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                                                                                                                                          May/June 2012

Income                                                                                                                Accounts
                                                                                                                ISA Transfers
your pension                                                                                                     Bloodline
 G   Lifestyle Protection                                   G         Creating Wealth
                                                                                                                               G          Tax Rules      G

                                                        station financial:
                                                       – Independent Financial Advisers –
                             26 Station Road, New Milton, Hampshire BH25 6JX
                T: 01425 611666 E: W:
         station financial: is a trading name of Station Financial Services Ltd which is an appointed representative of Intrinsic Independent Limited,
                                             which is authorised and regulated by the Financial Services Authority.
Increase your pension                                        Protect your income                                         Income through investing
Pension holders have an opportunity                          There are many areas which need                             Understanding the value of shares
to double their payouts     Page 2                           payment protection          Page 6                          within a portfolio            Page 10

                                                             Bloodline planning
The Budget 2012                                                                                                          Family survival
                                                             The best way to protect your
All the key announcements                                                                                                Good advice and product knowledge
                                                             children’s inheritance       Page 7
                                               Page 3                                                                    are the main criteria      Page 11
                                                             Dormant Accounts
ISA transfers                                                Government siphon off millions                              The baby boomers
Questions & Answers                                          to fund a new bank          Page 8                          Their rosy future looks in doubt
                                               Page 4                                                                                                    Page 12
                                                             Ethical investment
                                                             A growing trend                               Page 9
Bank of Mum & Dad                                                                                                        Reader reply section
Parents are risking their retirement                         AIM                                                         Personalised reply section
plans                           Page 5                       Tax-efficient share owning                   Page 10                                                    Page 12

              Need more information? Simply complete and return the information request on page 12

    Increase your pension
    Pension holders in the private sector have an opportunity to                             Ms Ros Altmann, a former government pensions adviser, who is
    potentially double their annual payouts through a legal                                  now director general of SAGA, has been fighting for tougher
    entitlement hidden in some policies.                                                     Financial Services Authority regulation on the sale of annuity rate
       Pension managers are advising pension holders to re-examine                           fixed pension payouts.
    the terms of their original policy contract before agreeing rates for                      She says ‘Buying an annuity is probably the most important
    their annuity.                                                                           pensions decision you will make because it is for life and once
       Over recent years, interest rates have dramatically fallen and                        you have bought an annuity rate it cannot be changed.’
    increasing life expectancy has forced pension providers to cut                             The problem for policy holders is, if they fail to spot the set rate
    back annual payouts to approximately 5.9 per cent of a total                             themselves and accept a lower offer, they will not be able to
    pension pot.                                                                             change it. However, had their advisor checked their policy on their
       Guaranteed Annuity Rates on policies issued before 1988 have                          behalf and not spotted the GAR then pension holders may be
    however been between 10 and 12 per cent.                                                 able to sue for professional negligence.
       In effect, what this means is, that someone with a guaranteed                           GARs, are described in many ways within a policy, with some
    return set in the Eighties could get an annual income of £11,000                         companies referring to them as guaranteed annuity options and
    from a £100,000 pension pot. This is much higher than the                                others referring to them as guaranteed minimum annuity rates,
    £5,900 that would be paid out on an £100,000 annuity                                     guaranteed rates, rates guaranteed in the policy or minimum
    purchased on the open market today.                                                      annuity rates.
       In these tough times pension providers are not likely to ensure                         Even though it is no longer to necessary for everyone who has
    policy holders get the best deals. Private pension holders have to                       a private pension pot to buy an annuity by the time they reach
    read the small print of their policies and use a professional                            75, it is still vital that pensioners are well informed and well
    financial adviser, as there is no one to tell you how valuable your                       advised beforehand.
    Guaranteed Annuity Rate actually is.

    The articles featured in this publication are for your general information and use only and are not intended to address your particular requirements. They should not be relied
    upon in their entirety. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the
    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. Will writing, buy-to-let mortgages, some forms of tax and estate planning are not regulated by the Financial
    Services Authority. Levels, bases of and reliefs from taxation are subject to change and their value depends on the individual circumstances of the investor.

  The Budget 2012
Chancellor George Osborne delivered his third budget speech in the
Commons. He is cutting the top 50p tax rate to 45p from April 2013. The
personal tax allowance is to rise to £9,205 in April 2013 as Osborne pledges
to “take low income earners out of tax altogether”. The chancellor is also
introducing a new rate of stamp duty on expensive homes. The corporate
tax rate is coming down to 24% in April and to 22% by 2014.

Economy                                             • Plan to give taxpayers statements showing      Infrastructure
• Office for Budget Responsibility says UK will      where their tax goes, such as on healthcare      • Network Rail will upgrade lines in the north
avoid technical recession with positive growth      and on interest payments on the national debt    of England
in first quarter of 2012                             Business taxes                                   • Need to address lack of airport capacity in
• OBR revises up growth forecast for this year      • Corporation tax being cut to 24% in April,     south-east
to 0.8% from 0.7% previously                        having already cut to 26% from 28%               • Want to “look at the opportunities for
• OBR cuts 2013 growth forecast to 2.0%             • Corporation tax will be 22% by 2014            increasing the role of private investment in the
from previous forecast of 2.1%                      • Need a simpler tax system which “businesses    road network, learning lessons from the water
• OBR forecasts growth of 2.7% in 2014, 3%          can easily navigate”                             industry.”
in 2015 and again in 2016                           • Consulting on simplifying tax for firms with
                                                                                                     Cigarettes, alcohol and gambling
• No change to OBR’s forecast unemployment          turnover up to £77,000
                                                                                                     • Introducing new gaming machines duty with
rate. In autumn it said rate would peak at
                                                    Child benefits                                   standard rate of 20%
8.7% this year and ease back to 8.6% next
                                                    • Partly removing child benefit from              • Plan to tax online gambling based on
                                                    households where at least one person earns       location of gambler not company
• Inflation is expected to fall from 2.8% this
                                                    over £50,000 - softened from previous plans      • Duty on all tobacco products will rise by 5%
year to 1.9% next year
                                                    • Considering proposals to manage future         above inflation, 37p on a packet of cigarettes.
Public finances                                     increases in the state pension age, beyond the
                                                                                                     Fuel and vehicles
• Fiscal forecasts have “improved a little” from    increases already announced
                                                                                                     • No changes to fuel duty plans already set out
                                                    Pensions                                         • Vehicle excise duty to rise by inflation, but
• Borrowing this year to come in at £126bn,
                                                    • State pension age to be automatically          frozen for road hauliers
down from November forecast of £127bn
                                                    reviewed to ensure it keeps up with growing
• OBR has forecast government on course to                                                           Energy
eliminate structural current deficit by 2016/17                                                       • Introducing package of tax changes to
                                                    • Simplification of tax system for pensioners
• “Public sector net debt is now set to peak at                                                      ensure get maximum from oil and gas
                                                    • Single-tier state pension to be introduced,
76.3% in 2014-15, almost 2% lower than                                                               extraction
                                                    estimated to be £140 p.w.
previously forecast, before falling the following                                                    • Introducing £3bn new oil field allowance to
year.”                                              Government bonds                                 open up fields west of Shetland Islands
                                                    • Debt management office consulting on            • Energy Secretary will set out our new gas
Personal taxes                                      issuing longer dated gilts beyond 50 years and   generation strategy in the autumn to secure
• Personal tax allowance, the threshold at
                                                    case for perpetual gilts                         investment.
which workers start paying income tax will rise
to £9,205 in April 2013, up £1,100 from the         Business                                         Public sector
£8,105 level this April                             • Expanding enterprise finance guarantee          • Looking at making public sector pay “more
• Top 50p tax rate being cut to 45p from April      • Want to double UK exports to £1trn this        responsive” to where workers are
2013.                                               decade
                                                                                                     Armed Forces
• Clamping down on tax avoidance and                • Expanding UK Export Finance and setting out
                                                                                                     • Government spending in Afghanistan will be
evasion                                             new plans to help smaller firms in new markets
                                                                                                     £2.4bn lower than planned over remainder of
• The tax system will allow the lowest paid to      • Review on how government can work better
be removed from tax altogether                      with private sector on growing economy to be
                                                                                                     • Extra £100 million of improvements in the
• 7% stamp duty tax on properties over £2m          conducted by Michael Heseltine
                                                                                                     accommodation of our armed forces and their
• Eradicating anomalies in VAT such as on           • Relaxing Sunday trading laws during
some foods and drinks                               Olympics and Paralympics
                                                                                                     • Doubling the families welfare grant which is
• VAT exemptions remain for food, children’s        • Exploring enterprise loans for young people
                                                                                                     used to provide additional support to the
clothes, books and newspapers                       starting businesses
                                                                                                     families left behind when people deploy
    ISA transfers Why
    Most of us are uncertain when it comes                                                     Existing rates may be
    to the rules on transferring our savings                                                   superseded by better
                                                                                               alternatives and become less
    to get the best rates. Here are some                                                       attractive or simply be
    questions and answers to ISA transfers                                                       Every year, banks review and
                                                                                               reduce the returns they pay
    so you can maximise your returns.                                                          out to loyal customers,
                                                                                               slashing rates as short-term
                                                                                               bonuses expire and fixed
                                                                                               terms mature.
    Your ISA transfer questions and answers                                                      It is not unknown for 90 per
                                                                                               cent to be shaved off a best
    How do I set up a transfer?                  separate account, all in the same tax year,
                                                                                               buy rate overnight. With fixed
    Once you have found a suitable ISA rate,     providing you do not contribute to both
                                                                                               deals, returns often fall to a
    check the new provider accepts transfers.    (i.e put new cash in both).
                                                                                               mere 0.5 per cent or less.
      Next check any penalties that might        If I have a fixed rate or easy                  Savers should get notified by
    apply before transferring the money from     access ISA, will transferring                 post that their rate is about to
    the old provider.                            affect my interest rate?                      drop through the floor. Many
      Arrange for the new provider to            Best rate ISAs, whether fixed deal or an       are then surprised to find you
    organise the transfer. They will contact     instant access account, normally have an      cannot simply withdraw the
    your old provider to transfer the funds.     expiry date on them.                          cash and move it to another
    How long does a transfer                       With fixed rates, you need to wait until     bank if you have used your ISA
    take?                                        the end of the term before moving your        allowance for that particular
    New rules introduced in January 2011         cash, as the penalties for early access can   tax year, as you will lose the
    state transfers should be completed within   be harsh, sometimes as much as 365            tax status on your funds.
                                                 days’ worth of interest. Savers can get         The big ISA no-no is to take
    15 days.
                                                 back less than they pay in if the are not     out the cash, because you lose
      Following a review of the industry by
                                                 careful.                                      the tax-free interest status of
    the Office of Fair Trading, further
                                                                                               your money. Transfers are the
    safeguards have also been introduced,          With easy access ISAs, there is no
                                                                                               way to mitigate this problem.
    which mean interest must be paid by the      problem. These variable rate accounts give
    new provider from the first day that          you freedom to move the money
    interest is no longer paid by an old         whenever you like, penalty-free.
    provider.                                                                                  ISA transfer rules
                                                  The value of your investment and the
    Do I transfer before or after                                                              You can transfer your money
                                                  income from it can go down as well as
    the beginning of the tax year?                up and you may not get back the              from one cash ISA provider to
    It really makes little difference when you    original amount invested. Past               another, as long as your
    transfer cash from an existing ISA as you     performance is not a reliable indicator      chosen provider allows
    are allowed to pay into one cash ISA per      for future results. Please contact us for    transfers in.
    tax-year. Crucially, a transfer does not      further information or if you are in any        You can open a cash ISA
    count as ‘paying in’. You can transfer as     doubt as to the suitability of an            (April 2012 to April 2013) and
    many times as you like, whenever you like.    investment.                                  then transfer the whole
                                                  The value of any tax benefits described       amount to the new provider.
    Is it possible to transfer one                depends on your individual                   It is possible to switch your
    ISA and then open another?                    circumstances. Tax rules may change in       cash ISA to a stocks and shares
    Yes, you can transfer previous years’         the future.                                  Isa, but you cannot switch
    savings to a better rate and open a                                                        from shares to cash.

Bank of
& Dad

Middle class parents are risking their retirement plans in order to      The handful of providers which will lend mortgage sums to young
lend their children money and the “Bank of Mum and Dad” is               adults, still require parents to use their own assets to back the
quickly becoming the main source of credit still available to            loan.
young adults.                                                              Financial advisers say parents are jeopardising their own
  Solicitors say these parents are writing an increasing number of       retirement income in order to fill the funding gap left by cautious
mortgage contracts in which the child’s parents, rather than a           lenders. Aviva estimates that one-third of parents have dipped
bank or building society, act as the lender. Parents are becoming        into their savings to provide financial support for grown-up
their own micro-lending banks.                                           children.
  The number of first-time buyers who received family help to               The financial services industry has become heavily focused on
buy a property has doubled since 2005, according to the Council          serving older generations who have built up wealth and require
of Mortgage Lenders, highlighting the divergence in economic             advice about retirement planning, while turning away indebted
fortunes between many in the affluent baby boomer generation              young people. It is considered by many to be a policy which may
and their often hard-pressed children.                                   be fool hardy. Unless young people start to save and invest, the
  Recent research by the Financial Times shows for the first time         financial services industry is going to come up against demand
in half a century, that young Britons entering the workforce             problems in the next few decades.
cannot expect to be better off than their parents, and that living         Young people will have debts but no investments. Balancing
standards of people in their 60s have overtaken those of                 this out is the next big challenge for the financial services
20-somethings for the first time.                                         industry.
  Experts have said these events are putting pressure on parents           The only products that advisers say are still actively marketed to
to continue supporting their children well into adulthood. More          young people are expensive, short-term loans.
than a quarter of parents questioned in a survey by Legal &                The Consumer Credit Counselling Service claims people in the
General say they expected to carry on financially supporting their        UK are now falling into debt earlier in life, and last year reported
offspring for the rest of their lives.                                   a sharp rise in the number of individuals aged 25 and under
  Wealthy older people are currently earning very little interest        seeking help with their debts. This will undoubtedly put even
on their capital, and if they have adult children still living at home   more strain on parents as we move forward.
they have a good incentive to loan them the money to move out.
Many solicitors now say they have seen a jump in large sums
gifted from parents to children.

    Protect your income
    There are many areas which need payment          problems, which are the most common              Such events could mean you need to
    protection, for example your home, your car,     causes of long-term absence.                     increase your IP cover, so make sure your
    your travel and even your pets but more            The insurance benefits can be in some           plan includes guaranteed insurability options.
    importantly your income. However the             cases as much as your net pay, and generally     There are other providers of Payment
    majority of working people fail to protect       would be paid until you return to work or        Protection Insurance (Short-Term Income
    their income.                                    retire. Premiums are based on age, sex and       Protection) and other products designed to
      Being totally unprotected is not               occupation, however, from December 2012          protect you against loss of income.
    particularly a nice feeling and if you are       the European Court rules that Insurance          For impartial information about insurance,
    unable to work as a result of an injury or       companies cannot calculate premiums based        please visit the website at
    long-term sickness, you might qualify for        on gender.                             
    employment and support allowance at the
                                                     Comparing income protection                      Reducing the premiums
    rate of up to £105.05 per week, which today
                                                     with ASU                                         You could reduce the amount of benefit on
    (2012/13) does not go far.
                                                     If you decide on the broader cover offered by    your policy by restricting cover to key bills
    Options                                          income protection insurance, there are a         such as your mortgage, utility bills, food and
    There are options available to protect so that   number of product features you need to           long finance agreements.
    your income is secure if the unexpected does     consider when comparing these products.            Also by increasing the length of time
    happen. An accident sickness and                    The definition of occupation is very           before benefit is paid, which is known as the
    unemployment policy (ASU) will cover you if      important. Own occupation is the key             deferred period, this can significantly reduce
    you are unable to work due to sickness or        definition, as this means the policy will pay     your premiums and most insurers offer
    injury or you are made redundant.                out if you are unable to do your own job.        deferred periods ranging from four weeks to
       Cover typically costs between £4 and £10         Some policies have “any occupation”           two years. Other financial arrangements you
    a month per £100 of monthly benefit but           definitions, but this is much more restrictive,   have in place might make this possible.
    there are many aspects that need to be           in effect saying that you will only receive      Investigate the sick pay you get from your
    considered so your premium may fall outside      benefit if you cannot do any job.                 employer. While some offer IP most only pay
    of this range.                                      Inflation-proofing your benefit is a clever      for up to six months.
       ASU is also available under a number of       step, especially if you are intending to take      Consider your savings. If you could live on
    different names, including payment               the plan out to cover a career spanning 20       these for a few months you will benefit from
    protection insurance, which is commonly          years or more. If you do this, your premium      lower premiums.
    sold alongside a credit card or loan, and        and your benefit will increase by the rate of       You could also reduce the length of time
    mortgage payment protection insurance,           inflation every year.                             your benefit is paid, with several of the
    when it is sold in connection with a                Flexibility is also important. Remember you   insurers offering benefit terms of two, three
     mortgage. There are exclusions on policies in   may advance up the ladder a number of            or five years.
       some cases, such as pre-existing medical      times throughout your career, get married,
          conditions, depression and back            buy a bigger house and have children.            Due to the complexities of the
                                                                                                      protection insurance it is essential
                                                                                                      to get professional financial

 With correct “Bloodline Planning” the assets
 you leave for your children will not be lost
What is the best way to protect                 as adding value to the recipients estate, it     consider other scenarios such as care costs,
my Children’s inheritance?                      would be wise to consider gifting with the       where property assets are particularly at
Bloodline Planning is ensuring that your        aid of Discretionary Trusts.                     risk, also family circumstances can also be
assets reach your children, grandchildren          When you gift to your children and            of concern. There may be some family
and other relatives, as you desire.             grandchildren, the asset need not enter          members you would wish to benefit and
  When assets are distributed to                their own estate which protects these            some that you would not. Family disputes
beneficiaries “absolutely”, they receive the     assets from any possible claims on them in       do occur and divorce and / or remarriage
assets in total, like property and cash or      the future. By Gifting to a Trust, the donor     can greatly influence who inherits and by
other assets, as a direct lump sum payment      retains full control but cannot gain access      how much.
so much can be lost. These assets are then      to the funds. Even if the donor never               Choosing the correct Trusts can provide
considered to be part of the beneficiary’s       received any benefit, but potentially could,      the protection and control for all assets
estate and would be at risk of attack from      the Gift is classed as “With Reservation of      from those risks previously mentioned.
any future divorce settlements, creditors       Benefit” and the full value is deemed to be
and taxation.                                   in the donor’s estate at death for Inheritance   Trust advice and some aspects of
  With the strategic use of Trusts, you can     tax purposes, not just the initial Gift. The     Inheritance Tax Planning are not
ensure that your children and                   Gift Trust ensures that all beneficiaries         regulated by the Financial Services
grandchildren are able to benefit                named can benefit at the Trustees                 Authority.
completely from the inheritance you want        discretion.
them to receive and at the same time,           Access To Protected Assets
protect the family home and other assets        A Discretionary Trust often referred to as a
from being lost to the costs of Long Term       Probate Trust is proving very popular              Assets which are not
Care.                                           because whilst still protecting assets from        protected by a Trust
  Other considerations could be if your         attack from care costs, it allows the Settlor
surviving spouse were to remarry? How           access to the assets held in the Trust. The
                                                                                                   could face problems
would this affect your own children if          Trust has a memorandum of wishes where             arising from –
he/she later changed their will in favour of    the Settlor is also a beneficiary. The purpose
the new spouse and any subsequent               for utilising this trust will be for bloodline     The Divorce or
children? There is a possibility that you had   planning and not Inheritance Tax Planning,
children from a previous marriage how           as a transfer of asset by the settlor would        separation settlements
would they gain their fair share?               be a Gift With Reservation of benefit               of future generations
  There may also be a business you have         (GWR).
worked hard to build up. You would not             The main use of a Probate Trust is for the
                                                assignment of Investment Bonds to ensure
                                                                                                   Inheritance Tax
want to see this unprotected for your
family?                                         they pass to those intended without the            liabilities
Asset Planning In Your Lifetime                 need to wait for Probate. In addition, for a
Some estate planning can be made whilst         single/widowed client, a proportion of the         Creditors or Bankruptcy
you are alive. Assets could potentially be      main residence can be conveyed into a
gifted to beneficiaries before your death.       Probate Trust which can protect the house
This could prove extremely tax efficient in      from care. Individual advice would be
terms of Inheritance Tax, as assets gifted      required as to whether this is an                  Distributing assets
away are fully outside of the donor’s estate    appropriate course of action.                      absolutely to
7 years after the gift is made.                 Utilising Trusts for Bloodline
  Rather than gifting assets absolutely, as     Planning.                                          beneficiaries exposes
this would mean that these assets will          Your children /grandchildren’s future              those assets to risk.
again be potentially at risk from divorce,      inheritance can be at risk from a number of
creditors and long term care costs, as well     issues. Taxation being one, you need to
    Dormant Accounts
    Millions of pounds of ‘dormant’ cash held in High Street banks
    across the country has been siphoned off by the Government to
    fund a new bank that will lend to charities and social schemes.
    The £600m rich Big Society          1,500 building societies that have million due to be paid out on life   “vanished”, usually because they
    Capital bank has been launched      been around in the past 100 or so policies.                             moved and never supplied
    as part of David Cameron’s Big      years but have since been taken      You can trace your claim by        forwarding addresses.
    Society project.                    over or merged into others.        using the unclaimed assets           PREMIUM BONDS
      The new bank is funded by         NATIONAL SAVINGS &                 register, which may be able to       Many Premium Bond prizes are
    £400m worth of cash lingering in    INVESTMENTS ACCOUNTS               help at                              unclaimed and range all the way
    ordinary Britons’ bank accounts.    There are hundreds of millions of but          up to £100,000 from £25.
    The money must have been left       pounds of unclaimed money in       they do charge a fee and the         If you think you may have left it
    unused for at least 15 years        dormant NS&I accounts but if you place to begin your pension            too long to claim a prize, there is
    before it is co-opted by the        also consider other NS&I           search is at the Pension Tracing     good news. There is no time limit
    Government.                         products like unclaimed premium Service. You can call 0845 6002         for claiming these forgotten
      Bank customers will still be      bond prizes, the figure is around 537, visit or        winnings.
    able to claim back money given      £1 billion.                        write to Pension Tracing Service,       National Savings &
    to the Government if they can          Some £400 million of            Tyneview Park, Whitley Road,         Investments (NS&I) say the most
    prove it is rightfully theirs.      unclaimed money is in fixed         Newcastle upon Tyne, NE98 1BA        common reason for winners
      Vast sums of money lie            interest savings certificates with UNIT TRUSTS, STOCKS AND               failing to claim was forgetting to
    unclaimed, when you include         a further £80 million in index     SHARES                               pass on their new address when
    shares, National Savings and        linked savings certificates.        Research by specialists Mintel       they moved. More than a third of
    insurance plans lying dormant       Another £260 million of the        suggested that there was at least    people lost touch with their
    and it amounts to billions of       forgotten money is tied up in      £12 billion of shares from           savings when they moved and
    pounds, so check through your       investment accounts.               privatised companies which had       failed to tell all their financial
    old paperwork to see if you have       A good place to start looking   never been claimed. That means       providers their new address,
    any forgotten money.                for money tied up in NS&I          the dividends on these shares        according to a survey for NS&I.
    BANK AND BUILDING                   products is                        have never been paid.                Many people said they found it
    SOCIETY ACCOUNTS                    Registrars admit the old system    difficult to remember all of the
    Banks have between £250 and         _service or through the            of share certificates, rather than    accounts they had opened over
    £350 million waiting to be          mylostaccount website.             holding shares through nominees,     the years.
    collected, which includes money     LIFE INSURANCE AND                  meant that shareholders simply         Others had forgotten about
    left in accounts with around 500    PENSIONS                                                                bonds that they had been given
    banks over the past 100 or so       Large insurance companies have                                          as children. Additionally prizes
    years. It is thought that between   said that they have life policies                                       could also go unclaimed if the
    £130 and £150 million is lying      which have never been claimed                                           winners had died and their
    unclaimed in building society       on and pensions savings which                                           executors were unaware that
    accounts. All building societies    have never been paid out. It is                                         they owned any bonds.
    have signed up to the               thought that there could be over                                           You can check whether you service.       £300 million of pension money                                           have won any of the unclaimed
    That means you should be able to    unclaimed and another £100                                              prizes, by visiting NS&I’s website
    trace money left in any of the                                                                              ( and entering your
                                                                                                                Premium Bond holder’s number.

In the past ‘going green’ and fair trade were        of UK adults with investments want to make           There are many other SRI opportunities across
viewed as passing fads, now though they have         money and make a difference.                         the globe, from forestry protection investments
gained momentum, and the same can be said                                                                 in Brazil, which aim to eradicate illegal logging,
                                                     Ethical and responsible
for Socially Responsible Investment (SRI),                                                                to overseas eco resorts which target water
                                                     Ethical investing allows you to invest in a
which is having significant importance to the                                                              recycling and energy efficiency.
                                                     socially responsible way. This can be simply
broader investor.
                                                     avoiding companies which engage in activities        Growth in investors
   Since the banking crisis and rapid decline in
                                                     you would not want to support, like tobacco          During the last year or so there has been
the global stock markets, there has been
                                                     firms, gambling institutions, or companies            significant growth in ‘ordinary’ investors who
increasing levels of concern over the stability of
                                                     investing in areas such as arms manufacture or       have found that SRI fits their financial
traditional investments which people relied
                                                     nuclear energy. Other areas are supporting           requirements. These are the people who may
upon. There is little doubt that from those
                                                     companies which have positive social and             have invested in property previously or, at a
events a better awareness of how financial
                                                     environmental policies in place, such as             lower level, invested in the stock market and
institutions use their customers’ money has
                                                     renewable energy, carbon offsetting, or              are now looking for something different.
prevailed. In addition, as the global economy
                                                     sustainable timber.                                  But while they are more aware of the
has struggled, awareness of climate change
                                                                                                          environmental and social impact their choices
has increased, the world’s population has
continued to grow at a rapid pace, people are        The days where ethical                               could make, they want and expect no
                                                                                                          compromise on returns, and they should never
becoming more concerned about human rights,
and the nation is becoming increasingly aware
                                                     investment was seen as a niche                       think that it is a choice between ethics or
of the impact of their choices.                      market are long gone; today it                          Many people still feel that they cannot
   With more exposure of such events, more
and more people are making an effort to have         is seen as a growing market                          afford ethical investments because they would
                                                                                                          be accepting poorer returns in return for a
a socially responsible outlook to their              trend.                                               clear conscience. This is a misconception;
investments. This is reflected in figures from
                                                                                                          research from Emerald Knight shows that 16
EIRIS, the non-profit sustainable investment
                                                        At the moment carbon offsetting is one of         per cent of British people would only ever
research firm, which shows that the amount of
                                                     the most popular forms of SRI. When you buy a        invest for personal profits but 30 per cent think
money invested in Britain’s green and ethical
                                                     carbon credit from a third party, you are            that you can have both profits and principles
retail funds has recently reached a record
                                                     helping to fund a project which will reduce or       when it comes to a socially responsible
height of £11.3bn. Moreover, in the last
                                                     remove a metric tonne of carbon emissions            approach to investment.
decade, the number of ethical investors has
                                                     from the atmosphere, at the same time, you              Choosing to invest ethically actually means
tripled, from 250,000 to three-quarters of a
                                                     are able to offset some or all of your own           that the two can go hand in hand. SRI typically
                                                     carbon emissions. The company will package           involves investment in the few industries which
   As part of National Ethical Investment Week
                                                     carbon dioxide emission reduction units into         have managed to remain in positive growth
Research, YouGov announced that 42 per cent
                                                     credit bundles that can be purchased as carbon       through the global recession.

The value of your investment and the income from it can go down as well as up and you may not get back the original amount invested. Past performance
is not a reliable indicator for future results. Please contact us for further information or if you are in any doubt as to the suitability of an investment.

                                        Income through investing
      AIM                               As interest rates are at all time lows, getting any income
                                        from your savings seems almost impossible. Could investing
                                        be the solution? We look at the main income-producing
     The Alternative                    investments, to understand their value within a portfolio.
     Investment Market
     offers a tax-efficient              GOVERNMENT BONDS                                    very good year in 2011. According to Capita
                                        If you are a cautious investor that does not        Registrar’s latest dividend monitor, the amount
     way to own shares.                 want to take on too much risk, UK Government        paid out by UK companies reached its highest
                                        bonds, known as gilts, could be a good starting     level since summer 2008, growing by 16%
     With the Chancellor cracking                                                           over the third quarter of 2011. These funds
                                        point. A Government bond is an IOU to a
     down on tax avoidance, being       Government in exchange for a fixed rate of           have always been a core holding for people in
     tax efficient should be an          interest over a set time.                           need of an income.
     essential part of your wealth         The amount of interest bonds pay is linked to       If your high income needs are less immediate
     plan. Unquoted shares are not      how risky the loan is considered to be. In the      then you may be better off looking for a fund
     counted as part of your estate     past, Government bonds have been regarded           that aims to deliver capital growth and a rising
     when it comes to inheritance       as the safest type of bonds because                 dividend payout over the years, ideally one that
     tax, this includes companies       Governments are very likely to be able to repay     will keep pace with inflation.
     which are listed on the            the debt when the bond matures; they                   The majority of UK companies yielding more
     Alternative Investment Market      therefore pay investors a lower rate of interest.   than 5 per cent are outside the top 100 listed
     (AIM).                                Bond yields are the rate of interest paid as a   companies. Many of these smaller companies
       The stocks must be owned         proportion of the price paid in the market,         have not historically paid out much in the way
     for at least two years to          these go down when bonds are in demand, as          of dividends because they reinvest the money
     qualify, but after this AIM        they have been with the Eurozone crisis. This       to expand the company, but the best ones are
     stocks are IHT free and certain    means these ‘safe haven’ yields are now well        likely to grow rapidly and become the key
     AIM stocks can also qualify for    below inflation, so investors are losing money       dividend payers of the future.
     a reduced rate of capital gains    in real terms.                                      GLOBAL EQUITY INCOME FUNDS
     tax.                               CORPORATE BONDS                                     There has been over the past years a growing
       AIM is the most successful       Moving up the ladder, the next range of bonds       interest in income funds with a global
     growth market in the world,        are corporate bonds, where you loan money to        perspective as firms around the world start to
     according to the London Stock      a business. Businesses are generally in a better    focus on paying dividends. These funds are very
     Exchange, and since its launch     position than Governments and these pay             flexible. Investors can move away from
     in 1995 with just 10 stocks,       different rates of interest depending on how        struggling regions, like Europe in favour of Asia
     more than 3,000 companies          secure the issuing company is. But, while           and emerging markets, where good growth is
     from all over the world have       riskier, both investment grade bonds, those         expected.
     joined.                            issued by blue chip companies and high yield        DISTRIBUTION FUNDS
       AIM shares can be a useful       bonds, those issued by less established, riskier    Distribution funds are income focused funds
     part of inheritance tax            companies are currently a better bet than gilts.    that hold both corporate bonds and equities.
     planning, particularly where a        High yield corporate bonds are riskier than      These can work well for income seekers who
     person wishes to tax-plan          investment grade bonds but they can be              also want some capital growth.
     without giving away their          appropriate for longer term investing.                 Distribution funds are not as widely used
     assets or where they are           STRATEGIC BOND FUNDS                                now as they once were but they are still useful,
                                        A sensible option for bond investors is a           especially for smaller investors.
     elderly and may not survive
     the requisite seven years for      strategic bond fund that moves between bond         STRUCTURED PRODUCTS
                                        classes as events change. A strategic bond fund     Structured products give some capital
     gifts to fall out of inheritance
                                        is particularly advantageous as it is not limited   protection and a set level of income, provided
     tax. Holdings of AIM-listed
                                        by geography or types of bonds: it can hold         the index in question does not fall below a
     shares qualify for 100 per cent
                                        corporate bonds from UK blue chips alongside        certain level.
     business property relief from
                                        Government bonds from emerging market                  For people who need income and can tie up
     inheritance tax, assuming that
                                        economies, which are attractive at present as       their capital for that length of time and are
     the relevant criteria are met.                                                         aware of the risks, these products are better
                                        emerging market bonds are expected to deliver
       The holding must have been                                                           used as a small part of a mixed income
                                        impressive growth in coming years.
     owned for at least two years,      UK EQUITY INCOME FUNDS                              portfolio. Structured products can be high risk
     the company must not be used       Equity income funds hold companies that pay         and complex and there are no guarantees you
     solely as an investment vehicle    regular dividends. Investors in this sector had a   will get all your money back.
     and if the company holds
     assets that are not used in its    The value of your investment and the income from it can go down as well as up and you may not
     business, their value may not      get back the original amount invested. Past performance is not a reliable indicator for future results.
     qualify for the relief.            Please contact us for further information or if you are in any doubt as to the suitability of an
Family Survival
Receiving good advice and knowing which        • Moving up the property ladder                    Another type of protection available is a
products to choose is the main criteria when   • Getting married or entering into a civil         whole-of-life assurance policy designed to
ensuring you have the correct amount of life       partnership                                    provide you with cover throughout your
assurance. This will enable you to protect     • Having children                                  entire lifetime. The policy only pays out once
your loved ones from having to deal with       • Becoming a stay-at-home parent                   the policyholder dies, providing the
financial hardship. Knowing which products      • Changing your job, promotion with salary         policyholder’s dependants with a lump sum,
to choose, including the most suitable sum         increase                                       usually tax-free. Depending on the individual
assured, premium, terms and payment            • Personal guarantee for business loans            policy, policyholders may be able to stop
provisions, is essential.                      • Reaching retirement                              paying once they reach a certain age or
  Life assurance helps your dependants to      • Relying on care                                  more likely contribute right up until death.
cope financially in the event of your              Your life assurance premiums vary
                                                                                                  Tax issues
premature death. When you take out life        according to a number of different factors,
                                                                                                  The proceeds from life assurance policies are
assurance, you decide the amount you want      which include the sum assured, the length
                                                                                                  tax-free, but they could form part of your
the policy to cover should you die, this is    (term) of your policy, your individual lifestyle
                                                                                                  estate and become liable to Inheritance Tax
called the ‘sum assured’. If you do not        factors such as your age, occupation, gender,
                                                                                                  (IHT). The easiest way to avoid IHT on the
update your policy as key events happen        health and whether you smoke or not.
                                                                                                  proceeds is to place your policy into an
throughout your life, you may risk being          If you are married, or have a partner or
                                                                                                  appropriate trust, which enables any payout
seriously under-insured.                       children, maybe you should ensure you have
                                                                                                  to be made directly to your dependants.
  Your individual need for protection will     sufficient protection to pay off your mortgage
                                                                                                  But, they cannot be used for life assurance
inevitably change. Here are some common        and any other liabilities. You may also need
                                                                                                  policies that are assigned to your mortgage
events which, when reached, you should         life assurance to replace at least some of
review your life assurance requirements:       your income. Ultimately, you will need to
                                                                                                     The first step is to understand what you
• Jointly buying a property                    decide how much money you would like to
                                                                                                  want the life assurance to protect. If you
• Having debts, other than a mortgage and      leave your family which enables them to
                                                                                                  simply want to cover your mortgage, then an
   dependants                                  maintain their current living standards.
                                                                                                  amount equal to the outstanding mortgage
                                                    The cheapest and simplest form of life
                                                                                                  debt can achieve this. However, if you want
                                                     assurance is term assurance. It is
                                                                                                  to secure your family from being financially
                                                      straightforward protection, there is no
                                                                                                  disadvantaged by your premature death,
                                                         investment element and it pays out a
                                                                                                  there are a few more areas you should
                                                           lump sum if you die within a
                                                             specified period.
                                                                                                  • Your current family expenses and how
                                                                                                     would they change if you died?
                                                                                                  • Childcare costs, if you were to die?
                                                                                                  • How much does your family income
                                                                                                     decrease if you die?
                                                                                                  • How long would your existing savings and
                                                                                                     investments really last?
                                                                                                  • What existing policies do you have and
                                                                                                     how far do they go to help?
                                                                                                  • How much cover do you receive from your
                                                                                                     employer or company pension?
                                                                                                  • How would inflation and the economy
                                                                                                     affect the available funds over time?

      The Baby
      Baby boomers were born just after the end of World War II, when there was the
      feeling of a better and more secure future. But today, in difficult economic times,
      as the baby boomers approach their 65th birthdays their rosy future looks in doubt.

      Their pensions are being undermined as the                          higher personal allowance is reduced by £1                         Anyone turning 65 after April 5, 2013 will
      Treasury and the Bank of England push to                            for every £2 earned above the limit. This                          now lose this tax perk. Instead of benefiting
      get the UK economy back on track.                                   means that after a pensioner’s income                              from the planned higher allowance of
         The 2012 Budget was yet another                                  reaches £30,190, the amount they can earn                          £10,500, they will now qualify for the same
      hammer blow as Chancellor George                                    free of tax is the same as it is for ordinary                      one as workers of all ages, £9,205 from
      Osborne reduced the higher personal                                 taxpayers.                                                         April 2013. If you are already 65 or older
      allowance for the over-65s, leaving many as                            It is estimated that approximately five                          and retired, your allowance will be frozen at
      much as £323 a year worse off. But what                             million pensioners qualify for the extra                           £10,500.
      does that really mean?                                              allowance, leaving them more money to                                 If you are 75 or over, the allowance will
         Back in 1925 the UK tax system                                   stretch further, which can be a lifeline when,                     be frozen at £10,660 from April 2013, those
      recognised that pensioners often live on                            as a pensioner, income is quite often fixed.                        rates will stay frozen until they match up
      small fixed incomes and so required more                             This additional allowance when compared                            with everybody else’s personal allowance as
      help than most.                                                     with a worker on exactly the same income                           it is raised, as expected, by the Chancellor
         As a result, the elderly currently enjoy a                       to a 65 to 74-year-old, shows a pensioner                          over the next couple of years.
      higher tax-free personal allowance than                             can end up paying up to £479 a year less                              An estimated 4 million pensioners with
      everyday workers. Anyone aged from 65 to                            tax. Anyone aged 75 or older has a slightly                        incomes between £10,500 and £30,190 and
      74 currently has a personal allowance of                            higher allowance again, meaning they pay                           who are turning 65 next year would be
      £10,500. It is even higher for those older                          £511 less tax than a worker on the same                            £323 worse off thanks to the Budget,
      than 75: £10,660. This is much higher than                          income.                                                            according to figures from The Institute of
      the current £8,105 allowed for everyone                                In his Budget speech, Mr Osborne moved                          Fiscal Studies. Around half of all pensioners
      else. However, wealthier pensioners with                            to get rid of higher allowances altogether,                        do not have sufficiently large incomes to be
      incomes over £25,400 do not qualify from                            rather than reviewing the levels at which                          taxed, so they will be unaffected and
      this higher allowance at the moment.                                tax was taken, which many pensioners had                           wealthier pensioners will also avoid the
         For over-65s, the extra allowance applies                        been calling for. However, he did announce                         changes, as their income is taxed at upper
      up to a total income of £25,400 in the                              increases to the basic State Pension.                              rates and do not benefit.
      2012-13 tax year. Above this threshold, the

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                                                                This magazine is for general guidance only and represents our understanding of the current law and HM Revenue and Customs practice.
                                                                We cannot assume legal responsibility for any errors or omissions it might contain. Level and bases of, and reliefs from taxation are those
                                                                currently applying but are subject to change and their value depends on the individual circumstances of the investor. The value of
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                                                                investments can go down as well as up, as can the income derived from them. You should remember that past performance does not
Great Marlings, Luton, Bedfordshire, LU2 8DL                    guarantee future growth or income and you may not get back the full amount invested.

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