The mortgage landscape has certainly changed a lot since the days before the 2008 financial crisis.  Now the key word for both residential buyers and landlords is “affordability” and although the concept of affordability is defined in different ways depending on whether the buyer is looking for a property to live in or a buy-to-let investment, but in either case lenders now have a legal obligation to undertake reasonable checks to ensure that the prospective borrower, can, in fact, manage their mortgage over the long term, even if interest rates rise.  They also have an obligation to their shareholders to manage their businesses responsibly and, essentially, avoid getting into the sort of situations which led to some of their number having to be bailed out by public funds. Deposits make a difference There are two reasons why deposits make a difference.  The first is the fact that they protect the bank both from short-term fluctuations in house prices and from adverse changes in the borrower’s circumstances.  Essentially the price of the house has to fall below the sales price minus the deposit before the bank’s funds are at risk and the bigger the deposit, the lower the price can drop before the bank has to face the potential loss of its capital.  Secondly, quite simply, being able to save for a deposit indicates that you are able to save in general, which indicates both that you have disposable income and that you know how to manage it.  This, of course, is a very good sign for lenders. Building a deposit While there are lots of good reasons why lenders like to see large deposits, there are also lots of good reasons why people may struggle to put together the sorts of deposits lenders like to see, especially if they are having to pay rent as well.  The challenge can be particularly difficult for people living in parts of the country where housing prices are highest (such as London and the south east), especially for younger people at the start of their careers, who are unable to call on help from the “bank of mum and dad”.  This fact has been recognised by the government and has led to the development of a number of schemes to help first-time buyers, including the Lifetime ISA and the Help to Buy Scheme (not to be confused with the Help to Buy ISA, which has now been discontinued).  Both of these schemes (and other options), may be helpful in certain situations, but it is strongly recommended to take professional advice regarding them (or any other options) so as to be sure you understand how they work, their specific requirements and their advantages and disadvantages. Saving for a house At this point in time it is probably fair to say that for most people saving for a house will be a medium- to longer-term project and that as such it will need to be managed as part of an individual’s overall financial goals.  Placing disposable income into investments such as equities, which may generate returns far in advance of interest rates on cash deposits may help to grow a deposit more quickly, but individuals should always remember that such investments generally carry some risk of capital loss.  On the other hand, while cash deposits may preserve capital, they will only grow in line with interest rates and may struggle even to keep pace with inflation.  It is crucially important that people strike the right balance between growth and safety and this is an area in which getting the right professional advice can make all the difference. Your property may be repossessed if you do not keep up repayments on your mortgage.

Fundamentally, your credit rating is simply a reflection of how well you manage your money.  While the term “credit score” does infer debt repayments, these days, your credit score can be a broader reflection of how you manage your money more generally. It’s pretty near impossible to opt out of having a credit score If you’re familiar with data protection, you will be aware that you have a large degree of control over what information companies hold about you and with whom they can share it and it is true that, in principle, you can refuse to share your data with any company or to decline to give your permission for them to pass it on to third parties such as credit reference agencies.  In practice, however, if you do, then you have to accept the very real likelihood that companies will refuse to do business with you.  This could cause you issues not only with getting credit products such as mortgages but also in day-to-day matters such as getting a mobile phone contract. You actually have more than one credit score, but they all work in similar ways In the UK there are three major credit reference agencies (Equifax, Experian and CallCredit), each of which has their own system of working.  Having said that, the basic ideas underpinning these services are much the same.  They work with companies such as loan providers, providers of other forms of credit (such as store credit) and providers of contracts for services (everything from mobile phone contracts to gym contracts) and over time they build up a picture of how you manage your money, i.e. how responsible you are with it and how likely you are to repay credit or fulfil a contract. You have a fair degree of control over your credit score Even though it’s practically impossible to opt out of having one, you can exercise a fair degree of control over your credit record and it often makes good sense to do so.  You have the right to see your credit record and although there is generally a small cost attached to this, it can be to your advantage to pay it once a year or so to see where you stand even if you are not planning on applying for credit any time in the near future and if you are planning on applying for credit, particularly large-scale credit such as a mortgage, then it is usually a very good idea to double check the information a potential lender will see about you to ensure that it is all present and correct and to see what steps, if any, you can/need to take to improve it. Steps to improve your credit record Make sure all information held on file is current, complete and consistent. Do all companies have the same address on file for you?  Even if you haven’t moved, it may still be possible for the same address to appear in different formats, for example Flat 4F and Flat F4.  You also want to be on the electoral roll at the same address as you use for your bank accounts, loans and so forth. Hint - There are two versions of the electoral roll, the open register and the full version.  The open register is made available to anyone to buy (e.g. for marketing purposes) and the full version, which is only available to certain authorities (essentially the government, the police and credit-reference agencies).  You can opt out of the open register if you have concerns about being deluged by marketing material. Make sure all details are correct - mistakes do happen. Remember you are judged by the company you keep - in other words, if you hold a financial product jointly with someone else, their behaviour can influence how you are perceived.  This can have both advantages and disadvantages. Pay off and close down any unused credit lines For example, if you’ve been tempted to take out a credit card/store card for a special offer and have stopped using it since then, formally close it rather than just leaving it gathering dust physically and on your credit record.

The old joke about death and taxes being the only constants in life will probably ring particularly true to many people when it comes time to fill in tax returns.  The good news is that there are various forms of relief available to savers and investors, so a little judicious advance planning can go a long way to minimising the amount of tax payable.  Here is a quick run-down of some of the various forms of relief currently available. Tax relief on interest income Basic-rate taxpayers can now earn up to £1000 interest income tax free, while higher-rate taxpayers can earn up to £500 interest income tax free. Property allowance While not, strictly speaking, a savings or investment allowance, it may be worth noting that it is now possible for individuals to earn an income of up to £1000 on property without paying tax on it.  This is separate from the long-established “rent-a-room” scheme.  This could potentially make it more interesting for people to use their property to generate a small income in some way, although those investigating the AirBnB route may wish to check where their mortgage provider stands on this. Trading allowance On a similar note, it is now possible to earn up to £1000 income from trading without paying tax on it.  This may be of interest to anyone with skills they are interested in monetising in a small way. Dividend income allowance Currently investors can receive up to £5000 of dividend income without paying tax on it.  This is due to reduce to £2000 in the 2018/2019 tax year. Capital gains tax relief Individual investors can make a profit of up to £11.3K on the sale of investments before capital gains tax becomes payable.  Depending on their personal situation, investors may be able to make use of the fact that transfers of assets between spouses and civil partners are exempt from taxation and hence dividing an asset between two halves of a partnership can make use of both allowances. Individual savings allowances It can be easy to forget about the familiar, so here's a quick reminder to make the most of your ISA.  There have been a few additions to the ISA stable over recent years, one of which (the Help to Buy ISA) has ceased to be offered, so for the sake of completeness, here is a quick run down of the ISAs currently on offer as of 2017/2018 and the relevant allowances. Adults aged 18 or over can save a total of £20K into ISAs.  They can choose to put all of it into a Cash ISA, a Stocks and Shares ISA or an Innovative Finance ISA or they can choose to mix and match between the different forms.  Lifetime ISAs have special rules around them and savers can only deposit up to £4000 each year, which comes out of their total ISA allowance, in other words, they would only have £16K to deposit in other forms of ISA. Niche forms of tax relief Certain investors may be interested in some, more niche, forms of tax relief such as Enterprise Investment Schemes, Venture Capital Trusts and Business Property Relief (this last is one which may be helpful for people looking at estate planning).  Those interested in these options are highly recommended to get specialist advice since these areas can be higher risk. Overall Investments are generally best looked at as a whole with tax relief just being one factor to consider.  If an investment is fundamentally wrong for your particular situation, then the fact that attracts tax relief is unlikely to make it right and vice versa.  If, however, there are two similar investments to consider, then the question of tax relief may well factor into your calculations as to which one to choose. For Investments we act as introducers only

Life can get really hectic and one of the keys to staying on top of everything you need to do and to manage is to ensure that you have a place for everything and everything in its place and that, if at all possible, like items are kept together.  This principle often holds good in many areas of life, including taking care of your finances.  Seeking out the best products for your needs and wants may have left you with a range of investments with a variety of providers.  If you are in this situation, then you may find it helpful to start using a platform. Platforms might not be suitable in every circumstance, for example, not all funds might be available on the platform which you choose, and they might also be available elsewhere with lower charges. You should seek advice from a suitably qualified professional adviser, if you are considering using a platform. Platforms can help you to go in the right direction In financial terms, platforms are simply dashboards which allow you to view and manage all of your investment products from one place.  They offer several advantages over accessing each of your investments individually. Simplicity For many people, this may be the most compelling aspect of using a platform.  In these days of multiple online accounts with associated passwords, pins, security questions and card readers, it can be a blessed relief to consolidate different accounts into one convenient and secure location with one set of credentials to remember.  What’s more the user will only have one interface to learn rather than having to master the process required to perform what is essentially the same action on several different websites. Clarity Taking care of your pennies is a good start but pounds do actually need some care too.  At the end of the day, the small savings we make through thrift are made for a reason.  For some people that may just be ensuring that they can get through the proverbial rainy day but for others it may be for longer-term life goals, whether that’s a (first) home or a dream retirement.  Having everything “under one roof” can make it easier to see the overall picture and hence can help to make it clearer what you need to do to achieve your goals. Responsiveness Generally speaking, as people travel through life, their needs, wants and priorities change.  A person in their twenties may be looking to get on the housing ladder with their first starter flat, while a person in their fifties may already be planning ahead to where they will spend their retirement.  Sometimes these changes follow broadly familiar patterns, at other times, they may pop up unexpectedly in the form of a new challenge or a fresh opportunity (sometimes a situation can be both at once).  Keeping all your financial matters together can make it easier to react to changes in your situation, even unplanned ones. Transparent charging Charges are a fact of life with any service and while it’s fair enough that people (or companies) who provide you with a good service earn a reasonable fee for their efforts, it’s important that you can feel confident that you are getting good value for money.  You can only determine if charges are in line with your expectations if you actually know what they are.  One of the benefits of using a platform is that you will be able to see at a glance how much you will pay for any given action.  On a similar note, using a platform can help you to manage your tax matters as effectively as possible, for example by making it obvious how much, if any, of your annual capital gains tax allowance you have used.  In fact some platforms may allow you to record the value of non-investment assets such as property on them, which can be very helpful not only from the point of view of managing your immediate taxation liabilities but for general financial management and, ultimately, for estate planning. The Financial Conduct Authority does not regulate Estate Planning or tax advice. For investments we only act as introducers

A mortgage is a long-term commitment and has to be met regardless of any short-term issues with your income such as unemployment or being temporarily unable to work through illness or injury.  With that in mind, it’s worth looking at how you can be sure to make your mortgage repayments are made even if you face adverse circumstances. Only take on a mortgage in the first place if you’re sure you can manage it for at least five years The house-buying process is something of an anomaly in a world where people have become used to buying and selling products at the click of a button.  It’s slow and there can be a lot of up-front costs associated with it such as surveyor’s fees, legal fees (conveyancing) and stamp duty and that’s before you get to moving costs and the cost of furnishing your new home.  Homeowners also have to be realistic about the fact that the process of selling a home, even in a buoyant market can take much longer and be more stressful than just handing in a month’s notice on a rental contract and that letting out a property as a means to pay the mortgage while you are away from it may be a whole lot more complicated than it sounds.  In other words, think carefully before you commit to a house purchase in the first place, as a minimum you should be confident about paying your mortgage for the next five years. Keep your mortgage within your means This advice should be less relevant than it used to be since the Mortgage Market Review obliges lenders to look at affordability rather than just to headline income figures, but it’s still worth repeating.  Just because you can get a mortgage of a certain level, doesn’t mean you necessarily should.  Also, just because you can borrow from family and friends to put together a (bigger) deposit doesn’t mean you necessarily should either. Make sure you still have some cash savings When it comes to deposits it’s generally a case of the bigger the better, but using up all your cash in hand leaves you with nothing to fall back on in an emergency.  If at all possible, aim to keep at least three months of living expenses, including mortgage payments, set aside “just in case”. Look at life insurance Having life insurance may well be a condition of your mortgage but if it’s not and you have dependents then it’s strongly recommended to look into it anyway and even if you don’t it could still be beneficial if it allows you to make life less stressful for those left behind.  If you are only taking out life insurance to cover your mortgage, then you can reduce your level of cover as you pay back your mortgage. Consider some form of income-protection insurance In the context of ensuring that a mortgage continues to be paid even if you are experiencing adverse circumstances, there are three forms of insurance it is worth considering.  (Mortgage) Payment Protection Insurance is a form of insurance which guarantees that a specific credit commitment will be met if the claimant fulfils the relevant conditions.  These are usually accident, sickness and unemployment, hence its alternative name of ASU cover.  The self-employed may be able to get similar cover but without the unemployment clause or they may wish to look at the second option which is Income Protection Insurance.  This is much the same as MPPI except that the income may be used as you wish.  Your third option is Critical Illness Cover, which, as its name suggests pays out if you are diagnosed with one of a range of serious illnesses and, again, the payment can be used as you wish.

The 2018/19 tax year starts at the stroke of midnight between the 5th and 6th of April.  While many individuals leave tax planning to the end of the tax year, you can look to maximise the benefits by using your personal tax allowances* and reliefs straight away.  Please get in touch to take advantage of one or more of the following: Income Tax (for non Scottish taxpayers) The tax free personal allowance has increased to £11,850 from £11,500 Basic rate tax of 20% will be payable on income above the tax free allowance and up to the new higher rate threshold of £46,350 (which has increased from £45,000). Additional rate income tax remains the same at 45% on income above £150,000 Income Tax (for Scottish taxpayers) New income tax rates and bands apply for Scottish taxpayers. The tax free personal allowance has increased to £11,850 from £11,500. A new starter rate of income tax of 19% for income above £11,850 up to £13,850. Basic rate tax of 20% will be payable on income above £13,850 up to £24,000. A new intermediate rate of tax of 21% for income above £24,000 up to the new higher rate threshold of £43,430. A new higher rate tax of 41% for income above £43,430. Top rate income tax of 46% for income over £150,000. Savings The Junior ISA allowance has risen to £4,260 from £4,128 for children under 18. The adult ISA allowance of £20,000 remains unchanged. If you are 16 or 17 this tax year (or have children of these ages), they can benefit from both the Junior ISA allowance and adult ISA allowance (cash only). The Personal Savings Allowance, which gives you tax-free savings interest, remains £1,000 for basic rate tax-payers.  This reduces to £500 for higher rate tax payers and additional rate tax payers do not get any allowance. Pensions The State Pension has increased by 3%, which for the full allowance is an increase of £4.80 a week to £164.35 Minimum pension contributions (paid by employers and employees) through auto-enrolment have risen to 5% (2% employer and 3% employee) from 2% (1% employer and 1% employee) The Lifetime Allowance for pension savings has increased to £1,030,000. The Annual Allowance stays the same at £40,000 (though this reduces for individuals with income over £150,000 or if you have already accessed your pension savings) Inheritance Tax The Residence Nil Rate Band has risen to £125,000 from £100,000. This can be added to the £325,000 Inheritance Tax allowance when a direct descendant inherits someone’s main house. The annual gifting allowance remains the same at £3,000 and if you did not use it in 2017/18, this can be carried over to this tax year. Investments The tax-free Dividend Allowance has reduced to £2,000 from £5,000 (although dividends received by pension funds and ISAs remain tax-free). There is no change to the taxation of Venture Capital Trusts, so you can invest up to £200,000 and get up to 30% income tax relief. Similarly, the taxation of Enterprise Investment Schemes is unchanged, meaning you can invest up to £1 million and claim up to 30% income tax relief. Capital Gains Tax The Capital Gains Tax allowance has increased to £11,700 from £11,300. Married couples and civil partners will continue to be able to combine their annual allowances. Landlord Mortgages Landlords will only be able to offset 50% of their mortgage interest payments against their rental income (down from 75%). By 2020, there will only be a 20% tax credit saving from a landlord’s mortgage interest. For advice on investments, pensions and tax planning we act as introducers only. Your property may be repossessed if you do not keep up repayments on your mortgage.*This information is based on our current understanding of the rules for the 2018-19 tax year. HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen. The value of investments and any income from them can go down as well as up and you may not get back the original amount invested. The Financial Conduct Authority does not regulate tax, trusts or commercial Buy to Let mortgages.

A house is the biggest purchase many people will ever make and hence taking out a mortgage can be a major decision.  Because of this, it is worth taking the time to understand the basics of them. Mortgage lenders have to abide by the Mortgage Market Review The Mortgage Market Review stressed the importance of looking in greater depth at affordability rather than simply looking at headline figures.  This means that anybody looking for a mortgage can expect to be asked detailed questions about their overall financial situation.  This applies to those remortgaging as well as to first time buyers. There are three main types of mortgages: repayment, interest only and offset Repayment mortgages pay off the loan and the interest thereon Repayment mortgages are arguably the simplest form of mortgage to understand.  You make a monthly payment which covers both the loan principle and the interest due and at the end of the term, you own the property. Interest-only mortgages only pay off the interest on the debt; they do not reduce the principle If you wish to keep the home you purchase, then you will need to have a clear plan in place to repay the loan principle at the end of the term.  If you are happy to sell it, then you will still need to have a plan in place for a situation in which house prices drop to the point where you find yourself in negative equity.  Interest-only mortgages aren’t actually banned in the residential mortgage market but they are subject to serious scrutiny regarding the borrower’s ability to repay them at the end of the term.  They are still very much a feature of the buy-to-let mortgage market as landlord’s are buying property to let out rather than to live in, although there is always the risk of negative equity. Offset mortgages work like giant overdrafts Basically, the idea behind offset mortgages is that you put all of your cash into one place and thus give up the interest you would have earned on your cash savings in exchange for paying less interest on your mortgage.  You still have access to your cash savings although there may be restrictions on how much you can withdraw since mortgage lenders have to keep in mind the need for the loan to be repaid by the end of the term.  These are still niche products, but can offer a combination of security and flexibility. Fixed rate mortgages can provide security but this may be at a price It may be tempting to opt for a fixed-rate mortgage as a hedge against rate rises, but remember that your lender will factor in the prospect of rate rises in the deal they offer you.  On the plus side, knowing what you will be paying each month will provide stability, which may be invaluable. Residential mortgages are for the purchase of residential property If you’re interested in purchasing a property to let out, then you need a buy-to-let mortgage. Letting out your property via Airbnb may be against the rules of your mortgage This goes back to the previous comment about residential mortgages being for residential property.  If you are letting out your property in its entirety, by definition, you’re not living in it at the time.  It is strongly recommended to check your lender’s policy on this. Renting out a room may require consent from your mortgage lender The government allows people to earn £1000 income from property without paying tax on it and there is also the “rent-a-room” scheme, which allows people to earn up to £7,500 from renting out furnished accommodation in their home.  This may be fine with the government, but your mortgage lender may have a different view, it’s strongly advisable to check. Your home may be repossessed if you do not keep up the repayments on your mortgage.

There’s a lot goes in to building a house and commercial housing developments are often a matter of teamwork, with tasks handed out to people who specialise in them.  Private housing development, however, can, within certain limits, work within their own rules and you might be surprised at the options for creating your own home from scratch (or almost).  Here are three options for doing so – and three considerations to keep in mind when making your plans. Renovate an existing property By this we mean, essentially, gutting a property which is currently uninhabitable, or close to it, and making it a desirable dwelling place.  This may not be quite the same as starting from scratch, but depending on the state of the property, it may be pretty close to it, in fact it may bring its own challenges.  On the plus side, if there is already a building on the land, you may find it easier to get planning permission, at least as long as you intend to stick fairly closely to what was already there.  If you’re planning something radically different, planning officials may need more persuading. Buy a prefabricated property and put it together yourself. You can buy a “tiny house kit” from as little as £6,500 plus chassis, although this will only give you the materials for the basic structure and you will have to add electricity and plumbing yourself as well as furnishing it.  Life in a tiny house may not be for everybody, but they can certainly be an affordable way of getting on the housing ladder and could be a good solution for young adults in their pre-child years allowing them to avoid handing over money to a landlord while they build savings towards a family home.  You can also sell on a tiny house when you are ready to move on, although this is still a niche market.  For those looking for something rather bigger, prefabrication is still very definitely an option and can make the building process quicker and simpler although the nature of prefabrication is such that there can be limited scope for customisation, so whether or not this is an appropriate choice depends on what your priorities are. Build a standard house from scratch In this situation you’re only restricted by your imagination, your budget, the realities of your site and the opinion of local planning officials.  This may sound like a long list, but how much of an issue any of these will be will depend on your plans and it’s worth remembering that, in principle, there’s nothing to stop you from starting small and expanding your home as your budget allows (with appropriate planning consent).  This option allows you to take the home of your dreams out of your head and make it a reality. Some practical advice When you create your budget and timescale allow yourself a generous margin of error and be realistic about how much you can realistically expect to be able to borrow on a self-build mortgage.  You may wish to look into getting professional advice on your options here.  Remember that lenders who provide self-build mortgages do not necessarily release all the funds at once.  They may opt to release them in stages when agreed milestones are met. Always keep the issue of planning consent to the fore when designing your dream home.  Planning officers can and do have the power to order owners of unofficial builds to tear down their creations. Check out other legalities too, for example you may be required to use qualified tradespeople for certain tasks and even if the law does not actually require it, your insurance company might.  If you’re tempted to go off grid, look into the legalities of this as well as the practicalities, for example see where your local authority stands on water disposal. YOUR PROPERTY MAY BE REPOSSESSED IF YOU NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

Death is a fact of life, but life goes on for those we leave behind and so being prepared for the reality of your own death can go a long way to easing the making life easier for those who stay behind.  Here are five tips to help you do so. Look at minimising the impact of inheritance tax Estate planning can be a complex topic, but the basic idea behind it is that you do everything legally possible to ensure that as much as possible of your estate goes to who and what you love rather than to HMRC.  If you have significant assets (for example if you own a house) you may wish to seek professional advice on this and if you have any assets at all, it can be very worthwhile to keep the concept of estate planning in your mind during your later years. Put your trust in insurance Life insurance policies can be ring-fenced into trusts, which has two big advantages for the beneficiaries.  The first is that it means that the payout can be made before probate is completed and the second is that is means that the money is excluded from the estate itself for the purposes of inheritance tax calculation. Make a will You have two choices, you take control of who gets what and how by making a will or you leave your estate to be divided up according to rules laid down by the government.  While considering this, you might also wish to consider the fact that while wills and inheritance planning are separate, hence the two separate points, they are related and the way in which you bequeath your assets can influence the amount of inheritance tax, which is ultimately payable.  You may remember that the late, great Rik Mayall died without a valid will, leading to much press speculation on how this would impact the tax payable on his extensive estate. Give guidance as to your wishes regarding the disposal of your body These days a funeral can be anything from a cremation with ashes being sent into outer space (literally) or turned into diamonds (also literally) to a simple burial in an environmentally-friendly casket and wakes can be anything from massive parties to small gatherings of family and close friends.  Setting out your wishes clearly can make it much easier for your nearest and dearest to organise the funeral you want rather than them having to try to second-guess your wishes. Put your (digital) paperwork in order In the old days, people had to think about storing paperwork safely so that it would be both protected from damage and accessible upon their deaths.  These days, there is still an element of this, it will probably be quite some time before it becomes acceptable to keep important legal documents such as wills and land registry documentation in purely digital format.  In fact, arguably anything which is really important should be recorded both on paper and in a digital format.  For example in addition to keeping a paper copy of your will yourself, you can scan a copy of it and keep it in electronic format and also keep a digital note of where your paper copy is kept and the details of the solicitor who drew it up. You should also keep details of any financial products you have such as: bank accounts, credit cards and loans including mortgages, investments, pensions and insurance policies. It is also a good idea to keep relevant documentation for any assets you own, particularly valuable ones such as your house, for example in addition to your mortgage and insurance details, you might find it useful to leave details of any work you had done on your house and any associated guarantees. Finally, in this day and age, you may also want to think about digital assets such as social media accounts. For Estate Planning, Wills, Tax and Trust Advice we act as introducers only The Financial Conduct Authority does not regulate Estate Planning, Wills, Tax and Trust Advice.

The importance of saving for retirement has been really driven home over recent years, particularly with the auto-enrolment campaign (“We’re all in”).  Here is a quick look at the four types of pension and what happens to them upon the holder’s death. The state pension A state pension is given to an individual (even though there are certain circumstances in which a person may be able to claim a state pension based on another person’s contributions).  Therefore, it ends upon the death of that individual. Defined benefits pensions These operate to their own set of rules and hence holders of such pensions would need to check what happens to them upon their deaths. Annuities-based pensions The key point to remember about buying an annuity is that once it is bought it is a done deal.  Therefore, if it is important to you that there is at least the option of your nearest and dearest receiving a legacy from your pension fund after your death, you need to look into this before buying your annuity since it is too late to do it afterwards. Pensions based on income drawdown Since “pensions freedoms day” 6th April 2015, holders of pension pots have been able to bypass the traditional annuities route and use their pension funds essentially as standard investment funds with which to generate an income.  Depending on the investor’s success, there may or may not be capital left over upon their death.  If there is, they are now able to pass the funds onto their chosen beneficiary or beneficiaries by means of a scheme called Nominee Flexi-Access Drawdown and then when the chosen nominee(s) die(s), they can pass it on to their chosen beneficiary by means of a scheme called Successor Flexi-Access Drawdown.  Under current rules, this process can essentially continue indefinitely, as long as there are funds left in the pension fund. In addition to the obvious benefit of being able to pass on your assets to those you love rather than simply handing them back to the company behind an annuity, there is the further benefit that the pension fund itself is excluded from the calculation of the value of the estate for the purposes of inheritance tax calculation.  What’s more, if the current holder of the pension fund dies before their 75th birthday, subsequent drawdowns (withdrawals) will be paid out free of income tax.  After that age, they are taxed as income but still free of IHT. NB: the Nominee Flexi-Access Drawdown scheme was introduced in April 2015, after the initial pensions freedoms, hence existing plans may not be set up to accommodate the scheme.  It is therefore recommended to check promptly whether your current pension scheme has this option and if not to take professional advice as to your best options. A final point about pensions There is a major difference in meaning between the words can and should.  You can choose to use income drawdown to fund your retirement and if you do you may have capital left over to bequeath to your chosen beneficiaries.  At the same time, however, it’s important to remember that the whole purpose of retirement funds is to fund your retirement and that any legacy you can leave is a bonus, which will benefit someone else rather than you.  It’s also important to remember that it may still be possible for you to leave a legacy even if you go down the route of an annuity-based pension, you would just have to look at other options for doing so.  Annuities-based pensions are still a valid way of ensuring an income in retirement and for some people may be a far superior option to income drawdown (whereas for others they may be a terrible choice).  It is therefore strongly recommended to take professional advice before making any major decisions with regard to your retirement. For Investment and pension advice we act as introducers only.

This week interest rates are on everyone’s mind. There are various ways to measure inflation but the basic idea behind them is much the same, inflation indexes track the changes in a basket of goods and services which is considered to be a good representation of how the average person spends their money.  Of course, whether or not it is a good representation of how you personally spend your money, depends on how closely you fit the model of the “average person” and this can work both ways, in other words, you might find that your personal rate of inflation is higher or lower than the official measure. Inflation and income There are essentially two ways inflation can influence income, one is direct and the other is indirect. Direct – inflation as a measure for wage and pension increases Employers can use the official rate of inflation as a convenient measure for determining annual, standard wage increases (i.e. wage increases which are unrelated to either promotion or performance).  It also forms part of the current “triple-lock guarantee” on state pensions (i.e. that they increase by the rate of standard earnings, inflation or 2.5%, whichever is the greater). Indirect – inflation as a parallel to interest rates When inflation is low, if a central bank wants to try to stimulate the economy, it has a choice between lowering interest rates or using quantitative easing.  If inflation rises, however, and a central bank wishes to put a gentle brake on the economy, then it really only has one tool at its disposal, which is to raise interest rates.  This is good news for savers as it increases the interest income they receive but of course it is bad news for borrowers since it increases the amount of interest they need to pay and hence reduces their effective income. A little inflation is seen as a positive The Monetary Policy Committee of the Bank of England is charged with keeping inflation at exactly 2%.  Of course, it's very hard to make sure a moving target stays in exactly the same position, so the MPC is allowed 1% leeway either way before it is called to account for its actions.  A reasonable level of inflation is seen as a stimulus, encouraging people to take action now rather than waiting for prices to rise further.  By contrast stagflation (static prices) or deflation (falling prices) can both encourage people to put off purchases in expectation that waiting will either make no difference or might even be beneficial. Incorporating the reality of inflation into your financial management strategy In very simple terms, any investment decision you make must at least match inflation in order for you to break even and must generate returns which exceed the rate of inflation in order for you to make a profit.  For example, in the current low-interest-rate environment, cash deposits in savings accounts are highly unlikely to make the sort of returns needed to beat inflation, although there may be other, perfectly valid, reasons for keeping them, in which case looking at strategies such as putting them in an ISA wrapper may be valid.  By contrast, stocks in start-up companies may offer the prospect of massive returns – although there may be a very high level of risk involved with them. The skill of balancing risk and reward is at the very core of successful investing and one of the key points which successful investors need to understand, is that sometimes the investments which seem the most safe can actually carry a high risk of their own, namely the risk of having capital devalued by the impact of inflation.  This is not, of course, to say that investors should see this as a sign to dive into the higher-risk end of investment vehicles, just that they may benefit from opening their minds to investments they might otherwise have rejected out of hand for being slightly too risky for their tastes. The value of investments can fall as well as rise. You may get back less than you invested.

When it comes to working out how much money you’ll need to pay for something, you need to have at least a reasonable idea of how much it’s going to cost.  This holds as true for retirement as for any other aspect of financial planning. Working out the cost of your retirement Look online and you can find plenty of sources giving suggestions as to how much you’ll need to enjoy a comfortable retirement.  These may be good places to give you some inspiration, but the reality is that the cost of your dream retirement will depend entirely on what your dream is.  For example, if you want to spend your winters cruising somewhere rather warmer than the UK then you’ll need more than if you’re happy to spend them curled up by the fire with a pile of good books.  Even if you decide to let dreams take care of themselves and concentrate on practical needs, the fact still remains that the cost of living in the UK varies widely depending on where you live and that is before you start thinking about options such as retiring abroad.  Likewise the opportunities for earning extra income can vary depending on where you live.  That being so, realistically, you will need to do your own sums when it comes to deciding how much money you will need for your retirement. Working out how much you need to save per month to finance your retirement This is actually a hard question and as such you may find it very beneficial to get professional help to answer it.  The only truly simple answer is: “as much as you possibly can”, but this is likely to be of very little practical help given that most people have to work out how to balance the competing priorities of dealing with decisions taken in the past (such as debts) and managing the present as well as preparing for the future.  The practical answer to how much you need to save per month to finance your retirement will depend on a number of factors such as your current age, your intended retirement age and your plans for retirement as well as what you can realistically expect to receive as a return on your retirement-related investments.  Remember, however, that the phrase “how much you need to save” can include contributions made by employers (such as workplace pensions) as well as money gained as a result of tax breaks for pension savings, so even though the numbers may look big and scary, you may be able to get help to achieve them, perhaps more than you currently realise. Working out the practicalities of how you are going to save for your retirement This is another very broad topic with which it may be useful to get professional help.  The first step in working out the practicalities of how you are going to save for your retirement is to work out how to maximise your disposable income, so that you have as much money as possible to save for retirement (or to put towards other purposes).  After that you may wish to look at what your options are for getting “free money” for example employer contributions (such as under the auto-enrolment scheme) and tax incentives for saving towards your retirement.  It’s also worth noting that while “retirement saving” and “pensions contributions” can often seem pretty much one and the same thing, you can save towards your retirement in other ways, such as via a Lifetime ISA or even a standard ISA, although only the former attracts government contributions as well as tax benefits. For Pensions we act as introducers only