Pensions and property

Enable’s IFA’s in Bishop’s Stortford and Saffron Walden have long suggested that for long term financial planning, rather than putting all your eggs in one basket savers should have a balanced portfolio of investments, of which property of course should form a part.  In a speech delivered recently by the City watchdog's (FCA) boss, Andrew Bailey, cautioned the idea of investing too much of one’s retirement fund in property.

His comment seem to directly challenge some of the more recent calls made by Andy Haldane, the Bank of England's chief economist, who has suggested that property is a better option for funding retirement than a pension. Mr Haldane had previously also admitted he could not make "the remotest sense of pensions" because they are too complicated.

Fresh data reveals the property wealth of over 65s in Britain has surpassed £1 trillion for the first time.  Key Retirement’s Pensioner Property Index reveals pensioners who have paid off their mortgages have gained on average £19,120 tax-free in the past three months taking their property wealth to a new record high.  Jon Greer, a pension’s technical expert, at Old Mutual Wealth, says “Housing wealth can be an important part of the mix when it comes to retirement income. But treating your house as your pension is a major risk. “Putting all your eggs in one basket is never a good idea, particularly when you consider that unlocking value in property is not straightforward.

Interestingly Halifax data shows the average home has risen in value by 231pc over the past two decades, while ABI data shows a typical pension fund has made 211pc investment growth over the same period. Enable’s IFA's in Bishop's Stortford can try and help you get the balance right.

http://www.telegraph.co.uk/news/2016/09/16/city-watchdog-chief-warns-against-using-property-as-a-pension/

Tax Advisors must be up to speed...

Experienced IFA’s like Enable of Bishop’s Stortford know how important it is to be fully up to speed about tax advice. Revenue and Customs (HMRC) have announced new plans for tackling suspected tax fraud using civil powers. HMRC will offer some people suspected of tax fraud the opportunity to enter into a contract to disclose that fraud in exchange for a guarantee that they will not face criminal prosecution.

Gary Ashford, Head of Tax Investigations at RSM Tenon, has welcomed the new facility, saying:
“This is a positive development. HMRC’s proposals would potentially provide greater clarity to those who have deliberately got their tax wrong and now want to engage with the taxman to regularise their affairs..”

 “This new facility will start to be used from 31 January. We are likely to see a flurry of big tax investigations starting then. Those pursued under the CDF can expect to have to pay the tax owed, interest and substantial penalties…..With HMRC targeting a five-fold increase in criminal prosecutions for evasion, the consequences of not clearing up tax irregularities could be grave.”

“The new procedures also raise the bar for tax advisers. Those seeking to advise clients in this area really will have to be sure they have the necessary skills and experience. There will be risks for client and adviser alike if these procedures are not followed properly – we are, after all, working in an area where criminal offences are being alleged.”

Independent Financial Advisors know tax efficiency is part of good financial management but it must operate within the law.

Managing your money is a vital skill...

At all times spreading your assets and diversifying is good financial advice. Experienced IFA’s like Enable have seen the benefits of diversification over the years.  Property has always been part of that diversification. Most portfolios contain property in some form even if it is just the house you live in but many also have money in Commercial Property.

But it is useful to note that the investment performance of UK commercial property over the longer term has been driven to a great extent by income return, reflecting rental payments received from tenants rather than capital appreciation. Over the 20 years to December 2010, commercial property delivered annualised total returns of 8 per cent per year, with the income return contributing 6.9 per cent per year.

In the nine months up to the end of September 2011, UK commercial property reported a total return of 6.4 per cent, comprising income return of 5.1 per cent and capital growth of 1.2 per cent suggesting, perhaps, that property had been delivering its ‘natural’ level of performance at the present time.

Property yields retain a considerable margin over dividend yields and an even more pronounced premium over 10 year gilt yields which have fallen as low as 2.5 per cent in recent weeks as concerns over the Eurozone sovereign debt crisis and whether the UK was heading towards a ‘double dip’ recession pushed investors towards extreme risk aversion.

The net income return delivered by property is however still proving attractive to investors for both investment performance and diversification benefits. Enable IFA’s of Bishops Stortford are happy to help you evaluate your diversification in these volatile times.