Month: May 2022

Plan for tomorrow, live for today

Change is the only constant in life. It inevitably involves twists and turns, with some that are expected while others may be entirely unplanned. When this happens, it’s important to feel secure with the knowledge that you have the right contingency plan in place.

None of us can predict exactly what a life-changing event will be or when it will occur, and many of them will take you by surprise, whether good or bad. Here, we consider some major life events you may wish to discuss with us.

Divorce and managing finances

Managing your finances after divorce can sometimes feel like an impossible task, especially if the amount of money coming into your household is much less than when you were married. For some people, divorce can mean financial devastation or hardship. You may lose half of what you have saved over the course of your adult life, and go into debt paying lawyer’s fees and other expenses.

Yet as messy and painful as divorce can be, it is often both necessary and ultimately a good thing – and it is possible to recover both financially and emotionally after a divorce. When you’re facing a divorce, you need to know where you stand financially. We can help you plan for a sound financial future, to give you security and peace of mind, allowing you to move forward with your life.

Thinking about financial planning for long-term care

More people in the UK are living for longer, which is good news. However, this longevity brings certain challenges, such as how we will fund any long-term care that may be needed in the future. If you are one of the many people faced with helping a parent or another loved one find long-term care, then you are probably grappling with a lot of questions.

Among them: How can I bring this up in a way that won’t upset them? How are they, or how are we, going to pay for this? What type of living situation is best? Ageing comes with many joys and challenges. We can discuss with you the options to help cover your loved ones’ care needs now and in the future.

Dealing with your finances in widowhood

Coping with the death of a loved one can be extremely hard. You may be dealing with lots of different emotions, finding it hard to process them and having difficulties moving on. Losing your loved one, whether expected or sudden, can prove almost too much to bear. But it’s surprising how uninformed some spouses can be about each other’s financial lives.

Even in marriages that consciously attempt to integrate finances (joint bank accounts, both names on the mortgage), a lot of financial activity is specific to one spouse, for example, a credit card, retirement planning, an ownership interest in a business, investments, a car with only one name on the finance agreement. After the death of a spouse, your financial situation will likely be a major concern. We will take the time to understand your needs and recommend solutions personally tailored to you.

What to do and not do with an inheritance

Losing someone you care about is one of the hardest experiences in life. Receiving an inheritance probably means coping with the death of a loved and cherished member of your family or a friend. The emotion associated with bereavement often makes taking decisions about both their estate, and what you stand to inherit, difficult.

Most estates are settled within six to nine months in the UK, but it depends on the complexity of the estate. If it isn’t handled appropriately, the pressure of the proceeds can be stressful, upset your relationships and complicate your finances. During this difficult time we can help you to consider your options, assess any tax implications and decide how this inheritance could be used to provide you with financial security in the years ahead.

The importance of financial planning

Financial planning helps you determine your short and long-term financial goals and create a balanced plan to meet those goals. The coronavirus (COVID-19) pandemic has demonstrated unequivocally that such unforeseen and unplanned-for events can wreak havoc on our personal finances. Establishing clarity around your finances is arguably one of the most critical things you can do for your overall financial success. It is important to understand your financial needs and then create a financial plan to meet them. Tax planning, prudent spending and careful budgeting will help you keep more of your hard-earned cash.

We know you’ll have different priorities for your wealth at different points in your life. Whatever your financial aims, we can help you achieve them for both you and your family.

Time to bring clarity to your financial affairs?

Everybody experiences life-changing events at some point, whether directly or through a loved one. To discuss how we can help you, please contact us.

Easier to manage your money

Having a financial plan in place early on can make it easier to manage your money further down the line. It’s never too early to make a financial plan. The sooner you work out your goals and start following a plan to achieve them, the more likely you are to succeed.

Here are three key questions to ask yourself when building a financial plan.

1. What are my goals?

Building wealth takes time and a little effort. Like any activity, be it growing a business or learning a new skill, you need to decide early on what your long-term objectives are. It’s exactly the same when you are building wealth – it is important to set financial goals. Without a goal, your efforts can become disjointed and often confusing. Being able to keep track of your progress towards achieving a goal is only possible if you set one in the first place. Being able to measure progress is extremely rewarding and will help you maintain focus. Procrastination is something we all battle with from time to time. However, when you set goals in life, specific goals for what you want to achieve, it helps you understand that procrastination is dangerous. It is wasted time. It is another day you aren’t moving closer to that goal.

Setting financial goals is essential to financial success. Once you’ve set your goals you can then write and follow a roadmap to realise them. It helps you stay focused and confident that you’re on the right path.

Consider the SMART principle when setting your own goals:

Specific – Clearly define what each goal is and use details such as numbers where possible (quantify it).
Measurable – Think about a tangible way in which you can measure your progress.
Achievable – Are your ambitions realistic? With planning we are often capable of more than we realise but being pragmatic is important. Discussing your goals with us will help you to balance this.
Relevant – Are your goals in line with your own personal values? It is useful to chat this through with somebody else to clarify your values.
Timebound – Think about the timeframe you are working within and whether there is any flexibility needed.

Your goals are personal and unique to you. Perhaps you want to set up your own business and follow a lifelong passion, or maybe you want financial security and to ensure you can pass a legacy on to your loved ones. Once you’ve defined your goals and you’re clear on your current situation, it’s a good time to work out if you have enough to achieve your goals or if there’s a gap. This isn’t an easy task as there are often many variables to consider, such as inflation, tax and growth rates.

2. Where am i now?

Cash flow planning is a concept borrowed from business and every business owner or finance director will be familiar with the term. These same principles can be applied to your personal financial planning. As we’ve mentioned, the starting point is to identify each one of your personal goals. Cash flow planning is most effective when all likely future needs are taken into account too. Just focusing on immediate needs may seem more practical but focusing on one goal at a time can limit future options.

Make a list or a spreadsheet of what you have, specifying where and how much; this could include any assets such as property, cash balances, investments, pensions, protection policies and any debts such as mortgage, credit cards or loans. Look at your income and expenditure levels. Remember, the future is somewhere you have never been before. Cash flow planning guides and updates you on your journey. If there are delays on the way it can find another path. Combined with our professional advice, we can help you arrive at your destination more smoothly.

3. What do i need to do next?

As we’ve seen with the coronavirus (COVID-19) pandemic, things can change very quickly. It goes without saying that your financial plans should not be static objects, and that you should review your plans over time and on a regular basis to ensure that you remain on track towards your goals. You also need to adapt your financial plans as your circumstances change. Reviewing your arrangements regularly is a vital way of ensuring you meet your financial goals and ensures that all your plans are up to date in light of changes to your circumstances and the wider financial landscape.

Reviews can also prompt you to consider some of those things that sometimes get left undone – such as your Will, which might still need to be arranged or updated. Or perhaps there is a Lasting Power of Attorney that has not been progressed or a life assurance policy that should be placed under an appropriate trust. As we’ve all recently experienced, life has a habit of springing unpleasant surprises on us when least expected.

let’s get started
Financial planning is the key to improving your financial wellness. Your personal plan is a roadmap to your financial success. You’ll see exactly what you need to do now to make a significant difference for your future. Please get in touch to find out how we can help you reach your financial goals – we look forward to hearing from you.

What can you do with your pension pot?

When the time comes to access your pension, you’ll need to choose which method you use to do so, with options including: buying an annuity, taking income through (flexi-access) drawdown, withdrawing lump sums or a combination of all of them.

There are advantages and disadvantages to each method, and in some cases your decision is permanent, so it’s important to ensure that you obtain professional financial advice when considering your different options. This is a complex calculation that must take into account the growth rate your investments might achieve, the eroding effects of inflation on your savings, and how long your savings will need to last.

Annuities – Guaranteed Income for Life

Annuities enable you to exchange your pension pot for a guaranteed income for life. They were once the most common pension option to fund retirement. But changes to the pension freedom rules have given savers increased flexibility.

You can normally withdraw up to a quarter (25%) of your pot as a one-off tax-free lump sum, then convert the rest into a taxable income for life – an annuity. There are different lifetime annuity options and features to choose from that affect how much income you may receive. You can also choose to provide an income for life for a dependent or other beneficiary after you die.

Flexible Retirement Income – Pension Drawdown

When it comes to assessing pension options, flexibility is the main attraction offered by income drawdown plans, which allow you to access your money while leaving it invested, meaning your funds can continue to grow.

This option normally means you take up to 25% of your pension pot, or of the amount you allocate for drawdown, as a tax-free lump sum, then reinvest the rest into funds designed to provide you with a regular taxable income.

You set the income you want, though this might be adjusted periodically depending on the performance of your investments. You need to manage your investments carefully because, unlike a lifetime annuity, your income isn’t guaranteed for life.

Small Cash Sum Withdrawals – Tax-Free

This is an important consideration for those weighing up pension options at age 55, the earliest age at which you can take up to 25% of your pension pot tax-free. You should ask yourself whether you really need the money now. If you can afford to leave it invested until you need it then it has the opportunity to grow further.

For each cash withdrawal, the remaining counts as taxable income and there could be charges each time you make a cash withdrawal and/or limits on how many withdrawals you can make each year. With this option your pension pot isn’t re-invested into new funds specifically chosen to pay you a regular income and it won’t provide for a dependant after you die.

There are also more tax implications to consider than with the previous two options. So, if you can, it may make more sense to leave it to grow so you can enjoy a larger tax-free amount in years to come. Remember, you don’t have to take it all at once – you can take it in several smaller amounts if you prefer.

Combination – Mix and Match

Of all the pension options, if appropriate to your particular situation, it may suit you better to combine those mentioned above. You might want to use some of your savings to buy an annuity to cover the essentials (rent, mortgage or household bills), with the rest placed in an income drawdown scheme that allows you to decide how much you can afford to withdraw and when.

Alternatively, you might want more flexibility in the early years of retirement, and more security in the later years. If that is the case, this may be a good reason to delay buying an annuity until later in life.

The Value of Retirement Planning Advice

There will be a number of questions you will need answers to before deciding how to use your pension savings to provide you with an income. These include:

• How much income will each of my withdrawals provide me with over time?
• Which withdrawal option will best suit my specific needs?
• How much money can I safely withdraw if I choose flexi-access drawdown?
• How should my savings be invested to provide the income I need?
• How can I make sure I don’t end up with a large tax bill?

How much are you saving for your retirement?

We can advise on your retirement planning whether you are in the process of building your pension pot or getting ready to retire. Working closely with you, we will identify what you want from your pension and develop a structure that meets your requirements. To find out more, contact us to discuss your options.

A pension is a long-term investment not normally accessible until age 55 (57 from april 2028). The value of your investments (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation which are subject to change in the future. You should seek advice to understand your options at retirement.

Accessing pension benefits early may impact on levels of retirement income and your entitlement to certain means-tested benefits and is not suitable for everyone. You should seek advice to understand your options at retirement.

Sharing Your Wealth During Your Lifetime Can Make A Big Difference

With all of us leading longer lives, you might be considering how you can help your family when it matters most. Sharing your wealth during your lifetime can make a big difference and bring you a lot of joy, particularly when helping younger generations who are dealing with rising house prices and university fees.

After you’ve determined how much you can afford to give, there’s a simple starting point. What exactly do your grandchildren need, and when do they need it?

The right way to give presents for your grandchildren can vary depending on how old they are, and whether you’re concerned about turning over a sizeable amount of money to a child who may still be impressionable.

Younger Grandchildren

Junior Individual Savings Account (JISA)

If your grandchild is under the age of 18, you might put money into their JISA account. While you won’t be allowed to open one on their behalf, you will be able to donate up to their annual JISA limit, which is £9,000 for the 2021/22 tax year.

The benefit of the JISA is that they can’t touch the money until they turn 18 – after that, it’s theirs to use as they choose. The funds may be stored in cash, invested in securities, or a mixture of both. Investment growth is tax-efficient in a Stocks & Shares ISA, while a Cash ISA’s interest is tax-free. If you put money away for 18 years, it might grow into a sizeable amount, but the value of any investment will go up and down.

Child’s Bank Account

Alternatively, a child’s savings account is a convenient and easy place for families and friends to deposit money for smaller presents.

Keep in mind, though, that savers’ rates have been poor in recent years and over time, inflation can reduce the value of the savings, because prices typically go up in the future.

Older Grandchildren

Lifetime Individual Savings Account (Lisa)

If your grandchild is 18 or older, a LISA will be able to assist them in saving for their first home. If they turned 40 on or before 6 April 2017 they won’t be eligible. Only first-time buyers can use a LISA to buy property under age 60.

For every £4 saved, the government will add £1 (worth up to £1,000 every tax year until they turn 50 years old). Up to £4,000 a year is eligible for the 25% bonus (they can add more but it won’t receive a government contribution).

The bonus is paid every month, so they benefit from compound growth. They can invest in either cash or stocks and shares and this forms part of their overall annual ISA limit, which is £20,000 in tax year 2021/22.

Would you like the reassurance of some control?

It’s understandable to be concerned about giving too much money to grandchildren too young.

You might like to have a say in where your moneyis spent and where it is spread. Putting a gift into trust will alleviate concerns over giving substantial sums to grandchildren before they have reached financial maturity and it can provide grandparents with the leverage they want.

You maintain some control of the assets and to whom and where they are paid as a trustee, and gifts to the trust will lower the estate for IHT. Giving money to your grandchildren may eventually affect the way your estate is taxed, so it’s important to obtain professional advice before doing this.

Plan Ahead for a Brighter Future for All

There’s a lot grandparents can do today, with a little extra thinking and forward planning, to ensure that the money donated goes towards ensuring a brighter future for your loved ones – when you’re still alive to enjoy it.

Giving your Loved Ones Financial Gifts

If you’re unsure about the best approach, talk to us to discuss your options. Please contact us for more information.

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.