What Does The 2016 Budget Mean for Pensions?

March 8th, 2016

What Does The 2016 Budget Mean for Pensions-On 16th March 2016, Chancellor George Osbourne announces the 2016 Budget.

Speculation on what will be changed has been on-going for months with recent reports (BBC, 2nd March) suggesting that the government was considering:

  • Abolishing the 25% lump sum which pensioners are allowed to withdraw tax free when their pensions mature
  • Cutting the maximum annual contribution
  • And perhaps even abolishing the entire tax relief system.

Rumoured Changes to Pensions

Tax relief on pension contributions is a growing issue for the economy. Employees benefit from tax relief because the portion of their income that goes into their pension is not taxed. Currently, the more income tax you pay, the more tax relief you receive on your pension contributions. Changes to this system could save the country a lot of money, and benefit some pension savers too.

HMRC data shows that total tax relief on registered pension schemes doubled between 2001-2 and 2013-14. At the moment, pension contributions are not taxed, but money taken out is taxed. Top rate taxpayers get 45% tax relief on their pension, higher rate taxpayers get 40%, and basic rate taxpayers get 20%. Higher rate and additional rate taxpayers receive two thirds of tax relief. Life expectancy continues to rise, meaning that tax relief on pensions is costing the country more as time goes on.

Flat Rate of Tax Relief on Contributions

One option that was considered was bringing in a flat rate of tax relief on contributions. Changing the system so that everyone gets the same level of tax relief would save the government a huge amount of money and benefit most ordinary people. However, this would be unpopular with wealthier people and, according to some, more difficult to administer.

The second option was to change pensions to resemble Individual Savings Accounts (ISAs). With an ISA or the possible new style of pension, contributions would be taxed beforehand via income tax, but withdrawals from the pension pot would not be taxed.

A less drastic option is for Osbourne to reduce the maximum pension contributions that individuals can make in a single tax year. Currently, everyone can save up to £40,000 per year into a pension. According to the BBC, it is “highly likely” that this will reduce, perhaps to as low as £25,000.

This option is less radical than overhauling tax relief, but it could be significant for people who have fallen behind on pension contributions and want to catch up as they approach retirement. The annual allowance has been reduced previously, being cut from £50,000 to £40,000 in 2014. Savers who want to contribute more than these amounts may want to consider getting pension advice soon, as future budgets may see further cuts to this allowance.

Latest News on Pensions in the 2016 Budget

On the 5th March it was reported that the Chancellor had ditched the proposed changes to tax relief on pensions. This means that upfront tax relief will remain, and there will be no flat rate of tax relief after all. However, these changes may still happen in future. An anonymous source at the Treasury told the BBC that this was “not to right time” to make these changes. The proposed changes would have cost the wealthy but encouraged lower earners to save more for retirement.

The announcement was disappointing for some, including the National Pensioners Convention, but ex-pensions minister Steve Webb said it was the right decision. Eleanor Garnier, the BBC’s political correspondent, speculated that the decision not to reform pension tax relief at this time may be related to the upcoming EU referendum, with George Osborne steering away from upsetting voters.

What Can You Do?

Although tax relief is not being addressed in this Budget, Osbourne still has the option of reducing allowances and making other changes to the system. Pension savers of all ages would do well to monitor their own arrangements, get pension advice from qualified pension advisers, and ensure they are contributing enough to see them through in light of changes that may or may happen next week.

If you are looking for advice on pensions, you can contact the advisers at Maxim Wealth Management for a free consultation: 0141 764 0040 (Glasgow office) 0207 112 8654 (London office)

Winners and Losers from the 2016 New State Pension

February 26th, 2016

Winners and Losers from the 2016 New State PensionThe New State Pension comes into force from 6 April 2016 and new UK pensioners will find a number of differences, with some pensioners gaining from the changes, while others will lose out.

What is the New State Pension 2016?

The new pension applies to everybody reaching pensionable age on or after 6 April and amounts to a maximum total benefit of £155.65 each week. Amounts of pension due are based on National Insurance records and pensioners will need a minimum of ten years payments in order to qualify for the minimum payments.

The new maximum pension is higher than the existing maximum rate of £115.95 weekly, however, you need at least 35 years of qualifying National Insurance contributions to achieve payments at this level. You could still qualify for the maximum pension if National Insurance credits were allocated at times during your life, for example if you were a carer, unemployed or parent with childcare responsibilities.

Does Everyone Qualify for the New State Pension?

The UK Government has failed to highlight just how many changes have been put in place and how they will affect new retirees and people who are approaching retirement age. An MPs enquiry is currently underway to investigate reasons the government failed to communicate all the forthcoming changes in a comprehensive manner to the public.

Reviews of the new regulations have already highlighted that only about 37 percent of retirees in 2016/17 are likely to qualify for the full rate of payment, as anybody who contracted out of the State Pension Scheme to join employment schemes will be unable to receive full payments. If you don’t qualify for the maximum payment, payments made into vocational schemes should ensure you won’t lose out financially.

Who Are the Winners and Losers Under the New Pension Scheme?

The major losers under the new scheme will be higher earners who won’t qualify for such generous state pension. It is felt likely that these pensioners would usually have built up substantial vocational pension and/or savings to mitigate any losses, however.

Winners under the new scheme are likely to be women who may only have partial National Insurance contribution records, alongside substantial credits due to carer responsibilities. Additionally, self employed people who have run their own businesses are likely to have access to higher payments. The total benefit to women and the self employed under the new regulations is likely to amount to around £40 per week, so it’s a genuine increase for some people retiring from April 2016 onwards.

What Can You Do to Improve Your Life At Retirement?

Increased likelihood of living longer has also meant reforms to the retirement age. From the year 2020 pensionable age goes up to 66 for men and women, and increases to 68 by the year 2046.

If you’re nearing retirement age now, it may be disappointing to consider you could have to work until the age of 66 and it’s important to find out what your state pension is likely to amount to. It’s possible to receive an accurate state pension forecast if you’re over the age of 55, and this will give you indicators of any additional savings or investments you need to put in place.

There are a number of resource available to help you understand all the potential pension and saving options. However this information is often generic and should not be taken as advice. In order to make the best decision about your financial future it is recommended that you seek professional pension advice from an experienced adviser. They will be able to help you put together a savings plan that fits your needs.

Maxim Wealth Management have been helping clients across the UK find their perfect saving vehicle since 2001. If you are interested in financial advice please contact us today for a free consultation: Glasgow 0141 764 0040 or London 0207 112 8654.

Are You Considering An Equity Release Plan?

February 16th, 2016

Are You Considering An Equity Release Plan-If you were thinking about Equity Release, you would not be alone. Sales of plans have risen over the past year and are set to rise further still.

Equity release plans were first introduced in 1965 and have since undergone many transformations however the recent steady rise can be attributed to the new pension freedoms which have widened the choice in pension solutions. This change has resulted in many considering their home as part of their retirement portfolio.

Rising House Prices

Last year pensioners freed up £4.7m a day from their properties, bringing the total value of property wealth released in 2015, to a staggering £1.71 billion. Sales of Equity Release plans rose to 23,747 in 2015 which was an 11% increase on the previous year.

Research has shown that the average customer released £72k, with Londoners releasing £128k – overall customers in the South East released an average of £84k. This increase in demand, is due to rising house prices, boosting confidence in using property wealth to increase retirement income.

Why Release Equity from Your Home?

There are many reasons for thinking about releasing the wealth from your most valuable asset.

Last year the most popular reason was home or garden improvements. 30% chose to use the money to enjoy a holiday and another 31% used the money to pay off credit cards and loan debts.

Debt in retirement is a cause for concern for some and can be a worrying and serious issue. A total of 24% of customers unlocking the value of their homes were doing so in order to pay off their mortgages. Where homeowners had once taken out endowment mortgages, with only the interest being paid off each month, these endowments failed to live up to the forecasts promised when originally sold. This in turn has left some homeowners with a shortfall and looking for alternative ways to cover the capital sum borrowed and allow them to stay in their homes.

This interest only mortgage problem is set to get worse in 2016, which makes money releasing plans all the more popular. The two main plans are open-ended Interest Only Mortgage where no payments are made by the borrower and an open-ended Interest Only Mortgage where interest payments are made to the lender. Either plan may also include a lifetime mortgage or home reversion plan.

67% of Equity Release Sales Made Last Year Were Drawdown Plans

Around 67% of Equity Release sales made last year were drawdown plans. A drawdown plan allows you to withdraw money in chunks as and when you need it, rather than taking out one big lump sum. The advantage to this type of plan is interest will only be payable on the money taken which can dramatically reduce the overall costs.

Releasing Equity from Your Home: An Important Financial Decision

Releasing equity is a decision not to be taken lightly and here at Maxim Wealth Management we have advisers who can help you make the right decision. Equity release is a lifetime commitment and will usually only be repaid when either you or your partner dies or go into long term care. It is important you seek financial advice about equity release as releasing equity from your home may affect entitlement to state benefits and your tax position. If for any reason you decide to pay back the loan early, it is possible that early payment charges may apply.

To request a FREE equity release consultation with Maxim Wealth Management please complete our Contact Form or call us direct at our London office: 0203 841 9941 or Glasgow office: 0141 764 0040

5 Pension Mistakes You Should Avoid

February 10th, 2016

5 Pension Mistakes You Should AvoidMany young people don’t think about their retirement. Even people reaching that inevitable age can bury their heads in the sand about building a pension pot; not wanting to face the truth that they are growing older.

This way of viewing retirement is understandable however the sooner you begin saving, the bigger the pot you will be able to build – something your future self will thank you for.

If you are unsure where to begin here are five pension mistakes you should avoid if you wish to maintain a similar standard of living in retirement to the one you have currently enjoy.

1. Not Having a Pension

The basic state pension will change to a flat rate of £155.65 per week from April this year (for people who have paid 35 years of NI). This equates to below £10,000 per annum. For many people this is a huge cut in their salary and not enough to maintain a reasonable standard of living.

You should also consider the fact that the pension age is rising over the next few years, so those wishing to retire in their early 60s will need to have other resources to live on until their state pension kicks in.

2. Delaying Saving

The value of your pension pot at retirement is based on the amount you put in and the length of time it is invested.

Whilst diverting your money into savings early on in your career may seem unfavorable when you are young, your older self will greatly appreciate it.

3. Not Understanding Your Options

There are a number of ways to save for retirement. You might be best suited to an ISA, whilst others may benefit more from a SIPP. What is best for you may not be the same as what is best for your friends or other members of your family. Understanding the difference and finding the option that suits you best is crucial for your pension pot to grow the way you want it to.

4. Failing to Review Your Pension Regularly

Do you know how much your pension pot is worth? Or which funds you have and their associated risk? If you currently have a financial or pension adviser, you may benefit from switching.

5. Not Seeking Pension Advice

The government launched a free service, Pension Wise, to help you understand what you can do with your pension pot money which people had found the website helpful to various degrees. It is important to note that the service offers guidance on what individuals can do, but not necessarily what they should do.

For detailed, individual advice on pensions it is worthwhile researching financial advisers who will be able to provide you with more specific advice on what you should do given your circumstances and attitude to risk.

Maxim Wealth Management offer financial advice from our offices in Glasgow and London. To request a FREE consultation please call us on 0203 841 9941  (London) or 0141 764 0040 (Glasgow). Alternatively you can fill in our contact form and we will get back to you.

The Pension Changes You Need to Know

February 5th, 2016

The Pension Changes You Need to KnowGeorge Osborne delivered his Spending Review and Autumn Statement on the 25th November last year.

In this statement the Chancellor did not announce any radical changes to the private pension system, for the first in this Parliament. He did however set out proposals for other areas regarding pensions which are detailed below.

The full changes will be understood in the March 2016 Budget.

New Basic State Pension

The new basic state pension will increase by £3.35 to £119.30 a week on April 6, the biggest rise in 15 years.

A New Flat-Rate Pension Will Be Implemented

There will be a new flat-rate pension set at £155.65 a week for anyone who reaches state pension age on or after April 6 next year. For someone working full-time today this equates to approximately 60% of the living wage.

The new flat-rate pensions aims to eliminate the current, complicated systems in which people receive a basic pension as well as extra payments based on their NI contributions.

Auto-Enrolment Delayed

A planned increase in the minimum pensions contributions employers would have to give their staff has been pushed back. The auto-enrolment, originally planned for October 2017 and 2018 will now come into force in April 2018 and 2019 instead.

Changes to Pension Credit

People who claim pension credit will have their payments stopped if they are out of the UK for more than four weeks. This replaces the old limit of 13 weeks.

The State Pension Age Will Rise

From 2020, the state pension age will be 66 for both men and women. This will increase to 67 between 2026 and 2028, and will be then linked to life expectancy after that.

ISA Allowance Frozen

The ISA allowance will be frozen at £15,240 and at £4,080 for Junior ISAs.

Are You Confused About Pension Changes?

If you are confused about the changes in pensions, or are unsure what the best saving vehicle is for you and your family, you should speak to a financial adviser who will be able to explain the possible options available to you.

Maxim Wealth Management are an independent financial advice company, with offices in Glasgow and London, covering the whole of the UK. To discuss your pension or retirement please contact us today:

Email: enquiries@maximwm.co.uk

Glasgow: 0141 764 0040

London: 0203 841 9941

Should You Change Financial Adviser in 2016?

January 28th, 2016

Should You Change Your Financial Adviser in 2016-Is it time for you to change your financial adviser?

In the most simple terms if you didn’t receive the return on your investment that you expected last year, then yes, it may well be time to change adviser.

In more complex terms there are a number of areas to consider more closely when judging whether or not its time to change adviser.

This post will run you through some key areas you should assess so as to make an informed decision about whether to switch to a new service.

Was Your Invest Performance Lucky?

Over the last six years or so, most investors have been receiving a good overall return and this period of time has been what is known as a bull market. In laymen’s terms, this means your adviser may have simply got lucky; earning you money without skill or insight.

This all changed in 2015 however, when the stock market had its first negative return in six years. This means it’s wouldn’t have been unusual to have received a lower return last year, but was yours lower than it could have been? Given the performance of the market last year, after typical expenses it may have been normal to receive a negative 2 or 3% return, but anything from 5-10% and its time to start looking at what went wrong.

Performance

What kind of strategy did your adviser apply and did it work? For example, he or she may have gone for a low cost ‘match the market’ strategy, if so did this work? Alternatively they may have gone for a higher cost, ‘beat the market’ strategy, if so did this more costly approach see a good return for you?

Reports and Feedback

A good adviser will keep you constantly updated- and not just when times are good. If you don’t feel your financial adviser has built a sufficient relationship with you, or fails to provide thorough data and reports, even during slump times, then it’s almost definitely time to change adviser. If you didn’t feel you were given enough facts to make an informed decision, this could also be an alarm bell to change services.

Risk

Does your adviser work from your own feelings on risk? A good adviser will take your lead when it comes to risk and won’t coerce you into either taking a gamble you wouldn’t take or playing it safe when you’d rather gamble. If you feel you were talked into a risk strategy that wasn’t to your choosing, this is another alarm bell.

Expenses

Quite simply, how much did your adviser charge? Was this expense greater than your overall return for 2015? If so then it’s almost certainly time to change adviser.

Is Your Financial Adviser Working in Your Interests?

Whilst these factors all look at the finer number crunching of investment, the most important thing is your instinct. How do you feel about your financial adviser? Does he or she understand where you are in your life and what you are looking for investment-wise? Do they have experience across the investment market including pensions, equity release and retirement as well as general investment? Do you feel he or she has invested in you as a person and will be there to inform you and answer questions in every sort of market, good or bad?

Another key area is to look at how many products you have been offered. Do you feel the products you’ve been offered in terms of pensions for example, has been limited? A good adviser will offer all products and not just the ones they make the best commission on.

What Should You Do If You Are Concerned About Your Finances?

If you feel your financial adviser hasn’t performed to the best of their ability, then it’s time to change. 2016 will be an interesting year for investment, especially for those looking to make the most of their retirement and ensure they have something to pass on, so make sure your adviser is up to the challenge.

If you are unsure about your current financial adviser, or haven’t previously had financial advice, then please contact Maxim Wealth Management today on 0141 764 0040 (Glasgow) or 0203 841 9941 (London). Our team will be happy to help you make sense of your finances.

Have You Discussed Your Family’s Finances?

January 19th, 2016

Have You Discussed Your Family's Finances-

Whilst it is easy to be naïve about the eventuality of old age, retirement is an inevitability for everyone.

If you wish to avoid paying high levels of tax and ensure your finances are correctly distributed among the members of your family retirement planning is a crucial step that should not be overlooked.

Even for those who understand the importance of pension planning, research has suggested that as many as 20% of couples over the age of 40 have never discussed their pensions with 49% have no idea about the level of retirement income they can expect once they stop working.

Why is it Important to Discuss Family Finances?

These figures are worrying, especially since families have become increasingly interdependent. Furthermore with the recent shake up to personal and state pensions (new pension freedoms were announced in 2014 and a new flat rate state pension will come into force this April) there is even more reason to discuss your plans for later life to ensure your partner and family receive the correct inheritance once you pass.

Despite these changes to pensions however, research also suggests that there is a reluctance for couples to visit a financial adviser to discuss retirement planning, with nearly two thirds having never met with one as a couple.

What Has Changed in Retirement Planning?

Traditionally retirement planning has focused on the needs of an individual, or a couple. However as families become increasingly interdependent, the situation has become more complicated as people need to factor in siblings, adult children or even parents into their financial plans.

Why Should You Discuss Your Will with Your Family?

One of the key areas that can cause confusion, or even disagreements following the death of a loved one is the Will. By speaking to a financial adviser to draw up a Will, and then discussing your intentions beforehand you will decrease the chance of upsetting arguments when it comes to distributing your estate after you are gone.

For those who have not set up a Will then it is time to stop putting it off. As many as 84% of 18-34 year olds and more surprisingly as many as 35% of over 55s are thought to not have a Will in the UK.

If you pass away without a Will you are considered to have died Intestate and specific rules apply. These rules changed on 1st October 2014 with the main beneficiary of these changes being your surviving spouse/civil partner.

Consider the Tax Implications of Inheritance

If you are planning to leave an inheritance to members of your family it is important to consider the most tax efficient way to do this to ensure that your loved ones do not lose much of your gift.

It can also be a good idea to consider the requirements of your children or younger generations. Attitudes to inheritance have changed in recent years with some younger relatives preferring their older family members fully enjoying retirement rather than struggling in order to leave something behind.

For those already at retirement, you may have already had the all-important family discussion and come to the conclusion that your family will not require as much in inheritance as you originally thought. This information could change your attitude to retirement, perhaps making you consider equity release or other retirement options.

Discuss Your Finances with Family and Advisers

It is understandable that you find the discussion of finances after your death a difficult subject to approach with your spouse, partner or family. However understanding the intentions of those around you is incredibly important.

Coupled with this you should seek professional financial advice from someone who can help you plan both your retirement and passing to ensure your money and assets are properly taken care of.

If you are wishing to speak to someone about pensions, retirement or financial planning please do not hesitate to contact Maxim Wealth Management today on 0141 764 0040 (Glasgow) or 0203 841 9941 (London). Alternatively you can fill in our Contact Form and one of our team will get back to you.

ISAs for Retirement Planning? – Understanding ISAs and Traditional Pension Funds

January 15th, 2016

ISA PensionsWhen you are planning your retirement you will need to decide which type of saving vehicle will best match your needs.

Whilst your ‘sunset’ years can be a great period retiring can also expensive, and when your regular paycheck stops coming you need to depend on your nest egg to match your lifestyle and expenses.

To make sure that you can not only live well after you stop working full time, but also pay for other expenses; healthcare for example, you would want to invest wisely in a retirement account.

Is an ISA Right for You?

If you choose to invest in cash ISA (individual savings account), not only will your savings work for your retirement years but you will also save on tax.

Because this type of account offers interest without taxes, it could be an ideal tax planning method. This type of investment is more stable so is better suited to those who are risk averse. The downside is that there is the chance that the interest rates will not grow a whole lot, unless you are open to taking more risks.

For people looking for a relatively safe place to invest for their golden years, this might be an option worth considering. Stocks and Shares ISA, while entailing a little more risk, also offer more returns, and the flexibility to invest as you like. It would also lead to greater degree of tax savings. There is also no time limit as to when your account is open for you to withdraw funds. Should you ever find yourself in a financial pinch you can think of using this account to rescue. However, with good financial planning, your savings should remain safe, and there should be no need to prematurely access it.

Pensions Are Still Worth Considering

Pensions have been the preferred way to save for the nest egg for decades. Pensions offer tax rebates, in that the amount you invest attracts relief on taxes, so you get to save more. The more you invest in a pension the more you stand to get as tax relief. Also, for employers that are contributing to an employee’s account, there is tax relief, and for the employee, more funds into the account. However, the planned changes to the tax rates on pension funds, would mean less savings.

Another reason to trust pension accounts is that contributions can be backdated. The contribution limits remain high, although the proposed changes to the law need to be studied in detail. You would also not be able to access the funds until a minimum age, so you would be prepared to do without the cash you saved in your hands, for at least a few years. In such a situation, you might want to consider an ISA. While the money you pay into the pension account may not attract tax, the money you withdraw will carry tax. How much you pay as tax is something your financial adviser will be able to tell you.

The Importance of Financial Advice

The New Pension Freedoms brought in by the current government have shaken up the way people plan for and enjoy their retirement. When it comes to making these important financial decisions, it is important that you seek the advice of a capable financial adviser.

The decisions you take today in regard to your savings and funds for post retirement will have far reaching consequences, for decades to come. That is why with the assistance of a financial adviser, who offers advice customised to your situation, you will be in a situation where you can face the future with confidence.

In addition to understanding the pros and cons of ISA and pension funds, you will also receive advice regarding other types of funds such as savings account, and premium bonds. You might also want to learn more about SIPP or Self Invested Personal Pension.

If you would like to speak to someone about your pension please do not hesitate to contact Maxim Wealth Management on 0141 764 0040 (Glasgow) 0203 841 9941 (London). Alternatively fill out our Contact Form with your question and we’ll get back to you.

5 Tips to Help You Save for Retirement

January 6th, 2016

5 Tips for Saving for RetirementAdjusting to retirement is a big change. Not having a job to go to every day after doing so for many years requires a complete lifestyle change, which you may or may not be prepared for, both mentally and emotionally.

The financial implications can be also seem daunting however with good planning, your sunset years can be comfortable and enjoyable.

By following the right preparation and advice you can make saving for your retirement easier. Here’s five areas you should consider to help you make the right plans in regard to saving for life after your working years.

1) Understand the new pension rules

If you have invested in a pension scheme, you have the freedom to decide how to take your pension. However, there are tax implications which many people do not understand. Typically, up to 25% of personal pension can be taken out without paying any taxes for those aged 55 years and above. The rest of it is taxable. Because pension income is put together with other income in the tax year the income is received and the total is taxed accordingly. This means that taking out a large sum could come with an equally large tax bill.

If your income is above a given bracket this could also cause personal allowance to be lost. To counter this you may benefit from spreading withdrawals over more than one tax year to benefit from tax allowances.

2) Pass on your tax benefits efficiently

The law enables you to pass on your pension upon your passing. This used to be subject to taxes of up to 55% if you had started withdrawing and the balance had been paid out as a lump sum. The rules changed and made it possible to pass on more of your pension upon your passing and in some cases, tax free.

For those who pass away before the age of 75, no income tax is paid when beneficiaries make withdrawals. After this age, withdrawals are taxed as income. Typically, pensions are exempt from inheritance tax. However, the rules vary depending on personal circumstances.

3) Two is better than one when it comes to tax allowances

Spouses as well as registered civil partners can transfer assets to each other without paying taxes. If one of you pays more taxes, it makes financial sense to spread or even them as a couple by transferring investments to save taxes on the one who pays less taxes. Also, a new Marriage Allowance has been introduced where it is possible to transfer 10% of personal allowance between partners to bring down the joint tax bill.

4) Taking all the shelter you can will also make a difference

There are a number of tax shelters available. The best known is the Individual Savings Account (ISA) that does not attract Capital Gains Tax or any other tax on income. Income from ISAs does not need to be declared making them ideal for generating additional, tax-free income for retirement. It is important to understand that an ISA is not in itself an investment but a way to shelter your savings and investments from tax.

You can withdraw from you ISA when you need to and they have no upper age limit. Individuals can put a maximum of £15,240 in an ISA for the current tax year (2015/16) and allowances can now be divided between different ISAs such as Stock and Shares ISAs and Cash ISAs as per an investor’s choosing.

5) Maximize on tax allowances

There are other changes that have been made that will be implemented this year where there will be added tax-free allowances for cash interest and income from shares or dividends. Some retirees may be paying thousands of pounds in taxes that they perhaps shouldn’t be. The changes have been confusing for some and unfortunately this has led to some not being able to take advantage of all the tax-free allowances they can get.

Speak to a Financial Adviser About Your Retirement Today

Sitting down with a professional financial adviser could have a major impact on your tax bill and improve the quality of your life in retirement. A pension adviser will be able to look at every aspect of your pension and help you understand how to make the most of these changes.

Maxim Wealth Management offers independent financial advice on pensions, retirement, equity release and other aspects of personal finance management. Contact us today to discuss your pension and let us help create the best possible retirement plan.

Putting A Buy To Let Investment To Good Use

October 6th, 2015

05 Putting A Buy To Let Investment To Good UseFor many of us, financial uncertainty seems to be a key feature of life; saving and investing for the future in a time of low interest rates has become immensely challenging.

Many people who have accumulated savings, inherited money or wound up with a significant sum to invest, look instead to the buy to let property market in order provide for their futures.

In this blog post we will explore the best ways of ensuring that buy to let properties can provide for you and your family in retirement.

The golden years

In the decade between 1997 and 2007, property seemed to be all anyone was talking about. The TV stations were bursting at the seams with programmes about property ladders, property fortunes and property presenters.

It was clear, in hindsight, that the property bubble was about to burst.

The moment that a critical mass of people enter the market in one go, assuming that property is a licence to print money, the count down to a crash begins.

In 2008, an era of cheap borrowing, available credit and rising property prices came to an abrupt end and so did the dreams of many who hoped to become property millionaires overnight.

All is not lost, however

Get rich quick schemes aside, property can still be a great way of investing for the future; the rental sector is growing rapidly and predicted to continue expanding over the next decade.

Unless housing is built at a similar pace in order to meet demand, it is likely that rents and therefore rental income will continue to rise.

Most private landlords who own a buy to let property are small time property investors with one or two properties.

These days, the more risk averse banks are reluctant to lend to landlords with dozens of properties, recognising that they represent unacceptable default risk levels.

Banks have to lend money to someone, however, or they cease being banks, so you might find you can get a buy to let mortgage by presenting yourself as a low risk borrower with few liabilities.

Bank, building society or broker

Bank lending rules have become far more stringent since April 2014 and few are now happy to consider a buy to let mortgage without an existing property to put up as collateral.

Helping the next generation

Housing costs in London and other major cities have sky rocketed in recent years and even affluent young professionals find themselves priced out of the housing market.

If you have grown up children and dependents who are unable to buy, you might be able to provide for them and find an investment opportunity at the same time.

You will need landlords’ home insurance if you choose to become a buy to let landlord, as regular insurance policies will not be considered valid and the first concern of any new landlord is ‘insuring my property against possible damage or loss.’

The government’s pension reforms in the past year have left many retirees with a lump sum of cash that they can invest as they see fit, no longer having to purchase an annuity.

By investing in buy to let properties, retirees may be able to use rental incomes to supplement their pensions, and have a property to leave to the next generation in their will.

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