“Recent research by consultants Aon Hewitt found that DC members retiring today had pensions that were 18pc smaller than those of people retiring just three years ago, thanks largely to declining annuity rates. The average DC pension pot is worth just £56,000 today. If 25pc is taken as a tax-free lump sum, this leaves only £42,000 with which to buy an annuity.
Three years ago this would have bought an income of £1,400 a year for a 60-year-old man; today it secures just under £1,200 a year.”
To improve your pension prospects possibly the most important thing to do is to regularly check your contribution rate. The bottom line is the more you put into your pension the more you should get out of it.
What happens a lot is that people choose the lowest contribution level when the join a pension scheme and then never review it or change it.
“On average, private sector workers put around 9pc of their salary into a DC scheme (this includes their own and their employer's contribution). This compares with contribution rates of around 20pc in a final salary scheme.
Tom McPhail of Hargreaves Lansdown said: "Everyone should find out how much is being paid into their pension – if it is less than 12pc of your salary, it is not enough."
A good rule of thumb is to take the age at which you starting contributing to a pension, then halve it; this is the percentage of your salary that should be going into a pension each month.”
To review if you are getting the best out of your pension contributions Enable, IFA’s in Bishop's Stortford can help.
Tuesday, 20 September 2011
Don’t put your head in the sand about your pension
There is much in the news currently about public sector pensions and all the talk of strike action to protect them but the irony is that many in the private sector would be quite happy with some of the pension provision, even that currently on offer to public sector workers. Pensions outside the public sector are much more patchy in their provision and might not be offering the kind of pensions people would have hoped for in the long run – a recent survey by Prudential showed that one in three workers didn't have any pension at all, which could lead to an impoverished old age if action is not taken to avert the situation.
Even of those who do have private sector pensions in place we at Enable, IFA’s based in Bishop's Stortford, would agree with the thoughts expressed this week in The Telegraph, “the two thirds who have joined their workplace scheme need to take an active interest in how their money is being managed. If not, it could cost them in the long run.
A combination of low contribution levels, poor investment returns and falling annuity rates means many of these DC schemes will produce far smaller pensions than those paid through final salary schemes, where people typically expect to retire on half their salary.”
If you have concerns about how your pension is being managed or simply want to understand what it is you have let Enable explore it with you.
Even of those who do have private sector pensions in place we at Enable, IFA’s based in Bishop's Stortford, would agree with the thoughts expressed this week in The Telegraph, “the two thirds who have joined their workplace scheme need to take an active interest in how their money is being managed. If not, it could cost them in the long run.
A combination of low contribution levels, poor investment returns and falling annuity rates means many of these DC schemes will produce far smaller pensions than those paid through final salary schemes, where people typically expect to retire on half their salary.”
If you have concerns about how your pension is being managed or simply want to understand what it is you have let Enable explore it with you.
How is your pension performing?
In the news this week “New research, seen exclusively by The Telegraph, shows that more than two thirds of the people who run private sector pension schemes admit that their members do not face "good outcomes" in retirement.
In other words, the trustees, consultants and advisers who set up and administer defined contributions (DC) schemes – the most common type of workplace pension – fear they won't provide sufficient income for a comfortable retirement.
The research, conducted by the insurance company Partnership, showed that there was widespread disengagement with pensions among the 2.5 million members of DC schemes – where a person's retirement income is based on contributions, investment returns and annuity rates, rather than earnings.
In total, eight in 10 of those surveyed said the average worker did not understand their pension. The professionals interviewed cited three main problems: apathy, a lack of education about retirement options and a "general fear of pensions".
All three things that we at Enable want to make sure you avoid by getting the best independent Financial advice with reputable IFA's in Bishop Stortford.
The Telegraph go on to report “This lack of engagement is less of a problem if you are still a member of a final salary or "defined benefit" scheme – where your pension is based on your earnings. Here, there are far fewer choices to make: members don't have to choose between different investment options or take out an annuity on retirement. It is the schemes' trustees that shoulder both the investment and longevity risks. If they make the wrong decisions, the scheme can suffer, but it is still obliged to pay out the promised pensions to members.”
If you not are in this more fortunate position Enable IFA's can help you plan for the future.
In other words, the trustees, consultants and advisers who set up and administer defined contributions (DC) schemes – the most common type of workplace pension – fear they won't provide sufficient income for a comfortable retirement.
The research, conducted by the insurance company Partnership, showed that there was widespread disengagement with pensions among the 2.5 million members of DC schemes – where a person's retirement income is based on contributions, investment returns and annuity rates, rather than earnings.
In total, eight in 10 of those surveyed said the average worker did not understand their pension. The professionals interviewed cited three main problems: apathy, a lack of education about retirement options and a "general fear of pensions".
All three things that we at Enable want to make sure you avoid by getting the best independent Financial advice with reputable IFA's in Bishop Stortford.
The Telegraph go on to report “This lack of engagement is less of a problem if you are still a member of a final salary or "defined benefit" scheme – where your pension is based on your earnings. Here, there are far fewer choices to make: members don't have to choose between different investment options or take out an annuity on retirement. It is the schemes' trustees that shoulder both the investment and longevity risks. If they make the wrong decisions, the scheme can suffer, but it is still obliged to pay out the promised pensions to members.”
If you not are in this more fortunate position Enable IFA's can help you plan for the future.
Thursday, 15 September 2011
Which Mortgage? What about offsetting your mortgage
The reality for most borrowers is the fact that their monthly mortgage payment is probably at the top end of what they can afford and they either do not have the spare cash to overpay, or they are using any spare money available for savings, to pay other debts or fund other purchases.
And with most lenders once that spare cash is paid into the mortgage, it is gone and cannot be used for anything else. This is probably why many borrowers prefer to keep their spare cash ‘liquid’ in savings accounts where they can access it for whatever they wish.
But for those who want the benefits of overpayment without technically overpaying, there is always the option of an offset mortgage. Here, instead of putting your savings into a separate account or ISA, you choose to put them in an offset pot alongside the mortgage. Instead of earning interest on the savings you offset the interest you would have earned against your mortgage, effectively overpaying.
With normal savings rates being particularly low, many borrowers with significant savings would benefit from offsetting as they would earn the equivalent of the mortgage rate on their savings. This method of overpaying also allows the borrower to keep their savings ‘liquid’ as they can always access the money from the offset pot at any time.
It is also worth bearing in mind that any interest you earn on your savings is taxable at your highest rate of income tax, which might be 20%, 40% or, as of April 50% for the highest earners. If you use your savings to overpay your mortgage instead, not only are you effectively earning interest on them at the mortgage rate, but because they no longer technically exist as ‘savings’ you do not pay any tax. Enable can help your look at your mortgage options again.
And with most lenders once that spare cash is paid into the mortgage, it is gone and cannot be used for anything else. This is probably why many borrowers prefer to keep their spare cash ‘liquid’ in savings accounts where they can access it for whatever they wish.
But for those who want the benefits of overpayment without technically overpaying, there is always the option of an offset mortgage. Here, instead of putting your savings into a separate account or ISA, you choose to put them in an offset pot alongside the mortgage. Instead of earning interest on the savings you offset the interest you would have earned against your mortgage, effectively overpaying.
With normal savings rates being particularly low, many borrowers with significant savings would benefit from offsetting as they would earn the equivalent of the mortgage rate on their savings. This method of overpaying also allows the borrower to keep their savings ‘liquid’ as they can always access the money from the offset pot at any time.
It is also worth bearing in mind that any interest you earn on your savings is taxable at your highest rate of income tax, which might be 20%, 40% or, as of April 50% for the highest earners. If you use your savings to overpay your mortgage instead, not only are you effectively earning interest on them at the mortgage rate, but because they no longer technically exist as ‘savings’ you do not pay any tax. Enable can help your look at your mortgage options again.
How to reduce your mortgage-overpay...
In these ‘money saving’ times, when advice about financial matters is more sought after than ever before and everyone considers all manner of ways to save cash on every expense, it is surprising how few people concentrate on the biggest financial burden they are ever likely to have: their mortgage.
The monthly mortgage payment is often viewed as a ‘given’; it can’t be changed so people continue to let it run as always and in that sense, borrowers are accepting that they’ll probably have the debt for at least 25 years and there’s nothing they can do about it. Of course, this is very far from the truth; one only has to consider the simple act of overpaying the mortgage each month to find a highly suitable way to save large sums over the life of the mortgage.
The benefits to be had from overpaying your mortgage can be so significant that it is often surprising how few borrowers actually do it. With the mortgage being the most long-term financial responsibility an individual will have, anything that cuts the number of years you will have your mortgage for and also decreases the overall amount you will have to pay through saving on the interest payable is obviously a good thing.
Overpaying also increases the amount of equity you have in the property, thus allowing you to access far more competitive mortgage deals when you come to look for new mortgage finance. If you are looking to make any changes in your mortgage Enable Indpendent IFA’s of Bishop Stortford are here to help.
The monthly mortgage payment is often viewed as a ‘given’; it can’t be changed so people continue to let it run as always and in that sense, borrowers are accepting that they’ll probably have the debt for at least 25 years and there’s nothing they can do about it. Of course, this is very far from the truth; one only has to consider the simple act of overpaying the mortgage each month to find a highly suitable way to save large sums over the life of the mortgage.
The benefits to be had from overpaying your mortgage can be so significant that it is often surprising how few borrowers actually do it. With the mortgage being the most long-term financial responsibility an individual will have, anything that cuts the number of years you will have your mortgage for and also decreases the overall amount you will have to pay through saving on the interest payable is obviously a good thing.
Overpaying also increases the amount of equity you have in the property, thus allowing you to access far more competitive mortgage deals when you come to look for new mortgage finance. If you are looking to make any changes in your mortgage Enable Indpendent IFA’s of Bishop Stortford are here to help.
Local Building Society's are doing there bit….
Couple of items I’ve noted recently: Cambridge Building Society has launched a five-year fixed rate mortgage at 4.19% specifically for large loans of between £500,000 and £2m. The mutual will accept loans of up to £750,000 on an interest-only basis. The five-year fixed is available up to 75% LTV, with an arrangement fee of 0.2% or a minimum of £2,000.
Carole Charter, marketing manager at the Cambridge Building Society, said: "Larger loans are not suitable for everyone, but there are people out there who would benefit from this unique product."
She added: "The Cambridge is committed to offering a range of options for borrowers and the larger loan mortgage is a product that we feel we need to be able to offer our wealthier customers looking to purchase a house in this price range."
Also, the Cambridge Inflation Linked Bond Receives Surge in Interest. All applications for the five year bond must be received by 15th September 2011*. The Cambridge Inflation Linked Bond pays customers a return, at maturity, that tracks the annual rate of inflation, as measured by the Retail Prices Index (RPI), plus a guaranteed 1.00% gross p.a./AER** fixed for five years.
Andy Lucas, Head of Cambridge Direct at The Cambridge Building Society says: “We have seen surge in customer interest following the recent withdrawal of the NS&I index-linked certificate.
“Customers who want to take the opportunity to invest in a product that offers protection against the effects of inflation need to take advantage of the inflation linked products that are left in the market whilst they are still available.”
Enable Independent, IFA’s of Bishop's Stortford are here to help with savings and mortgages anytime you want to re-think your finances
Carole Charter, marketing manager at the Cambridge Building Society, said: "Larger loans are not suitable for everyone, but there are people out there who would benefit from this unique product."
She added: "The Cambridge is committed to offering a range of options for borrowers and the larger loan mortgage is a product that we feel we need to be able to offer our wealthier customers looking to purchase a house in this price range."
Also, the Cambridge Inflation Linked Bond Receives Surge in Interest. All applications for the five year bond must be received by 15th September 2011*. The Cambridge Inflation Linked Bond pays customers a return, at maturity, that tracks the annual rate of inflation, as measured by the Retail Prices Index (RPI), plus a guaranteed 1.00% gross p.a./AER** fixed for five years.
Andy Lucas, Head of Cambridge Direct at The Cambridge Building Society says: “We have seen surge in customer interest following the recent withdrawal of the NS&I index-linked certificate.
“Customers who want to take the opportunity to invest in a product that offers protection against the effects of inflation need to take advantage of the inflation linked products that are left in the market whilst they are still available.”
Enable Independent, IFA’s of Bishop's Stortford are here to help with savings and mortgages anytime you want to re-think your finances
Tuesday, 6 September 2011
Would like to be in your own home by Christmas?
Then contact us for a mortgage - we are not tied down to one mortgage provider, which means we can always find the best mortgage product from across the whole market place.
“The level of house prices, the need for larger deposits and stricter lending criteria set by banks, has combined to cut first-time buyers out of the market” says the National Housing Federation. “People need much bigger deposits now, and typically people can only get mortgages of about 75% of the price of the home.”
Getting onto the property ladder may seem like an enormous task in the current climate but it is not impossible and given all the upward pressures on the housing market it still seems like the only sensible thing to try and do. Experienced IFA’s like Enable of Bishop Stortford help you look at what can seem like overwhelming mortgage data to help you find the deal that works for you.
In the news this week Accord Mortgages, the intermediary arm of Yorkshire Building Society, has cut up to 0.45% from the cost of its 85% loan-to-value (LTV) fixed rate mortgages.
Its deals now include a two-year fixed rate at 3.74% and a five-year fixed rate at 4.64%, both available up to 85% LTV with a £995 fee. Accord has also reduced the interest rates on its 75% LTV products by up to 0.25%.
Steve McAvan, group intermediary product manager at Accord, said: "Our new range still includes offset options, products suitable for first-time buyers and our popular tracker and fixed hybrid deals ensuring we provide brokers with a broad range of competitive products to suit the needs of their clients whilst still providing some of the best rates on the market."
Just one of many of the options Enable Independent can help you consider to meet your housing needs - we are what it says on the tin - Independent.
“The level of house prices, the need for larger deposits and stricter lending criteria set by banks, has combined to cut first-time buyers out of the market” says the National Housing Federation. “People need much bigger deposits now, and typically people can only get mortgages of about 75% of the price of the home.”
Getting onto the property ladder may seem like an enormous task in the current climate but it is not impossible and given all the upward pressures on the housing market it still seems like the only sensible thing to try and do. Experienced IFA’s like Enable of Bishop Stortford help you look at what can seem like overwhelming mortgage data to help you find the deal that works for you.
In the news this week Accord Mortgages, the intermediary arm of Yorkshire Building Society, has cut up to 0.45% from the cost of its 85% loan-to-value (LTV) fixed rate mortgages.
Its deals now include a two-year fixed rate at 3.74% and a five-year fixed rate at 4.64%, both available up to 85% LTV with a £995 fee. Accord has also reduced the interest rates on its 75% LTV products by up to 0.25%.
Steve McAvan, group intermediary product manager at Accord, said: "Our new range still includes offset options, products suitable for first-time buyers and our popular tracker and fixed hybrid deals ensuring we provide brokers with a broad range of competitive products to suit the needs of their clients whilst still providing some of the best rates on the market."
Just one of many of the options Enable Independent can help you consider to meet your housing needs - we are what it says on the tin - Independent.
Property house prices - it's time to review your property investments
It may not be the most ground breaking news but it confirms what many have long suspected. The National Housing Federation (NHF) report says that the UK faces an unprecedented “chronic under-supply of homes” in England. It claimed the acute shortage was a result of the difficult economic climate making mortgages difficult to obtain but that at the heart of the problem remains a chronic under-supply of new homes.
In 2010/11 just 105,000 homes were built in England – the lowest level since the 1920s.
More government investment in affordable housing would stimulate a wider, faster economic recovery and help fix our broken housing markets, according to the Federation.
It is calling for suitable surplus public land to be made available for the building of affordable homes, for local authorities to regularly assess housing need and for ministers to make a renewed commitment to building the homes the country needs. Minister Grant Shapps said government says it is making more land available for building and is investing £4.5bn in lower-cost homes that would “get Britain building again”. Shapps said: “That’s why I’ve announced plans to release thousands of acres of public land for house building.” But the NHF said Government plans represented a cut of 63% on the previous programme of government spending on homes to rent or buy. NHF campaigns director Ruth Davison said: “What we need to do is to build new homes.”
What to talk it through? Come and talk over your property investments with an IFA at Enable Independent Ltd.
In 2010/11 just 105,000 homes were built in England – the lowest level since the 1920s.
More government investment in affordable housing would stimulate a wider, faster economic recovery and help fix our broken housing markets, according to the Federation.
It is calling for suitable surplus public land to be made available for the building of affordable homes, for local authorities to regularly assess housing need and for ministers to make a renewed commitment to building the homes the country needs. Minister Grant Shapps said government says it is making more land available for building and is investing £4.5bn in lower-cost homes that would “get Britain building again”. Shapps said: “That’s why I’ve announced plans to release thousands of acres of public land for house building.” But the NHF said Government plans represented a cut of 63% on the previous programme of government spending on homes to rent or buy. NHF campaigns director Ruth Davison said: “What we need to do is to build new homes.”
What to talk it through? Come and talk over your property investments with an IFA at Enable Independent Ltd.
When to buy a house - Safe as Houses
In the news recently the National Housing Federation’s independently-commissioned Oxford Economics Report predicts: Home ownership in England will slump to just 63.8% over the next decade - the lowest level since the mid 1980s – locking an entire generation out of the housing market. According to a new study, huge deposits, combined with high house prices and strict lending criteria, have sent home ownership into decline in recent years and the downward trend will continue for the foreseeable future.
The Federation warned the housing market will be plunged into an unprecedented crisis as it forecast steep rises in the private rental sector, huge social housing waiting lists, and a house price boom – all fueled by a chronic under-supply of homes.
According to Oxford Economics, who were commissioned to produce the forecasts:
In England, the proportion of people living in owner occupied homes will fall from a peak of 72.5% in 2001 to 63.8% in 2021.
In London, the majority of people living in the capital will rent by 2021 with the number of owner occupiers falling from 51.6% in 2010 to 44% by 2021.
The North East will be the only English region to see any increase in owner occupier numbers over the next decade, rising marginally from 66.2% to 67.4%.
The average house price in England will meanwhile rise by 21.3% over the next five years from £214,647 in 2011, to £260,304 in 2016,
As investors what should you do? If you own a property hold on to it if you have the capital maybe buy to let is not such a bad idea again? Enable IFA's in Bishop Stortford can help you talk through what to do.
The Federation warned the housing market will be plunged into an unprecedented crisis as it forecast steep rises in the private rental sector, huge social housing waiting lists, and a house price boom – all fueled by a chronic under-supply of homes.
According to Oxford Economics, who were commissioned to produce the forecasts:
In England, the proportion of people living in owner occupied homes will fall from a peak of 72.5% in 2001 to 63.8% in 2021.
In London, the majority of people living in the capital will rent by 2021 with the number of owner occupiers falling from 51.6% in 2010 to 44% by 2021.
The North East will be the only English region to see any increase in owner occupier numbers over the next decade, rising marginally from 66.2% to 67.4%.
The average house price in England will meanwhile rise by 21.3% over the next five years from £214,647 in 2011, to £260,304 in 2016,
As investors what should you do? If you own a property hold on to it if you have the capital maybe buy to let is not such a bad idea again? Enable IFA's in Bishop Stortford can help you talk through what to do.
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