the bonnet and look at the finer details do you establish what these changes mean in practice.

This can be said of the new main residence nil rate allowance commencing in the new year. The government never make life easy and one could say over engineered although its aim is no doubt achieved – give a little but not too much. However this often causes issues as individuals read the headline, don’t take advice as the feel this change addresses any issues they had.

The new rules provide an additional allowance of £100,000 in the tax year 2017/18 and a further £25,000 over the following three tax years, so that in 2020/21, clients will potentially have their existing nil rate personal allowance of £325,000 and an additional £175,000. However this assumes that a property is involved and this passes directly to the descendants, such as children and step children.

This is where it becomes a little more complex, what if you downsize or sell a property, what happens to spouses allowance on death, or discretionary trusts or discretionary will trusts, are other trusts affected the list does not stop there.

In addition, where estates exceed £2million a taper relief comes into play, reducing any property related relief potentially to zero. As a business owner you may feel this does not affect you as your main assets attract business property relief or a farm agricultural relief however this is not the case as taper relief does apply to all assets.

The simple answer is to seek professional assistance as this is a complex area and important to take independent financial advice, which often involves working alongside other professionals.

This article does not provide individual financial advice and are the views of the columnist only. Vision Independent Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority

 

Best Business Awards 2017

We are thrilled to announce that Vision have been awarded ‘Best Customer Focus’ at one of the UK’s highest profile awards, the Best Business Awards.

The Best Business Awards highlight and reward excellence in business. All entries were judged by a large, independent panel of past winners and other business experts, who selected the winners according to strict criteria.

Commenting on the award to Vision Independent Financial Planning, in Best Customer Focus Category, the Chairman of the judges said:

“Vision Independent Financial Planning has proved it’s commitment to customers by paying for an extensive independent quality assurance review by tax specialist Grant Thornton of it’s legacy advice given to customers. This is something few other independent financial advisers (IFAs) have undertaken. After achieving a glowing report, Vision now plans to continue with an independent review every year. With advice by IFAs constantly being scrutinised by regulators, this is an exceptional initiative that inspires confidence in Vision.”

Use them or lose them

by Sarah Williams

It is that time of year again to take stock of our finances and review our tax and pension allowances.

The current maximum contribution level for an Individual Savings Account (ISA) is £15,240 and there is also the Junior ISA allowance of £4,080. You can also contribute up to £40,000 into a pension plan subject to various criteria such as income and considerations in respect to annual and lifetime allowances.

There are several other investment schemes which allow you to defer capital gains tax and provide income and inheritance tax relief, although they are often complex and not always suitable for the faint hearted.

One of the least used allowances in an individual’s capital gains tax allowance which is currently £11,100 and mainly used when selling a large asset such as a buy to let property or investment. We often see clients where the returns have performed well, but tax is not managed, giving rise to gains which are subject to taxation. Should these investments have been actively managed they may have been reduced or avoided such liabilities by use of their CGT allowance, this can be true of many model or managed portfolios, but there are alternative options.

It is important to take Independent financial advice, which often involves working alongside other professionals such as accountants and solicitors.

This article does not provide individual financial advice and are the views of the columnist only. Vision Independent Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority.

Making a Real Difference

by Sarah Williams

Investing or children is extremely powerful and provides a great financial start for your children or grandchildren. Time is a powerful thing and one that many underestimate, such as a longer time horizon allows greater risk taking and higher potential returns, plus the power of compounding as profits are re-invested year on year. If you assume an annual return of 5%, £10,000 invested at birth could grow into £43,000 by the child’s 30th birthday. A cash bond paying 2.2% over the same period would be just over £19,000.

However parents do need to be careful, for a child under the age of 18 earning more than £100 in a year on money gifted by a parent, as that income will fall under the parent’s tax regime as would funds under a bare trust. However it does not apply to Junior ISA’s child trust funds and junior pensions.

Grandparent’s gifts do not apply with the money being taxed under the child’s own tax regime. Children, like their parents are liable for tax, but also have the full £11,000 income allowance and £11,100 capital gains tax allowance.

The type of investment will very much depend upon the age of the child, time horizon, reason for investing, how much control is required and whether you want them to have access at 18, as some options will do exactly that. As a parent myself, you hope that your “little darlings” will be mature and sensible enough to manage these well-earned funds but the reality can be very much different.

This article does not provide individual financial advice and are the views of the columnist only. Vision Independent Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority.

 

New Year Resolution

by Sarah Williams

It is so often the smaller changes that often do not reach the front pages that so often make the biggest difference. In a changing and ever evolving World it is important to take stock of your finances and what better time than the beginning of a New Year.

2016 saw political change both in the UK and across the water in the US, in addition to the new political landscape, we have recently experienced numerous changes expanding across most, if not all financial arrangements, from pension freedoms, to tax changes on buy to let properties and phasing in of the main residence property relief in April 2017.

Whilst many individuals may be happy with their existing arrangements, it is worth reviewing these through an independent financial adviser, as so often what appears to be a small change often has the largest impact.

One such case is that surrounding death benefit rules and the resultant estate planning that can be achieved following pension freedom introduction. Old pension rules allowed a pension holder to pass on assets on death to their dependant/s or their chosen beneficiaries dependent upon the scheme rules.

New rules continued the concept of dependants but also added the concept of nominees and successors. These are fundamentally different to old pension rules as the pension money remains in the pension plan for the use of the beneficiaries and then potentially for the next beneficiaries. If used correctly, it is a real family trust for generations to come.

This article does not provide individual financial advice and are the views of the columnist only. Vision Independent Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority.

 

Confused: Pension vs Lifetime ISA?

by Sarah Williams

From April 2017 those aged from 18 to 40 will be open to a Lifetime Individual Savings Account (LISA) which offers a 25 per cent government bonus on savings up to £40,000 per year.

Savers accessing these funds for any purpose other than buying their first home up to the value of £450,000 or before the age of 60, will suffer high penalties which would see them lose 25 per cent of their fund unless they are terminally ill. This, of course, will include the growth that your investment may have achieved, which could be a hefty amount if held for many years.

According to the regulator the Financial Conduct Authority (FCA) has identified that providers need to make it clear to investors of the penalties. One man concern is that investors may choose to invest in the new LISA and not their employer pension plan and lose out on their employer contribution by being tempted out of the workplace pension.

The bonus is very generous for those who have maximised their workplace pension, the Lifetime ISA could be a great way of building additional retirement savings but will very much depend upon the individual concerned. However, for any financial decision investors should be encouraged to consider their investment choices in relation to their individual savings objectives, their financial circumstances, amount of risk they are willing and can afford to take along with their investment time horizon.

This article does not provide individual financial advice and are the views of the columnist only. Vision Independent Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority.

 

Financial Innovation Awards

We are very pleased to announce that Vision were awarded Winner of the ‘Best Risk Project’ at the Financial Innovation Awards held last Thursday evening in London.

This is a prestigious national award ceremony with the majority of firms nominated being FTSE 100 Banks and leading finance companies. The award recognises the outstanding achievement and results of the File Review work commenced last year. The focus on improved professional standards led us to voluntarily issue an invitation to Grant Thornton to confirm the quality of our back book and determine that the advice legacy was strong. By scrutinising every high risk sale ever made and checking all other advice areas, we have established that customers have historically been treated fairly and structures are in place to maintain these high standards.

Commending the winners at the Financial Innovation Awards, Alex Fraser, Chief executive at The London Institute of Banking & Finance, said:

‘At a time when the banking and finance industries are facing a variety of complex challenges, both at home and abroad, the projects recognised by Financial Innovation Awards reminds us of the importance of innovation in developing new solutions which drive the sector forward.

‘In an extremely competitive field, the winning entry from Vision Independent Financial Planning  was a worthy winner and we offer all those involved in the project our warmest congratulations. Their initiative serves as a great example of the power of creative thinking and something for other organisations to strive to emulate.’

 

 

Pension tax relief cut?

by Sarah Williams

As we head closer to the autumn budget on November 23, speculation is growing that the new Chancellor, Peter Hammond, will make cuts to pension tax relief.

We have seen numerous changes, around ten in all since 2006 resulting in reductions to lifetime and annual pension savings, affecting how much we can save into a pension and benefit from tax relief. Currently the pension tax relief matches the rate of income tax an individual pays based upon contributions; 100% of earnings or £40,000 whichever is the lowest. This allowance was reduced in April to £10,000 for those earning over £210,000 and reduced between £210,000 and £150,000.

The government has explored numerous options including taxing pensions like (ISA’s) Individual Savings accounts with contributions made out of taxed income and savings taken tax free and scrapping higher rate tax relief moving to a single tax incentive rate. Some specialists believe that replacing pension tax relief which is age based and weighted towards the young may also be a consideration.

With the tax relief bill currently standing about £21billion a year, most of which is claimed by higher and top rate earners there are calls for a big shake up. The government had discounted any reforms due to a lack of agreement and the rollout of automatic enrolment. However, only time will tell and with the autumn budget looming it is worth getting independent advice from the whole of the market to make sure that you fully understand how any changes may affect you.

This article does not provide individual financial advice and are the views of the columnist only. Vision Independent Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority.

 

paul_sweatonMortgage lending at its lowest

by Paul Sweaton

Glancing over UK house prices at the moment it would appear that the Brexit vote has had little discernable effect, and according to the Nationwide on average house prices have actually rose 5.6 per cent in August compared with the same month last year. Nationwide have also commented that last month’s growth was the strongest since March when they were boosted along by a demand in buy-to-let houses by investors and second home buyers in order to beat the stamp duty changes. All encouraging news for home sellers but are the homebuyers actually out there buying?

Because it seems that although house prices haven’t been effected by the Brexit vote consumers are somewhat turning away from the larger purchases since the vote showing an err on the side of caution. The Bank of England released figures recently showing that mortgage lending and mortgage approvals in the UK had fallen to its lowest level in 18 months. This does seem to reflect the economy’s uncertainty this year following the referendum although it probably doesn’t help that there are many mortgage lenders out there currently that haven’t passed on last months Bank of England’s base rate quarter point cut to their variable rate borrowers. With that in mind it’s definitely time to review your mortgage to see if you are getting the best benefits from your provider and if you are a first time buyer wondering whether to wait – mortgage lending rates are at an ultra low now and probably waiting is not worth loosing out on your desired property by dallying.

As with investing, we all know that stock markets can bounce around moving up and falling down to the tune of market sentiment so no doubt come the following months we will see the property market regain its momentum once again. If you need to discuss any mortgage requirements it is always worth speaking to an independent mortgage adviser to ensure you have the information you need to make an informed lending choice.

This article does not provide individual financial advice and are the views of the columnist only. Vision Independent Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority.