Savings & Investments

man at laptop trying to carry out a pension scam

Beat the Scammers

 560 315 Jess Easby
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man at laptop trying to carry out a pension scamBeat the pension scammers, don’t become a victim of illegal pension activities.

Your pension is one of your most valuable assets, and for many it offers financial security throughout retirement and the rest of their lives. But, like anything valuable, your pension can become the target for illegal activities, scams or inappropriate and high-risk investments.

Fraudsters promise high returns and low risk, but in reality, pension savers who are scammed can be less with nothing. When savers realise they’ve been scammed, it can be devastating – many lose their life savings. Once the money is gone, it’s almost impossible to get it back.

How pension scams work

Anyone can be the victim of a pension scam, no matter how savvy they think they are. It’s important that everyone can spot the warning signs.

Scammers try to persuade pension savers to transfer their entire pension savings, or to release funds from it, by making attractive-sounding promises they have no intention of keeping.

The pension money is often invested in unusual, high-risk investments like:

  • Overseas property and hotels
  • Renewable energy bonds
  • Forestry
  • Parking
  • Storage units

Or it can be simply stolen outright.

Warning signs of a pension scam

Scammers often cold call people via phone, email or text – this is illegal, and a likely sign of a scam. They often advertise online and can have websites that look official or government-backed.

Other common signs of pension scams:

  • Being approached out of the blue: by text, phone call, email or at your front door
  • Phrases used like ‘free pension review‘, ‘pension liberation‘, ‘loan’, ‘legal loopholes‘, ‘savings advance‘, ‘one-o# investment‘, ‘cashback‘, ‘government initiatives’
  • Recommendations of transferring your money into a single overseas investment, with returns of 8% or higher
  • Guarantees they can get better returns on pension savings
  • Help to release cash from a pension before the age of 55, with no mention of the HM Revenue & Customs (HMRC) tax bill that can arise
  • High-pressure sales tactics-time limited offers to get the best deal; using couriers to send documents, who wait until they’re signed
  • Unusual high-risk investments, which tend to be overseas, unregulated, with no consumer protections
  • Complicated investment structures
  • Long-term pension investments – which often mean people who transfer in do not realise something is wrong for a number of years
  • Claims that they are from a legitimate organisation like ours, the Pension Service, Pension Wise
  • Visits from a courier or personal representative to pressure you to sign paperwork and speed up your transfer
  • There may be an authentic-looking website, but these can be cloned from legitimate organisations
  • There will be little or nothing in the way of contact names, addresses or phone numbers

Scams can take many forms

Many scammers persuade savers to transfer their money into single member occupational schemes, or other occupational pension schemes. It’s good to remember that pension scams can take many forms and usually appear to most to be a legitimate investment opportunity. What to do if you think you’ve been or are being scammed If you think you might have already been targeted and you’ve agreed to transfer your pension, you should:

  1. Contact your pension provider immediately – they may be able to stop the transfer if it has not already gone through.
  2. Contact Action Fraud on 0300 123 2040 and report the scam.

If you need any further help or guidance on how to beat the pension scammers, please get in touch!

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Older man enjoying skiing in a bright orange jacket after not exceeding his lifetime allowance

Take it to the Max

 560 315 Jess Easby
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Older man enjoying skiing in a bright orange jacket after not exceeding his lifetime allowance

Feel confident about your retirement!

If you’ve been diligently saving into a pension throughout your working life, you should be entitled to feel confident about your retirement. But, unfortunately, the best savers sometimes find themselves inadvertently breaching their pension lifetime allowance (LTA) and being charged an additional tax that erodes their savings.

If you are a high-income earner or wealthy individual, you could be putting too much into your lifetime pension and risk exceeding the pension lifetime allowance.

The government will maintain the pensions Lifetime Allowance at its current level until April 2026, removing the usual annual incremental rises.

The following questions and answers are intended to help you avoid this tax charge.

Q: What is the lifetime allowance?

A: The LTA is a limit on the amount you can withdraw in pension benefits in your lifetime before you trigger an additional tax charge. By pension benefits, we mean money you receive from your pension in any form, whether that’s a lump sum, a flexible income, an annuity income or through any other method.

This allowance applies to your total pension savings, which may be in different pensions.

Q: How much is the allowance?

A: In the 2021/22 tax year, the LTA is £1,073,100. This allowance has now been frozen until April 2026.

Q: What happens if you exceed the allowance?

A: Once you have received your full LTA in pension benefits, you will be required to pay an additional tax charge on any further benefits you receive.

If you take your remaining benefits as a lump sum, you’ll pay a tax charge of 55%. If you take your remaining benefits as multiple withdrawals, you’ll pay a tax charge of 25% on each one.

Q: How is the usage of your lifetime allowance measured?

A: Each time you access your pension benefits (for example, by purchasing an annuity, receiving a lump sum or establishing a flexible income), this is recorded as a ‘benefit crystallisation event’. There is an additional benefit crystallisation event when you turn 75, and finally, upon your death.

Q: Is lifetime allowance protection available?

A: You can only protect your pension from the LTA if your savings were worth more than £1 million on 5 April 2016. You may be able to protect your pension savings up to £1.25 million, or up to the value of your pension on that date, depending on the type of protection you have.

Q: Is it possible to avoid the lifetime allowance?

A: If you do not have LTA protection and you are approaching the limit, there are various actions you can consider. These include stopping your contributions (and, instead, investing your money into an alternative tax-efficient environment), changing your investment strategy or starting retirement earlier.

Q: Who does the allowance affect most?

A: The LTA affects high earners and those approaching retirement age the most, including those with defined benefit pensions. As the value of high earners’ pensions rises over the next five years towards a lifetime limit that will remain fixed, more and more individuals may find they need to stop contributing to avoid breaching the limit.

Q: When should you seek professional advice?

A: The rules around the LTA are very complex and making the right decisions can feel difficult. Receiving professional financial advice will help to identify if you have a problem and offer different solutions to consider, based on a full review of your unique circumstances.

For more information on information regarding the Lifetime ISA, please get in touch!

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Retirement Options

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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 2021). 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 are 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.
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Six Principles of Investing

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Putting aside money for your future and getting it to work for you! Whatever stage of life you’ve reached and whatever plans you may have for the future, you want your money to earn the best return possible without taking undue risk. That’s why it’s important to invest in a way that’s right for you and that will meet your goals.

Creating and maintaining the right investment strategy plays a vital role in securing your financial future. How much control do you want over your investments? Investing can seem daunting but you don’t have to do it all on your own.

So what do you need to consider?

1 Have a plan and stick to it

Your wealth should work in all the ways you want it to. Whatever your goals are in life, careful planning and successful investing of your wealth can help you get there. The first thing to consider is to establish your investment objectives based on your future goals. It is one thing to have a target, but a sound financial plan can make the difference between simply hoping for the best and actually achieving your investment goals. You need to review your investments regularly to ensure they remain on track, stay focused on your plan and make sure you don’t get distracted by short-term market uncertainty.

2 Cash isn’t always king

Putting your money in cash can seem appealing as a safe and secure option – but inflation is likely to eat away at your savings. For most people with longer-term investment plans, cash needs to be supplemented with investment in other asset classes that can beat the perils of inflation and offer better capital growth potential. If you’re investing – especially for major goals years away, such as retirement – you can’t afford to ignore the corrosive effect rising prices can have on the value of your assets. Different asset classes provide varying degrees of protection against inflation.

3 Diversify and always consider your investments as a whole

If we could see into the future, there would be no need to diversify our investments. We could merely choose a date when we needed our money back, then select the investment that would provide the highest return to that date. One of the easiest ways to manage investment risk and improve your probability of success is to have a variety of investments. You can diversify your portfolio across different asset classes, geographical markets and industries. A diversified portfolio, including a range of different assets, will help to iron out the ups and downs and avoid exposing your portfolio to undue risk.

4 Start investing early if you can

Starting early is one of the best ways to build wealth. Investing for a longer period of time is widely considered more effective than waiting until you have a large amount of savings or cash flow to invest. This is due to the power of compounding. Compounding is the snowball effect that occurs when the money you earn investing generates even more earnings. Essentially, you grow not only the original amount you invested, but also any accumulated interest, dividends and capital gains. The longer you are invested, the more time there is for your investment returns to compound.

5 Don’t abandon your plans

Some investors suffer from what behaviourists call ‘activity bias’: the urge to ‘just do something’ in a crisis, whether the action will be helpful or not. When investments are falling in value, it can be
tempting to abandon your plans and sell them – but this can be damaging because you won’t be able to benefit from any recovery in asset prices. Markets go through cycles, and it’s important to  accept that there will be good and bad years. Short-term dips in the market tend to be smoothed out over the long term, increasing the potential for healthy returns.

6 Tailored investment advice

Every single investor’s needs are different and, while the points above are good general tips, there’s no substitute for an investment approach that’s tailored specifically for you. Once we know an investor’s risk tolerance and their investment goals, we can put in place a global portfolio of equities, fixed income, cash, and, when appropriate, alternative investments. The goal is to invest with a long-term view and maximise after-tax returns. It may just be the best investment you ever make.

7 Make informed decisions

Making the right choices to invest for your future can seem complex. But with the right investment strategy in place you can ensure you are able to make informed decisions to secure the financial
future you want. Life doesn’t stand still, so your investment approach shouldn’t either. Although people may have very different goals depending on what life stage they are at, their goals can be broadly categorised into essential needs, lifestyle wants and legacy aspirations. Getting investment advice can be one of the most beneficial things you can do for your personal finances and long-term financial wellbeing.

Looking to invest for growth, income of both?

If you’re not sure which investments are right for your needs, we can help. Whether you are looking to invest for growth, income or both, we can provide the expert advice to ensure you achieve your financial goals. To identify which investment options are right for your individual circumstances or to find out more, please contact us – we look forward to hearing from you.

The value of your investment can go down as well as up and you may get back less than you paid in. Laws and tax rules may change in the future. Your own circumstances and where you live in the UK also have an impact on tax treatment.
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Generation Xers Chronically Under-Saving

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57% face financial difficulty in retirement years.

According to The International Longevity Centre UK (ILCUK) report, a substantial proportion of Generation Xers (those born between 1965 and 1980) in the UK face financial difficulty in retirement, with one in three expected to face significant disadvantages.[1].

Many 40-55-year-olds are reluctant to invest because they are frustrated by various financial stresses, such as coping with fluctuating incomes and balancing conflicting goals like childcare, loans and mortgages.

Multiple financial pressures

Generation Xers are chronically under-saving, with nearly one in three at risk of reaching retirement with inadequate incomes. The majority (57%) say they want to save more for retirement but they cannot afford to because of multiple financial pressures.

Many are also unaware they are saving too little to achieve the level of income they desire: just 7% of those with a defined contribution (DC) pension are saving enough to achieve a moderate lifestyle in retirement.

No pension funds

More than half of those who contribute to DC pensions do so with less than 8% of their wages, and over half have substantial delays in their pension savings of at least ten years.

Of those who are employed, more than a quarter expect to rely on the State Pension for the bulk of or all their retirement money, or have no pension funds at all.

Additional income in retirement

COVID-19 has further disrupted people’s retirement plans, with one in five Generation Xers saving less or spending down their savings as a result.

Generation X is a very diverse cohort. Some subgroups in the age band are well prepared for retirement: almost 60% expect to have additional income in retirement, such as property wealth, other investments or savings, an inheritance or income from their partner or family.

High risk of financial difficulty

But other subgroups are at high risk of financial difficulty in later life, including those on benefits, the self-employed, low earners, renters and carers.

The pandemic has disproportionately influenced Generation Xers: they are the age demographic most affected by the pandemic, with 91,000 more older adults unemployed now than a year earlier. This is a year-over-year rise of more than 30%, and far more than in any other age demographic.

Uncertain about retirement plans

According to the ILCUK study, nearly 40% of Generation Xers are uncertain about retirement plans, and few grasp the rate of investment needed to reach a secure retirement income.

The findings of this report are really worrying and highlight the precarious financial future facing some of those in their 40s and 50s. Increased housing costs, insecure work and caring responsibilities risk leaving many without the savings they need for later life.

Maximise your wealth potential

Everyone’s situation is unique. This is why a personalised approach is important to help you, and your family, map out your goals and aspirations. Whatever the source of your wealth, there is an opportunity to maximise its potential through professional financial advice. To find out more, please contact us.

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Source data: [1] https://ilcuk.org.uk/slipping-between-the-cracks/

Retirement Clinic

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Answers to the myths about your pension questions. If you are approaching retirement age, it’s important to know your pension is going to finance your plans.

Pension legislation is extremely complex and it’s not realistic to expect everyone to understand it completely. But, since we all hope to retire one day, it is important to get to grips with some of the basics. It’s particularly helpful to become aware of the things you may have thought were facts that are actually myths. Here are some examples.

MYTH: The government pays your pensions

FACT: The government pays most UK adults over the pension age a State Pension, which is currently:
– Retired post-April 2016 – max State Pension of £179.60 a week
– Retired pre-April 2016 – max basic State Pension of £137.60 a week (a top-up is available for some, called the Additional State Pension)

Not everyone is eligible for the full amount, which requires you to have at least 35 qualifying years on your National Insurance record. If you have less than ten qualifying years on your record, you’ll receive nothing. Even if you receive the full amount, you’ll usually need to supplement it with your own pension savings.

MYTH: Your employer pays your pension

FACT: Most people are automatically enrolled into a workplace pension. Your employer is usually required to pay a minimum of 3% of your salary into it and you must also pay a minimum of 5%
of your salary.

If you keep your contributions at the minimum level, it might be difficult to save enough for retirement. As life expectancies grow longer, your retirement can be almost as long as your working life. It’s therefore important to put aside a portion of your earnings to create a pension pot that will enable you to receive the income and live the lifestyle you want during retirement.

MYTH: You can’t save more than your lifetime allowance

Fact: There is a lifetime allowance on the benefits you can access from your pension, which is currently £1,073,100 (tax year 2021/22). That doesn’t mean that you can’t withdraw any more after that, but it does mean that you’ll pay a tax charge of up to 55%. However, there are ways of withdrawing the money with a tax charge of 25%.

MYTH: Your pensions provider’s default fund is suitable for everyone

Fact: Most pension default funds will start out with a high-risk strategy and steadily move your capital into lower-risk investments, such as bonds and cash, as you get closer to retirement. This is to reduce volatility in the value of your investments so that you can have a higher degree of confidence in how much you’ll eventually end up with.

If you don’t plan to purchase an annuity, you don’t necessarily need to reduce volatility before retirement. You may be leaving some of your money invested for several more decades, in which case a higher risk strategy may be more  appropriate.

MYTH: Annuities are outdated

Fact: There was a time when almost everyone bought an annuity when they retired, and that time has passed because there are now alternative ways to access your pension savings. But annuities still have a useful role for generating a retirement income and can be an appropriate product for some people. Unlike other pension withdrawal methods, such as drawdown, an annuity offers a fixed income for life, so there’s no risk of your money running out. That’s a crucial benefit for many pensioners.

MYTH: Your can’t pass on a pension

Fact: If you’ve used your pension savings to purchase an annuity, the income from this will usually cease when you die. But if you have pension savings that you haven’t used to buy an annuity (for example, if you’ve been taking an income through drawdown), what’s left can be passed on to a loved one.

If you die before the age of 75 there will usually be no tax to pay by the beneficiary. Otherwise, they will need to pay Income Tax according to their tax band.

Look after your future

There’s a whole lot to think about when you’re planning for retirement. Is it worth paying into private or workplace pensions? Are you saving enough? Which investments should you choose? All these unanswered questions can make planning feel a little overwhelming. To review your situation or consider your options, please contact us – we look forward to hearing from you.

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.
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Combined Finances

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Planning ahead for your financial future together.

Some couples may prefer to keep their finances separate, while others share everything. Whichever method you’ve chosen, when it comes to retirement saving, it’s worth planning together to ensure you’ve made the most of all the allowances and benefits offered to couples.

Your golden years may ultimately be the best of your relationship if you understand each other’s future goals, needs and expectations.

Set your budget

The first step of planning for retirement is to look at how much money you’ll need to cover your outgoings. Start by analysing your current spending, and then identify where your spending
might increase and decrease over the years.

If you have different perspectives on how extravagant your lifestyle will be, it’s best to discuss this openly and early on as you’ll need to come to an agreement. One of you might be underestimating how much you’ll need or overestimating what you can realistically afford.

Remember to plan for different circumstances. Hopefully, you’ll enjoy a decades-long retirement together, but your finances might look very different if one of you were to fall ill or die. It might be unpleasant to discuss but is essential to plan for.

Assess your finances

Next, look at the income you’ll both have from the State Pension and any private pensions. Set aside some time to trace pensions from previous workplaces that you might have forgotten about
or not known an employer was paying into, as many people find extra cash that way.

Make sure you understand all of your options for withdrawing your pensions, as the amount you get back from your pension depends, in part, on which option you choose. Consider, for example, whether you want to take a tax-free lump sum of up to 25% of your pension savings at the start of your retirement, and how best you could use that.

If you have any debts or savings you haven’t mentioned to your partner, it would be wise to open up about these now.

Top up your savings

If your existing pension savings won’t provide the income you think you’ll need, look at ways to address the shortfall. Could you make some lifestyle changes now to save more for later?

If one or both of you have less than 35 years on your National Insurance record, you can make voluntary contributions to receive more State Pension.

It’s worth obtaining professional financial advice about using both of your pension allowances, and whose pension it is more sensible to contribute to. You both have an ‘annual allowance’, which is £40,000 in the 2020/21 tax year, or 100% of your income if you earn less than £40,000.

This means with the current annual allowance limit, someone paying Income Tax at the standard rate of 20% would receive a maximum sum of £8,000 of pension tax relief towards their pension pot. If you pay tax at the higher rate of 40% you would receive up to £16,000 of tax relief, while those in the additional rate band of 45% would currently receive £18,000 of tax relief.

Need help with your retirement plan?

It’s important to carry out any financial planning exercise together, holistically, as a couple. If you don’t fully understand your options or want to boost your pension savings, speak to us to discuss your circumstances.

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 financial conduct authority does not regulate tax advice.
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Responsible Investing

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Responsible, sustainable and environmentally friendly investing is here to stay. But, while demand is growing among all age groups, genders and income bands, some savers and investors are missing their biggest opportunity for responsible investing, which is through their pension.

We all want to make responsible choices as more of us are becoming aware of global challenges, such as environmental issues, human rights and climate change. We’re also starting to care more about how our behaviours affect the planet and society.

Future Success

Taking ESG (Environmental, Social and Governance) factors into consideration when investing is becoming more mainstream. It is acknowledged that companies that act responsibly to their employees, the environment and the public have a better chance of future success than those that don’t. Investing in these companies is a logical approach financially as well as ethically.

Many pension holders understand this approach and see the value of it. In a recent survey, more than one-third of respondents said that the option to invest their pension only in sustainable companies is important to them[1]. Nearly two-thirds said having clearly branded funds for investing in environmentally and socially responsible companies is important.

Pension Investments

The same survey suggests that pension holders feel that sustainable investing isn’t just important, but interesting. More than half of respondents said that a fund focused on clean energy and lowering carbon would make them more interested in their pension. A similar number felt that way about a zero-plastic fund.

But while pension holders feel these issues are important and interesting, that isn’t yet affecting the way they invest. Most people don’t manage their pension investments themselves, instead leaving their pension invested in the default options set by a provider chosen by their workplace. So, more than two-thirds of pension holders do not know how sustainable their pension is.

Environmentally Friendly

Many pension holders don’t know that they can choose their own funds, and therefore that they can choose sustainable or responsible funds. Around half are unaware of ways to ensure their
pension is environmentally friendly. Clearly, there is a large audience of individuals who would like to invest their pension more sustainably and responsibly but don’t know where to start. There are plenty of options, but without specialist experience, it can be difficult to select those that are truly responsible and environmentally friendly and will also deliver the financial return you’re seeking.

Investing with purpose

Responsible investors essentially take responsibility for the impact that the companies they invest in have on the world. Speak to us about what responsible investing options are available in your pension scheme and for advice on how to help your money have the greatest impact. We look forward to hearing from you.

Source data: [1] https://adviser.scottishwidows.co.uk/assets/literature/docs/2020$09-responsibleinvestment.pdf
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The value of your investment (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 the interest the rates at the time you take your benefits. The tax implications of pension withdrawals will be based on individual circumstances, tax legislation and regulation which are subject to change in the future. You should seek advice to understand your options at retirement.
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Wealth needs managing now more than ever

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Achieving your financial goals through investing, and one size does not fit all Even as we hope to put the coronavirus (COVID-19) pandemic in the rearview mirror in 2021, uncertainty regarding both the virus and Brexit is likely to continue to weigh on the UK and global economies as well as on our personal finances during this year. While we hope volatility is less elevated this year, financial markets and the economy could still remain at the mercy of COVID-19 developments.

Setting specific investment goals is key

Understandably investment volatility can make it easy to focus on the short term and those temporary peaks and troughs. Setting your specific investment goals is important to keep you focused when you need it and will enable you to build a portfolio to get you where you want to be. Investment strategies should include a combination of various investment and fund types in order to obtain a balanced approach to risk and return. Maintaining a balanced approach is usually key to the chances of achieving your investment goals, while bearing in mind that at some point you will want access to your money.

Market factors that determine volatility

Market volatility can be nerve-racking, even for the most seasoned investors. Many different factors can impact market volatility, sending values of investments in either direction. Some of the most common factors that determine the volatility of the market include investor concern, political events, natural disasters and major events in foreign markets. But it’s important to keep matters in perspective. Avoid making rash decisions and focus on your long-term goals. Keep investing as you normally would. Also don’t attempt to pick the market bottom or the turnaround to jump in. Fight the impulse to think you can.

Riding out the market ups and downs

Investments don’t always go in a straight line – they have the potential to react and recover from short-term market events. Rather than looking at short-term volatility, it pays to look at the bigger picture. Over the long term, investments will usually deliver returns that allow you to grow your wealth. Looking at a twelve-month snapshot of your investment portfolio may show that investments have underperformed but look back over the last five or ten years, and you’ll hopefully be on track.

Tolerance for risk

One of the first steps in developing an investment strategy is to identify your tolerance for risk as an investor, referred to as your ‘risk profile’. Every investor has a different risk tolerance with
regard to their investment selections. Making investment decisions can depend on your personality as well as the goals you are investing towards. Weighing up the level of risk you’re willing to be exposed to can be challenging. Whether you’re reviewing your pension or building a personal investment portfolio, balancing risk is a crucial part of the process.

Well-allocated investment portfolio asset classes

During volatile times, asset classes such as stocks tend to fluctuate more, while lower-risk assets such as bonds or cash tend to be more stable. By allocating your investments among these different
asset classes, you can help smooth out the short-term ups and downs. Portfolio diversification may reduce the amount of volatility you experience by simultaneously spreading market risk across many different asset classes. By investing in several asset classes, you may improve your chances of participating in market gains and lessen the impact of poorly performing asset categories on
your overall portfolio returns.

Diversification to protect and grow investments

Diversify, diversify, diversify – in other words, ‘don’t put all your eggs in one basket’ – is sage investing advice. In addition to diversifying your portfolio by asset class, you should also diversify
by sector, size (market cap) and style (for example, growth versus value). Why? Because different sectors, sizes and styles take turns outperforming one another. By diversifying your holdings according to these parameters, you can smooth out short-term performance fluctuations and mitigate the impact of shifting economic conditions on your portfolio.

Time to reach your financial goals?

There’s always a purpose behind financial investments. What’s yours? For many of us, building a nest egg feels like a natural thing to do. Perhaps it’s performance. Or preserving your wealth for the next generation. Or maybe you want your investments to reflect your values. What’s important is that you understand your situation and your financial goals. To discuss accessible ways of investing that could help you make your money work harder, please contact us.

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Don’t miss the ISA deadline

 560 315 Jess Easby
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Saving and investing for a future that matters. Yours. Each tax year, we are given an annual Individual Savings Account (ISA) allowance. This can build up quickly, letting you accumulate a substantial tax-efficient gain in the long-term.

The ISA limit for 2020/21 is £20,000. The proceeds are shielded from Income Tax, tax on dividends and Capital Gains Tax. To utilise your ISA allowance you should do so before the deadline at midnight on Monday 5 April 2021. We’ve answered some typical questions we get asked about how best to use the ISA allowance to help make the most of the opportunities as this tax year draws to a close.

Q: Can I have more than one ISA?

A: You have a total tax-efficient allowance of £20,000 for this tax year. This means that the sum of money you invest across all your ISAs this tax year (Cash ISA, Stocks & Shares ISA, Innovative Finance ISA, or any combination of the three) cannot exceed £20,000.

Q: When will I be able to access the money I save in an ISA?

A: You can take money out of your Cash ISA but how much, and how often, depends on which type of ISA you have. If your ISA is ‘flexible’, you can take out cash then put it back in during the same tax year without reducing your current year’s allowance. Your provider can tell you if your ISA is flexible.

Stocks & Shares ISAs and Innovative Finance ISAs don’t usually have a minimum commitment, which means you can take your money out at any point. That said, you should invest for at least five years. As such, if you’re looking to use your money within the next few years, you should probably keep it in a Cash ISA. There are different rules for taking your money out of a Lifetime ISA.

Q: Can I take advantage of a Lifetime ISA?

A: You’re able to open a Lifetime ISA if you’re aged between 18 and 39. You can save up to £4,000 each tax year, every year until your 50th birthday. The government will pay an annual bonus of 25% (capped at £1,000 per year) on any contributions you make.

Q: What is an Innovative Finance ISA?

A: An Innovative Finance ISA allows individuals to use some or all of their annual ISA allowance to lend funds through the Peer to Peer lending market. Peer to Peer lending allows individuals and companies to borrow money directly from lenders. Your capital and interest may be at risk in an Innovative Finance ISA and your investment is not covered under the Financial Services Compensation Scheme.

Q: What is a Help to Buy ISA?

A: A Help to Buy ISA is a government scheme designed to help you save for a mortgage deposit to buy a home. The scheme closed to new accounts at midnight on 30 November 2019. If you have already opened a Help to Buy ISA (or did so before 30 November 2019), you will be able to continue saving into your account until November 2029.

Q: I already have ISAs with several different providers. Can I combine them?

A: Yes you can, and you won’t lose the tax-efficient ‘wrapper’ status. Consolidating your ISAs may also substantially reduce your paperwork. We’ll be happy to talk you through the advantages and disadvantages of doing it.

Q: Can I transfer my existing ISA?

A: Yes, you can transfer an existing ISA from one provider to another at any time as long as the product terms and conditions allow it. If you want to transfer money you’ve invested in an ISA during the current tax year, you must transfer all of it. For money you invested in previous years, you can choose to transfer all or part of your savings.

Q: What happens to my ISA if I die prematurely?

A: If you die, the money and investments you hold in an ISA will be passed on to your beneficiaries. After your death, your ISA will retain its tax benefits until one of the following occurs: the administration of your estate is completed or the ISA is closed by your beneficiary

Still unsure what’s right for you?

Tax-efficiency is a key consideration when investing because it can make such an enormous difference to your wealth and quality of life. If you want to understand more about our ISA options 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. Past performance is not a reliable indicator of future performance. The value of your investments (and any income from them) can go down as well as up, and you may not get back the full amount you invested. Innovative finance ISA (IFISA) is not protected under the financial services compensation scheme. This means your money could be at risk if you save with an IFISA company that goes bust.
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