Pensions and Isas can work together for you

We are getting to that time of year when Enable’s IFAs in Bishops Stortford like to make sure you know where you are with your Isas.  Putting money into and Isa does not mean you should not put money into a pension and visa versa.  It is important to remember that both pensions and Isas are tax-efficient ways of saving your money so it makes sense to combine the best elements of both of them, in co-ordination with your personal financial goals.

For long-term savings a combination of pensions and Isas is the way pensions provide the initial tax relief, which gives your savings an immediate uplift, whereas Isas can still be tax efficient but you are still able to access your money whenever you like.  Sean McCann of NFU Mutual. “Pensions and Isas work hand in hand as vital parts of many portfolios. Understanding what you want the money for, and when you may need it, is critical to making the best choice.” It is important to still remember that when you hold investments in either of these wrappers they will still present the same risks. You can lose money as well as gain money.

If you are a higher or additional rate income taxpayer, and are prepared to invest over the long term, then it could be beneficial for you to hold more of your money in pensions. However, if you’re a basic rate taxpayer and  might need to access your money, perhaps for a shorter-term goal, then you should put more focus on Isas – cash Isas in this case as investment Isas are really only appropriate for longer-term purposes.

“The downside of a pension is that you can’t access your money until you reach the current age limit of 55, which isn’t helpful if you need to get your hands on it in the meantime,” says Chase de Vere's Patrick Connolly. “However, the flip side to the easy accessibility of Isas is that people might fritter away their savings and have nothing left when they need it, for example. This is why a combination of pensions and Isas is usually the best approach.” Enable’s IFA’s can help you set up both to work for you.

Issued by: Enable Independent Financial Life Planners
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE

Managing money in the future

Finovate has been recognised as the event to showcase truly innovative financial services intended to disturb and transform the personal finance market.  Earlier in February this year it’s European event saw 70 organisations, covering areas from cybersecurity to payments, peer-to-peer lending to financial advice, had a seven-minute opportunity to present their vision of the future.

Out of it came one innovation that might be directly relevant to the way consumers are likely to manage their money in the future. MoneyHub and sister Yourwealth.co.uk, are not new but at Finovate MoneyHub showcased its Goal Life Planner, which shows how a personal financial management service can enable consumers to easily differentiate the impact on their wider life of choosing to spend (eg, holidays or paying off mortgage) or invest money in different ways. It uses  graphics and clear visuals, and takes financial planning and applies it in a lifestyle context. For example if a client receives a bonus, rather than just show the impact of different actions in cash terms, they are also represented as lifestyle benefits, such as paying a mortgage off “x” number of days earlier or being able to retire “y” days sooner if the money is committed to a pension. Offering a detailed picture of the client’s financial life.

This latest iteration of the service, is due to go live in the summer, it will be available in three versions:  A customer direct offering via Yourwealth.co.uk, which is free or £10 per year with the Yodlee aggregation. A version for IFAs and smaller wealth organisations called MoneyHub Connect, which, for £1,200 per year, will give advisers a lightly branded way to deliver a consumer service to clients. This includes the Yodlee aggregation for the first 20 clients and then there is a per-customer cost if that service is required.  Enable’s IFA’s in Bishop’s Stortford are still here to talk to you in person about your financial management options.

Issued by: Enable Independent Financial Life Planners
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE

Formal protection review requirement

In February Enable’s IFA’s in Bishop’s Stortford noted that Pink Home Loans advisers will be supplying  documentary evidence that they have discussed protection with their clients in every mortgage they arrange. Their brokers have been advised to ask clients to bring in their employment contract to illustrate what benefits they will be entitled to if they become too ill to work and the  borrower will be asked to sign a declaration if they do not wish to take the advice.

Making sure that clients understand that income protection might be worth thinking about is part of this move. Statutory sick pay rules mean employers must pay claimants at least £87.55 per week if they are ill, but most homeowners would struggle to meet their mortgage obligations on this.
Pink director Mark Graves said: “An adviser should, in every situation, be able to point out how long the client could maintain the mortgage and put food on the table if they suffered a long term illness or lost their job. In my experience very few consumers will be familiar with just how little they are likely to receive from their employer in the event that they are no longer able to work.”

Other networks however have no plans to follow the move. Homeloan Partnership commercial director Neil Hoare said members of his network are expected to discuss protection with each client but are not formally required to do so he said, “I don’t think we would introduce a formal policy whereby a protection chat is required, but brokers know that any poor outcomes experienced by their clients will lead to a review of the advice process and as a result, we expect them all to be taking the necessary actions to make sure this doesn’t happen.”

L & G Mortgage Club managing director Stephen Smith says: “A protection discussion is prudent and proper in any advice process but I would imagine many networks already recommend their members should do this."

Your home could be at risk you do not keep up your mortgage payments.

Financial Education

At Enable in Bishop Stortford our IFA’s can see there could be real value in the wider and earlier financial education that the government has implemented.  But it is interesting to note questions being raised about the influence some big companies might have on financial education as schools implement the new lessons on money management.

The industry has been urged to play a role in ensuring schools have the expertise needed to teach financial planning and money management well but as schools appear to be rejecting offers of help from financial advisers, concerns are being raised over the influence of some of the big corporate brands.

Personal Finance Education Group chief executive Michael Mercieca says: “Schools are at very different stages in their delivery of financial education and for those who are just beginning it may well take the whole of this academic year to fully develop their provision.”

MoneySavingExpert editor Martin Lewis, says: “The first year of implementation was always going to be tricky and Ofsted is unofficially ‘going easy’ on schools this year while they get things in place.”

Tony Stenning, head of UK retail business at Blackrock and chairman of the project, says: “Financial education from a young age is key to achieving a more financially resilient society and helping people make the right choices when it comes to things like pension freedoms.”

At Enable our IFAs know good financial education is vital at any age to help make good financial planning and financial life choices across saving, investing, mortgages and pensions.

Issued by: Enable Independent Financial Life Planners
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE

Pension advice

With all the changes in pensions the Government have been under pressure to provide their guidance service, and Enables’ IFA’s in Bishop’s Stortford noticed that the online version of the Government-backed guidance service called  Pension Wise went live recently.  It is of course important to have as part of the Treasury-designed website - pensionwise.gov.uk - focus on the six steps users should take in deciding how to turn their pension pot into retirement income.

The site recommends that if you are looking to plan for your retirement you should:

Check the value of your pension pot; understand the options available to you; plan how long you will need the money needs to last; work out how much is needed in retirement; become aware of the tax implications and finally shop around for the best deals. All sound reasonable advice.

Financial advice is also referenced at the end of the shopping around section and the site explains that advisers will “look at your circumstances and recommend what you can do with your money”.  It also recommends asking whether advisers are independent or restricted, and explains that fee structures may vary between advisers, asking questions of your IFA’s is always important.

In addition it suggests looking at the Money Advice Service website for tips on choosing an adviser.
There is also information on how to avoid pension scams, living abroad and how the benefits system interacts with pensions. The site is still in what they are calling ‘beta’ mode, meaning it is under development but it says Citizens Advice will be delivering the face-to-face aspect of the guidance guarantee, while The Pensions Advisory Service is running telephone support. For face to face support on planning your pension in Bishop’s Stortford Enables IFA’s are here to help.

Investing in bonds?

Know your bonds at Enable in Bishop Stortford our Independent Financial Advisors often talk about “investing in bonds” with our clients but we like to remind ourselves that not everyone understands exactly what they are, how they work.

There are a couple of things worth understanding clearly about bonds. Firstly there are many different types of bond – corporate, government (sometimes known as gilts), retail and index-linked bonds and they all have different levels of risk and return. But what they have in common is that they are a bond essentially a kind of IOU, when you invest in a bond, you are lending the issuer your money in return for regular payments. 

Some savings institutions use the word bond for fixed-rate savings accounts; these may be described as “a two-year bond” or similar, but are actually ordinary savings accounts where your money is protected by the FSCS, meaning the first £85,000 would be returned by the government if the bank went bust. However, “real” investment bonds are not savings accounts and do not benefit from this cover.

This means that bonds are more risky, traditionally bonds have been seen as a safer option than shares, mainly because unless a company or government which issues them goes bankrupt or (for governments) simply fails to pay you, you are pretty likely to get the par value back., If however
the issuer does “default” the value of your investment will be lost.

The other thing to understand is that the value of bonds traded on the stock market falls as well as rises depending on interest rates. In general, bond values and interest rates have an inverse relationship. If interest rates rise and they can get a better return from other types of investment, the value of the bond becomes less to them, so it falls. Conversely, if rates fall the value of a bond will tend to rise. Enables IFA’s are happy to answer any investment questions you may have.

Issued by: Enable Independent Financial Life Planners
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE

Tracker funds and your investments

One pound in every ten is invested in a tracker fund.  At Enable our IFA’s have long favoured passive investments and that is essentially what a tracker fund is, tracker funds simply replicate the performance of their chosen index, whether it moves up or down.

A computer programme largely runs tracker funds so there is no expensive fund manager making them very cost effective. The annual charges on a tracker fund range from 0.25pc to 1pc, compared with 1pc plus on many actively managed funds. However, since the implementation of the Retail Distribution Review, fees charged by platforms have made some tracker funds less competitive than they used to be.

Historically in developed markets, tracker funds may beat all but the very best actively managed funds. But with developing markets, the expertise of a fund manager can sometimes be better than an index fund. In a rising bull market, tracker funds tend to do well: but in a bear market the best actively managed funds should in theory beat trackers – because the fund manager can switch the fund’s investments to protect against losses.

But there’s an alternative, cheaper way to track: exchange-traded funds (ETFs) are just like tracker funds but the way they are structured means they are traded like shares. Because of this, ETFs can be cheaper for personal investors than traditional tracker funds as there is usually no added platform fee.  Catherine Penney, a product manager says: “The appeal of ETFs is twofold. Firstly they offer low-cost access to a particular index or market - and this is the overwhelming benefit that has led to their increase in popularity…. Secondly, their transparency: traded like a share, prices are constantly being updated and can be purchased or sold online whenever it suits with full knowledge of the price the trade was placed at.” Enable’s IFA’s in Bishops Stortford can help you keep your investments on track.

Issued by: Enable Independent Financial Life Planners
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE

Planning for the cost of kids

Experienced Independent Financial Advisors like those at Enable in Bishop Stortford know that savings are often made to help provide for the family.   In a recent study, carried out by the Centre of Economic and Business Research (CEBR) for the insurer Liverpool Victoria (also known as LV=) it would seem the overall basic cost of raising a child in the UK, from birth to the age of 21 has increased to by 63 per cent since 2003, when the survey was first carried out. 

Currently the projected cost stands at £229,251.  It has risen by just under £2,000 in the last year alone, almost twice the current rate of inflation.  The costs that have been pushed up are childcare costs and those associated with education, ranging from uniforms and books to school trips, which together account for almost two thirds of the total expense.

It also points to evidence that the expense of raising children could be shaping the population, with some parents actively postponing of ruling out having a second child because of the cost.

Almost half of mothers consulted by the researchers also said they had either been forced to go back to work earlier than they would have wished or taken on extra work to help meet the cost of raising a family. Myles Rix, managing director of Protection at LV= said: “Having children has never been more expensive and, with costs such as childcare and education continuing to rise, for many families across the UK this is set to remain a pressure point. “No parent wants their child to go without and given a significant chunk of a family’s income is spent on children, it is important that parents take steps to secure their household’s financial future.” Enable’s IFA’s in Bishop’s Stortford can help you lay your financial foundations for having a family.

Issued by: Enable Independent Financial Life Planners
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE

Lasting power of attorney

Enable’s independent financial advisors see people every day planning their finances to protect their and their family’s futures. We all hope we won’t need it but to add to that protection of our families and ourselves it is well worth considering registering your preferences for lasting power of attorney.

Just 246,000 lasting power of attorneys were registered in 2013 - but there are currently 850,000 people in the UK living with dementia let alone cancer or other illness. Power of attorney is a lot easier to set up before it is needed - otherwise it can be necessary to go through the courts. You can set up LPA, at any age it is not just older people and hopefully for most of us even though it is set up, it might never be used.

Planning for the future is unfortunately something that all too often gets forgotten or put on the back burner until it's too late. Managing our finances in later years can also be something we don’t like to look at too closely especially if we fear becoming unwell. But having a valid LPA in place is the only way to ensure you can legally speak and act on behalf of someone else in the family - even if you are married or co-habiting. Lasting power of attorney gives the person or persons of your choice the power to deal with your affairs, should you ever become unable to do so.

There are two types of lasting power of attorney arrangements. One allows someone to handle your finances and property - essentially, managing your affairs on a daily basis. The other puts someone in charge of your healthcare, so they can make decisions about medical treatments you may need. Enables’ IFA’s in Bishop’s Stortford can see that setting up both can be worthwhile for peace of mind.

Issued by: Enable Independent Financial Life Planners
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE