Pensions Drawdown. Do not delay on pensions

This week pension’s minister Steve Webb has confirmed the Government will delay automatic enrolment for small employers until after 2015. Details of the revised schedule will be published early next year. Webb said: “We will be going ahead with auto-enrolment as planned and I can confirm all businesses remain in scope. We have however decided to extend the current five year implementation period so that small businesses will not have to start enrolling their workers until the start of the next parliament. Never the less these revised plans will still result in more than half of all workers enrolled before the end of this parliament.”

Legal & General pension’s strategy director Adrian Boulding, who was part of the three man ‘Making automatic enrolment work’ review commissioned by the DWP last year, says the delay is a “huge mistake”. He says: “Demographically this is completely the wrong thing for the Government to be doing. “The point of getting people to save for their retirement is that the baby boom generation are still in work, so this is their opportunity to save for retirement. “If we delay, defer or miss this opportunity then the costs for providing pensions for that big generation are being landed on the much smaller generations following them. It is a huge mistake.”

As you already know Enable of Bishop’s Stortford don’t like to see any delay on signing up for your pension. If you need Independent Financial Advice on what is best for your pension provision do not hesitate to call reputable IFAs of Bishop’s Stortford Enable.

What is VAT? Clarity about what qualifies as VATable services for IFA's

Even experiences IFAs like Enable of Bishop’s Stortford can find it very confusing at to what is and what is not client services or advice that is VATable - The latest HM Revenue & Customs draft guidance states that “VAT will not apply where a customer agrees to take out an investment product following a financial adviser’s recommendation. Investment management or portfolio advice services where an adviser suggests particular transactions will be subject to VAT. Ongoing advice, such as regular reviews, will be subject to VAT but if the ongoing advice includes portfolio rebalancing, it will be exempt. It also states that investment management or portfolio advice services where an adviser suggests particular transactions will be VATable.”

Portfolio rebalancing is simply buying and selling investments. What if an investment recommendation is made that then makes it a VAT-exempt transaction when the fee is charged but then the client’s situation changes and they do not invest? Would the client be re-invoiced to include 20 per cent VAT as the professional service provided was pure advice as there was no transaction?

Kim North thinks “Now is the time to include more discerning IFAs in HMRC and FSA policymaking to ensure all the remaining confusion is cleared up well before the introduction of the RDR.
If this happens, rules will be made that are in the best interests of the financial adviser and the investing public and therefore match what goes on in the real world.” IFAs Enable of Bishop’s Stortford are happy to help you work out what is VATable.

Uk investments, New regulations for renewal or trail commission

Kim North managing director of Technology & Technical was at this month’s Personal Finance Society conference and spoke to many of the top IFA's.  It was good to hear that other top IFA's like Enable of Bishop’s Stortford are generally optimistic about business but she spotted a couple of general frustrations with some of the new rules not matching the real world.

She noted that “The regulator issued another draft guidance paper last week covering legacy commission. It sets out whether various situations will amount to advising on investments under article 53 of the regulated activities order. It contains a rather interesting table explaining when commission can be taken or not when advising on investments.”

“This makes little sense to me” she said “as where a client receives no advice on their investments, the adviser can receive trail commission but where advice is provided on the investments clients may have taken out previously, the adviser cannot receive any trail commission. Does the FSA understand that trail commission does not affect investment advice as trail is paid by the majority of investment funds and products? Trail helps with cash flow for adviser businesses and advisers work hard to keep existing clients and attract new clients with previous investments to bring together a portfolio under the advice of one professional IFA. If existing investments are not advised upon, what happens if the fund manager or team leaves or the fund starts to underperform? Surely advisers should have incentives to provide regulated advice on legacy business.”

Enable reputable IFA’s of Bishop’s Stortford know that some financial business can seem very complicated but are happy to explain as fully as they can the guidance covering commissions.

Not all property is a safe bet

In the news it was stated recently that investors, since 2007, may exceed £30 million in landbanking.
The Insolvency Service is warning the public to be alert to the unscrupulous practice of landbanking as figures indicate that these scams are on the increase. Since 2007 Company Investigations, part of The Insolvency Service, has closed down 49 landbanking companies in England and Wales that have collectively caused the public to lose over £30 million.

Reputable IFA’s of Bishop’s Stortford like Enable would like to bring this disreputable practice to the attention anyone thinking of investing in land. Landbanking involves a plot of land - often green or brown belt - being bought by "developers" and then being sub-divided into a number of smaller plots which are then marketed, often under the false pretext that planning permission will be granted for development.

The Insolvency Service has seen a 33 per cent increase in the number of complaints it has received (2009-2011) against companies involved in these scams and a 100 per cent increase over two years in the number of complaints about landbanking scams accepted for investigation.

Robert Burns, Head of Investigations at The Insolvency Service, said:
"It's clear that landbanking scams are designed to target the more vulnerable investor, many of them trusting pensioners who are eager to see a greater return on their savings or pension lump sum than they could ever expect from traditional savings and investments. Tragically this often leads them to rashly invest in what seems to be, on the face of it, safe 'get-rich-quick' schemes."

"We need to alert people to the warning signs and the fact that if a scheme seems 'too good to be true', that's usually because it is. ‘’

Rental Properties - your rental portfolio

The new from the Association of Residential Lettings Agents (ARLA) states that increased demand for rental property is sparking a renewed interest in the PRS in parts of the UK. If you are looking to invest in property achievable rent levels on residential property have risen in the last six months, according to 60 percent of ARLA member agents, and have outperformed other investment classes consistently for the past two years.

The average period for which a rental property is empty in between lets is just 2.7 weeks per year, down from an average four weeks two years ago. Ian Potter, Operations Manager at ARLA, said: “Three quarters of our members are reporting that demand for rental property is outstripping supply and, with rental returns currently at 5 percent, anyone thinking about investing a property to rent could be well-placed to consider their options in the coming months.”

“Our research shows that prudent landlords are moving quickly to expand their portfolios, with almost a quarter (23 percent) reporting that they have bought properties in the last year. The most popular regions for investment are the North West, Midlands and Central London. In contrast the Rest of London saw the fewest landlords buying property.

Reputable IFA’s like Enable of Bishop’s Stortford could help you look at your investment portfolio with a view to a buy to let mortgage even if it was appropriate to your means and plans. Not everyone is cut out to be a landlord, but at the same time a good letting agent should be able to help you navigate the market should you choose to invest.

Safe as houses...

Recent industry data seems to indicate that buy to let property investment continues to be one of the best ways to invest at the moment.

Statistics from the Halifax reveal house prices increased by 1.2 per cent in October with the average home in the UK now valued at around £163,311 and the rental market has continued to go from strength to strength as first time buyers struggle to get on the property ladder.

Almost four million homes were designated in the Private Rented Sector (PRS) in 2010, providing homes for one in six households and the Countrywide agency says rental properties now take an average of just 12.7 days to be let, with an average of five prospective tenants competing for each property.

Ray Withers, director of buy to let experts Property Frontiers, added: “With demand outstripping supply in the buy to let market, those with enough capital to invest in the growing buy to let arena are benefiting from some of the highest monthly returns on record.”

Perhaps unexpectedly the North West has enjoyed a 20 percent rise in rental rates this year alone and in Liverpool demand is outstripping supply probably due to the reduction in home ownership and the number of new homes being built (well below the Government target of 250,000 per annum). Meanwhile, demand for accommodation in and around the city centre also continues to rise as more students and young professionals enter the area.

Independent Financial Advisors like Enable of Bishop’s Stortford can help you look at your investment portfolio.

Pensions in safe hands...

A key part of June Mulroy’s work will be a blueprint for DC provision which will outline 11 basic principles that trustees, providers and employers will need to follow.

The regulator’s initial discussion paper, entitled, Enabling good outcomes in DC pension provision, published in January, identified six elements which it believes are important for achieving good outcomes for savers; appropriate decisions with regards pension contributions, appropriate investment decisions, efficient and effective administration of DC schemes, protection of scheme assets, value for money, appropriate decisions on converting private pension savings into a retirement income.

The Pensions Regulator will produce 11 principles for good quality defined contribution provision building on these six key elements.

Mulroy says: “We have tried to capture the principles in simple language, so the opposite should obviously be wrong. So, for example, we will say ’assets should be safeguarded’ the concept of assets not being safeguarded is obviously not right. “We will also outline a couple of principles about charging around transparency and simplicity.”

While the amount providers charge on pension products has inevitably grabbed the headlines in recent weeks, the regulator is equally focused on the costs incurred by providers. Mulroy says: “. We need to get disclosure of what it is costing because we do not have a proper comparative market. Getting to that point is not going to be easy but it is absolutely doable.”

Whatever kind of provision you have made for retirement Independent Financial advice from reputable IFA’s like Enable of Bishop’s Stortford can help put your mind at rest.

Unconventional pension regulation...

It’s hard not to notice the Pensions Regulator executive director for defined-contribution June Mulroy she is not exactly your stereotypical regulatory official. To start with she is a woman and she dresses in quite an unusually flamboyant way, her hair is dyed pink and she is plain talking.  She has been tasked with kicking the pensions industry into action on some pretty sensitive and entrenched issues, such as pension charges and the disclosure of costs.

She says: “We have had some very interesting conversations with people about what their charges are. Interesting in the Chinese sense. Nobody can really tell us what their charges are. We have done a lot of research, so we know some of the things that are underneath the charges. But we really had to dig to get people to be honest and open”.

“There is an awful lot of Tommy Cooper that goes on when people try to describe charges but I do not think it is as complicated as certain people in the industry try to make out. It is no more complicated than forms of pricing are in any financial product.”

Mulroy is attempting to break through some of the jargon and complexity of the pension industry as she looks to improve both the quality and the comparability of DC schemes.

Your pension requirements might not be as flamboyant as June Mulroy but plain talking is what Enable like and reputable Independent Financial Advisors like Enable of Bishop’s Stortford are happy to talk through your pension provision with you.

Clarity for charges…

Clarity is always a good thing and it is particularly important in the management of wealth and the charges applied for IFA’s and their services. But it has been widely acknowledged for the RDR reforms to be successful, the regulator must ensure its new charging rules are implemented effectively for independent and restricted advice. The FSA has been clear that, “for both independent and restricted advice, no payments can be made from provider to adviser relating to product distribution. The only payment an adviser can receive will come from a client-agreed charge.”

Independent Financial advisors like Enable welcome the clarity provided by the new reforms but like many acknowledge the difficulties, even the regulator has acknowledged the difficulties of ensuring its rules are followed by vertically integrated firms and the Treasury select committee has urged the regulator to conduct regular reviews to ensure the RDR is not circumvented.

But the FSA must also keep a close eye on ensuring that tied arrangements between big distributors and providers comply with its new adviser-charging rules. The FSA must give clarity and reassurance about what will and will not be acceptable after the RDR to ensure its reforms are not undermined. It would also be good to hear the regulator’s views on a potential rush to sign long-term distribution deals in the run-up to 2013.

If you want to know more about the RDR reforms and if they have any impact on the management of your wealth, IFA’s of bishop’s Stortford Enable would be happy to talk it through.

Eurozone crisis – it’s hard not to worry

It’s hard not to worry about how a break-up of the Eurozone would affect all of us, but ultimately some believe it could help the UK after the short-term pain from the event.  Enable, experienced independent financial advisors know that it often pays to take the longer term view.

Research by the Centre for Economics and Business Research says the demise of the European currency would drive down the UK’s GDP growth in the year following the event but argues that the overall consequences would be less severe than many commentators suggest.

The study predicts that within five years of the euro’s break-up, the UK would be “at least as well off” as it would be if the region survived its ongoing debt crisis intact. Although the ‘think tank’ concedes that the collapse could drive the UK back into recession, the following growth is likely to be stronger than before.

 In its assessment of the cost of a euro break-up, the Centre for Economics and Business Research (CEBR) said the UK would experience a 0.5 per cent reduction in gross domestic product (GDP), based on GDP in the Eurozone contracting 2 per cent as a whole.
 “If it breaks up the immediate pain is much more intense, but then there is a more stable basis and we would expect that within about 30 months growth will actually be faster than if the Eurozone survives in its current form,” states the CEBR.

House Prices barely changed over 2011

House price averages seem to spike and fall month on month but with all of these things it is best to take a longer view of things, it might looks as if house price jumped 1.2% in October but a more reliable view would be the quarterly figures that showed a downward trend, according to Halifax. The lender said the average price of a UK home had risen for the first time in three months, to £163,311 however, this followed falls of 0.5% in September of 0.5% and 1.1% in August, and over the quarter prices actually dropped by 0.3%.

This is the first time since June that the quarterly figure was negative. But on an annual basis, comparing the three months to October 2011 with the same period in 2010, prices were down by 1.8%.  It might not come as great news if you are trying to sell your house but this is the lowest annual fall since December 2010 and is markedly less than the 4.2% annual drop recorded in May 2011. However there is always a North, South divide and in some places like Bishop’s Stortford house prices have increased in this period.

Halifax's housing economist, Martin Ellis, said that over the course of 2011 prices had barely changed, and the market had been supported by low interest rates and a steady supply of homes coming up for sale." The housing market has proved highly resilient in recent months despite the weak economic recovery and the deterioration in the outlook for both the UK and global economies," he said.

Property is always a valuable part of any portfolio reputable IFA’s like Enable can help you consider how to make the best use of it.

Wondering when to take out your annuity

“A life annuity is a financial contract in the form of an insurance product according to which a seller (issuer) - typically a financial institution such as a life insurance company — makes a series of future payments to a buyer (annuitant) in exchange for the immediate payment of a lump sum (single-payment annuity) or a series of regular payments (regular-payment annuity), prior to the onset of the annuity. The payment stream from the issuer to the annuitant has an unknown duration based principally upon the date of death of the annuitant.”

A lifetime annuity is supposed to be a kind of longevity insurance where the uncertainty of an individual's lifespan is transferred from the individual to the insurer, which reduces its own uncertainty by pooling many clients, the difficulty is deciding when to take one out so it is good to see that some different annuity products are coming on to the market.

LV have launched a guaranteed annuity product which allows investors to lock-in investment growth. The Pension Income Plus Annuity allows clients to select an assumed investment return of between 0 and 4 per cent on their policy.  Investors are protected from falls in investment returns by a minimum income guarantee. If investment yields improve the guaranteed minimum income level increases, locking-in a proportion of the investment returns received.

Head of annuities at LV Matt Trott says:  “Investment-linked annuities are increasingly popular in the UK market, with advisers and clients alike looking for more flexible and cost effective alternative solutions to standard lifetime annuities.“   Experienced IFA’s like Enable can help you assess your options.

Need to make sense of changes to pensions?

The Department for Work and Pensions has amended the Pensions Bill and has redefined money purchase schemes and defined benefit schemes as a result of a recent High Court case.

According to John Lawson, head of pensions policy at Standard Life,” the case focused on dividing the line between DB and DC schemes”. The scheme at the centre of the challenge, Home Decor Pension Scheme, was, according to the DWP, promoted in the “same way as a money purchase scheme but it did not have any means to fulfil its promises”.

The DWP argued that it was a money purchase scheme, which the scheme denied. The Supreme Court found in the scheme’s favour. Mr Lawson said: “Money purchases schemes such as personal pensions [and/or] DC occupational schemes where funds go up or down in the market can only become an annuity with an insurance company or income drawdown. “Schemepensions have been left out of the reclassification, which implies they are DB. DWP wants to make sure trustees are funding these schemes properly.”

According to Mr Lawson, currently those in scheme pensions can reduce the level of income they are taking if their fund is running low or investments are performing badly. However the DB rules mean the provider would have to make up any deficit or risk the scheme falling onto pension lifeboat scheme the Pension Protection Fund, meaning schemes having to pay PPF levies.

Sounds too complicated, let Enable IFA’s of Bishop’s Stortford help you make sense of it.

Own your own house - Making your house work for you

One of the things you can do if you own your own house is release some of the equity.  “The equity release market is seeing a rise in the number of plans sold with more pensioners opting for drawdown products which enable them to benefit from lower borrowing costs today, allowing for increased flexibility to access further funds over time as and when required.”

Jon King, who works in this area has seen it’s continued rapid growth in the third quarter of 2011 with a 9.3 per cent market share. He said “the lender has now nearly trebled its share of new business from the 3.5 per cent market share it achieved in the last three months of 2010, which was its first full quarter of operation.”

Around 60 per cent of customers are qualifying for the highest level of enhanced LTVs ranging from 34 per cent at age 65 to 44 per cent at age 75 as brokers focus on health issues in their equity release fact find, according to Mr King.  He said: “The success of enhanced equity release demonstrates the need for innovation in the market.

“Equity release has a bright future based on demographic trends but the industry needs to offer products which are suited to the needs of retired people. “Enhanced equity release recognises and meets immediate customer needs to maximise capital from their property wealth when they need it.”

If you want to look at equity release as an option for you, reputable IFA’s like Enable of Bishop’s Stortford can help you consider all the options.

Safe as houses in your retirement...

It has recently been reported that retiredhomeowners have total property wealth owned outright of £756.6bn despite continuing housing market volatility. This figure comes from research from equity release provider.

Homeowners aged 65-plus have gained a total of £4.4bn in the last three months, equivalent to around £962 each, according to the Pensioner Property Equity index.While overall housing wealth has increased there is a growing divide between winners and losers with six regions showing increases and five suffering declines.

Over-65 homeowners in Scotland were by far the biggest winners seeing average gains of £10,070 whereas over-65s in London and the east of England also benefited with gains of £3,867 and £3,548.

However over-65 homeowners in the north west, East Midlands plus Yorkshire and Humberside suffered average losses of £1,420, £1,203 and £1,111 respectively.

The figures show a third of property equity is owned by pensioners in London and the south east of England – in London over-65s own property without any mortgages worth £127.2bn while in the south east pensioners own £122.24bn of property without mortgages.

Dean Mirfin, group director of Key Retirement Solutions, said: “While the gains of the past three months are welcome the picture is not at all clear and, as the figures reveal, the recovery is very patchy. “ However the over-65s own considerable property wealth which still represents a massive investment success as they no longer have mortgages and will in most cases have bought more than 25 years ago."

If you are one of these investors and want to explore what your house can provide for you Enable Independent, IFA’s in Bishop’sStortford can help you think it through.