eSmart Money April 2013

7/30/2019 eSmart Money April 2013

1/15

Time is

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Is 60 thenew 40?

Top 10

Tax TipsTax pla chcklt 2012/13f y, y faly ad y b

rt baby b

a tt t a wdl f lat lf

Hav y flly d y

2012/13 isA allwac?

MARCH/APRIL2013

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2/15

Financialplanning isour business.Were passionate about making sureyour finances are in good shape.

Our range of personal financial planning services is

extensive, covering areas from pensions to inheritance

matters and tax-efficient investments.

Contact us to discuss your current situation, and well

provide you with a complete financial wealth check.

one of the biggest purchases

youll ever make

Tis important one-o decision has long-

term consequences i you get it wrong

generating an income from

your investmentsAn important requirement especially i

youve retired or are approaching retirement

is your family

protected financially?

Te cost o bringing up a child until they

reach the age o 21 has hit an all-time high

top 10 tax tips for you, your

family and your business

ax planning checklist 2012/13

gender neutrality

An important requirement, especially i

youve retired or are approaching retirement

is 60 the new 40?

Retiring baby boomers are setting out a new

model or later lie

trust in your future

A renaissance period or

investment trusts

time is running out

Have you ully used your 2012/13

ISA allowance?

social care in old age

capped at 75,000

Measures introduced through the Care and

Support Bill come into eect in April 2017

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uk credit rating downgrade

Te UK has lost its AAA credit rating or the

rst time since the 1970s

the italian election

Uncertain election results rekindle euro-

crisis ears

warren buffett, one of the

most successful investors of

the 20th century

Te important tenets o his investment

philosophy and mythology

the child benefit tax charge

Te child benet tax charge, introduced on

7 January, aects over one million amilies

how to make the

most of your pension

ake a look at our checklist to see how we

could help you

a bleak picture of peoples

ability to cope with

financial shocks

Are you prepared or the nancial needs and

challenges that may lie ahead in the uture?

will your retirement strategy

minimise potential taxes and

duties on your death?

Immediate access to your pension unds,

allowing you to take out what you want,

when you want it

CONTENTS

TodiscussyourfinancialplanningrequiremenTsorToobTainfurTherinformaTion,pleaseconTacTus

06

12

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26

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MARCH/APRIL2013

IN THIS ISSUE


3/15

IN THIS

ISSUE

RETIREmENT

4 05

Welcome to the

latest issue. In

times like these,

every penny

ounts. Interest rates are at historic

ows and rising ination can erode

our buying power. One way to

mitigate these eects is to shield

avings rom tax by investing

hrough an Individual Savings

Account (ISA). On page 14 we

ook at why this exible wrapper,

under which a wide range o

nvestments can be made ree o

apital gains or income tax, is an

option worth considering.

When you approach retirementge, you will have to decide what

o do with the pension und you

have built up. I applicable to you,

on the right we consider one option

buying an annuity. Its important

o nd an annuity that suits you

nd one that provides the best deal.

Aer your property, an annuity is

probably the biggest purchase you

will ever make.

As your wealth grows, it is

nevitable that your estate becomes

more complex. With an increasing

number o people now expected to

each age 75 each year, more and more

people could be aced with a 55 per

ent tax charge on any money lef in

heir pension und when they die. Turn

o page 28 to read the ull article.

A ull list o all the articles eatured

n this edition appears on page 03.n

Te content o the articles eatured in thisublication is or your general inormation

nd use only and is not intended toddress your particular requirements.Articles should not be relied upon in theirntirety and shall not be deemed to be, oronstitute, advice. Although endeavoursave been made to provide accuratend timely inormation, there can be nouarantee that such inormation is accurates o the date it is received or that it willontinue to be accurate in the uture. Nondividual or company should act uponuch inormation without receivingppropriate proessional advice aer ahorough examination o their particularituation. We cannot accept responsibilityor any loss as a result o acts or omissionsaken in respect o any articles. Tresholds,ercentage rates and tax legislation mayhange in subsequent Finance Acts. Levelsnd bases o, and relies rom, taxation areubject to change and their value dependsn the individual circumstances o the

nvestor. Te value o your investmentsan go down as well as up and you may getack less than you invested.

if y av thh a pvat p, wh y appach tt a yll hav t dcd what

t d wth th p fd y hav blt p. if applcabl t y, pt t by a aty. it

ptat t fd a aty that t y ad pvd th bt dal bca, aft y ppty, a

aty pbably th bt pcha y wll v ak.

one of ThebiggesT purchases

youll ever makeTis important one-o decision has long-term consequences i you get it wrong

An annuity is the annual pension that many

people buy with their private pension pots

when they retire. Purchasing your annuity

is an important one-o decision that has long-term

consequences i you get it wrong. You may not receive

the best deal i you just take the annuity oered by

the insurer that has been investing your money.

LAck of AdvIce

mIght be costLy

You only have one opportunity to shop around

or your annuity. Once you have committed to an

annuity provider and started to receive an income,

the decision cant be reversed. So it is essential that

you shop around and obtain proessional inancial

advice to help you through the process.

Last year, the National Association o Pension

Funds (NAPF) announced that the lack o advice

in this area might be costing hal a million retirees

each year as much as 1bn in uture pension income.

fAILure to

shop Around

Te NAPF pointed out that the ailure o someone to

shop around or being unaware they were able to do so

might reduce their annual pension income by a third.

he insurance industry has now agreed to

reorm its annuity practices, and rom 1 March

this year insurers will have to conorm to new

guidelines set down by the Association o British

Insurers (ABI).

new guIdeLInes wILL requIre

Insurers to:

Provide clear and consistent inormation, including

details on how to shop around or an annuity

Highlight the details o enhanced annuities the higher

pension income available to those with shorter

lie expectancy

Signpost clients to external advice and support

that is available

Give a clear picture o how their products t into

the wider annuity market

the poInt of retIrement

Insurers have been obliged since 2002 to draw their

clients attention to the act that they can shop around

or an annuity at the point o retirement.

One o the ways in which people may end up with

too small an annuity is by not taking into account

their own medical circumstances. Having conditions

as seemingly manageable as high blood pressure or

diabetes could qualiy you or an enhanced annuity,

which could pay you more income because your

average lie expectancy may be less. n

I you are approaching yourretirement we can take youthrough the process step bystep to ind the best annuity oryou. Your retirement shouldbe a special time when you dothose things you never had theopportunity to do beore. Soits essential you think and plancareully, as the decisions youtake now cannot be undonelater. I you are concernedabout your retirementprovision, please contact us toreview your current situation.

Live better inretirement

CONTENTS

20

20

18

16

06

5 Key points about annuities

Make the right decision now, because youcannot reverse it later.

Dont just accept the annuity your pensionprovider gives you.

Shop around - it could be worth up to athird more income per month or you.

You can combine multiple pension pots

into one annuity.

Common health issues includingsmoking, high blood pressureand diabetes can lead to an even higher

monthly income.

1

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3

4

5


4/15

6 07

COmE INCOmE

w d y at a labl c wh tt at a tck at all-t

w ad th Bak f elad qattatv a plcy f pt y

qz yld vt bd (lt) ad th vtt?

GENEraTiNGaN iNCOmEfrOm yOur

iNvESTmENTSAn important requirement, especially i youveetired or are approaching retirement

your AbILIty to

generAte Income

With more o us living longer in the

UK, maintaining our standard o living

in retirement and unding holidays and

outings requires some careul planning.

Have you considered how a longer liespan

and rising ination could aect you and

your ability to generate income?

Generating an income rom your

investments will be an important

requirement, especially i youve retired

or are approaching retirement, or i you

need to supplement your salary or have a

relatively short investment timerame.

fIxed Interest

Te most popular orms o income

investment are bonds (which are also

known as xed interest investments)

and cash, both o which pay a regular,

consistent rate o interest either annually,

twice a year or our times a year. You can

also obtain an income rom shares in

the orm o dividends, and many equity

unds are set up solely with the purpose o

generating a stable income. Importantly,

equity income unds oen aim to achieve

not only stability, but also an increasing

income in the long term.

Past perormance is not necessarily a

guide to the uture. Te value o investments

and the income rom them can all as well

as rise as a result o market and currency

uctuations and you may not get back the

amount originally invested. ax assumptions

are subject to statutory change and the value

o tax relie (i any) will depend upon your

individual circumstances.

good cAsh fLow

Income stocks are most usually ound in

solid industries with established companies

that generate good cash ow. Tey have

little need to reinvest their prots to help

grow the business or und research and

new product development and are thereore

able to pay sizeable dividends back to their

investors. Examples o traditional income-

generating companies include utilities, such

as oil and gas, telephone companies, banks

and insurance companies.

You should remember that these

investments do not include the same

security o capital that is aorded by a

deposit account. n

With more o us living longer in the UK,maintaining our standard o living in retirementand unding holidays and outings requires somecareul planning. Have you considered how alonger liespan and rising ination could aect youand your ability to generate income?

Which incomegenerating investmentsare right for you?In the cur rent environment o abnormally

low interest rates, cash savings accounts

almost all pay negative rates o returnaer taking into account the eects o

ination and tax. o discuss your nancial

position or review which type o income-

generating solutions are right or you,

please contact us or more inormation.

10 income investing tips

1Sustainable long-term dividend growth Investing in

businesses when the growth potential is not reected in

the valuation o their shares not only reduces the risk o

losing money, it increases the upside opportunity.

2Ination matters Always bear in mind the detrimental

eect o ination. Corporate and government bonds oer

higher yields than cash but returns can be eroded by

ination. Investment in property or equities provides a vehicle

to help achieve an income that rises to keep pace with ination.

3Consider international diversication A small

number o UK companies account or approximately

40 per cent o UK dividend payouts. Tis compares with

over 100 companies in the US, or example, that provide the

opportunity to increase the longevity o dividend growth.

4Patience is a virtue Investing or income is all about the

compounding o returns or the long term. As a general

rule, those businesses best placed to oer this demonstrate

consistent returns on invested capital and visible earnings streams.

5Reliability is the key Select sectors o the equity market

that do not depend on strong economic growth to deliver

attractive returns to investors.

6High and growing ree cash ow Look or companies

with money le over aer all capital expenditure, as this

is the stream out o which rising dividends are paid. Te

larger the ree cash ow relative to the dividend payout the better.

7Dividend growth In the short term, share prices are

bueted by all sorts o inuences, but over longer time

periods undamentals have the opportunity to shine

through. Dividend growth is the key determinant o long-term

share price movements the rest is sentiment.

8Cautious approach Prots and dividends o utility

companies are at the whim o the regulator. Be cautious o

companies that pay a high dividend because they have gone

ex-growth such a position is not usually sustainable indenitely.

9Investment diversication Te rst rule o investment

is oen said to be spread risk. Diminishing risk is

particularly important or income-seekers who cannot

aord to lose capital.

10Tax-efciency Increase your net income by using an

ISA (Individual Savings Account). Te proceeds rom ISA

income is ree o taxation, thereby potentially improving

the amount o income you actually receive. UK dividend income

has been taxed at source at the rate o 10 per cent and this cannot be

reclaimed by anyone. Te proceeds rom ISAs are also ree rom capital

gains tax, allowing you to switch unds or cash in without a tax charge.

Te economic environment has been particularly unorgiving

or investors who need to generate an income. Te Bank o

England reduced interest rates to a record low level as the

nancial crisis deepened and savings rates ollowed. n


5/15

098

OTECTION

is your familyproTecTed financially?

Iggest expendIture

or pArentsucation and childcare remain the biggest

penditure or parents. Te cost o education*

cluding uniorms, aer-school clubs and university

sts) has increased rom 32,593 to 72,832 per

ild in the last ten years a 124 per cent increase.

hildcare costs are also up rom 39,613 in 2003 to

3,738 today a 61 per cent increase.

From birth to age 21, parents spend an average o

9,270 on ood and 16,195 on holidays which

w cost 4 per cent more than last year. In act, in the

t decade, costs have risen in all areas o expenditure

art rom clothing, which has seen a 5 per cent drop.

ookIng After the pennIes

ums and dads all over Britain are tightening their

rse strings, with more than three-quarters o

rents (76 per cent) orced to make cutbacks to

ake ends meet. While many are reining in spending

luxuries such as holidays (45 per cent), more than

quarter are also cutting back how much they spend

essentials such as ood (27 per cent).

O those parents who are cutting back, 68 per

nt have switched to buying cheaper or value

ods. Vouchers and discount codes are also

pular, with 56 per cent o these parents using

em to save on shopping bills. Many are also

ying to boost their income, with 40 per cent

ling personal items online or at car boot sales.

ushIng pArents fInAnces

o the LImIt

e cost o raising a child continues to soar and is

w at a ten-year high. Everyone wants the best

r their children, but the rising cost o living is

shing parents nances to the limit. Tere seems

be no sign o this trend reversing. I the costs

sociated with bringing up children continue to

e at the same pace, parents could ace a bill o

er 350,000 in ten years time [2].

Over the last ten years, London (239,123), the

uth East (237,233) and the East o England

(233,363) have remained the three most expensive

places to raise children. en years ago this was

closely ollowed by Wales, whereas now it is

Northern Ireland (232,883).

Families in the South West have seen the biggest

hike in costs, now paying 100,077 more per child

than they were ten years ago.

keepIng up wIth the LAtest

technoLogIcAL AdvAnces

Forget dolls and train sets. odays children want

the same toys as their parents, and the popularity

o smartphones, tablets and laptops is adding to the

expense o raising a child.

Many parents eel under pressure to keep up

with the latest technological advances even or

children as young as three years old. Almost a third

(28 per cent) o parents have bought their child

an electronic gadget in the last 12 months, with

around a h (18 per cent) paying out or a laptop

or tablet. Te average yearly amount parents spend

on these gadgets or their child is 302.

protectIng the fAmILys

fInAncIAL future

Many amilies are responding to nancial pressures

by saving less and spending less. wo-hs (40 per

cent) o parents have reduced the amount they are

putting towards savings and a urther 26 per cent

(up rom 22 per cent last year) have cancelled or

reviewed insurance policies to try to save money.

Almost hal (47 per cent) o parents have no lie

cover, income protection or critical illness cover

in place. While 36 per cent o parents do have lie

cover, only 11 per cent have critical illness cover

and a meagre 6 per cent have income protection.

cAtAstrophIc ImpLIcAtIons

on the fAmILys fInAnces

Te cost o raising a child wont always be the rst

thing parents think about when deciding to have a

amily, and regardless o the cost, people wouldnt

change having children or the world. But parents

considering cancelling insurance such as lie cover

or income protection as a way o saving money

need to think long term. It could have catastrophic

implications on the amilys nances i either parent

became unable to work or was no longer around.

Te cost o raising a child has increased rapidly

over the last decade and looks set to continue

rising. It is imperative that parents make sure they

nancially protect themselves and their amily and

seek proessional nancial advice to talk about

what best suits their needs. n

[1] he cost o a child calculations, rom

birth to 21 years, have bee n compiled by the

Centre or Economics and Business Research

(CEBR) on behal o LV= in December 2012 and

are based on the cost or the 21-year period to

December 2012.

Te report also includes omnibus research

conducted or LV= by Opinium Research rom

11-13 December 2012. Te total sample size was

2,013 UK adults. Results have been weighted to

nationally representative criteria.

[2] I the cost o raising a child continued at the

same pace as the last ten years (58 per cent increase),

in 2023 the cost would be 351,483.

* Does not include private school ees.

Parents who send their children to private school

can add 106,428 or a child at day school, and

195,745 or a child who boards, to the overall cost

o raising a child.

time to revieW yourfamiLy protection?Protection insurance oen costs lessthan people think, and whether to take

out cover is one o the most important

nancial decisions people will evermake. To discuss or review your current

requirements please contact us dont

leave it to chance.

RETIREmENTWEalTH PROTECTION

Having children has never been more expensive, with the cost o bringing up a child until they are 21 at an

ll-time high o 222,458. Tis is more than 4,000 up on last year and 82,000 (58 per cent) more than ten

ears ago, when the rst annual Cost o a Child Report [1] rom protection provider LV= was published.

Te cost o bringing up a child until they reach the age o 21 has hit an all-time high

genderneutrALItyNew rules mean women

could increase their pension

income by over 20 per cent

Te new 20 per cent upli in capped

income withdrawals will come into

orce on 26 March this year, and people

could start to see the benet o this upli

rom the start o their new income year

ollowing that date.

new gender

neutrAL ruLes

An income year is driven by the date

a person rst started taking income

withdrawals rom their pension. While

people do not need to take any action or

this upli to take eect, women could see

their income rise by over 20 per cent as a

result o the new gender neutral rules, but

they need to take steps to achieve this.

Changes to the maximum capped

income calculation as a result o gender

neutrality commenced on 21 December

2012. Te actors that determine the

amount o income withdrawals that men

and women are permitted to take rom

their pension each year is now identical,

which means the position or women has

improved signicantly.

extremeLy benefIcIAL

for women

o benet rom the new gender neutral rates,

an income recalculation point is needed or

women. It could be extremely benecial or

women to take this action, especially i more

income is needed to live on.

Te 20 per cent upli in pension

income will happen automatically,

However, women can now benet rom

enhanced gender neutral terms, so i

applicable to you, it is important you nd

out whether triggering a recalculation

could increase your income even urther.

Some pension schemes have the

exibility to recalculate the income annually,

making it easy or women to take advantage

o this enhancement. For those who are in a

scheme that does not oer annual reviews,

you could still trigger a recalculation by

transerring new money into your capped

income und, but you should always seek

proessional nancial advice to ensure this is

the best option. n

ARe you sAtIsfIed you ARe PAyIngtHe MInIMuM tAx neCessARy?As everyones circumstances are dierent, we would be delighted to review yours with you so we can

help you make the maximum tax savings. o discuss how we could help ensure that you are not paying

any more tax than you absolutely need to, please contact us or urther inormation.

Make sure you take advantage o the wide range o year-end tax

planning opportunities available this year. Here is our checklist o the

main top ten areas to consider or you, your amily and your business.

ax planning checklist 2012/13 or you,your amily and your business

for myseLf And my fAmILy

I hAve...

Made the most o my 2012/13 Individual

Savings Account (ISA) allowance

aken advantage o increased pension

contributions to reduce taxable income

Ensured that I have a tax-efcient

giing strategy

Used my annual capital gains tax

exempt amount

Reviewed my estate planning and my Will

for my busIness

I hAve...

Extracted prot rom my business

at the lowest tax cost

Made sure my sta remuneration

packages are tax-efcient

Careully considered the timing

o asset purchases and sales

Recorded any appropriate constructive

obligations in respect o employment awards

Planned the purchase o business equipment

to take ull advantage o capital allowances

TOp 10 Tax TipS


6/15

TIREmENT

is 60 The

new 40?

data rom the latest census in 2011

showed there were 754,800 people

aged 64 in England and Wales,

and almost 6.5 million people are

turning 65 over the next decade compared with

5.2 million in the previous decade. he spike is

due to the post-war birth rate soaring when the

armed orces returned rom the Second World

War, with the new-born generation dubbed the

baby boomers.

pushIng bAck

the boundArIes

Allied with improved health care, more people

are remaining active as they approach retirement

age, and the report shows how they are pushing

back the boundaries at work and in their leisure

time. 23 per cent o 65- to 74-year-olds were

still wage earners in December 2012, compared

with 18 per cent when t he report irst launched

almost three years ago in February 2010.

fueLLIng the rIse

of Income And sAvIngs

With 55 per cent o 55- to 64-year-olds also still

in employment, compared with 41 per cent in

February 2010, this trend looks set to continue

as more baby boomers pass the age o 65. It has

already uelled the rise o income and savings

among over-55s during the last three years. he

typical over-55 now has an income o 1,444

each month along with 14,544 in savings

(December 2012), compared with a monthly

income o 1,239 and savings o 11,590 in

February 2010.

enjoyIng the

fruIts of your LAbour

Despite 80 per cent being concerned by

rising living costs over the next six months

(December 2012), the UKs over-55s are

determined to enjoy the beneits o extending

their working lives. Nearly hal (44 per cent)

plan to use their extra time in retirement to

travel more, while 42 per cent are ocused on

spending more time in their gardens.

Socialising is high on the agenda or many over-

55s in retirement, with 37 per cent planning to

invest extra time in their amilies and 33 per cent

keen to socialise more with riends.

the most

common motIvAtIon

hey also have philanthropic intent: two-thirds

(66 per cent) o over-55s would be interested in

carrying out charity work or volunteering once

they have retired. he most common motivation

is to give something back to the community

(49 per cent) and to stay active by getting out o

the house (48 per cent).

A new modeL for LAter LIfe

Its clear that the irst baby boomers are setting

out a new model or later lie, and getting the

most out o their improved physical health and

the reedom to continue working or longer. Many

people ind that staying active in a job helps to

keep them young at heart with the bonus being

that it boosts their earning and savings potential

in the process.

he key to making the most o this opportunity

is or people to start planning or their 60s and

beyond well in advance. In this way, rather than

accepting the old retirement stereotypes, you

can have the reedom o choice about whether

you continue to work or not, rather than eeling

orced to carry on out o the demand to meet

inancial commitments. n

are you using yourWeaLth to get What youWant from your Life?

Everyone enjoys using their wealth in

dierent ways. For you, it might be the joy o

travel, helping others through philanthropy,

sharing your success with amily and riends

or your passion or collecting. It might be

the simple reedom to do what you want,

when you want. Whatever your priorities,

we can help you use your wealth by ensuring

its working or you now and is structured

to be lexible or the uture. o discuss your

requirements, please contact us.

Te UK is witnessing the march o a new type o retiree as the rst post-war baby boomers pass the old

Deault Retirement Age o 65. According to Avivas latest Real Retirement Report, more than one in three

39 per cent) over-55s are continuing to receive a wage and nearly hal are intent on using their extra

arnings to travel more when they nish ull-time work.

Retiring baby boomers are setting out a new model or later lie

11


7/15

13

INvESTmENT

superIor

performAnce records

Investment trusts are in a renaissance period

and are coming up on the radar o more people,

ar more than ive to ten years ago. here is a

lot more attention on the superior perormance

records o these trusts versus their equivalent

open-ended unds.

Investment trusts can play a useul role in your

investment line-up. Tey were born in 1868, are closed-

end products listed on the London Stock Exchange and

unlike their more popular rival, unit trusts, they have a

xed number o shares in circulation.

broAder economIc mArket

You can buy these shares when the trust is irst

launched in the oer period or you can trade

them on the stock market. Although a trusts

share price generally moves in line with the value

o its investments, the price can be aected by a

range o actors, such as demand rom investors

and the situation in the broader economic market.

Buying or selling shares when the price is

below the value o the trusts assets is called

trading at a discount, while the opposite scenario

o the shares being higher than the asset value

means youre trading them at a premium.

IncreAse your returns

In contrast to other types o und, investment

trusts can borrow money to boost investment.

his is known as gearing. Although gearing can

increase your returns when markets are on the up,

it can exacerbate your losses i markets are alling.

he more gearing the trust has, the more likely

your gains, or losses, will be magniied. Gearing

is one o the ways in which investment trusts have

managed to beat their unit trust peers.

Aside rom higher returns over the long term,

investment trusts can provide a more stable, growing

income. Whereas unit trusts tend to invest in equities

or bonds, investment trusts have the ability to tap

harder-to-access areas such as private equity.

shoppIng And

fIndIng A bArgAIn

he opportunity to buy a trust at discount is

like shopping and inding a bargain you know

is worth more than the price. But i youre

concerned about the price luctuating or the

discount widening even urther, trusts tend to

have control mechanisms in place.

Historically, most investment trusts have

traded at a discount and oten traded at high

discounts. Now, many have a discount control

mechanism where the board can buy back the

shares, which is a good thing, to ensure there are

not discounts o 40-50 per cent.

trAdIng At A premIum

On the ipside, i a trust is trading at a premium,

it does not mean its worth writing o. You need

to look at your time horizon. Its less o an issue i

youre invested or ten years with a quality manager.

Investment trusts have tended to have lower

charges, which can help to boost your gains over

the long term. A major beneit o investment

trusts is that they are usually cheaper than open-

ended unds, and this should help to increase

their popularity. n

Past perormance is not necessarily a guide to the

uture. Te value o investments and the income

rom them can all as well as rise as a result o

market and currency uctuations and you may

not get back the amount originally invested. ax

assumptions are subject to statutory change and the

value o tax relie (i any) will depend upon your

individual circumstances.

Investment trusts have had to exist in the shadow o unit trusts or the past

ew decades. But in rising markets investment trusts generally outperorm

other unds and can deliver more stable, growing income streams.

A renaissance period or investment trusts

trust in

your future

Te opportunity to buya trust at discount is likeshopping and nding abargain you know is worthmore than the price.

In contrast to other typeso und, investment trusts

can borrow money to boostinvestment. Tis is knownas gearing.

heLping you groW yourWeaLth is an importantpart of What We dohere are many dierent ways to grow

your wealth. Our skill is in helping you to

understand your choices, and then helping

you to make the investment decisions that

are right or you. hat depends on your

lie priorities, your goals and your attitude

to risk. o discuss how we could help you,

please contact us.


8/15

15

time isrunning out

any time without losing tax relie. You do not

have to declare income and capital gains rom

ISA savings and investments or even tell your

tax ofce that you have an ISA.

Q. Can I put money into an I SA or my child?

A. Junior ISAs are a popular way or amily

and riends to build up tax-eicient savings

and investments to help with the cost o

university, provide a deposit or a house

or simply give children a start in lie. Any

child resident in the UK qualiies who wasnt

eligible or a Child rust Fund (CF):

Children born on or ater 3 January 2011

Children (aged under 18) born on or

beore 31 August 2002

Children born on or between

1 September 2002 and 2 January 2011

who didnt qualiy or a Child rust

Fund. Most children born between these

dates did qualiy or a CF

he current maximum allowance per child

per tax year is 3,600 and this will increase to

3,720 or the 2013/14 tax year. he account

is held in the childs name and a parent or

guardian can open and manage the childs

account. Once a parent or guardian opens

the account or their child, anyone, riend

or amily, is able to make a contribution

up to the annual limit. No withdrawals are

permitted until the child reaches the age o

18, at which point their account is automatically

converted into an adult ISA giving them ull

access to their investments and savings. n

Past perormance is not necessarily a guide to the

uture. Te value o investments and the i ncome

rom them can all as well as rise as a result o

market and currency uctuations and you may

not get back the amount originally invested. ax

assumptions are subject to statutory change and

the value o tax relie (i any) will depend upon

your individual circumstances.

Let us heLp you maKe

the right isa choiceTis tax year you can shelter up to11,280 rom tax by investing in anISA. o discuss how we could help yousave tax and make more o your ISAinvestments, please contact us. Dontmiss the 5 April deadline to benetully rom this years ISA allowance.

EalTH CREaTION lONG-TERm CaRE

A fLexIbLe wrApper

An ISA is not itsel an investment its a exible wrapper

under which a wide range o investments can be made, and

the proceeds are ree o capital gains or income tax. You

can choose rom two types o ISA Stocks & Shares ISAs

(shares, bonds or unds based on shares or bonds) and Cash

ISAs. Stocks & Shares ISAs are also known as Equity ISAs.

your questIons Answered

he 5 April ISA deadline is ast approaching and, i you

dont invest by then, you will lose your 2012/13 tax year

ISA allowance orever.

Here are answers to some o the most common

questions we get asked about ISAs.

Q. What is an ISA?

A. ISAs began on 6 April 1999. With an ISA you are

entitled to keep all that you receive rom that investment

and not pay any tax on it. You can save up to

11,280 in the current 2012/13 tax year. A tax year runs

rom 6 April to 5 April in the ollowing year. he ISA

scheme provides dierent ways o saving to meet peoples

dierent needs. You can plan or the short term or put

your money away or much longer.

Q. What are the dierent types o ISA?

A. here are two types o ISA: Cash ISAs and Stocks

& Shares ISAs. In each tax year you can put money, up

to certain limits, into one o each. Cash ISAs may be

suitable or short-term savings, so that you can get at

your money easily.

Stocks & Shares ISAs may be appropriate i you can

aord to leave your money untouched or longer than,

say, ive years.

Q. Can I have an ISA?

A. You have to be aged 16 or over to open a Cash ISA, or

18 or over to open a Stocks & Shares ISA. You also have

to be resident and ordinarily resident in the UK or t ax

purposes, or a Crown employee, such as a diplomat or

a member o the armed orces, who is working overseas

and paid by the government. he spouse, or civil partner,

o one o these people can also open an ISA. You cannot

hold an ISA jointly with, or on behal o, anyone else.

Q. How many ISAs can I have?

A. here is a limit to t he number o ISA accounts you

can subscribe to each tax year. You can only put money

into one Cash ISA and one Stocks & Shares ISA.

But, in dierent years, you could choose to save with

dierent managers. here are no limits on the number o

dierent ISAs you can hold over time.

Q. How much can I put into ISAs?

A. In the tax year 2012/13, which ends on 5 April 2013,

you can put in up to 11,280 into ISAs. Subject to this

overall limit, you can put up to 5,640 into a Cash ISA

and the remainder o the 11,280 into a Stocks & Shares

ISA with either the same or another provider.

So, or example, you could put:

5,640 into a Cash ISA and 5,640 into a Stocks &

Shares ISA; or

3,000 into a Cash ISA and 8,280 into a Stocks &

Shares ISA; or

nothing into a Cash ISA and 11,280 into a Stocks

& Shares ISA

Q. What are the tax beneits o an ISA?

A. You pay no tax on any o the income you re ceive rom

your ISA savings and investments. Tis includes dividends,

interest and bonuses. UK dividend income has been taxed

at source at the rate o 10 per cent and this cannot be

reclaimed by anyone. You pay no tax on capital gains arisi ng

on your ISA investments (losses on ISA investments cannot

be allowed or Capital Gains ax purposes against capital

gains outside your ISA). You can take your money out at

n times like these,

very penny counts.

nterest rates are at

istoric lows and rising

nation can erode

ur buying power. But

ne way to mitigate

hese eects is to shield

avings rom tax by

nvesting through an

ndividual Savings

Account (ISA).

Have you ully used your 2012/13 ISA allowance?

Measures introduced through theCare and Support Bill come intoeect in April 2017

Bills or long-term care in old age are to be capped at

75,000 in England. Te recent announcement or

changes to social care is thought to be part-unded by a

reeze on the inheritance tax nil rate band threshold.

Chancellor George Osborne announced during

the Autumn Statement 2012 that inheritance tax

rates would rise rom 325,000 (650,000 or

married couples and registered civil partners) to

329,000 (658,000 or couples) in 2015/16. Tis

will now be delayed until 2018/19. As a result o this

three-year extension, more people could be subject toan inheritance tax bill. Inheritance tax is charged at

40 per cent and is payable when the value o an estate

exceeds the available nil rate band threshold.

dIsAppoIntment

At the LeveL of the cAp

Jeremy Hunt, the Health Secretary, told the

Commons in February that the historic long-term

care reorms would save thousands o people rom

having to sell their amily home to pay or care.

Some campaigners voiced their disappointment at

the level o the cap, which was more than double the

35,000 recommended by the independent Dilnot

Commission in 2011.

meAns-tested

government support

Alongside the cap, Mr Hunt announced a rise rom

23,250 to 123,000 in the asset threshold beneath

which people will receive means-tested government

support or care bills. He also announced a lower cap

on costs or people who develop care needs beore

retirement age, as well as ree care or those who have

needs when they turn 18.

Andrew Dilnot, whose report recommended a

cap o between 25,000 and 50,000, said he was

disappointed by the governments proposal o a

higher level, but did not think it would undermine

his system. Te proposed 75,000 cap rom 2017

equated to 61,000 at 2011 prices, he p ointed out.

he measures will be introduced through

the Care and Support Bill and come into eect in

April 2017.n

hoW can We heLp you?We recognise that everyones needs are dierent

and choosing the best care provision or you or

a amily member is an important decision. o

discuss how we could help you make an inormed

choice, please contact us.

Te 5 April ISAdeadline is astapproaching and,i you dont investby then, you willlose orever your2012/13 tax yearISA allowance.

your IsAALLowAnceI you are over 18

and a UK resident,then each tax yearyou have an ISA

allowance.

stocks &shAres IsA

Te allowances orStocks & Shares ISAsor this tax year and

the next one are:

2012/13: 11,280 2013/14: 11,520

dId you know?You can split your

allowance and save upto 5,640 in a Cash ISA

in 2012/13 and theninvest the remainder ina Stocks & Shares ISA.

Once a parent or guardianopens the account ortheir child, anyone, riendor amily, is able to makea contribution up to theannual limit.

sociaL care in oLdage capped at 75,000


9/15

Youve

protectedyour mostvaluable assets.But how financially secure areyour dependents?

Timely decisions on how jointly owned assets are held,

the mitigation of inheritance tax, the preparation of a

will and the creation of trusts, can all help ensure yourdependents are financially secure.

Contact us to discuss how to safeguard your

dependents, wealth and assets, dont leave it until

its too late.

6

CONOmy

uk crediT raTingdowngrade

overnments cApAcIty

o repAy Its debtsedit ratings provide an indication o a

vernments capacity to repay its debts, but

y concerns about the downgrade leading to

rise in the borrowing costs or the UK appear

erplayed, at least i the recent experiences

the US and France are any indication: the

S lost its AAA status in August 2011 while

ance was d owngraded in November 2012. Te

rrowing costs o both nations have declined

nce their respective downgrades while their main

ockmarket indices have risen signicantly.

IscAL consoLIdAtIon

rogrAmme

Te implications o the UKs downgrade are likely

prove more political than economic. Moodys

nouncement highlighted the challenges that

ubdued medium-term growth prospects pose to

e governments scal consolidation programme

d the coalition government continues to ace

bstantial challenges in its attempts to reduce

e UKs debt levels. Politicians have placed

nsiderable value on the UKs top credit rating

ndeed, in the Conservative Partys maniesto o

ring 2010, George Osborne pledged to saeguard

Britains credit rating. As such, the news o the

downgrade puts more pressure on the Chancellor

o the Exchequer than on the economy itsel.

cAtALyst for fresh troubLe

aking everything into consideration, a drop

in the UKs credit rating is not likely to make

much dierence to the undamental perormance

or health o the countrys economy. Although

Moodys decision highlights the challenges that

the government ace, the downgrade itsel is likely

to represent a symptom o the existing problems

rather than a catalyst or resh trouble.

promIsIng

growth prospects

Te decline in the value o sterling is likely to

continue, as investors move their money into

currencies used by countries with more promising

growth prospects. A weaker p ound would certainly

help exporters, but it also makes imports more

expensive. Te price o petrol has already risen over

the past month, and urther increases like this are

likely to put more pressure on household incomes

and company prots, as well as on economic growth

as a whole. A lower credit rating could also make it

more expensive or the UK to borrow money.

Longer to

resoLve thAn expectedIn a similar way to borrowing rom a High Street

bank, i you are in a well-paid job and are living within

your means, you will have to pay a lower interest

rate on a loan than someone who the bank thinks is

overstretched and maybe not able to keep up with

repayments. At present, the UK needs to borrow more

than 100bn a year rom investors, both at home and

around the world. It seems that the UKs economic

problems, in line with many other countries, will take

longer to resolve than expected. n

Te credit rating agency Moodys, at the end o February, downgraded the UKs sovereign debt rating rom AAA to AA1,

elegating the UK to the second tier or the rst time since 1978. Te announcement made headline news, but it was ar

rom unexpected and the possibility o a downgrade had been predicted; the coalition government is taking longer than

xpected to reduce the UKs sizable decit and all three leading credit rating agencies Fitch, Moodys and Standard &

oors had already placed the UK on a negative outlook during 2012, stoking expectations o a downgrade.

Te UK has lost its AAA credit rating or the rst time since the 1970s

aking everythinginto consideration, adrop in the UKs creditrating is not likely tomake much dierenceto the undamentalperormance or health othe countrys economy.


10/15

19

THE NEWS

Th ppct f a l pd f pltcal ctaty fllw lct

italy, th z thd-lat cy, ha hattd th f ay

cal epa facal akt ad dtatd that th ccy

a py t hck.

ThE iTaliaNElECTiONUncertain election results rekindle euro-crisis ears

Italys protest vote against the

Eurocrats has wrenched market

attention away rom the hunt

or yield and back onto political

risk. he social disaection caused

by youth unemployment has been

strikingly relected by the surge o the

Five Star movement.

Italian economic undamentals are

ragile and the recession still deep. At

best, the political impasse in Italy will

push back the markets expectation o a

recovery there. At worst, the contraction

could deepen as consumer and business

condence cowers under an extended

period o political uncertainty.

AusterIty-fIrst

soLutIon

Te elections have also emphasised that

the most powerul opposition to the

euro-zone crisis managers austerity-rst

solution to the blocs nancial crisis could

come rom the ballot box. Tree polls last

yeara reerendum in Ireland on new

scal rules and elections in the Netherlands

and Greecewent in avour o the euros

political masters, in Greeces case only just.

However, in Italy, the euro zone seems to

have run out o luck in a vote interpreted as

a rejection both o the countrys traditional

inancial-market tranquillity ollowing

the promise rom European Central

Bank President Mario Draghi in July to

do whatever it takes to save the euro.

A grAnd coALItIon

We can now expect weeks o hiatus in

the Italian political system as political

leaders discuss whether they can orm

a grand coalition that can govern the

country seems a certainty. Nothing

ormal can happen until March 15, at

the earliest, when Parliament is ormally

convened. By May 15, President Giorgio

Napolitanos mandate will expire and a

new president must be elected. An early

decision to call new elections seems

unlikely: to do so in an apparent eort

to get the right result or the EU risks a

urther backlash among voters.

fIscAL dIscIpLIne

Te political will to preserve Eurozone

stability has been proven in Greece. A new

government in Italy, when it is eventually

ormed, is more likely to be unstable and

ineective than unorthodox and radical.

Fiscal discipline is likely to be broadly

preserved even i serious structural reorms

are now o the agenda. Hence, the negative

market reaction to events in Italy may

provide an opportunity to buy into the

periphery, albeit at signicantly higher

yields. It will be important to keep an eye

on the rating agencies, who could well

jangle nerves with another downgrade i

policy uncertainty in Italy persists. n

political class and o the austerity many

Italians see as being imposed on them by

Brussels and Berlin.

fInAncIAL-mArket

trAnquILLIty

he return o growth in Southern

Europe is oicially projected to be

reached in the next 12-18 months, but

may have been urther postponed due to

recent uncertainty. But there was no sign

o any rethink: euro-zone governments

and the European Commission have

urged Italy to stick to the path o

economic overhauls and budget

stringency. he election has challenged

the optimism beginning to emerge

among politicians that the crisis was

over, which had been encouraged by the

Italian economic undamentals are ragile

and the recession still deep. At best, the

political impasse in Italy will push back the

markets expectation o a recovery there.

Te elections havealso emphasised thatthe most powerulopposition to the euro-zone crisis managersausterity-rst solutionto the blocs nancialcrisis could come romthe ballot box.

Silvio Berlusconi


11/15

0 21

warren buffeTT,one of The mosTsuccessful invesTorsof The 20Th cenTury

IndIng Low-prIced vALue

hile evaluating the relationship between a stocks

vel o excellence and its price, Buett asks himsel

veral questions to nd low-priced value:

As the compAny

onsIstentLy

erformed weLL?

e looks at a companys return on equity (ROE) and

termines whether or not they have consistently

rormed successully, compared with others in the

me industry. However, looking at the ROE o a

mpany over the last year alone isnt enough. o get

better perspective o historic perormance, investors

ould view the ROE rom the past 5-10 years.

As the compAny AvoIded

xcess debt?

uett also considers the debt/equity ratio o

company, as he would preer to see minimal

mounts o debt, meaning that earnings growth

being generated rom shareholders equity and

ot rom borrowed money. A high level o debt

mpared to equity will result in volatile earnings

d large interest expenses.

re profIt mArgIns hIgh?

re they IncreAsIng?

ot only does the protability o a company

pend on a good prot margin but also their

argins consistently increasing. A high prot

argin means that the company is not only

ecuting its business well, but increasing margins

eans management has been efcient and

ccessul at controlling expenses. Investors should

ok back at least ve years to get a clear indication

a companys historical margins.

how Long hAs the compAny

been pubLIc?

One o Buetts criteria is longevity: value investing

means looking at companies that have stood the

test o time but are currently undervalued. He will

usually consider companies that have been around

or at least 10 years, meaning that he would not

consider most o the technology companies that

have had their initial public oerings (IPOs) in the

past decade. Historical perormance is also crucial

determining i a company can perorm as well

going orward as it has done in the past is tricky,

but Buett is very good at it.

do the compAnys products

reLy on A commodIty?

He will usually steer clear rom investing

in companies whose products are

indistinguishable rom those o their

competitors; i they d ont oer anything

dierent than another irm within the same

industry, Buett sees little that sets them apart.

He uses the term economic moat as a way o

describing any characteristic that is hard to

replicate; the wider the moat, the harder it is or

a competitor to gain market share.

Is the stock seLLIng At A

25 per cent dIscount to

Its reAL vALue?

Te most difcult part o value investing is

determining whether a company is undervalued,

and is Buetts most important skill. Investors

must analyse a number o business undamentals,

including earnings, revenues and assets, to

determine a companys intrinsic value, which is

usually higher than its liquidation value.

Buett will then compare it to its current market

capitalisation. I his measurement o intrinsic

value is at least 25 per cent, he s ees the company

as one that has value - the key to this depends on

his unmatched skill in accurately determining this

intrinsic value.

the proof Is In the puddIng

As you can see rom the above examples, Buetts

investing style reects a practical, down-to-earth

attitude. Tis value-investing style is not without its

critics, but nobody can question the success it has

brought. Te thing to remember is that the most

difcult thing or any value investor is in accurately

determining a companys intrinsic value. n

Inormation is based on our current

understanding o taxation legislation and

regulations. Levels and bases o and relies rom

taxation are subject to legislative change and their

value depends on the individual circumstances o

the investor. Te value o your investments can go

down as well as up and you may get back less than

you invested.

investment strategyOur services cover a wide range o

investment products and strategies. Ourdedication to fexibility and innovation

ensures we are able to secure new andtactical opportunities to help with your

investment strategy. To discuss what you

need to do next, please contact us orurther inormation.

Warren Buett is considered by many as the most successul investor o the 20th century and named one the most inuential people in the world by ime magazine in 2012. In this article we look at Buetts

nvestment mythology and analyse some o the most important tenets o his investment philosophy.

Te important tenets o his investment philosophy and mythology

Buett also considers the debt/equity ratio o

a company, as he would preer to see minimalamounts o debt, meaning that earnings

growth is being generated rom shareholdersequity and not rom borrowed money. A highlevel o debt compared to equity will result in

volatile earnings and large interest expenses.

ROfIlE PROfIlE

Warren Buett


12/15

Isnt it time

you had afinancial review?Well make sure you get the rightadvice for your individual needs.

We provide professional financial advice covering

most areas of financial planning, including, tax-efficient

savings, investment advice, retirement planning, estate

& inheritance tax planning, life protection, critical illness

cover and income protection.

t i i, la a .

23

IN THE NEWS

A faly wth 2 chld cld th aal pdabl c dp by

p t 1,752 p.a. 2013/14, whl th wth 3 chld cld l 2,449 pa. Wth

pc fat tha c, t patv f ay fal t kw hw

thy wll b affctd, ad what pt a avalabl t hlp pv th tat.

ThE ChildbENEfiT

Tax CharGETe child benet tax charge, introduced on 7 January, aects over one million amilies

whAt Are the

ImpLIcAtIons of

the tAx chArge?

Benet payments will continue to be

paid in ull to the claimant, but i the

households highest earners personal

taxable income exceeds 50,000 per tax

year then the amount will be clawed back

by way o a tax charge. Once taxable

income exceeds 60,000 in a tax year, the

charge will be 100 per cent o the benet

claimed i.e. the value o the benet is wiped

out. For incomes between 50,000 and

60,000, the tax charge is 1 per cent

or every 100 income exceeds the

50,000 threshold. Overall, these people

will benet, as the tax charge will always be

less than the benet claimed.

For the 2012/13 tax year, the tax charge

will never exceed 25 per cent o the yearly

benet claimed as the tax charge will only

have been operational or one quarter o

the current tax year. As such, the tax will

be limited to 438 where benet is being

claimed or 2 children, or 612 or

3 children. Around 500,000 people will

need to complete a tax return or the rst

time. Te tax charge will be collected

at 2 per cent or payments over the upper

earnings limit - i the employer agrees to

pass their 13.8 per cent NI saving on to

the pension then the contribution itsel

can be increased. Another alterative is

to simply continue claiming the benet

and paying the tax, which is a more likely

consideration or those amilies where

the higher earner has adjusted net income

between 50,000 and 60,000, when the

benet will still exceed the tax charge. n

under sel assessment; thereore, or those

submitting online, the rst return will need

to be in by 31 January 2014. It is important

to note that ailure to do so could result in

nes and late payment penalties.

whAt ActIon

cAn be tAken?

Tis will very much depend on an

individuals personal circumstances and

priorities. Making an individual pension

contribution to reduce income to below

50,000 would wipe out the child benet

tax charge altogether, while higher rate

tax relie would also be available on the

contribution i it all alls in the higher rate

band. Any contribution reducing income

to a level between 50,000 and 60,000 will

still result in a surplus o child benet over

the tax charge, and a tax return would still

need to be completed.

A pension contribution by salary

sacrice is an alternative way o reducing

taxable income. With the employers

agreement, an employee can reduce

their contractual income in return or

an equivalent employer payment to their

pension. Te employee will also save NI

are youconcerned aboutthe chiLd benefittax chargebeing unfair andcompLex?To discuss how we could help you

understand the complexities o

the child benet tax charge andsecure the best results or your

individual needs, please contact

us or urther inormation.


13/15

4 25

ETIREmENT

how To makeThe mosT ofyour pension

ith less than ve years to go beore retirement,

ere is still a lot you could do to maximise your

entual pension income. ake a look at our

ecklist to see how we could help you make the

ost o your pension pot.

heckLIst In the run-up to

our retIrement

Request up-to-date statements or your personal

and company pensions

Get an up-to-date state pension orecast at

direct.gov.uk

race any lost pensions through the Pension

racing Service at direct.gov.uk

Include any investments and savings when

assessing your retirement income

Seek proessional nancial advice i theres a

signicant shortall, as delaying or phasing

retirement could be an option

Reduce any potential investment risk to protect

your pension rom any downturns in the stock

market as you approach retirement

I possible, augment your pension by

increasing your contributions and/or adding

lump sum payments

ake advantage o any unused pension tax

allowance. Current rules allow you to carry

unused allowances orward or three years

n hink about whether you want to take

your pension as an annuity or through

income drawdown

n I you want to take an annuity, decide

which type. An annuity can, or example,

increase by a set percentage or be linked to

the rate o inlation

n Look at impaired lie annuities i you have any

serious health issues

n I appropriate, consider consolidating your

pension or pensions to a Sel-Invested

Personal Pension (SIPP) i you want to take

income drawdown

n Consider whether you want to take 25 per cent

o your pension pot as a tax-ree lump sum and

think about how you might use this money

n Write a will or review any existing will

you have in place

n Check what will happen to your pension

i you die

n Assess the value o your estate or inheritance

tax (IH) purposes and consider ways to reduce

a potential liability

Seek proessional nancial advice i the value o

your estate is signicantly higher than the nil rate

IH band (currently 325,000) or your nancial

aairs are complicated n

All fgures relate to the 2012/13 tax year. A

pension is a long-te rm investment, and the und

value may uctuate and can go down. Your eventual

income may depend upon the size o the und at

retirement, uture interest rates and tax legislation.

Te Financial Services Authority does not regulate

estate planning, wills or trusts.

need heLp?What should you be doing in the run-up

to retirement? To discuss your options,

please contact us or more inormation.Dont leave it to chance.

Te closer you get to retirement, the greater the need to preserve your savings and ensure they will last

ll through your retirement. In addition, youll need to consider whether you need to make changes toour investments as you approach retirement.

ake a look at our checklist to see how we could help you

With less than ve years togo beore retirement, thereis still a lot you could doto maximise your eventualpension income. ake a lookat our checklist to see howwe could help you make themost o your pension pot.


14/15

6

THE NEWS

a bleak picTure ofpeoples abiliTy To copewiTh financial shocks

AnAgIng to

ut somethIng AwAythough 63 per cent o Britons are managing

put something away, nearly a third (32 per

nt) have a total pot o less than 1000, which

less than the UK average combined monthly

ortgage and council tax costs (1009). In

dition, almost one in ive o those who

pect their inancial priorities to change are

riously concerned about job security

r the coming year.

Tese statistics paint a bleak picture o peoples

ility to cope with nancial shocks that could hit

w or in the uture.

AmILIes shouLder

he burden

25 per cent o respondents with amilies have

aned a substantial amount to their children,

en to simply help them meet daily living

penses. Support is also provided or higher

ucation and property purchases, with an average

an o almost 15,000 an 11 per cent increase

om the amount reported last year. Interestingly,

hen asked what theyd rather give their children

oney or, parents opted or helping them get on

the housing ladder (63 per cent) over university

es (21 per cent).

A stArk ImpAct

on pArents fInAncesTis level o support is having a stark impact on

parents nances with a quarter (24 per cent)

cutting back on their savings and almost one in ten

(8 per cent) stopping saving altogether.

However, it isnt just parents unding their children;

whole amilies are pulling together to support each

other. Te report shows that grandparents are helping

their grandchildren; children are lending money to

their parents, and siblings are also supporting each

other. Specically, on average grandparents have lent

3,665 to their grandchildren, 6 per cent have lent

to their parents with an average amount o

4,371 exchanging hands and 9 per cent o people

have lent an average 3,485 to their sibling.

the sAvIngs

shortfALL spIrAL

Te wider economic climate is also increasing the

pressure on those struggling to save. 30 per cent

o people report that they have been orced to

cut back on their savings by rising costs, whilst a

urther 27 per cent are saving less than two years

ago, principally due to a lower level o disposable

income. Across the board, the majority (64 per

cent) o people report that having no money

available is a major barrier to saving.

ImportAnce of

buILdIng A sAfety netPeople clearly recognise the importance o saving

something towards their uture nancial wellbeing,

which is encouraging. Te importance o building

a saety net or themselves and their amilies is a

priority, with 63 per cent o people reporting that

they managed to save some money in the last

12 months. However, just a quarter o those people

believed they were saving enough to meet their

long-term needs, with a urther 37 per cent saying

they would denitely not be achieving this goal.

When we are aced with immediate inancial

commitments, such as mortgage payments and

day to day living expenses, then it is absolutely

necessary to give these pressing needs priority.

However, taking a wholly short-term view o our

inances will mean we are unprepared or the

inancial needs and challenges that lie ahead

in the uture. n

is it time to taLK to us?To discuss how we could help you toreview your current nancial situation

and plan or your uture goals, please

contact us or urther inormation.

Almost 15 million people across the UK (31 per cent o the adult p opulation) are not currently making any eorts to

ave or the uture, while eight million people (17 per cent) have no savings to their name at all, according to Scottish

Widows seventh annual Savings and Investment Report.

Are you prepared or the nancial needs and challenges that may lie ahead in the uture?

Achieving a

comfortableretirement.Do you need a professionalassessment of your situation tomake this a reality?

If you are unsure whether your pension is

performing in line with your expectations, and that

youve made the right pension choices dont leave

it to chance.

Contact us to discuss these and other important

questions, and well help guide you to a

comfortable retirement.


15/15

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RETIREmENT

As your wealth grows, it is inevitable that your estate becomes more complex. With over400,000 people now expected to reach age 75 each year [1], more and more people could beaced with a 55 per cent tax charge on any money le in their pension und when they die.

Will yOur rETirEmENTSTraTEGy miNimiSEpOTENTial TaxES aNdduTiES ON yOur dEaTh?Immediate access to your pension unds, allowing you totake out what you want, when you want it

free of Any deAth tAxMoney saved via a pension can be passed on to a loved

one, usually outside the pension holders estate and ree

o any death tax, provided the pension und has not

been touched and the pension holder dies beore age

75. People ortunate enough not to need immediate

access to their personal pension may thereore decide

not to touch those savings or as long as possible.

However, once someone reaches age 75, the

death benet rules change dramatically and their

entire pension und may become subject to a 55 per

cent tax charge on death. Tis means it can become

a race against time or many individuals to reducethe impact o this charge.

fLexIbLe drAwdown LIfeLIne

It can take years to move money out o the 55 per

cent death tax environment using capped income

withdrawals due to the set limits on the amount

that can be withdrawn each year. A lieline can,

however, come in the orm o exible drawdown.

Flexible drawdown can provide people with

immediate access to their pension unds, allowing

them to take out what they want, when they want

it. Flexible drawdown is only available to people

who are already receiving 20,000 p.a. minimum

guaranteed pension income which can include

their state pension entitlement.

For individuals who wish to leave as much as

possible to their beneciaries, taking income rom

their pension and giing it to their beneciariesunder the normal expenditure rules will allow

certain amounts o money to be passed to their

beneciaries outside their estate.

pAssIng money

outsIde the estAte

Tis may be more tax-efcient than suering the

55 per cent death tax charge, or the 40 per cent

inheritance tax charge i the money is simply

brought into their estate. Any money taken out

under exible drawdown will be subject to income

tax, so higher rate tax payers need to be careul toensure the money is either passed on outside their

estate tax-eectively or that their estate is within

the annual IH allowance o 325,000 (2012/13).

Tis may be particularly relevant or people who

are approaching, or who have already reached,

their 75th birthday, especially as many older

pension arrangements will not allow pension

savings to continue to be held beyond that date.

Younger people who have accessed their pension

und, even i its just to take the lump sum cash,

could also be at risk o the 55 per cent death tax,

and could benet rom moving unds out o this

environment as efciently as possible. n

Want to investigatethe opportunitiesavaiLabLe to you?Te benets o exible drawdown should not

be underestimated. Putting o accessing your

pension income could store up problems when

you reach age 75. But once someone does access

their pension und, regardless o age, exible

drawdown can dramatically help with estate

planning. o investigate the opportunities

available to you, please contact us today.

[1] Oice o National Statistics, igures rom 2011 Census.

Flexible drawdown is a complex product. I you are at all uncertain about its suitability or

your circumstances you should seek proessional fnancial advice. Your income is not secure.

Flexible drawdown can only be taken once you have fnished saving into pensions. You

control and must review where your pension is invested, and how much income you draw.Poor investment perormance and excessive income withdrawals can deplete the und.

Documents

eSmart Money April 2013