THE ADVISER. Hughes Financial Services Ltd - Summer 2009
Welcome to the latest edition of The Adviser, our update on developments in the world of financial services.
What is an
Options for ISA?
savers An Individual Savings
UK interest rates have tumbled Account (ISA) is a tax-
in recent months, from 5% in efficient wrapper in which
September 2008 to just 0.5% by you can place a wide
March 2009. This might spell variety of assets to protect
good news for borrowers, but them from capital gains tax
not so for savers who have on growth and additional
witnessed plummeting rates on income tax on income.
their bank and building society There are currently two
accounts. According to types – the cash ISA and
Moneyfacts, mortgage free the stocks and shares ISA
pensioners who rely on their - and you can invest a total
savings have been particularly of up to £7,200 in the
hit, with their expenses rising by 2009/10 tax year (or £10,200
2.3% (in line with the Consumer form October for those
Price Index) whilst their savings over 50). A cash ISA
have fallen by 1.77% in real allows you to invest up to
terms. Many are looking for £3,600 (£5,100) into a
ways to make the most of deposit account or
what's left. qualifying cash fund then
the balance between this
A cash ISA is one alternative. Rates are not necessarily much higher than the rates cash investment and the
on normal deposit accounts, but ISAs do at least pay this interest tax-free - and from full allowance can be
October, if you are aged over 50, the annual allowance for cash increases to £5,100 invested in a stocks and
for this tax year. Meanwhile, with UK interest rates at unprecedented lows, bonds shares ISA. These can
could offer the chance to receive a stable income stream with less volatility than the hold various assets,
equity market – and, after heavy falls last year, bonds have been considered well including equities and
priced. bonds and investment can
be either direct or via
If you are willing to take more risk then the upside of falling share prices does at collective funds.
least mean dividend yields have soared, making equity income funds more attractive.
Admittedly, in the current climate, some companies are cutting or cancelling these
dividends as they attempt to protect their profits from the economic downturn.
Nevertheless, an equity income strategy does allow you to benefit from a decent
yield whilst also offering the chance of capital growth when the recovery does kick
Hughes Financial Services Ltd , 4 Jubilee Rd , Newtownards , Co Down , BT23
4WN , T: 028 9181 5928 , F: 028 9182 1415 , E: email@example.com , W:
Income if you can't work The benefit
Regardless of whether you are single or you have a small army of dependants, if you
are suddenly unable to work, your income disappears. Yet, while many of us cover our of advice
lives to protect our families, very few take the time to protect our health.
The mortgage market is highly
Permanent Health Insurance (PHI) is less well known than life insurance but competitive and lenders
potentially has many more applications. It will pay up to a maximum of 60% of your
salary (depending on the insurer) if you are unable to work, minus any sick pay that constantly bring out new deals.
you may be entitled to. Although it can appear to be expensive, it is available with a They are required to provide
choice of deferment periods and extending this can reduce the cost of cover. The more
savings you have, the longer you can fund yourself before a claim needs to start Key Facts and illustrations, but
paying out and therefore the cheaper the policy will be. many can only provide
Income under a claim will be paid until retirement age, until you are able to return to
information – they cannot give
work or until the end of the policy term whichever is the earlier*. Therefore, while you advice on whether their loan or
are rehabilitating or coming to terms with changes in your life, it stabilises your
another provider's is best for
financial position, ensuring you can pay your bills. Such cover can be of particular
benefit to single people and for the self-employed as a lack of sick pay or financial you. In the UK, residential
support from a partner makes you even more vulnerable to a break in your income. It mortgage advice is regulated by
can also reduce the need for payment cover which might be offered when you take out
mortgages or loans. (*Note: payment would also cease on death of the claimant, if the Financial Services Authority.
applicable). Advisers use their research skills
and sourcing systems to keep up
to date with details of all the
latest mortgage products so they
can find the best rates and deals
- and explain which one will best
suit your requirements. So, if
you want someone to do the
Funding a decent income hard work, then see an expert.
When making plans to start any pension plan, the first thing to consider is how much
income you think you will need. Few people need as much income in retirement as
they do while working – the mortgage may be paid off, children will likely have left
home and day-to-day expenses will probably fall. However, with more leisure time
available, you may have some ambitious plans for travel. All this needs to be
considered so you can set some realistic expectations.
Once this target figure has been determined, you can then begin to decide how much
needs to come from a pension and how much can come from other means. For example,
the state pension is £95.25 a week (for 2009/10), plus you may have money in ISAs or
from rent on second properties. You may also decide to work part time or take some
other type of temporary paid employment. Pension plan savings are then the first step
in working out how to generate the difference - and this can be complicated. You may
have some form of work pension from previous or current employment, but it is
unlikely they are sufficient on their own so some form of continued saving will be
required to meet your target.
At current annuity rates, with interest rates at very low levels, £10,000 worth of annual
income for a male aged 65 will require a pension fund valued at over £140,000. For
females - or for those wanting to retire earlier - the fund required will be even higher.
Hence the need to start planning. The earlier you start, the easier reaching that target
Issued by Hughes Financial Services Ltd an Appointed Representative of Ralston Bennett Financial Planning Ltd which is authorised and regulated by the Financial
Services Authority. The contents of this newsletter do not constitute advice and should not be taken as a recommendation to purchase or invest in any of the products
mentioned. Before taking any decisions, we suggest you seek advice from a professional financial adviser. All figures and data contained within this document were
correct at time of writing.