F I N A N C I A L S O L U T I O N S MoneyMatters JANUARY/FEBRUARY 2011 Input into your A quick guide Pension to the 2011 Retirement Matters pension changes guide to growing MONEY EQUITY RELEASE VAT Is it right for savings to be made YOU? Investment Trusts a Plan for Inheritance tax Explaining Unemployment Planning Prosperous the data New Year Insurance $ Lifestyle Protection $ Creating Wealth $ Tax Rules $ Credencis Limited 18 Prince Street, Long Eaton, Nottingham NG10 4LH T: 08456 385 047 F: 01159 316409 E: email@example.com www.credencis.co.uk Credencis Limited is an appointed representative of Mint Financial Services Limited which is authorised and regulated by the Financial Services Authority inside Input into your Pension Plan for a prosperous New Year… Plan for the future … Ethical savings … Review your personal finances Saving for your children Investment in the mainstream Page 2 Page 6 Page 10 Input into your pension… Offshore bonds or pensions….. Are you ready for retirement? … Is it in line with the Tax Year? Which is right for you? Plan and prepare now Page 3 Page 7 Page 11 8 point plan to beat inflation… The 2011 guide to growing your Maximum investment plans … The ISA increase… money The return of the pension Your allowance is set to rise alternative Page 8 Page 12 If you earn less than £130,000, you have This could lead to problems for schemes that £50,000. Unfortunately, the scheme’s next Page 4 until the new tax year which starts on 6 April haven’t notified their members of their PIP, PIP ends 31 March 2014, the date of the 2011 to make a significant contribution into including those who are retiring. Members of member’s retirement. This is also in the Unemployment insurance... Is your cover legal? … Reader Reply… your pension fund, before the annual defined benefit schemes that didn’t decide on 2013-14 tax year, so must also be tested Protecting against a loss of income Insurances to cover the costs of a claim Personalised reply section allowance for tax-privileged pension savings their PIP in 2006, for tax purposes, are now against any remaining annual allowance for Page 5 Page 9 Page 12 plummets to £50,000. But beware, you will assigned a default PIP year of 7 April 2010 to that tax year. need to check your pension fund’s pension 6 April 2011. However, the tax year runs from Therefore it is essential for employees to Need more information? Simply complete and return the information request on page 12 input period, if it is not in line with the tax 6 April 2010 to 5 April 2011. This one day know what the PIP is for their pension year, you could be in for a nasty surprise. may seem insignificant, but it could make a scheme. Using the above example, the Each and every pension scheme has a high earner eligible for a tax liability on member could decide to postpone retirement Plan for a prosperous pension input period or PIP for short. This payments made in 2010-11. until after 6 April 2014 and as a result, have time period is used to measure the benefit The new regime will also affect retiring single PIP ending on 31 December 2013. This accrued by a pension scheme member for tax employees, where the benefits accruing over being in the 2013-14 tax year and hence NEW YEAR purposes. These were introduced on 6 April up to two years could be measured against subject to an annual allowance of £50,000. 2006, which was known as ‘A-Day’, as part of only one annual allowance of £50,000. The next PIP ends on the members advised the widespread pension simplification by the Under the current system, a PIP also ends date of retirement in the 2014-15 tax year previous Government. The idea was to allow the day you take all of your benefits from a and hence now subject to the annual pension schemes the flexibility to align their scheme. It is currently possible to have two allowance of £50,000 for the 2014-15 tax annual allowance periods within their scheme PIPs ending in the same tax year, but there is year. year and their sponsoring employer’s financial only one annual allowance in each tax year. Keeping New Year’s resolutions is difficult, returns. These levels are due to increase as Review pension arrangements year. Imagine a scheme’s PIP running from especially sorting out your finances. But from April 2011 in line with inflation to Do you know how much income you can The annual allowance is currently 1 January to 31 December. The employee is simple steps can save you hundreds of £10,680. expect in retirement? Contact your £255,000 but this is set to fall to £50,000 retiring on 31 March 2014. The first PIP ends pounds. Here, we outline ways to plan to a Profesional Independent Financial Adviser next tax year. This will be the maximum on 31 December 2013 in the 2013-14 tax Reclaim forgotten cash prosperous New Year. to see if you are saving enough. You can amount that you and your employer can year, so the employee’s benefits to that date If you had premium bonds as a child, or Check your tax code received shares after a mutual or utility also get a state pension forecast from the contribute to a pension in any tax year are subject to the annual allowance cap of Pension Service by calling 0845 3000168. without incurring a tax charge. Elderly people and students are was listed on the Stock Exchange, you Some pension schemes have aligned their particularly susceptible to paying too should reclaim the money. Go to Clear credit card debt PIPs with the tax year but others may not much tax. Check your tax code now and www.mylostaccount.org.uk to search for If you slapped Christmas on the credit have done so. If they are unaligned the you could receive a rebate. Your code dormant bank, building society and card, paying this off should be a priority. possibility exists that an investor could find should reflect your personal allowance. Up National Savings & Investments accounts. If you are struggling with your debt, never pension contributions made on one tax year to age 64 this is £6,475 (tax code L), but The Unclaimed Assets Register has a skip a repayment or pay less than the being assessed against their annual from 65 to 74 it increases to £9,490 (tax database of unclaimed life policies, minimum as it could lead to penalty allowance in a different tax year. Should this code P) and at age 75 and above it is pensions, unit trust holdings and share charges and higher interest rates. Any happen, it is the annual allowance in the year £9,640 (tax code Y). If you think your code dividends drawn from many companies missed payments will also remain on your in which the accounting period ends that sets may be wrong, contact your local tax file for six years. Talk to your card issuer if the limit for your pension contribution. Cut household bills office. you have problems making repayments. For example; if a pension scheme’s Use a comparison website to find a You may be able to reschedule your accounting period ends on September 30 Move savings into ISAs cheaper deal for your gas and electricity. payments, or take a temporary payment each year, contributions made between 30 Savers had a dismal 2010, as interest The average yearly energy bill will be £1,239 holiday. September 2010 and 30 September 2011 will rates fell to record lows. ISAs, which in 2011, but this can be cut by up to £300 take up part of the annual allowance for the should be the first port of call for any by switching to a different tariff, according Start saving for next Christmas 2011-12 tax year, because that is the tax year taxpayer, allow you to invest up to to www.uSwitch.com. Moving to dual fuel, If you are debt-free, consider putting in which the accounting period ends. With £10,250 in both cash and stocks and paying by direct debit and signing up to money aside for this year’s holiday, or the annual allowance dropping to £50,000 shares, without being taxed on the an online plan will all save cash. even for next Christmas. pension contributions being made by some investors now could be tested against next 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 year’s lower allowance, potentially incurring 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 a tax charge. such information without receiving appropriate professional advice after a thorough examination of their particular situation. Will writing, buy-to-let 2 mortgages, EFRBS and some forms of tax and estate planning are not regulated by the Financial Services Authority. 3 2011 guide to growing your UNEMPLOYMENT MONEY INSURANCE The threat of inflation Inflation or deflation, which is the biggest 2) Locking in Investing in the stock market can be scary, 5) Bonds How will bonds fare if inflation rises? Protecting yourself against loss of income threat to the global economy? All the but to grow your wealth in real terms you Bonds have traditionally been seen as indications point to the importance of have to do more than simply find the best defensive, low-risk investments. However, people in Great Britain taking the threat savings account. as inflation rises that no longer holds of inflation very seriously. If you are prepared to lock up your true. Short-dated Government bonds (or It is impossible to ignore the impact money for five years to get a relatively gilts) look vulnerable, but there may be an that inflation is having on our lives. modest interest rate then you are likely to argument for holding other types of The economic outlook is still uncertain linked loan and again usually just for one cases the policies will pay out if ill-health Figures suggest the average UK see successful investing. bonds, particularly ‘high yield’ corporate and many are bracing themselves for year, but the payout is usually made prevents you from doing your own job; household needs to find an extra £1,133 Investing is risky but so is leaving your bonds and emerging markets bonds. more job cuts, especially if we head into a directly to the credit provider. with ASU you are only likely to make a a year to maintain the standard of living money in cash where it will fall in value 6) Are index-linked bonds worth a “double dip” recession. The cost is dependent on the monthly valid health claim if you can’t do any two years ago. because inflation is higher than interest punt? So what can employees do if they are benefit you are insuring and the “excess work at all, which means far fewer claims Here are 8 areas to consider. rates. Index-linked bonds specifically offer worried about losing their jobs? period”. Premiums are lower if you opt will be paid out. 1) Cash squeeze 3) Consider shares protection against inflation and so have Consider insurance. There are a number of for a 60 or 90 day deferral, which can be Additionally, most ASU policies If you are a higher rate taxpayer the bad Despite the bad news we read about, become popular with investors. products available, all of which will pay useful for those who know they will get a automatically exclude claims relating to news is that it is now almost impossible such as Greece and Ireland, now could be However, they now appear to be out a monthly sum if the policyholder is reasonable redundancy pay out. back injuries or stress, two of the most to find a no-strings attached savings a good time to invest. The experts suggest expensive. account to beat inflation. that in particular buying shares in big, made redundant. When buying ASU cover there are a common complaints why people have 7) Commercial property However, there are concerns that number of exclusions to consider. prolonged periods off work. Higher rate taxpayers need a pre-tax, stable, multinational companies is The property bubble burst in the credit gross rate of approximately 5.33% to attractive. Not only are some of these smaller insurers are beginning to refuse to The most important one being that this crunch. Should it still be part of an preserve the value of their money. There shares undervalued and poised for growth investor’s portfolio? The world is trying to offer cover to those in the public sector cover will not be valid if your employer are so few accounts doing that at present when the market lifts up, but they could repay its debts, and it seems this area has and as widespread job losses look likely, has already announced a redundancy and those that do require at least 70 per also return good dividends. little value at the moment due to the fact premiums may well rise sharply. programme. Those working in the public cent of your money into an investment 4) Emerging markets that the enterprises in commercial Those considering unemployment sector need to recognise that if the bond which will be investing in the stock Many investors have some investments in property rely on borrowing. insurance, have the choice between two school, NHS trust, local authority or market. Rising inflation is a great argument the emerging markets. The rise of the different products. private company, has already announced 8) Commodities for investing in the stock market but there BRICs countries, Brazil, Russia, India and The first is known as Accident, Sickness a redundancy programme, then it is too Gold has soared to very high amounts per are better ways of doing it than through China has been well documented. Their and Unemployment cover ( ASU). This is late to buy cover. If you do, any ounce, and investors have turned to this certain available bonds, and remember, it stock markets, are generally extremely known safe haven against inflation. an annual insurance, as it is renewed subsequent claim will be rejected. makes sense to keep your cash savings volatile, but have generated huge returns Demand has prompted concerns of a every year, much like your home or car The second option is a policy called an and stock market investments separate. for investors over the years. However, speculative bubble in gold. However, insurance. So you can cancel it, if and Income Protection Policy. This insurance is Basic rate taxpayers need only a 4 per these returns are not guaranteed for with the world beset by currency wars it when the economic situation improves. designed to pay out if a policyholder is cent interest rate to beat inflation. future years. probably has further to go. If you are unable to work, either as a unable to work through ill-health, but it is Unfortunately, the number of accounts offering that has fallen quite dramatically result of ill-health or redundancy, these possible to buy an unemployment add-on. over recent months, with the best deals policies will pay out a fixed sum for one The differences being that any claim for in three and five year bonds. year. ill health will be paid out until the person A form of this insurance, known as returns to work, as there is not a Payment Protection Insurance (PPI), is 12 month cut off, although there is for often sold alongside loans, credit cards unemployment cover. Premiums are also and mortgages. Basically it is the same, guaranteed for as long as you hold the the only difference being the payout only policy, ASU insurers could increase covers the interest payments due on the premiums at renewal annually. In most The value of your investment and the income from it can go down as well as up and you may not get back a significant proportion of your investment. Past performance is not an indication of future performance. Please contact us for further information or if you are in any 4 doubt as to the suitability of an investment 5 Plan for the Offshore Bonds Future As university costs rise and Pensions? Or Child Trust Funds disappear, we If you are a high earner and you want to offshore bond, a higher-rate taxpayer After basic-rate tax it would be worth consider the options available to put money into a pension, as from 2011 you will notice that you will start to lose would have £196,000 at the end of the term, an extra £41,000 as gains would £200,869, or £170,652 for a higher-rate taxpayer. You could withdraw an income concerned parents pension tax relief on your contributions if have rolled up gross. Also, bonds allow of £16,242, or £13,180, by taking you earn over £130,000. The argument for withdrawals of up to 5 per cent a year for advantage of the 5 per cent rule. This an offshore bond has become a lot more up to 20 years with no immediate tax to income would last 20 years giving you compelling for high earners as many are pay. In effect, you are “rolling up” the tax, approximately £4,000 per year, which may The idea that students will have to pay up contribution and automatic enrolment of its marketing to attract saving on behalf of reluctant to tie up money in pensions in which could mean big savings for those not be enough to manage on without to £9,000 per year in university tuition fees predecessor. children or grandchildren. Parents be return for comparatively little tax relief, who expect to move to a lower tax rate cashing in the bond and taking the tax is sending shockwaves down the spines of A spokesman for the Treasury announced warned, that while investment funds can be therefore this could be why offshore bonds later in life. liability. many parents. However, these fees will start the new account would be available by held on behalf of children, they cannot be are becoming a retirement saving plan However fund charges can be high, By comparison, a top-rate taxpayer who to be repaid once the student earns more autumn 2011, and would be backdated to owned directly until the child is 18 years alternative. usually between 0.3 per cent to 1 per cent made an £80,000 pension investment than £21,000. ensure that no child born too late to get a old. Offshore bonds are an insurance upfront, as well as around £400 or up to grossed up to £100,000 (if eligible for However, parents are going to have to CTF missed out on the new tax-free savings Tax “wrapper” around a portfolio of 0.25 per cent per year on top depending basic-rate tax relief only), would have a save much more if they want to be able to programme. Every child has their own personal tax investments, which receive tax advantages on how much you invest, and that is just £320,714 retirement pot. After taking help their children to avoid large debts at Approximately 5 million children in Britain allowance and you can ensure that your by allowing you to defer the tax on the on the wrapper alone. With adviser 25 per cent tax-free cash at £80,178, there university, but just as parents are realising have had CTFs opened for them since the child does not pay more tax than necessary growth of the investments. Capital growth commission on top, this generally means would be an annuity of £9,381 for a they need to save more for their children; initiative was launched in 2002. The current on savings interest by completing an R85 the Government is abolishing the Child Trust Government announced in May 2010 that it in an onshore bond is taxed at 20 per cent, the bonds are usually best for investments higher-rate taxpayer or £12,508 for a form. whereas offshore bond capital grows tax greater than £100,000 held for more than basic-rate taxpayer. Fund. was abolishing the funds; children received There are special rules to consider if So what can parents do to build up a nest vouchers at birth and on their seventh free. The wrapper protects your assets five years. If the investor were to die at the age of parents give savings to their children, where egg to help pay for their children’s birthday for £250, with children from low from tax for as long as you hold it. Then If you are looking for a pension 77 after taking an annuity each year for gifts from a parent produce more than £100 education? We set out some of the options. income families receiving £500. when you cash in your assets, you pay tax alternative, offshore bonds are not 12 years, the tax savings would be a year in interest, the whole of that amount Existing CTFs will continue until maturity on the accumulated gains. While basic-rate necessarily the answer. If you invested identical when using an offshore bond or a Savings accounts is taxed as the parent’s income. This rule A very flexible way of putting money aside on the child’s 18th birthday, and friends and does not apply to financial gifts from taxpayers have no more tax to pay when £80,000 in the offshore bond, it would pension. However, the plus point for the for your son or daughter is a conventional family can continue to make contributions anyone else, including grandparents. they cash in an onshore investment bond, have a value of £231,086 in 20 years offshore bond is that you will have been savings account. Many accounts are now into those funds up to a maximum of higher-rate taxpayers must pay a further assuming a 5.5 per cent return and able to make the 5 per cent withdrawal at Pensions intended specifically for youngsters and £1,200 a year. 20 per cent and top-rate taxpayers 30 per charges of 1 per cent a year. any time. Pensions are a very tax-efficient way of encourage regular saving with favourable The new Junior ISA is expected to have cent. With offshore bonds, there is no tax saving for children, though they cannot rates of interest. limits and will also have similar restrictions to pay until you encash the bond, when access the fund until they are 55, so it Parents could also consider Premium to the CTFs, as the money will belong to the higher-rate taxpayers will pay the entire cannot be used to cover the cost of Bonds from the state-owned National child and cannot be taken out until they 40 per cent and top-rate payers liable for education. Savings & Investments. Premium Bonds do become an adult. Similar to the CTF, 50 per cent. You can save up to a maximum of £3,600 not pay interest, though the chance of parents will be able to choose either a cash If you invested £100,000 in an onshore a year into a pension for each child, and winning a tax-free prize each month is an or shares account and all returns will be bond, you would have a lump sum of because basic-rate tax relief is added exciting proposition. tax-free. £155,000 after 10 years with a growth of automatically, it will cost only £2,880 to Junior ISAs Investment funds make a £3,600 contribution. This means 6 per cent a year, according to Barclays Children can have their own cash ISA at age There are a number of investment funds that a £100 contribution costs only £80. Wealth. If you invested the same in an 16 or over, but they have to be 18 or over and products aimed at saving for children, If parents have spare cash, this is a good for a stocks and shares ISA. The but there are no products aimed specifically way to build up a retirement fund for their Government though has announced an at saving for education cost, so parents children as it will remain invested for a very alternative for the Child Trust Fund, a tax- should do their research before signing up. long time. free savings plan called the Junior ISA. Investment funds do not usually offer Investing in a pension for a child can be This ISA is expected to have a similar cap anything extra or special. They are done in any one of three ways: a and restrictions to the Child Trust Fund mainstream products that are marketed as stakeholder pension, personal pension or a (CTF), but will not have the Government savings for children, but this is often just self-invested personal pension (SIPP). The value of your investment and the income from it can go down as well as up and you may not get back a significant proportion of your investment. Past performance is not an indication HOME performance. Please contact UNDERSTAND THE FEATURES AND RISKS THESE ARE LIFETIME MORTGAGES AND of future REVERSION PLANS. TO us for further information or if you are in any doubt The value of your investment and the income from it can go down as well as up and you may not get back a significant proportion of your investment. Past performance is not an indication of future performance. Please contact us for further information or if you are in any doubt as to the suitability of an investment as A PERSONALISED ILLUSTRATION. ASK FOR to the suitability of an investment 6 7 Maximum Is your cover Investment Plans LEGAL? With cutbacks in legal aid, families should What legal fee insurance is to ownership or occupation of your consider taking out legal fees insurance to available? homeand contract disputes for buying or cover events like divorce, industrial injury There are two types of legal fees selling your home. as well as employment, schools and insurance, Before the Event (BTE), which is ATE insurance benefit disputes, as these will largely no usually offered by household and motor After the Event (ATE) legal expenses longer be covered. insurers as an add-on to the main policy, insurance has rapidly grown since the Divorce withdrawn from legal aid and After the Event (ATE), which is often Government cut legal aid funding for Divorce will no longer qualify for legal aid. purchased through a solicitor when you personal injury claims in 2000. This The return of the Under the new system, which will start to first decide that you want to take a case to insurance is generally sold by solicitors take effect from January 2011, anyone court. and claims management companies with assets worth more than £1,000 will Legal fees insurance will not pay your dealing with personal injury claims. It pension alternative have to pay at least £100 towards their insurance claim, but it will cover the legal covers legal costs after you have suffered legal costs. costs involved in pursuing or defending a a non-fault personal injury. However, legal aid will still be available claim, including the appointment of The cost of ATE insurance can range for divorce cases where there are solicitors, barristers and expert witnesses. from around £75 to £5,000 depending on allegations of domestic violence, child In most cases, the legal fees provider the amount you are claiming. In personal Wealthy individuals are seeking an option period, usually 10 years. The market for they are being charged for, and when they manages the claim throughout. to pensions and moving to Maximum MIPs is growing again among wealthy have to pay it. abduction, or forced marriage. These injury and medical negligence claims, cutbacks are expected to encourage more BTE insurance some firms offer a ‘no-win no-fee’ or investment plans (MIPs) which has seen a individuals who have already maximised MIPs also offer high net worth savers couples to arrange a pre-nuptial agreement, Before the Event insurance is generally conditional fee service as well as ATE legal resurgence of new competitive products contributions to individual savings the chance to reduce exposure to the particularly as a ‘pre-nup’ was recently, for covered under household insurance where expenses insurance. But under the on the market. accounts and pensions. volatility of the markets by being able to the first time, upheld in a British court. legal expenses cover is included, it proposed cutbacks in legal aid there will The products were popular in the 1980s MIPs are not subject to the higher rate invest monthly, a process called pound typically covers legal costs incurred in Legal fees policies & costs be reductions here also. Lawyers will no but went out of vogue when they became of tax on returns, provided the policy has cost averaging. Advisers also warn disputes over faulty goods, employment The average legal fees policy costs no longer be able to recover their success associated with high commissions and “qualified” by being held for at least 7.5 investors to take care when selecting a claims, including unfair dismissal, more than £15 to £25 to add onto a fees from ‘after the event’ insurance unclear charges. years, the underlying investments, policy as each has significantly different redundancy, discrimination on grounds of household or motor policy, but adding policies and the claimant will have to pay However, providers are starting to managed by life companies, are deemed terms and conditions. sex, race or disability, civil claims related this fee out of any damages awarded with divorce or extending the cover to include launch new products with transparent to have been taxed already at 20 per cent, Choosing a MIP allows you to invest in a cap of 25 per cent of the damages. It is full medical negligence, industrial disease charges that are attracting high earners, so higher-rate taxpayers have nothing a broad range of investments and initial hoped that this will keep these rapidly and injury claims, could increase the because MIPs are not subject to higher more to pay. charges are closer to 20 per cent rather rising fees under control and will reduce premium significantly. However, the rate tax on returns if set up and held The products are also a type of life than the traditional 40 per cent charges. the costs for defendants. cutbacks in legal aid could be the stimulus correctly. assurance policy, meaning the initial Once taken out, a MIP must maintain its for insurers to offer more comprehensive Problems and restrictions High earners are looking for alternative investment is protected. If the policyholder qualifying status to provide the maximum cover. The problem with BTE policies are that a savings routes following the Government’s dies, the minimum levels of life cover can benefit. So, as well as holding the policy Many household policies already offer a high proportion of claims are rejected and decision to reduce the amount people can still be invested as planned. for 7.5 years, premiums must be paid at legal expenses cover for property, claimants are often obliged to use the save into a pension each year with tax Other savers though like the inheritance least annually, the plan must pay out a employment, and third party disputes as insurer’s lawyers to pursue their claim and relief to £50,000 from April 2011. tax benefits of using a MIP. The product capital sum either on maturity or death, an extension of the main policy. But all claims will need to be approved by the As pensions become inflexible MIPs will can be put inside a trust so that the saver and the premiums in any one year must divorce, child custody and medical insurer, before you even consult a lawyer rally, annual payments into MIPs for a is no longer the beneficiary. not exceed twice the premiums in any negligence, areas where there are likely to and legal fees insurers, like all insurers, period of 10 years or more mirrors the It is thought that the arrival of new other. If qualifying status is lost, tax will be be the greatest number of potential have a vested interest in rejecting your savings into a pension, and while MIPs with clearer pricing structures will payable on the proceeds of the MIP at the claims, are rarely covered. claim or keeping costs to a minimum. investors still have to pay tax on these boost interest from advisers and investors investor’s own tax rate. payments, it is at a low tax rate. alike. Transparent charging structures MIPs are essentially short-term mean that clients will know exactly what endowment plans that mature after a set The value of your investment and the income from it can go down as well as up and you may not get back a significant proportion of your investment. Past performance is not an indication of future performance. Please contact us for further information or if you are in any doubt as to the suitability of an investment 8 9 Are you ready for retirement? Ethical savings Plan and prepare Investment into the mainstream Ethical investing is moving rapidly into the Most people are looking for the best Interest rates on these may not be a mainstream, the growth of the market overall return for their investment with “best-buy”, but they are not that so far over the past 10 years has added more minimum risk. Funds that do not include off and anyone who wants to save than 100 products, from ISAs, to unit Rolls-Royce, BP or BAE are difficult to ethically should consider choosing trusts and pensions. They are now offering recommend to someone who is risk averse building societies, which, with their long Changes to pension legislation could change a responsible or sustainable element and and people generally still tend to go for historical links with the mutual movement, have opened up the sector to those with income over ethics. are preferable to high-street banks. small and large amounts to invest. New figures from the Co-op show that Equity bond performance is different for ethical funds in the short and medium Another product area that has seen a marked increase in ethical schemes is the way you plan for the amount of cash invested in ethical term, but over the longer term, there is no pensions. Many stakeholder pensions now your retirement. financial products has had its biggest performance cost, as income yields are offer ethical funds. Those with a higher annual increase in 10 years, rising 34 per broadly similar. than average income which are more cent last year from £14.3bn to £19.2bn. If you are a cautious investor, then comfortable with riskier investments, have As a result of the recession, the COULD IT AFFECT YOU? MAKE A PLAN This increase outstripped the mainstream ethically screened corporate bond funds the option to invest in a single company or Governments spending review and The Governments change to the state pension Retirees should start planning their life in a finance market, which grew 15 per cent, may be for you. Screening includes an sectors such as sustainable fuels or advances in health care, the retirement age is a start of a general trend toward different way and ask themselves, what would over the same period. The report adds that analysis of things like the effect an technologies, but you need to know the picture is changing fast. people working longer and retiring later, for they do if they got to 66 and had another 25 the average UK household now has industry has on the environment, a market inside out or be advised by those For people approaching retirement or some by choice and others because they years of life ahead of them. How will you almost £750 invested in ethical funds and company’s track record on social and that do. There are some areas, such as a thinking about when to retire, now is the simply cannot afford to give up work. occupy your time, maybe you want to travel or savings accounts. environmental issues and the geographic few interesting wind-farm co-operatives time to indulge in some serious Many people have been misled into go on holiday in your retirement, but this will Many professional financial advisers regions affected by the operation. that will stand up to investigation in terms retirement planning. thinking that just by saving more they will require funding. deal with green and ethical products, Some banks and building societies of liquidity, protection and risk levels but have an adequate pension pot, but the With this in mind those approaching although many still had concerns about offering ethical cash ISAs use the money you need to be careful. SO WHAT ARE THE CHANGES? savings will still not be enough for many normal retirement age should begin a The recent decision to change the state their performance relative to more on deposit to fund socially and Experts expect it to continue to grow, as people. Employers are going to have to dialogue with their employers. People will mainstream investments. environmentally beneficial projects at banks look to use a new-found ethical pension age faster than planned may not engage with gradual retirement. need guidance, financial education, lifestyle home and across the world, such as stance to win back the trust of customers impact on everyone’s retirement plans. People will need to consider retirement in planning and a pre-arranged agreement with investment in renewable energy schemes which was damaged during the credit A change in the state pension age does not two phases. The first is your prime-time their employer. or sustainable housing. crunch. They also hope that if the automatically mean a change for your retirement, before the age of 75, when you Most importantly, do not underestimate the Government follows through with its retirement plan, but there are other changes may still be able to work flexibly, while the amount that you need to have within a promise of a green investment bank, then that may affect the age at which you decide second is your senior years, when you may decent pension pot. A typical 35 year old will a green ISA scheme to fund it may not be to retire, and how that retirement happens. need extra care. need to save approximately 32 per cent of far behind. The Government has announced changes WHAT TO DO? their wage in order to receive a retirement that will affect public sector pensions, making The first step is to work out what you already income two thirds of their current salary them less attractive. It has also announced a have. You can get a state pension forecast at 65. change in the pensions saving credit that will leave some pensioners worse off. from the Government, and you can also get a UNDERSTAND THE FINANCES The default retirement age of 65 is being forecast for any occupational pensions you Seek professional financial advice and use all abolished from October 2011, extending have. your options. You don’t have to spend all of peoples working lives. Unless you have a final salary pension, you your pension pot on an annuity; you can mix The recession is also having an impact on may need to buy an annuity with your it up and move it around. people’s pension funds. Due to stock market pension pot. You can find out roughly how Those choosing the annuity route should fluctuations they are generally worth less and much your pension pot will buy you by using take note of what inflation could do to their the low-interest-rate environment combined an online annuity calculator. income if they plan to buy a level annuity, with relatively high inflation has made it more Many people are disappointed at the where the income stays the same. However, difficult for pensioners to live on a fixed present annuity figures and it is felt that annuity inflation-linked annuities are generally more income. rates will not be recovering any time soon. expensive. To discuss how you can get the most out of your retirement planning, please contact us for further information 10 11 The ISA increase Your allowance is set to rise The Government have officially announced the an average of £4,700 to cover the cost of bills uncertainty, it is considered important that news that ISA limits will rise by £480 from and other emergency costs. people set aside a realistic sum of money to be £10,200 to £10,680 in line with inflation. This The research also uncovered that 20 per cent used in emergencies. new allowance for 2011/12 tax year is due to of all adults have no savings at all, with the 25 With this background in mind and with the increase in line with September’s retail price to 34 year old age group being the least increasing limits to ISA investments, savers index of 4.6 per cent. This retail price indexation prepared for a financial emergency. 41 per cent should make full use of their tax free savings uplift will have the effect of adding £480 to the of people in this age group have less than £250 allowances. current £10,200 individual ISA limit. saved and 25 per cent have nothing at all. A couple will be able to save jointly £21,360 Recent research from HSBC has suggested Women are at a higher financial risk than per year in their ISAs and enjoy tax free returns. Britons are not saving enough and almost a third men, as 33 per cent of women have less than As taxes rise, savers and investors should ensure could and would not be able to survive for more £250 in savings, whilst just 26 per cent of men that they invest as much as they can in their ISA than a week on their savings. have less than this amount in savings. each year. It is thought over 42 per cent of the Research in October 2010 from HSBC has Taking the UK as a whole, people in the North UK population is still not taking up their ISA indicated that around 30 per cent of the UK West are the least likely to have a financial allowance. ISAs are an efficient all year round tax population have less than £249 as a financial cushion as 25 per cent had no financial safety perk and a way to avoid giving hard earned safety fund, which at today’s rates is equivalent net in place. money straight back to the tax man, they are of five days average take home pay. Experts Such findings from the HSBC survey show a also a good vehicle to ensure a financial safety recommend that families should keep a financial worrying trend and lack of preparation amongst fund is in place for the future. fund of at least three months’ take home pay or UK residents. With the current climate of The value of your investment and the income from it can go down as well as up and you may not get back a significant proportion of your investment. Past performance is not an indication of future performance. Please contact us for further information or if you are in any doubt as to the suitability of an investment For more information on any subject that we have covered in this issue, or on any other subjects, please tick the appropriate box or boxes, include your personal details and return this section to us. I Financial wealth check Name I Tax efficient investments Address I Pensions Postcode I Tax planning Tel. (home) Tel. (work) I Critical Illness cover Mobile Email I Protection I Mortgage/Re-Mortgage Please return to: I Healthcare Credencis Limited I Director and employee benefit schemes 18 Prince Street, Long Eaton, Nottingham NG10 4LH You voluntarily choose to provide your personal details. Personal information will be treated as confidential by us and held in accordance with the Data Protection Act. You agree that personal information may be used to provide you with details and products or services in writing or by telephone or email. 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 Produced by M8trix Media Limited, Basepoint Business & Innovation investments can go down as well as up, as can the income derived from them. You should remember that past performance does not Centre, Great Marlings, Luton, Bedfordshire, LU2 8DL guarantee future growth or income and you may not get back the full amount invested.