Archive for September, 2014

Financial Tips For Debt-Burdened Graduates

Friday, September 26th, 2014

Debt-Burdened Graduates Blog ImageThe late, great, Rik Mayall and his fellow Young Ones lived in a very different era from modern students.  While the trials and tribulations of house sharing may ring familiar bells, the financial landscape facing the modern student is very different to that of their 1980s counterparts, fictional or otherwise.  With universities opening their doors to new and returning students alike in the next few weeks, let’s look at the steps recent graduates can take to find their financial feet.

Understand that you are now your own family and in charge of the family finance

While parents and family will always be there for you, as a graduate you’re now a fully-fledged adult and now in charge of your own future, with all that implies.  Hopefully you will have had the opportunity to learn healthy financial habits such as budgeting, if not then the sooner you start to acquire them, the better it will be for you in the long run.

Try living like a student for a while even when you’re working

Landing your first decent job is arguably one of life’s best milestones.  Those who’ve struggled financially to get through university could well feel justified in treating themselves a bit more generously now that they finally have a regular salary. This is perfectly understandable, but also try to keep a longer-term perspective in mind.  If you can stick to living like a student for a while, you can free up your salary for other purposes, whether this is paying down debt or saving up for a deposit on a house.

Build an emergency savings pot as quickly as you can (even if you have debt)

This may seem like a topsy-turvy piece of advice, but it’s aimed at stopping you from getting (further) into debt.  No matter how great you are at planning ahead, life can always throw something unexpected your way and that something could just as easily be a great opportunity as a problem.  In either case having ready access to funds can save you a lot of hassle when life’s slings and arrows hit you.

Make sure that you are on the electoral roll

Credit checks are a fact of life these days and one of the key points of passing them is being on the electoral roll.  If you’re still sorting out your accommodation options or working in an environment where it may not be feasible to register to vote at your main accommodation (such as in a hotel or holiday park), then it is much better to be registered at your parents’ address (or the address of another family member) than not to be registered at all.

Keep on learning

If you’re a recent graduate then the chances are you have many years ahead of you and that you will see many changes during those years.  To keep yourself employable until you are ready to retire (if you choose to retire), remember to invest time and money in yourself.  Keep your skills up-to-date and work on maintaining and building your social and professional networks.  Your graduation is a huge step in your education, but it is far from over.

Life Insurance – A Simple Way To Save An Inheritance

Friday, September 19th, 2014

Simple Inheritance Blog ImageWould you rather leave your worldly goods to your loved ones (or your favourite charity) or the tax man?

Inheritance tax has long been the subject of heated debate, but the chances of it being repealed any time soon, is very remote. So for most people, the choice of creating a financial plan to deal with it or leave your loved ones to foot the bill is pretty important.

Inheritance Tax Is A Growing Concern

Under current rules transfers of assets between spouses and civil partners are (usually) ignored for the purposes of any tax, including inheritance tax. Each individual can leave an estate of up to £325K to any other individual or organization before Inheritance Tax becomes payable.

Inheritance Tax is levied at a flat rate of 40% (with a reduction of 4% where the deceased has left at least 10% of their assets to charity).

Any unused portion of this allowance can be transferred to the surviving spouse/civil partner as a percentage. For example £162.5K would be transferred as an allowance of 50% extra. This means that the surviving spouse/partner would be able to leave a tax-free estate consisting of their own personal allowance plus an extra 50%.

Looking at these figures and comparing them with house prices, it’s easy to see that many home owners could find their estate subject to inheritance tax.

Inheritance Tax Must Be Paid Before The Estate Is Released

Upon a person’s death, their executor must inform the Inland Revenue of the value of that person’s estate. They will then receive a formal notification of how much tax is due. In general, this must be paid within 6 months of the deceased’s death. If it is not the Inland Revenue will charge interest on the outstanding balance. Although the payment can be made out of the deceased’s estate, it must be made before the bulk of the estate is released.

There is an exception for funeral expenses, although the bank or building society must agree to allow the executor access to the account. If they do not, these can be recouped from the estate and can be deducted from its value for tax purposes. Added together this can all mean that families who have worked hard at money management to put their family finances in good order can find themselves under tremendous financial pressure at a time when they are likely to be feeling highly emotional.

Planning ahead with the help of a financial adviser can help to minimize the stress of dealing with a bereavement.

Life Insurance Can Be A Lifeline

Life insurance can be a very efficient way to ensure that there are funds readily available to cover Inheritance Tax and funeral expenses.   Rather than naming an individual as a beneficiary of the policy, the holder can request that the eventual payout be made into a trust, held on behalf of your preferred beneficiaries.

In this way, the funds will be kept separate from your estate and can be released immediately (and relatively simply). This can also help to ensure that a surviving partner and/or children have sufficient funds to live comfortably while probate is being undertaken.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

The Ombudsman – The Consumer’s Champion

Friday, September 12th, 2014

ombudsman_blogWhile the Financial Services Authority (FSA) might have become a familiar name, it is now no more. As of April 2013 regulation of the financial services industry was divided between the Prudential Regulatory Authority (PRA) and Financial Conduct Authority (FCA). The Bank of England also gained direct supervision for the whole of the banking system through its powerful Financial Policy Committee (FPC), which can instruct the two new regulators.

The Financial Ombudsman Service (FOS) still exists and carries on in its existing role.

What does this mean for me as a customer?

In practical terms the FPC and PRA will have little direct influence on the experience of those who buy financial products. The FPC monitors the overall health of the financial services sector and regulates it as required, while the PRA monitors the health of major banks and insurance companies and can intercede if it believes that they are acting imprudently. The FCA is responsible for promoting effective competition, ensuring that relevant markets function well, and for the conduct regulation of all financial services firms. This includes acting to prevent market abuse and ensuring that consumers get a fair deal from financial firms. The FCA operates the prudential regulation of those financial services firms not supervised by the PRA, such as asset managers and independent financial advisers.The FOS acts as a mediator between financial institutions and their customers.

What exactly is the difference between the FCA and the FOS?

The FCA looks at how institutions manage customer service and the strategies they use to sell their products. It may take action against any given institution if it believes that there are general failings in some aspect of its behaviour but it leaves individual complaints to the FOS.

The FOS is essentially an adjudication service set up by parliament to sort out individual complaints that consumers and financial businesses aren’t able to resolve themselves. It is completely free to customers and if it finds in a customer’s favour the institution must comply with its decision. However, the FOS don’t write the rules for financial businesses – or fine them if rules are broken. That’s the regulator’s job. The FOS covers a wide range of financial institutions from the main High Street names and their products to payday lenders and pawnbrokers.

How does it work precisely?

The FOS will only take action in a case if the financial institution in question has failed to resolve a dispute to a customer’s satisfaction. In other words, any complaint should be sent to the institution in question in the first instance so that they have an opportunity to investigate and rectify it. They have 8 weeks in which to do so. At that point, if the customer is still left unsatisfied by the institution’s response they may proceed to the FOS.

Once the customer has set out their complaint, the FOS will need to gather all relevant information in order to come to a fair decision. Depending on the complexity of the complaint this may take anything from a few weeks to several months. The FOS aims to be as quick as possible but also has to be thorough and fair to both parties and many of the complaints it handles require it to understand a complex set of unique circumstances.

Payment Protection Insurance (PPI) complaints are a typical example of this. Once the regulator has all the facts it will take a decision and inform both parties of it in writing. If the FOS finds in the customer’s favour, the institution must comply with the decision.

What happens if my complaint is upheld?

Basically, the FOS aims to relieve you of the impact of the institution’s failing so it will award a level of compensation which it feels will achieve this. For example it might order an insurer to uphold a claim or a lender to refund the cost of a mis-sold product. It is highly unusual for the FOS to award compensation for inconvenience and distress and on the rare occasions when it does so, awards tend to range between £200 and £1000.

While the FOS has the authority to require institutions to make payments to customers, only the FCA can levy fines or other penalties on them. The FOS’s role is as arbitrator; regulation is a completely separate matter.


New Parents Ignoring Life Insurance

Wednesday, September 10th, 2014

BRITAIN-ROYALS-BABY-RELIGIONHaving a first baby is a steep learning curve. One of the first things new parents may have to learn is how they can adapt to survive on minimal sleep. It’s also expensive. Cots, prams, car seats and other paraphernalia all need to be bought to keep the newborn safe and healthy. Putting these together means that new parents can often find themselves spending money and missing out on important purchases.

A Savings Account Versus Life Insurance

Parents may open some form of savings account for their new arrival. In itself this can be a sensible option. For example Junior ISA’s provide a tax-efficient way of saving for when your tiny baby becomes a full-size, 18-year-old. Few parents, however, give serious thought as to what would happen to their child if they were to die in the meantime. While it’s fair to say that we are far more likely to live to a ripe old age than, say 50 years ago, sadly there is no guarantee. Accidents happen and so do illnesses.   Younger people can and do die, and when they do, the consequences can be particularly severe. For new parents, who are caring for a child in the most physically demanding period of its life, the death of one or more parents can be catastrophic. Savings accounts may be a useful way of planning for the future, but life insurance will take care of financial issues in the here-and-now.

Life Insurance Needs To Change With Your Lifestyle

Parents who have bought a house prior to having a baby are likely to have life insurance already. It’s a condition of many mortgages. For some mortgages however, the only requirement is to be able to repay the outstanding balance. When a baby comes on the scene, the new parents have to think seriously about how to ensure their child’s welfare in the event of the unexpected death of one or both of them. This means thinking well ahead until the end of the child’s full-time education. It needs to cover everything from childcare fees in the early years to school trips in later childhood and university fees in early adulthood.

Peace Of Mind Can Cost Less Than Toys

New parents may find themselves buying baby items which are hardly or even used. The cost of these items could well cover the cost of life insurance for the first year of the baby’s life. For healthy, younger adults an acceptable level of cover could be priced as low as a few pounds a week. This is usually more than achievable for people who exercise good money management and keep a firm grip of the family finances. Of course, life insurance only pays out in the event of a death and since both parents will hopefully live to see their baby reach adulthood, it can help a lot to have a financial plan in place to ensure that there are funds available to them when they reach school-leaving age. Getting advice from a financial adviser can help put your child’s future life on a solid footing before they have even taken their first steps.

Is Britain Having A Tech Boom?

Friday, September 5th, 2014

Tech Blog ImageIn 2002 half a decade of heady excitement about the money making potential of the Internet came to a shuddering halt.

Several years of over investment, mainly in the US, and mainly in dot com businesses that looked like interesting and worthwhile projects (but seemed incapable of making any money), caused what we now know as the dot com crash.

It was the first major financial calamity of the internet age but it is unlikely to be the last. Ever since, whenever companies such as Facebook or Twitter have been floated on the stock exchange, financial commentators have muttered the words ‘dot com’and ‘crash’ominously.

There is good reason to be cautious with investments in new technology and online ventures; the rate of dot com failures is extremely high and for every Instagram or Facebook type business there are countless failed ventures.

Even with the chances of tech success being so low, it hasn’t stopped a generation of UK based start ups from helping to build a vibrant new part of the technology sector in the UK.

The good news for skilled IT professionals in the field is that the tech sector is keen to hire, with over a third of start ups looking for new staff.

It is predicted that the sector will contribute £12bn to the economy over the next decade, and the recent London Technology week saw an influx of 30,000 visitors to the capital to see how Britain’s tech sector was powering ahead.

This is all good news, especially if you work in the IT sector, but how does it affect the rest of the economy?

Global trends forecaster Oxford Economics has predicted that the tech sector could produce nearly 50,000 jobs in the next decade, which is not an inconsiderable amount.

Whether Britain is capable of producing 50,000 skilled ICT professionals in that time is something of a different matter.

If she can, then the economy will have succeeded in creating a large number of well paid, highly employable and mobile workers, which, in terms of long term GDP per capita growth and tax revenues, is gold dust.

At present, most of this new activity is based in the South East and London, with the North of England, the South West (excluding Bristol) and Wales lagging behind. A tech revival in Newcastle, Hull or Cornwall would provide much needed confidence and interest in marginalised regions.

In 2010 Tech City, the London IT sector’s industry body was established and this year it was given the remit to represent and assist tech start ups across the UK.

Among their initiatives is a project designed to help young entrepreneurs between 18-25 set up their own digital businesses, as well as advice on how existing businesses can grow and develop.

If the predictions are correct and Britain is able to compete in the tech sector in the next few decades then it’s probably wrong to think of it as a tech boom, which conjures up images of unsustainable growth resulting in collapse.

Instead, Britain’s economy appears to be shifting naturally into a high technology future, the question for individual investors and readers of this blog is whether or not to have anything to do with it?

It’s always worth considering Warren Buffett’s sage advice here, (paraphrased) ‘if you don’t know how it works, leave it alone.’

Or find out. Before you consider risking your shirt and backing the next Facebook (and you will quickly learn that everyone has the next Facebook), it might be worth consulting an independent financial advisor who knows the field.

It is possible for you to learn about the new tech industry, but even pundits who are immersed in it on a day to day basis have no idea what will work and what won’t.

If you do invest in technology, take a long term approach, don’t put in more than you can afford to lose and have it as but one facet of a wider investment portfolio.

© 2018 Maxim Wealth Management. Web Design Glasgow Adeo Group