Virtue Money Magazine 2014 Sept by Virtue Money

september/october 2014

Do you know your Inheritance Tax numbers?

HOW BRIGHT IS YOUR FINANCIAL FUTURE?

How to shelter your assets from unnecessary tax

Save smart and make your existing money grow 5 tips to help you be more confident about your financial future

CLEVER RETIREMENT STRATEGIES How to influence the income you’ll receive in your retirement

Pension reform: what you need to know

What’s in your basket?

8 steps to a BRIGHTER retirement

Further clarity on the new rules for pensions published by the Government

Diversifying your assets helps spread risk by lessening the potential for losses

Make sure you can afford a comfortable lifestyle when you retire

Virtue Money, The Hub, East Gateway Business Park, Beancross Road, Grangemouth, FK3 8WH Phone: 0345 034 34 24 Email: info@virtuemoney.com Web: www.virtuemoney.com Virtue Money is trading style of Policy Services Ltd. Registered office: Priorsford, 75 Grahamsdyke Road, Bo’ness, EH51 9DZ. Registered in Scotland No. 230167. Policy Services Limited Ltd. is authorised and regulated by the Financial Conduct Authority.

Financial planning is our business. Weâ&#x20AC;&#x2122;re passionate about making sure your 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 weâ&#x20AC;&#x2122;ll provide you with a complete financial wealth check.

CONTENTS

INSIDE THIS ISSUE 05

Save smart and make your existing money grow

How bright is your future?

5 tips to help you be more confident about your financial future

Millions of over-40s expect to carry on working until they physically can’t continue

Pension reform: what you need to know Further clarity on the new rules for pensions published by the Government

Do you know your Inheritance Tax numbers?

Clever retirement strategies

How to unlock your assets from unnecessary tax

How to influence the income you’ll receive in your retirement

What’s in your basket?

A new-look NISA way to save and invest

Plugging the household gap

Pension decluttering

Diversifying your assets helps spread risk by lessening the potential for losses

Have you taken advantage of your larger taxefficient allowance?

UK adults forced to borrow money from family members

Have you considered tidying up your arrangements?

What next for interest rates?

THE COST OF RAISING A CHILD

Part-time pensioners

Why the days of ultra-low interest rates look numbered

Child expenses from birth to age 21

Taking a more gradual approach to retirement

Inside this issue Welcome to the latest issue of our financial magazine, crammed full of topical articles dominated by the recent pension rule changes and some significant challenges for investors in the form of geopolitical upheavals, economic growth and monetary policy. On 10 July this year, the Office for Budget Responsibility warned that many of us might not be eligible for a State Pension until we reach the age of 70. That’s the minimum age the Government will be able to afford to pay our pensions by 2063 if it is also to stop the national debt spiralling out of control. Read the full article on page 10. Most investors are used to hearing the term ‘diversification’ – but it has a broader meaning than many realise. On page 12, we explain the importance of diversification as investors face new challenges this year and next. The new Individual Savings Account (NISA) rules were introduced in July. On page 13, we explain how savers and investors now have more flexibility and a larger tax-efficient allowance than ever before. Retirement should be an exciting time, and these days there’s more scope than ever to arrange your finances the way you want them. On page 08, we consider why the financial decisions you make need careful consideration. A full list of the articles featured in this issue appears on page 03 and opposite.

The nation’s favourite overseas retirement destinations Over 6 million UK adults plan to move abroad in later life

Geo-political matters Significant challenges for investors this year and beyond

Europe’s economic slowdown Is there room for any further disappointment?

The hidden cost of divorce

8 steps to a brighter retirement

UK couples are spending more than £44,000 on average when they divorce or separate

Make sure you can afford a comfortable lifestyle when you retire

The content of the articles featured in this publication is for your general information and use only and is not intended to address your particular requirements. Articles should not be relied upon in their entirety and shall not be deemed to be, or constitute, advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts. Levels and bases of, and reliefs from, taxation are subject to change and their value depends on the individual circumstances of the investor. The value of your investments can go down as well as up and you may get back less than you invested. Past performance is not a reliable indicator of future results. Will writing, setting up a power of attorney and trusts are not regulated by the Financial Conduct Authority. Not all inheritance tax planning is regulated by the Financial Conduct Authority. 04

Wealth creation

Save smart and make

your existing money grow 5 tips to help you be more confident about your financial future 1 Always have some money that you can access easily and quickly for emergencies, before looking to invest for the longer term. It’s reassuring to know you’ve got money set aside to cover your rent, mortgage, food and utilities for a number of months. 2 Avoid the risk of your savings losing real value. Regularly check the interest rate you’re getting to see if you can do better and beat inflation. 3 Once you’ve built up enough cash, consider investing to build up savings for the longer term. One tax-savvy option is a Stocks & Shares New Individual Savings Account (NISA). From 1 July, the annual NISA limit increased to £15,000, providing even greater opportunity to start to build your wealth. In the UK, hundreds of people are reported to have amassed NISA funds in excess of the magic million by squirrelling away the full limit each tax year since the early 1990s.

4 Don’t delay. The earlier you start investing for your future, the more chance your money has to grow. 5 Don’t miss out on free money. If you’re employed, chances are you’ve been auto-enrolled in a company pension, with employer contributions and generous tax benefits from the Government, so take advantage of this. If not, take advantage of a personal pension – don’t leave it to chance. n

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE. PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE. A PENSION IS A LONG-TERM INVESTMENT. THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN. YOUR EVENTUAL INCOME MAY DEPEND UPON THE SIZE OF THE FUND AT RETIREMENT, FUTURE INTEREST RATES AND TAX LEGISLATION.

Do you need to do something about it today? To afford the lifestyle you want, you need to do something about it today. It’s never too early to start saving and investing in order to protect your future. To find out more about how we can help you plan, please contact us for a full review of your particular situation.

Retirement

How bright is your future? Millions of over-40s expect to carry on working until they physically canâ&#x20AC;&#x2122;t continue

Whatâ&#x20AC;&#x2122;s the best course of action for you? Before you make any decision about your retirement planning, we strongly recommend you obtain professional financial advice. We will assess your personal circumstances and advise you on the best course of action for you. To discuss how we could help, please contact us for more information.

Retirement

ne in five Britons admitted that they are planning to ‘work until they drop’ in order to have a comfortable retirement, a study from Aviva has revealed. Worries about being able to afford their ‘ideal retirement’ means millions of over-40s are expecting to carry on working until they physically can’t continue.

Day-to-day bills Others are concerned about simply paying their day-today bills without the regular income from employment coming in. A further three in ten expect to continue working until at least a few years past the state retirement age. Retirement should be a time to look forward to, whether it’s to get away from the pressures of work or simply to have more time on our hands. But worryingly, it seems there are a large number of people who are so concerned about what their financial situation is going to be like, they are beginning to consider the possibility that they will always be working.

Give up work There will be a number of people who simply will not want to give up work, but many would prefer to spend their retirement doing what they want to do, rather than continue to work. And while some will be working to ensure they have enough money to have the kind of retirement they are hoping for, it seems there are some who will still be getting up every day to go to work simply to pay the bills. Your State Pension is unlikely to cover everything you want to do during your retirement and cover unexpected expenditure, so it’s important to have a financial plan in place to provide additional funds to give you some breathing space.

Budget 2014 changes The changes to pensions and annuities announced in Budget 2014 now mean you can spend your pension pot how you want, but given we’re all living longer too, it’s still important to make sure you have enough put by to cover your annual costs for the long term. The study of 2,000 over-40s found that while the average adult would like to retire around the age of 60, one in five believe they will be working right until the bitter end.

No plans in place More than three quarters said they are worried about being able to afford all they have planned during their retirement. Another 64% are concerned about simply paying for day-to-day living costs. But despite these fears, around three in ten over-40s have no plans in place to fund their retirement. Even among those who have a financial plan, 64% admit it’s probably not going to be enough to do everything they want to do. And almost two thirds of those surveyed wish they had started to plan for their retirement much earlier.

Active full lifestyle Worryingly, more than half don’t really have any idea what sort of sum they need to save in order to be able to achieve the kind of retirement income they are hoping for. It’s quite conceivable that people who retire at the State Pension age could live for 30 years in retirement, so it’s important that they have funds available to support them, especially if they want to have an active and full lifestyle. Over two thirds of those surveyed do have plans in place to fund their retirement, even though some are concerned that it’s probably not going to be enough, but others don’t have any idea of how much they need to save in order to have enough in retirement. n Source: Aviva. Methodology – 2,000 UK adults aged 40 and above were interviewed between 2–9 April 2014. INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE. PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE. A PENSION IS A LONG-TERM INVESTMENT. THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN. YOUR EVENTUAL INCOME MAY DEPEND UPON THE SIZE OF THE FUND AT RETIREMENT, FUTURE INTEREST RATES AND TAX LEGISLATION. THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

Retirement

PENSION REFORM:

what you need to know

The right to take 25% tax-free cash hasn’t been affected – there had been some speculation earlier this year that it would be impacted.

Further clarity on the new rules for pensions published by the Government Retirement should be an exciting time, and these days there’s more scope than ever to arrange your finances the way you want them. For example, you could continue to work and take your pension benefits. That flexibility is great, but it does mean that the financial decisions coming up need careful consideration.

ew rules for pensions have recently been published by the Government, with more details on the changes that will apply from April 2015. This follows on from the initial announcement in the March Budget and gives a clearer picture of what these changes could mean for you.

Freedom to transfer your pension People will now not face a ban on certain pension transfers. If you’re in a private sector defined benefit scheme (for example, a company pension that will pay an income linked to your years of service and salary), if appropriate you’ll still have the choice to transfer it to a more flexible kind of pension. That choice applies before you start taking the pension. The option to transfer is also available for people who are in public sector schemes that are ‘funded’, which includes the Local Government Pension Scheme and Universities Superannuation Scheme.

Annual allowance of £10,000 once you’re taking a flexible income The new rules commencing from April 2015 will apply to people who are in a ‘give and take’ situation. In other words, people who are still paying into a private or workplace pension and who are also taking a flexible income from a pension (an annuity or State Pension will not count). These rules don’t apply if you’ve just taken your tax-free cash – they apply when you start to take a flexible income beyond that. In this situation, the amount you’ll be able to pay into your pension will drop to £10,000 a year.

55% pension death benefit tax charge The Government has made it clear that it intends to reduce this tax rate. We’ll have to wait until the Autumn Statement later this year to find out the exact figure. This applies when a pension lump sum is passed on to your loved ones if you die aged 75 or older or where you’ve started to take an income from your pension.

Obtain professional advice

Age 55 becomes age 57 in 2028

There’s an important safeguard here – before you proceed with this kind of transfer, you should obtain professional advice from an adviser who is not associated with the pension scheme and who is authorised by the regulator. There’s a lot to weigh up when considering whether to transfer your guaranteed pension. As the Government has said, ‘for the majority of people, but not all, it will remain in their best interest to stay in their defined benefit scheme.’

Under the new tax rules, the Government will increase the minimum age at which people can access their private pension from age 55 to 57 in 2028. This affects those born from March 1973 onwards and means people will need to wait until their 57th rather than 55th birthday to take money out of their private pension. This change is also being extended to public sector schemes, except the Police, Fire Service and Armed Forces pension schemes, where the qualifying age isn’t changing.

KNOW YOUR NUMBERS

Do you know your Inheritance Tax numbers? How to UNLOCK your assets from unnecessary tax

£325,000 The first £325,000 value of your estate is called the ‘Nil Rate Band’ because although it is taxable to Inheritance Tax (IHT), it is taxed at 0% (tax year 2014/15).

40%

25% tax-free cash continues The right to take 25% tax-free cash hasn’t been affected – there had been some speculation earlier this year that it would be impacted. n

Stay on track for the retirement you want Saving for your retirement is one of the most important things you can do, and it’s essential to make sure you review your pension regularly and stay on track for the retirement you want. To review your situation, please contact us for further information. We look forward to hearing from you.

Currently, IHT is payable on death at this rate on the value of your net assets over £325,000 (tax year 2014/15).

£5,000

If your children get married, you can give them or their new spouse a lump sum up to this value completely free of IHT (tax year 2014/15).

£650,000 When a married couple or registered civil partnership estate exceeds this amount, IHT will usually only be paid on the excess, provided the necessary claims are made to HMRC within the appropriate time limits (tax year 2014/15).

£2,500

The number of years you must survive if you give away large amounts of money or valuable assets while you are alive, otherwise HMRC will tax If your grandchildren get married, you you for IHT as if you still owned them can give them or their new spouse a when you die (tax year 2014/15). lump sum up to this value completely free of inheritance tax (tax year 2014/15).

£3,000

Everyone has an ‘Annual Exemption’ for IHT of this amount every tax year (tax year 2014/15).

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE. A PENSION IS A LONG-TERM INVESTMENT. THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN. YOUR EVENTUAL INCOME MAY DEPEND UPON THE SIZE OF THE FUND AT RETIREMENT, FUTURE INTEREST RATES AND TAX LEGISLATION.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE. THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE INHERITANCE TAX PLANNING OR TAXATION ADVICE.

R E T I R E M E NT

Clever retirement strategies How to influence the income you’ll receive in your retirement

On 10 July this year, the Office for Budget Responsibility warned that many of us might not be eligible for a State Pension until we reach the age of 70. That’s the minimum age AT WHICH the Government will be able to afford to pay our pensions by 2063 if it is also to stop the national debt spiralling out of control.

his milestone could be reached as soon as 2037 – meaning that some people in their late 40s today may have to work to age 70. And if the population ages more quickly than currently forecast, the State Pension age could increase to age 75 in 2064. By then, the UK’s official budget watchdog says there could be more than one million people aged over 100 in the UK.

rates at historical lows, this is no easy task. It is important to remember that your pension income will not just be a function of the pension vehicle you choose – whether this is an annuity, income drawdown or another arrangement. You can also influence the income you receive in retirement by making clever use of different retirement strategies.

Life expectancy increasing

Three retirement strategies to consider

With life expectancy increasing at a rapid rate, you will probably live for longer than you think and, as such, your pension income will need to last longer. Therefore, it is essential to eke out as much income as possible from your retirement savings and, with interest

Defer your State Pension

Retirement should be a gradual phasing in of income to free up spare time – it does not necessarily have to mean that you stop

working or earning. There is no reason why you have to stop working or claim your State Pension when you reach State Pension age – currently 65 for men and 62 for women. If you put off claiming your State Pension, you can either earn extra State Pension or benefit from a one-off lump sum payment. If you have not yet claimed your State Pension and you want to put off taking it up, you do not need to do anything. Those already drawing their State Pension, but wanting to stop claiming it to earn more income, will have to contact their pension centre. It is, however, worth noting that the terms for deferring your State Pension are very different for those who reach State Pension age before 6 April

R E T I R E M E NT

2016 compared to those who reach it afterwards. For those who reach State Pension age before 6 April 2016 (men aged 64 or more at April 2015 or women aged 62 or more at April 2015), the rate of deferral is very generous – 10.4% per annum plus the inflationary increases. In comparison, the lump sum alternative may be poor value for money. For people reaching State Pension age after 6 April 2016, the rate of deferral at the time of writing this article had not been set but is expected to be 5% per annum plus inflation, and there will be no lump sum alternative.

Use employment to top up your pension

Furthermore, your employer will not pay National Insurance on the amount of bonus given up – usually at 13.8% – and if they wish, they can pass some or all of this saving back to you.

Company share pensions Those who hold shares in employer share schemes can place these within a self-invested personal pension (SIPP) and benefit from the tax relief. You can either sell the shares and invest proceeds into your SIPP or move the shares into the SIPP. Once the shares are transferred into a SIPP, any future growth and dividend payments will be tax-efficient.

If you are employed, there are a number ways in which you can top up your pension:

Salary sacrifice Salary sacrifice involves giving up some of your salary in exchange for payments into your pension. This will not only increase your pension contributions and overall pension fund but can also mean savings on income tax and National Insurance. You will receive tax relief, depending on the tax band you fall into. It is, however, worth remembering that a reduction in your salary could impact your ability to secure a mortgage, as banks and building societies use income to decide on loan eligibility.

Bonus sacrifice In a similar way to salary sacrifice, you can make potential tax savings by using bonus sacrifice to pay into your pension plan. If you are a high earner, chances are that you receive a basic salary as well as bonus payments. Typically, you will be offered the chance to sacrifice some of this bonus and instead have that money paid into your pension scheme. This is arguably one of the most taxefficient ways of getting extra money into your pension plan, since you are not taxed on the amount of bonus that you give up. Your total income is reduced and therefore you are only taxed on the income you actually receive. The part that goes into your pension is not taxed as it is instead an employer contribution. This means you save on income tax and National Insurance.

Retirement should be a gradual phasing in of income to free up spare time – it does not necessarily have to mean that you stop working or earning.

Build in inflation protection

If you are still saving for retirement, it is important that you keep increasing the amount you pay into your pension each year. If you don’t, inflation means that your monthly contributions will be worth less every year. If you expect inflation to rise, then consider investing your pension fund in higher-risk assets such as equities, as rising inflation will eat away at the more cautious investments such as cash, fixed interest and low-risk funds. You will have to take into consideration how many years it will be before you retire and whether you can afford to take the risk of investing in these assets. Once you reach the point of retirement, you can inflation-proof your income by opting for an inflation-linked annuity,

although these usually have a low starting level of income. Alternatively, you can look at using a drawdown arrangement, usually making use of a multi-asset approach to investment that aims to allow income to be withdrawn while maintaining the real value of your investments. Under this approach, you won’t have a guaranteed income, but you retain ownership and control of your assets while staying abreast of inflation if the investments perform well. However, it is sensible to make sure your essential expenses are covered with a source of secure income where possible.

Closer to retirement Retirement may be a long way off for you at the moment, but that doesn’t mean you should forget about it, and as you get closer it makes sense to have a clearer idea of what you’ll need to live on in the future and what your income might be. n

Enjoy the life you want The sooner you start to plan for your future, the easier it is to build up the kind of money you need to enjoy the life you want. To discuss your options, please contact us for further information about how we can help you build the pension income you want.

Investment

What’s in your basket? Diversifying your assets helps spread risk by lessening the potential for losses Most investors are used to hearing the term ‘diversification’ – but it has a broader meaning than many realise. Diversification is the process of investing in areas that have little or no relation to each other. This is called a ‘low correlation’.

Spreading investment risk You can also invest in assets that have a negative correlation. This means that the assets will move in opposite directions to each other. Diversifying your assets helps spread risk because you’re lessening the potential for losses. If you had all of your money invested in one asset, sector or region and it began to drop in value, your investments would suffer. By investing in assets that aren’t related to each other, while one part of your investment portfolio is falling in value, the others aren’t going the same way. Some assets may actually go up in value when others could decrease. It is also possible to diversify through investing in different markets, countries, companies and asset types.

Adverse market conditions Diversification is an essential part of building your investment portfolio. It can give you peace of mind that your investments will sustain in adverse market conditions and cushion losses. But it will not lessen all types of risk. Diversification helps lessen what’s known as ‘unsystematic risk’, such as drops in the value of certain investment sectors, regions or asset types in general. But there are some events and risks that diversification cannot help with. These ‘systemic risks’ include interest rates, inflation, wars and recession. This is important to remember when building your portfolio. n INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE. THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

Diversify by assets

country and one government’s fiscal policies. Many markets are not correlated with Having a mix of different asset types will each other – if the Asian Pacific stock spread risk because their movements are either unrelated or inversely related to each markets perform poorly, it doesn’t necessarily mean that the UK’s market will be negatively other. It’s the old adage of not putting all affected. By investing in different regions and your eggs in one basket. areas, you’re spreading the risk that comes Probably the best example of this is shares, or equities, and bonds. Equities are from the markets. However, you need to be aware that riskier than bonds and can provide growth in your portfolio, but, traditionally, when the diversifying in different geographical regions can add extra risk to your investment. value of shares begins to fall, bonds begin Developed markets like the UK and US are to rise, and vice versa. not as volatile as some of those in the Far Therefore, if you split your portfolio East, Middle East or Africa. Investing abroad between equities and bonds, you’re spreading the risk, because when one drops, can help you diversify, but you need to be comfortable with the levels of risk that come the other will rise to cushion your losses. with them. Other asset types, such as property and commodities, move independently of each other, and investment in these areas can Diversify by company spread further. Spread your investments across a range of different companies. The same can be said for bonds and property. One of the best Diversify by sector ways to do this is via a collective investment Say you held shares in a UK bank in 2006. scheme. This type of scheme will invest in a This investment may have been very basket of different shares, bonds, properties rewarding, so you decide to buy more or currencies to spread risk around. In the shares in other banks. When the credit case of equities, this might be 40 to 60 crunch hit the following year sparking the shares in one country, stock market or sector. banking crisis, the value of your shares in With a bond fund, you might be invested in this sector (financials) would have tumbled. 200 different bonds. This will be much more So once you’ve decided on the assets you want in your portfolio, you can diversify further cost-effective than recreating it on your own and will help diversify your portfolio. by investing in different sectors, preferably those that aren’t related to each other. If the healthcare sector takes a downturn, Beware of this will not necessarily have an impact on over-diversification the precious metals sector. This helps to Holding too many assets might be more make sure your portfolio is protected from detrimental to your portfolio than good. dips in certain industries. If you over-diversify, you might not end up losing much money, but you may be holding back your capacity for growth as Diversify by geography the proportions of your money in different Investing in different regions and countries investments will be too small to see much in can reduce the impact of stock market movements. This means you’re not affected the way of positive results. by the economic conditions of just one

Wealthcreation

A new-look NISA way to save and invest

‘Four out of ten people told the consumer organisation Which? that they would save more as a result of the annual limit increasing to £15,000, up from £11,880.’

Have you taken advantage of your larger tax-efficient allowance?

he new Individual Savings Account (ISA) rules were introduced in July, giving savers and investors more flexibility and a larger tax-efficient allowance than ever before. Four out of ten people told the consumer organisation Which? that they would save more as a result of the annual limit increasing to £15,000, up from £11,880. Over the previous 15 years, more than 23 million people have opened ISAs, totalling over £440 billion, according to HM Revenue & Customs. The increase in the total amount you can save and invest in what are now called New Individual Savings Accounts (NISAs) is not the only change since July.

New flexibility and higher limits n You pay no tax on the

interest you earn in a Cash NISA n With a Stocks & Shares NISA, you pay no capital gains tax on any profits and no tax on interest earned on bonds. The dividends paid on shares or funds do have the basic rate of 10% tax deducted. This means that higher and additional rate taxpayers don’t have to pay their higher rate of tax on their dividend payments.

It’s never too late to start saving If you’ve already paid into an ISA in this current tax year, you can top it up to the new limit if your provider allows – each account provider will have different deadlines by which date all requests to increase amounts must be processed. If you want to add more money and your provider doesn’t allow it, if appropriate

you could transfer your existing Cash ISA to another provider that will allow top-ups. You’ll need to check first whether there are any penalties for transferring to another provider. Another alternative if you’ve opened a Cash ISA and not fully utilised your allowance at the start of this tax year is to open a Stocks & Shares NISA to use the rest of your allowance. Remember, you are only allowed to open one Cash NISA and one Stocks & Shares NISA in one tax year. n

Did you know? n You can decide how you want to split the £15,000 between the Cash and Stocks & Shares parts of a NISA n Or you can allocate the whole £15,000 into either a Cash or Stocks & Shares NISA. Previously you could only put up to half the annual ISA allowance into a Cash ISA n You can move your money from a Stocks & Shares NISA into a Cash NISA, or vice versa. Previously you couldn’t move money from a Stocks & Shares ISA into a Cash ISA

Make the most of an increased NISA allowance of £15,000

Helping you make the right choice Whether you’re putting money away for a rainy day or saving for something special, find out what you’ll need to think about so that you make the right choice – to find out more, please contact us.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE. THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED. PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE. 13

You’ve protected your most valuable assets. But how financially secure are your 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 your dependents are financially secure. Contact us to discuss how to safeguard your dependents, wealth and assets, don’t leave it until it’s too late.

In the news

Plugging the household gap UK adults forced to borrow money from family members More than one in four (28%) UK adults have been forced to borrow money from family members, according to new research. With the average amount borrowed by individuals standing at £2,123, the collective family lending economy is now worth around £31billion. Family Generations & Financial Pressures is the title of the new report from Scottish Widows think tank Centre for the Modern Family and shows that 23% of family borrowers need this support just to cover day-to-day household costs. In addition to borrowing from family members, more than a quarter (26%) of people have raided their savings in order to cope with higher living costs, and the same percentage has cut back on saving for the future. Showing no improvement on 2012 levels, almost one in ten (8%) people were found to be skipping meals just to keep on top of household costs. The same number were also selling valuables in order to get by.

household spending, compared to one in four overall. Meanwhile, one in five parents of children under 18 has taken out a loan, spent on credit cards and gone overdrawn – double the average of one in ten for the total population.

Boomerang kids

The report finds that the generations are pulling together to help each other out financially in the post-recessionary climate. Parents and grandparents were found to be the most generous lenders, with 39% of parents with adult children living at home and 36% of empty nesters having lent to their children. More than a third (37%) of grandparent child carers have also lent money to their children. Single renters are the most likely to Rising household costs have borrowed from the Bank of Mum Identifying eight different generations* within the modern family, the report finds and Dad, with 43% having done so. This is compared to just over one in four (27%) that rising household costs are still the ‘boomerang kids’ – adults under the age of biggest and most immediate pinch point 34 living back at home with their parents. for UK families across the generational Despite high levels of intergenerational spectrum, according to 41% of adults, lending and borrowing, only one in ten overtaking long-term goals such as mortgage repayments (26%) or paying off family lenders said that they resented having to lend money to family members, debt (10%). with over half (55%) saying they were Of the family generations, grandparents pleased to do it. This rises to 63% among and parents of children under 18 are the groups being disproportionately squeezed. parents with adult children still living at home. One in four family lenders never One in three grandparents who are expect to get back the money they have providing childcare for family members loaned, and one in five family carers and has spent their savings to keep up with day-to-day spending. A third of parents with grandparents say they expected to have children under 18 have had to cut down on to lend money to family members and vital living costs, such as groceries, to cover budgeted accordingly. n

Time to get an expert perspective? Whatever your hopes and goals for you and your family, you’ll need enough money to make them happen. To get an expert perspective on what options are available to you, please contact us for a review of your situation.

Source: *For the purposes of this research, the Centre for the Modern Family identified eight generation groups that exist in the modern family today: 1) Individuals living with friends in rented accommodation 2) Under-34s living at home with parents 3) Co-habiting/married couples without children 4) Parents with children under 18 5) Parents with grown-up children (over 18) who are still at home (full nesters) 6) Parents with grown-up children (over 18) who have left home (none still at home) (empty nesters) 7) Grandparents providing childcare for family members (grandchildren or otherwise) 8) Providing regular care and support for a relative The research was completed by YouGov, and the findings are based on 2,082 online interviews with a nationally representative sample of adults aged 18 and over living in the UK. The interviews were conducted between 28 April and 1 May 2014. 15

Retirement

Pension decluttering Have you considered tidying up your arrangements? It would appear we are now increasingly becoming a ‘consolidation nation’, with many people combining their different contracts and services to make them easier to manage. It’s a growing trend, and new innovations are coming into the market all the time to tempt consumers. The recent launch of ‘quad-play packages’, which now combines mobile, home phone, broadband and TV, are a good example.

Time to take the same approach with your savings We all want an easier life, not one cluttered with paperwork and crowded with concerns about our money. So, as we as a nation get used to combining our utility bills and insurances, if appropriate maybe it’s time to take the same approach with your savings. To discuss your requirements, please contact us today. 16

Making it easier Research from YouGov has found that over half of us are now doing this, with reasons ranging from making it easier to keep track of costs, to keeping on top of admin. Easily the most popular thing to combine was energy, with a third of us choosing to combine gas and electricity, followed by home and contents insurance. Just behind that comes TV, phone and broadband. But the consolidation trend hasn’t taken off in all areas. The research showed just 9% have combined their car insurances and only 3% have combined their mobile contracts to make use of mobile phone family tariffs.

Providing a clearer view Interestingly, just 3% of those surveyed have consolidated their pension. However, this trend might change because of the reforms in the Budget announced earlier this year, giving people even more reason to consider tidying up their pension arrangements. Many of us have more than one pension, and almost two thirds of us with pensions don’t know their total value. Some pension decluttering could also make our finances simpler to manage and provide a clearer view too. If you’re thinking about a spot of pension decluttering, it’s always good to have a plan in place first. n Source: All figures unless otherwise stated were from research for Standard Life conducted by YouGov Plc among 2,059 GB adults. Fieldwork was undertaken between 17–19 December 2013. The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+). INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE. A PENSION IS A LONG-TERM INVESTMENT. THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN. YOUR EVENTUAL INCOME MAY DEPEND UPON THE SIZE OF THE FUND AT RETIREMENT, FUTURE INTEREST RATES AND TAX LEGISLATION.

Here are 5 tips that could help with your pension planning: 1. Create a list of all your pension plans and check you receive an annual pension statement – Billions of pounds worth of pension funds is going untraced as a result of people losing contact with their pension. The Government provides a free pension tracing service which allows you to find lost pensions using your national insurance number. 2. Make contact with each provider to check the value of your pension and find out what it is likely to provide at retirement – This will help you assess whether your plans are on track. 3. Understand your benefits – If you’re considering consolidating your pensions, check you’re not giving up valuable benefits such as guarantees or enhanced tax-free cash. It’s important to speak to an expert to get information on your own situation, as you may want to keep these. 4. Check how your money is invested – Make sure your money is invested in funds that reflect your attitude to risk. Keep this under review, particularly as you get closer to the time you plan to retire. 5. Get online – See if you can view your pension savings online – that way you can keep track and see how your pension is doing more easily, so you feel more in control.

In the news

What next for interest rates? Why the days of ultra-low interest rates look numbered Inflation figures recently showed a sharper than expected drop in prices, cementing expectations that any rise in interest rates would be delayed until next year.

‘Smart’ money Until recently, the ‘smart’ money has been on a November rate rise. However, given the Bank of England’s weaker outlook for wages, the current consensus among economists is now that rates will only rise in the first quarter of 2015. Expectations are for a February rate rise, when the inflation report is published, although some argue that interest rates could stay low until after the general election. The Bank is wary of increasing borrowing costs before households are better able to afford them, with Bank of England governor Mark Carney emphasising the UK’s feeble wage growth as a major concern in the latest quarterly inflation report.

Breeding confusion As the future path of interest rates becomes murkier, is the Bank of England’s concept of ‘forward guidance’ working? Many argue that this policy, designed to give certainty on the direction of interest rates, is instead breeding more confusion. Turn the clock back to August 2013: Mr Carney had recently taken over the reins as Bank of England governor and introduced the concept of forward guidance as a reliable way of indicating the Bank’s thinking on the direction of interest rates. The idea was to help consumers and businesses plan for the future.

Under Mr Carney’s first version of forward guidance, ultra-low interest rates were here to stay unless the unemployment rate dipped to below 7%. This was not expected to happen until 2016. But then the economic growth picked up and the jobless rate fell much quicker than anyone had expected. So, six months after first implementing forward guidance, Mr Carney overhauled his forward guidance policy.

addressing the issue of whether the UK’s recovery is unbalanced. Growth in the economy has been centred on the housing market and consumer spending, while improvements in manufacturing, business investment and exports have been unspectacular. As such, it is perhaps unsurprising that British workers aren’t seeing the improving economy and labour market being reflected in their pay packets.

Wage growth

Financial bubble

Under forward guidance 2.0, the focus shifted to ‘slack’ in the economy – the amount of additional growth that can be delivered without putting upward pressure on inflation. This would be measured by a broader range of indicators. We recently appeared to have moved to yet another version of forward guidance. With unemployment falling sharply and UK growth likely to pass the 3% mark – double the average rate since the financial crisis – Mr Carney’s focus has shifted to wage growth, with the governor highlighting the feeble growth in earnings as the Bank’s main concern and a significant factor in deciding when to raise interest rates.

The unbalanced nature of the recovery is important for a number of other reasons. As a start, such unbalanced growth makes the UK particularly vulnerable to higher interest rates. Even just a small rise in the Bank of England’s base rate could mean a disproportionate deterioration in the household finances of many, particularly those who have borrowed large sums. On the flipside, if we are heading towards another financial bubble driven by excess borrowing, there is a case to be made for increasing rates to stop such a bubble from inflating even further. It could be that the Bank of England is caught in a classic catch-22 situation – damned if they do, and damned if they don’t. n

Avoiding the issue As Mr Carney moves from one measure to another, he seems to avoid

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Source: Fidelity Junior ISA Calculator 19

Isnâ&#x20AC;&#x2122;t it time you had a financial review? Weâ&#x20AC;&#x2122;ll make sure you get the right advice 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. To discuss your options, please contact us.

Retirement

Part-time pensioners Taking a more gradual approach to retirement The nature of retirement has changed – it is no longer a matter of leaving the workplace with a golden carriage clock and entering a quiet life of leisure. According to research from LV=, many people are taking a more gradual approach to retirement and are working beyond the State Pension age, slowly cutting back their hours and reducing the number of days they work. Just one in three (38%) UK adults at State Pension age[1] no longer work – with working longer becoming the new norm.

Retirement phasing UK adults who are in employment in their sixties[2] are working an average of 24 hours, having cut down their hours over the years. Of those over 60s who are still working, a third (35%) want to phase their retirement, which could lead to them working part-time[3] or taking on consulting and voluntary roles to ease themselves into retirement. There are many reasons for the rise in ‘part-time pensioners’. For some, there is a financial element that impacts on their decision to work past state retirement age, with almost half (49%) remaining in the workplace to boost their retirement income. However, the key reasons people choose not to retire are because they enjoy working (52%) and feel that they are far too young to stop (46%). In fact, when asked how old they feel, three quarters (75%) of those aged 60+ felt much younger than they are.

working – or even go back to work after life run their own business, with one in five (21%) of these starting up when the retiring – because they simply cannot afford to stop. n entrepreneur was in their sixties. At the same time, since semi-retiring, close to a third (32%) have switched careers to try Make sure you select the best something new. retirement income options In fact, wanting to ‘have something to With the nature of retirement changing, do’ (45%) and a desire ‘to feel useful’ it is important that you have the income (25%) are the key drivers behind the UK’s flexibility you need in your later life. ‘grand-trepreneruial’ spirit, suggesting this With this in mind obtaining professional is an ambitious group who believe they financial advice will ensure that you are still have a lot to offer. able to make the most of your savings and pension funds and select the best Positive choice retirement income options for your It would seem that when it comes individual circumstances. For more to work, the over 60s are the real information, please contact us. ‘boomerang generation’. The findings

show that there is a trend to ‘unretire’, with many retirees returning back to work. One in six (15%) of those in their 60s have returned to work after retiring – equating to one million workers[4]. Although some over 60s come out of retirement to give their retirement income a boost (49%), there are many who go back to work to avoid boredom (39%). Interestingly, while many are working longer, returning to work or delaying taking their private pension to boost their retirement income, very few consider taking their State Pension later. Just one in 20 (5%) of those working past retirement age have deferred their State Pension, despite the fact that this would Grand-trepreneurs It would seem that over 60s refuse to be increase the value of their State Pension by 10.4% a year[5]. constrained by their age. The research For many people, working for longer revealed a particular group of modern day ‘grand-trepreneurs’ – adults of State is a positive choice. Many people in their sixties and seventies enjoy their jobs Pension age who are choosing to use and are keen to remain active in later their new-found freedom to set up or life. However, for others their financial invest in businesses. Over a quarter (28%) of those who are working into later situation means they have to continue

Source: [1]The State Pension age is currently 65 for men and 61 and 9 months for women [2]By late sixties, we are referring to those aged 65–69 [3]A part-time worker is someone who works fewer hours than a full-time worker. There is no specific number of hours that makes someone full- or part-time, but a full-time worker will usually work 35 hours or more a week, according to https:// www.gov.uk/part-time-worker-rights [4]According to Opinium, 1,047,690 adults aged 60 and over who had previously retired had to return back to work. There are 6,984,600 adults aged 60–69 according to ONS, and of these 15% returned back to work after retiring – 15% of 6,984,600 = 1,047,690. [5]Pensions Minister, Steve Webb MP, has announced that for those retiring after April 2016, deferring when they take their benefits will increase the value of their State Pension by 5.8% a year.

Retirement

The nation’s favourite overseas retirement destinations Over 6 million UK adults plan to move abroad in later life An even split In total, over 6 million UK adults are planning to retire abroad, with an even split between Europe and the rest of the world. Of the estimated 3.2 million UK adults planning to retire in Europe, Spain is the most popular destination with 26% of the vote. France follows in second place with 17% of votes. Italy comes in third place with a 10% popularity rating. Looking further afield, an estimated 3.2 million UK adults are planning to retire outside Europe. The most popular destination is America, with 16% of votes. Australia follows in second place with 14% of votes. Coming in third place is the Far East, which pulled in 13% of votes.

The right planning As is evident, a huge number of people harbour a desire to retire abroad. Thoughts of better weather, cheaper living costs and potentially cheaper property than the UK can be a strong draw. But, thinking that your regular holiday destination can also be your ideal retirement home might be hit with flaws. Without the right planning, savings and advice, you can quickly get caught out by local tax laws, exchange rates and other financial arrangements, turning a retirement dream into a potential nightmare.

You might also get a nasty shock later in retirement when you find your UK State Pension does not increase annually because the country you choose to retire to does not have a reciprocal agreement in place with the UK. As an example, if you retired to Canada ten years ago, your UK State Pension would now be worth 42% less than if you had retired across the border in the US. Or, put another way, your pension would be worth £1,742 more a year by simply choosing the US as a retirement destination rather than Canada. n Source: MGM Advantage research among 2,028 UK adults aged 18+, conducted online by Research Plus Ltd, fieldwork 17–22 October 2013. The UK full basic State Pension for a single person was worth £79.60 in 2004. From April 2014, it is now worth £113.10 a week, an increase of 42%. If the country you’re retiring to has a reciprocal agreement in place with the UK, then the UK State Pension will be paid and increase as normal. However, where there is no agreement, and that includes Australia and Canada, your State Pension will be frozen and won’t increase.

the nation’s favourite overseas retirement destinations are: 1st: Spain 2nd: France 3rd: USA 4th: Australia 5th: Far East 6th: Canada 7th: Italy 8th: South East Europe 9th: India 10th: Portugal

Navigating the complexities of retiring abroad To help you navigate the complexities of retiring abroad, professional financial advice can make the world of difference between the retirement of your dreams or an altogether more challenging experience. To find out how we can help you, please contact us today – we look forward to hearing from you.

IN THE NEWS

Geo-political matters Significant challenges for investors this year and beyond In the first half of the year, geo-political unrest has dominated the headlines. There have been significant challenges for investors in recent months – geo-political upheavals, economic growth and monetary policy. Once the summer is out of the way, the attention will turn to domestic political uncertainty.

t’s been a big year for elections around the world, and now the political focus has turned up on our own doorstep. First the Scottish referendum in September, then next May’s General Election. In between, November sees the US’s mid-term elections, which could bring America’s deficits to the fore again. India showed us this year just how much politics can matter to financial markets. The prospect of a new business- and investor-friendly government under new Prime Minister Narendra Modi galvanised the Bombay exchange and resulted in big gains for

those who jumped on the bandwagon early enough. As is often the case, it has been better to travel than to arrive. Having surged since February in anticipation of the change of regime, markets have paused for breath since the result was confirmed. Indonesia was a similar story, with markets rising ahead of the election of reformist candidate Joko Widodo. The Turkish result was also preceded by a big run-up in the country’s stock market. The latest opinion polls

for the Scottish referendum suggest a vote that’s too close to call. A ‘No’ vote (continued membership of the UK) looks marginally more likely, especially after the recent TV debate. But it could go either way. As for the General Election, a definitive result looks even more unlikely. Another hung parliament is a distinct possibility. For the first time in many years, there is also a significant gap between the two main parties on economic policy, and the rise of UKIP raises the prospect of a fractured vote. It really is anyone’s guess how things will turn out next May. A bigger question for investors is whether it really matters? n

TIME TO MAKE SURE YOU’RE ON TRACK TO ACHIEVING YOUR FINANCIAL FREEDOM? WANT TO FIND OUT MORE?

In the news

Europe’s economic slowdown Is there room for any further disappointment? Europe has suffered a stream of destabilising news this year. Firstly, there was January’s emerging markets crisis, which slowed the demand for European exports. Then there were EU parliamentary elections in May, which returned a large number of anti-establishment MEPs to Brussels and spurred David Cameron’s attempt to block the appointment of Jean-Claude Juncker as EU president.

n more recent months investors have also had to contend with fears of a Russian military intervention in Ukraine, tit-for-tat trade sanctions between the EU and Russia, and the bailout of Portugal’s second-largest listed bank, Banco Espírito Santo.

The possibility of deflation Data that was recently released showed the eurozone’s economy slowing to a standstill in the second quarter of the year, raising more questions about the sustainability of Europe’s recovery and the possibility of deflation[1]. Now, as evidence of slowing growth in the second quarter of the year for a number of eurozone countries has also shown, questions about the sustainability of Europe’s economic recovery and the possibility of deflation intensify.

Extraordinary measures According to official preliminary data, Italy slipped back into recession in the second quarter of the year, with the economy shrinking by 0.2% after a 0.1% contraction the quarter before[2]. Even Germany, the powerhouse of economic growth up until recently, seems to be suffering, with the economy undergoing a 0.2% contraction last quarter[3]. The danger is that the European Central Bank (ECB) may be missing the big lesson from 1990s Japan – that dallying over economic policy risks a deflationary spiral that’s hard to get out of.

Not that the ECB isn’t trying. In June, eurozone interest rates were cut to a record low, and banks began to be charged for holding cash reserves at the ECB. These extraordinary measures followed hard on the heels of a surprise fall in the annual rate of eurozone inflation to just 0.5% in May[4]. It’s just that the big gun of quantitative easing (QE) shows little sign of being fired yet. The ECB’s reticence is understandable, even as the evidence of economic fragility piles up. For one thing, QE might be seen – in Germany at least – as providing indebted nations at the periphery with the breathing space necessary to ease up on their attempts to reduce their spending and budget deficits. For another, the ECB found out two years ago that a pledge to ‘do whatever it takes’ on its own was enough to save the euro. It’s likely too that just the expectation that QE might be used has helped to support bond prices this year.

Devalued currency

What the ECB must be looking forward to and, perhaps, investors are being asked to also, is some sort of resolution to the crisis in Ukraine and Europe’s economic recovery gathering momentum during the second half of this year.

Bright spots Certainly, there have been bright spots. Spain’s economy, for example, appears to have been on the mend. The economy there grew by 0.6% in the second quarter, reflecting perhaps a widening gap between countries that have embarked on convincing structural reform programmes and those that have not[5]. However, the International Monetary Fund forecasts economic growth across the region to be ‘a little over 1%’ this year. While that’s an improvement on last year’s contraction of 0.5%, it’s still only about one third of what is expected from the UK and about half the speed at which the US is forecast to grow[6]. To achieve even this, Europe’s economic slowdown last quarter leaves precious little room for further disappointment. n

Something the ECB ought not to be concerned about is the notion that QE might unleash inflationary pressures and lead to a devalued currency. The US, Japan and the UK, which led the way on QE, have Source: provided practical demonstrations that this [1]Eurostat, 14 August 2014 need not happen. [2]Istat, 6 August 2014 If QE is, as some say, the tide that [3]Destatis, Federal Statistical Office, 14 lifts all ships of the financial kind, then August 2014 European stocks and bonds might benefit [4]Eurostat, Harmonised Index of Consumer from a change of heart at the ECB. In the Prices, 17 July 2014 absence of QE, or presence of only a tiny [5]Instituto Nacional de Estadística, 30 July 14 bit of it, Europe may be set to remain a [6]International Monetary Fund, July 2014 stock-picker’s zone.

Achieving a comfortable retirement. Do you need a professional assessment of your situation to make this a reality? If you are unsure whether your pension is performing in line with your expectations, and that you’ve made the right pension choices – don’t leave it to chance. Contact us to discuss these and other important questions, and we’ll help guide you to a comfortable retirement.

In the news

The hidden cost of divorce UK couples are spending more than £44,000 on average when they divorce or separate Achieving a fair resolution of all the financial issues surrounding divorce or the dissolution of a registered civil partnership can be highly stressful. Alongside wanting to resolve these effectively and affordably you may also be worrying about how you will achieve the fairest division of your family assets, how to deal with any requirements for continuing support or perhaps even how you will manage to make ends meet in the future.

K couples are spending more than £44,000 on average when they divorce or separate, totalling £5.7 billion per year across the nation. A new study from Aviva reveals the hidden cost of divorce as £21,979 per person or £43,958 per couple.

Financial impact

The financial impact of a separation is also clear from people’s behaviours when a relationship breaks down. Almost a third of couples (29%) said they tried to reach an amicable settlement to save on legal fees, while one in ten said they effectively separated but continued living together for several months because they couldn’t The figures show a 57% increase since afford to live apart immediately. A further the study was last carried out in 2006 6% initially put off getting a divorce when the cost of divorce was around because of the costs involved. £28,000. While the data suggests legal Women were more likely than men to fees for divorce have actually fallen over the period – from £1,818 to £1,280 – with make lifestyle changes to supplement their income following a separation. many opting for cheaper online services, additional costs such as moving house and One in eight women (13%) said they worked longer hours or took a second child maintenance payments mean the job following a break-up, while one in ten overall price of separation has soared. who didn’t work before the split got a job. Women were also more likely to use Added extras short-term fixes to make ends meet after As well as considering the core costs a separation: 27% of newly single women associated with a break-up, the study also dipped into savings compared to 16% of looked at added extras that many people buy following a split. The research suggests men, while 23% relied on credit cards, that four out of ten newly separated people compared to 14% of men. Two thirds of couples who are married or splash out on items to treat themselves. co-habiting have some shared finances, so For example, the study found one these arrangements can take some time in eight people (13%) took a holiday to unravel if a relationship unfortunately to celebrate their newly single status breaks down. Beginning again following at a typical cost of £1,925, while the a separation can be a daunting time, not same (13%) treated themselves to new to mention a busy one, but it’s crucial that technology, shelling out an average of newly single people review money matters £1,292 on gadgets and gizmos. Four out of ten respondents said they were when their circumstances change. financially worse off following their separation, and more than half of couples (53%) took Facing the facts: longer than six months to settle financial n Interviewees were typically with their matters. The typical time to settle was 11.5 partner for 10 years and eight months months, but one in ten couples (11%) said the before separating, although one in process took more than two years. ten (9%) were together for less than With this in mind, it’s perhaps no two years surprise that 36% of people surveyed said n The average age at separation in the they’d prefer to stay single in the future! study was 38 years and two months

n Two thirds (66%) of separating couples had joint finances: four in ten of these shared all finances, while the remaining six in ten had some shared and some separate n One in five women took out protection insurance (such as life cover) after separating, compared to one in ten men, but a quarter of respondents said they didn’t have life cover following the split (25%) n One in eight separated women (12%) said they have no pension/savings plans as they were relying on their partner to fund their retirement n One in ten respondents (10%) said they would be significantly worse off in their retirement as a result of their break-up n Four out of ten women (42%) said they were worse off financially as a result of their divorce/separation compared to 33% of men. Four out of ten men (39%) said they were actually better off, compared to 29% of women n More than a third (36%) of respondents said they would prefer to remain single following their break-up, but 25% would marry (again)

Reviewing money matters Beginning again following a separation can be a daunting and emotional time, not to mention a busy one, but it’s crucial that newly single people review money matters when their circumstances change. If someone becomes the sole income earner for their family unit, it’s important they think about what they might do if they were unable to work, for example, through illness or injury. Protection insurance – such as life insurance, critical illness cover or income protection – can provide that all-important peace of mind, so people can start on a firm footing as a new chapter begins. n

In the news

Source: Latest figures from the Office of National Statistics show that 118,140 marriages and 794 civil partnerships ended in England and Wales in 2012, while 9,700 marriages and 67 civil partnerships ended in Scotland in 2012/13 according to latest figures for Scottish civil law cases. This equates to 128,701 divorces/dissolutions annually, relating to 257,402 people. Average cost of divorce is based on total costs according to the study, multiplied by the proportion of people who spent on each item, divided by the number of divorces/ dissolutions across the UK annually.

Concerned for your own financial security? The resolution of finances can often be an emotional rollercoaster and will be a different experience for each person. Everyone is understandably concerned for their own financial security and that of their family and so it is not unusual, therefore, for the financial settlement to end up being the key focus of attention. To discuss your situation please contact for further information.

The stakes are too high These days retirement can easily last 20 or 30 years. People are living much longer and the nature of retirement is changing too. The longer you live in retirement the more susceptible to the pressures of inﬂation your retirement income will become. Pensioners are being squeezed further as more of their income is spent on food and fuel, the costs of which continue to rise more quickly than goods.

Is your pension big enough to last your lifetime?

Average life expectancy

Years in retirement

Life Expectancy of a UK Citizen upon Retirement Age of 65 Source: ONS, Cohort expectation of life by selected age for the year 2008

According to the Bank of England inﬂation calculator, £10,000 in 1994 would be worth only £6,127.31 in 2011. A pension income that doesn’t rise means that effectively you will face a pay cut every year throughout your retirement. Take a look at the impact of inﬂation of 3% on income at retirement: Starting income Rate of inflation How much is How much is How much is it How much is it it worth in real it worth in real worth in real worth in real terms in year 5 terms in year 10 terms in year 15 terms in year 20 £3,000 3.00% £5,000 3.00% £10,000 3.00% £25,000 3.00%

£2,655 £2,280 £4,426 £3,801 £8,852 £7,602 £22,132 £19,005

£1,958 £3,264 £6,528 £16,320

£1,681 £2,803 £5,606 £14,015

Unfortunately, you can no longer rely on the State to support you during your retirement. The basic State Pension has been steadily reducing over the years. In fact, it’s now among the lowest in Europe. And that’s not all. Because retirement can last so long these days, each pound you’ve saved won’t go as far as it might have in the past. It’s crucial you make the most of your retirement savings.

Retirement

8 steps to A bRIGHTER retirement Make sure you can afford a comfortable lifestyle when you retire 4. If you have a small pension pot (individually below £10,000 or up to three valued at less than £30,000), you may be able to take the whole pot as a lump sum under the current ‘triviality’ rules (from April 2015, you will be able to take the whole pension as cash, subject to marginal tax rates at the time).

5. If an income is important to you, consider all the different options available to you, such as an annuity, an investmentlinked annuity and income drawdown. Each of these comes with different risks – income from drawdown or an investment-linked annuity could fall in future.

6. Think about how much flexibility you need over your income, bearing in mind you may be in retirement for 20 plus years, and if you want to protect your spouse or partner when you die.

With annuities, the income is guaranteed but may come with the risk of inflation, which means the income you receive may not buy as much in the future. You can protect your income from inflation but this comes at a cost.

2. Consider when you want or need to take your benefits – from both state and any private pensions. You don’t have to use them at ‘traditional’ retirement ages or when you stop working.

Consider the ‘cost of delay’ – if you are looking for a guaranteed lifetime income, then an annuity could be your safest option. By delaying any decision until next year, you are losing out on income this year, which could take many years to make up.

1. From April 2015, you can use your pension savings in any way you like. The first 25% can be taken as tax-free cash and the remainder used as you wish (all income or capital withdrawals subject to your marginal rate of tax at the time).

Will you achieve your desired retirement income? Putting as much as you can into a pension plan as soon as you can will give you a much better chance of having the retirement you want. Find out how much you should be saving to help achieve your desired retirement income. To review your particular requirements, please contact us for more information.

8. If you buy an annuity, don’t automatically purchase it from the company you saved with. Make sure you shop around other providers, giving full information about your health and lifestyle – this can help you get a substantially bigger income.

Published by Goldmine Media Limited, Basepoint Innovation Centre, 110 Butterfield, Great Marlings, Luton, Bedfordshire LU2 8DL Articles are copyright protected by Goldmine Media Limited 2014. Unauthorised duplication or distribution is strictly forbidden.

ORIGINAL AMOUNT INVESTED.