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.