26

Feb

Personal Finance Society members who have obtained qualified status are now able to display their commitment to professional standards through a dedicated Qualified member logo. 

The Personal Finance Society is committed to its purpose of building public trust in the profession. The Qualified member logo allows members to effectively demonstrate their knowledge and expertise.

Independent Financial Adviser/Advisor – Chartered Financial Planner – Based in Petersfield – Covering Hampshire, Surrey & Sussex

 

 

19

Dec

The City of London only has a permanent resident population of around 7000 (there are no available statistics on the naughty/nice split), so presumably they won’t get a lot of attention when the jolly bearded bloke at the North Pole is marking out his route in a couple of weeks time.

In addition, most investors probably don’t even believe in Father Christmas; they spend their time analysing company reports, foreign exchange rates and global current account balances rather than hand-writing long lists and sending them to the Arctic Circle. However, if there were such a wistful money manager this is what they might have sent up their chimney to Father Christmas…

 

Dear Father Christmas,

I have been a good boy/girl/quantitative analyst all year. I have kept my room tidy, eaten my greens and not broken any of the laws in the Financial Services and Markets Act (2000). So please would you bring me:

  1. A sensible exit from extraordinarily loose monetary policy by central bankers
  2. Continued US growth.
  3. Renewed Emerging Market growth
  4. No political instability in the Eurozone
  5. No housing bubble in the UK

I have left you a glass of wine, a mince pie and a copy of Graham & Dodd’s Security Analysis.

Please say hi to Rudolph.

 

In general investors will be hoping for consistency rather than miracles. After a year in which all of the major equity indices have had double digit returns, where government bond yields have risen gently rather than blown out, and where economic conditions have been improving steadily, the desire is, understandably, for more of the same. Added to that request is a fervent prayer or two that meddling politicians can resist the temptation to ruin the outlook.

The first item is likely to be tricky to deliver. No one is quite sure how a sensible exit from QE should look, because the scale of monetary expansion has been unprecedented in the first place.  Unfortunately it may be that the only way we can find out if the financial system is resilient is to put it under strain – by removing the artificial support that has been in place since the global financial crisis. Of course this need not mean a sudden and total stop to QE but a gradual weaning off the drug of extra liquidity that QE brings over the course of the year. Nor does it mean that all regions must take action simultaneously, but one by one as the economy of that region shows it can stand on its own two feet.

The second item – continued US growth – may be easier to address. After the sequester this year, year on year comparators will be easier for a start and also the adjustment in the cost of mortgages to take account of tapering is already priced into the housing market. Growth so far this year has probably meant that many companies in the US, that have been sitting on cash, now seem more willing to invest in more capacity and even to take on more labour. That said,  what would really embed a consumer recovery would be to see some real wage growth. So Father Christmas, remember that when bringing us more US growth please!

If the US, that old engine of world growth does pick up more steam next year then we can expect that Emerging markets will benefit too. And could you make sure China continues to grow using Emerging Market raw materials too please? That always helps growth for the newly emerging economies when there is demand for their commodities.

Coming closer to home, please stop the politicians from managing to unpick all the good work done by the European Central Bank (‘ECB’) in recent times, by going off on domestic tangents as a populist response to electioneering for the European parliamentary elections this Spring. We have seen some genuine reforms starting to have an effect and really these economies need such change regardless of the political background. It would I suppose be too much ask for an outbreak of commonsense reform in France….. Or political reform in Italy…..

The final wish is perhaps the most difficult to deliver. Here in the UK our obsession with owning our house meant this was an easy way for the government to stoke growth but it is quite worrying that people are being egged on to borrow perhaps a little more than they can afford in a rising rate scenario but given the ‘Help to Buy’ scheme they feel they cannot go wrong! And of course the flurry of activity pushes up prices and so the merry-go-round continues. So Father Christmas, will you make sure people borrow what they can truly afford and can manage when that rainy day finally strikes! And can we ask that we don’t let the prices spiral away up and then drag more inflation into the system?  Would it be asking too much to discourage others from taking out loans based on their property ownership to fund frivolous pursuits such as holidays and yachts and the like?

If we can get through next year with our wishes granted then we will not only have made good strides in the repair of the damage done by the credit crunch but markets should be kind to us too!

9

Oct

Annuities rates are changing following ban on annuity gender discrimination

If you are a man approaching retirement you should beware of the following information.

Following a ruling by the European Court of Justice, with effect from 21 December 2012, insurers will no longer be able to take gender into account when pricing insurance policies and annuities. A Lifetime Annuity is one of a few types of income you can take from your pension fund. Once set up, it cannot be changed.

Currently, due to life expectancy, Lifetime Annuity rates for men are better than for women. This will change in December when annuity rates will be equalised for new contracts. The impact will be that men will get less annuity income than at present and women will get more.

The judgement applies to ‘insurance and pensions which are private, voluntary and separate from the employment relationship’. This means it will affect anyone who has a Personal Pension, SIPP or Stakeholder, who has yet to draw benefits from their plan. Members of occupational schemes will not be affected – bearing in mind that a Group Personal Pension is NOT classed as an Occupational Scheme in this context.

Currently a £100,000 pension pot will purchase a Lifetime Annuity of approximately £5,663 for a man on a single life basis with a 5 year guarantee and £5,459 for a woman when issued on standard terms, subject to change (source Money Advice Service 9th October 2012).

However, an increasing number of individuals choose not to buy an annuity now, but to draw their pension income direct from their fund; in this instance the maximum rate of withdrawal will reduce for men, and whilst one would like to think that females may see an improvement in terms, this is by no means certain.

Please do not take this as a recommendation of any kind since a lot will depend on your individual circumstances and obviously it is impossible to predict the outlook for annuity rates in the future.

If you have any questions in respect of the above please do not hesitate to contact us.

Stiles & Company Financial Services (Petersfield) Limited is a firm of Independent Financial Advisors dedicated to providing a highly professional service to our clients, spread predominately across Hampshire, Sussex & Surrey.

12

Oct

‘Looking for a high level of Guaranteed Income for Life?’

If you have a lump sum to invest then a Purchased Life Annuity could be the answer since the net income from a purchased life annuity can be up to 30% higher than the interest from a bank or building society account due to the lower tax charge applicable. The majority of the income is deemed a return of capital, a figure which increases with age. The level of income will not fluctuate as with bank interest and is guaranteed for the whole of your life.

A Purchased Life Annuity is normally available to a person aged 55 and over, who has a large lump sum to invest and requires a guaranteed income for life. The minimum lump sum necessary is around about £20,000, the product is often utilised near or at retirement and is frequently funded by the Tax Free Cash payment available from most pension plans. However, the money for a Purchased Life Annuity can come from any source.

The taxation of Purchased Life Annuities is very favourable compared to that of pension annuities and they provide for a higher income net of tax. This means that the majority of individuals at retirement that want to maximise their pension income should commute the maximum Tax Free lump sum and use this for a Purchased Life Annuity.

A Purchased Life Annuity can also include many of the added features of pension annuities such as a guaranteed period, being paid in advance or arrears, with proportion, single or joint life basis, level or escalating. This includes the provision of a dependent’s income paid to a spouse.

Capital Protection

This feature is unique to purchased life annuities. Capital protection can be selected instead of a guaranteed period. A guaranteed period allows for the continuation of income payments for up to 5 or 10 years after the annuity was purchased even if the annuitant dies within this time period.

Capital Protection ensures that if the annuitant dies earlier than expected, the difference between the gross income received and the original capital used to purchase the annuity will be paid as a lump sum into the annuitant’s estate.

To provide income after the death of the annuitant, a person can therefore choose between a dependents income, capital protection or a guaranteed period, all with different levels of protection and associated costs.

Long Term Care Costs

Around half a million people are in care homes in the United Kingdom and only a small proportion receive some kind of assistance from the state with the balance of the cost provided from savings or the proceeds from the sale of a family home. To allow family members greater control of the finances it is possible to at least partially meet these high costs by purchasing a Purchased Life Annuity or alternatively, depending on a person’s medical condition, an Immediate Needs Annuity.

Many people with elderly relatives are aware that long term care is a problem and has many associated costs. These costs can quickly erode assets such as savings and the family home. It is possible to use a Purchased Life Annuity or Immediate Needs Annuity to help pay the costs of a rest home or nursing home.

In the UK there around 9 million people over the age of 65 and so this issue is likely to arise on an ever more frequent basis.

Please contact us for further information in relation to any of the above matters.

Stiles & Company Financial Services (Petersfield) Limited is a firm of Independent Financial Advisers dedicated to providing a highly professional service to our clients, spread predominately across Hampshire, Sussex & Surrey.

19

Oct

The increase in the ISA subscription allowance to £10,200 from 6 April 2010 is great news for investors. This further reinforces the use of ISAs as a tool to help you build a significant investment portfolio in a tax-efficient manner.

For those who will be aged 50 or over before the end of this tax year the news is even better. From 6 October 2009 you can subscribe £10,200 in the 2009/2010 tax year. With the stock markets showing signs of recovery and confidence returning, now could be a good time for you to think about investing and making the most of your increased ISA allowance.

In the April 2009 Budget, the chancellor Alistair Darling announced that from 6 October 2009 the ISA subscription limit will increase to £10,200 for anyone eligible to invest in an ISA who was born on or before 5 April 1960 (That is, those people who will be aged 50 or over during the current tax year). Up to £5,100 of the new ISA allowance can be saved in a cash ISA with one provider. The remainder of the £10,200 can be invested in a stocks and shares ISA with either the same or another provider. Alternatively, the full £10,200 can be invested in a stocks and shares ISA with one provider.

If you are not yet 50

From 6 April 2010 anybody who is eligible for an ISA will be able to take advantage of the higher limits.

Stiles & Company Financial Services (Petersfield) Limited is a firm of Independent Financial Advisers dedicated to providing a highly professional service to our clients, spread predominately across Hampshire, Sussex & Surrey.

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