Archive for the ‘SIPPS’ Category

Is A Self Invested Pension Right For You?

Thursday, April 2nd, 2015

Is A Self Invested Pension Right For You?In the past year, due to pensions reform,  the UK pensions market has undergone radical change and savers will have more autonomy and more choices now than ever before after 6th April 2015.

Whilst this is undoubtedly a positive development for many, it also means that savers need to be better informed than ever before about the benefits and potential downsides of different types of pension.

The Self Invested Personal Pension (SIPP) gives the saver control over their investment choices and this blog will explore what investors can gain from them.

Traditionally, pensions were policies sold by and managed by large providers.

Pensions would tend to invest in funds managed by the pension company meaning that the policy holder is limited in their investment choices.

A SIPP is quite different. It is a DIY flexible pensions policy that enables the holder to invest in a wide range of choices, with the shares held in a ‘pensions wrapper’. The investments that a SIPP owner can buy have to be approved by HMRC.

Who might benefit from a SIPP policy?

Pension companies are paid for their ability (in theory)  to maximise the return on investments and minimise risk. However, there are individual investors often understand how to profit from investing already.

If you already understand investing, are happy to do your homework and work out what investment opportunities suit your needs then a self invested pension might well be a good opportunity for you.

However, as any seasoned investor knows, the value of investments can go up, but it can also go down.

Stepping out on your own can be liberating but at the end of the day any poor investment decision made by you will see your fund decline in value.

What do I do with my SIPP?

You can put a variety of different types of investments into your SIPP, so choosing a mixture of low, medium and higher risk stocks, shares and bonds (among other investments).

One of the advantages of a SIPP is the government tax relief you will receive when making an investment. If your personal rate of income tax is 20 percent, this is the rate of tax relief that will be applied to your SIPP.

Therefore, if you invest £8,000 in a SIPP, the government will assume that, without the 20 percent tax that would normally be levied on your earnings, you would have had £10,000 to invest. The government will then top your SIPP up by £2,000 to £10,000.

If you are earning a wage you can invest up to 100 percent of your wages (up to £40,000 in the 2014-2015 tax year). If you are unwaged you can contribute up to £3,600 per year and still access tax relief.

What else do I need to look out for?

In order to open one through an investment firm, you will be looking at setting up fees.

You might find that some SIPPs don’t charge an annual fee, but others will charge anything between 0.5 percent and one percent of the total value of your investments per annum.

Therefore on a £100,000 pot you could wind up spending £1,000 a year in fees.

In addition to this, you as an investor are responsible for the cost of your own trades, which might be anywhere between £10-£15 a time.

Before you commit yourself to any investment you should talk through your needs and priorities with a professional financial advisor who is an expert in the field.

 

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED

When Did You Last Check Your Credit Rating?

Tuesday, March 31st, 2015

When Did You Last Check Your Credit Rating?Whether or not you realize it, Experian, Equifax and Callcredit all have a huge impact on everyday life in the UK. They are the “big 3” credit-rating companies. . Businesses use their services for a whole variety of reasons. For example some companies use them to confirm a person’s identity, particularly if they deal in age-restricted goods such as alcohol. Mobile phone networks also tend to check with credit-reference agencies before they hand out expensive contract smartphones. Some employers check them, particularly if a job involves dealing with money. This means that even if you have no intention of applying for any credit in future (not even a mortgage), it can still be a good idea to keep your credit record looking good.

Credit records are about more than just money

When thinking about brushing up your credit record, your first thoughts may be about how to manage the family finance (better) as this does indeed have an impact on your credit rating. For example late payments or being over limit on credit card will set your score back. At the same time, even those with a perfect financial track record and plenty of savings to draw on, can find themselves with poor credit scores for a number of reasons. Whatever you do, make absolutely sure you are on the electoral role as this is a major point during credit scoring.

Wrong data

Everybody makes mistakes and that holds true of credit-scoring companies. Ideally you should make a point of checking your credit record every year or so, to give yourself the opportunity to have any mistakes corrected before you feel any need or want to apply for credit. You should certainly check your file before making any significant application for credit (e.g. a mortgage).

Mixed messages

You fill in a form to apply for something and put down that you live in flat 6F. You fill in a form to apply for something else and put down that you live in flat F6. Your letters might still get to the right address but the computers at the credit reference agency might not make the connection. Even if you’ve always filled in your details in correctly, data from hand-written forms can be entered incorrectly and even forms submitted online can go wrong occasionally. Again, you can pick up these issues by checking your file.

Lack of closure

It’s fine to keep a credit card for emergencies, but if you only have a card because you’ve never quite got round to closing it, then close it. Very simply, every credit card you have on your file will be considered a card that’s available for you to use (which technically it is). This may impact how much money other lenders are prepared to offer you.

In short…

Having a good credit record is partly about general financial health and partly about making sure that your credit record is correct.

Investment Portfolio Health Check

Thursday, October 4th, 2012

Investments

Time for a portfolio health-check.  Once a financial plan has been put in place, it is tempting to believe the paperwork can simply be tucked away in a drawer and forgotten.  However, like a well-kept garden, a financial plan needs regular tending to ensure it is still on track. ‘Weeds’ can spring up or you may just like to grow something new.  What should a financial health-check comprise?

check it is still fit for purpose.  The original financial plan will have been matched to an investor’s goals – to retire at 60, say, to fund education for children or whatever.  A review will first look at whether these goals have changed, perhaps with the birth of another child, or a change of job or a surprise inheritance.  It should consider whether investors need to save more or switch to different types of investments to achieve their goals.

The Portfolio Review

A review will also look at an investor’s progress towards their goals.  It may be a portfolio has performed particularly well and it is no longer necessary to take as much risk – or the opposite might be true and an investor needs to take on more risk.  A financial health check will also examine whether the underlying investments are performing in line with expectations.  Fund managers will have good and bad periods.  A run of bad performance may mean their style is out of favour – for example, they may target larger, dividend-paying stocks while the market currently prefers small companies – but your financial adviser will be able to judge whether this is expected or whether it is a sign of a deeper problem.  It may be a manager is losing their touch, has left their employer or there are problems within the investment house.  In this case, it may be worth switching to another manager.

Investment Changes

A portfolio will also need to be tweaked according to the wider economic environment.  The 2008 financial crisis changed the investment landscape – for example, the low interest rates that have followed mean income-seekers have had to work harder to generate the same level of yield.  While an event of this magnitude will hopefully not repeat itself in the short term, it highlights the importance of regular reviews and ensuring your financial plan continues to be appropriate.  Financial health checks can ensure your garden grows abundantly in all weathers.  A little tending can go a long way.  To arrange a financial review contact Maxim Wealth Management or call 0141 764 0040.

Pension Transfer Advice

Wednesday, August 29th, 2012

Pension Transfer Advice

Pension transfer advice, for the pot that you have accrued.  Most people switch jobs several times during their working life.  When you change employers, it is worth thinking about, combining your pensions into one pot.  It is easier to keep an eye on fund performance if your pensions are all under one umbrella.  A single pension pot will incur less paperwork and administration, and could also generate lower costs and better overall performance.  Sounds like a no-brainer?  In theory yes, however, there are some important issues to consider before taking the plunge seek independent Pension Transfer Advice.

Occpational Pension Schemes

Most occupational pension schemes and private schemes can be transferred, but there are restrictions and potential pitfalls.  It is not usually worth transferring final-salary or public-sector pension schemes the benefits are too good to lose.  You should only transfer if you have actually left a company.  If your current employer contributes to your existing occupational pension scheme, you should not switch.  Also it is worth noting that the money in your pension can only be transferred from one pension scheme to another (until you have retired), and not every new pension scheme accepts inward transfers.

Small Pension Pots

If your pension pot is very small, it may not be worthwhile switching: you will have to pay charges when you transfer, and some providers impose harsh penalties if you leave their scheme.  And, if you are relatively close to retirement, you might not have sufficient time to recover the costs incurred by transferring.

According to the Pensions Advisory Service, the Department of Work & Pensions (DWP) is set to publish a consultation paper examining the consolidation of small pension pots.  Possible approaches could see your pension pot moving with you when you change your employer; alternatively, when you change your job, your pension pot could be left behind and – unless you decide to opt out – the cash would automatically be transferred to a central aggregator fund.  The DWP believes the changes would increase the visibility of pensions saving: instead of seeing several small figures, each individual would be able to view one larger, consolidated figure.

Transferring and aggregating your pension pots might generate significant long-term benefits; however, any decision to do so should be taken for the right reasons.  Tread carefully and, above all, take expert advice before making an irreversible decision.  For Pension Transfer Advice contact Maxim Wealth Management  who are well-placed to help you with this.

Can you afford to spend 1/3 of your life in retirement?

Thursday, September 15th, 2011

Life expectancy in the UK is rising

It has long been accepted that improvements in medicine, lifestyle and an understanding of the effects which habits such as smoking can have on our health means life expectancy is increasing. Future generations will enjoy much longer and healthier lives on average than their predecessors.

Figures released in April 2011 by the Department of Work & Pensions help illustrate rather exactly what this means. These figures suggest, of the under 16s already alive today, over a quarter are going to reach the age of 100 – and already, the average new-born female is going to live to over 90.

As Steve Webb, Minister for Pensions, commented at the time, this means that millions of people will spend over a third of their life in retirement.  But, as the DWP were quick to point out, this news also coincides with a period during which pension savings are in serious decline.

A population with increasing life expectancy is putting our welfare system under significant pressure as more people need not only pension income but also healthcare, incapacity support and help within the home.   When the time comes for you to retire you can expect that your State Pension will provide little more than a safety cushion. If your retirement plans include holidays, visiting relatives and treating yourself on occasion, then its time to take control of your savings and start building up a retirement fund of your own.

Call us today on 0141 764 0040 and our professionally trained financial advisers can talk you through your retirement planning options.

Retirement Planning

Thursday, September 15th, 2011

When it comes to retirement planning, time is one of the most important assets you have to save for retirement.

It takes a long time to build up the investments needed to provide a comfortable retirement income and the sooner you start retirement planning and saving, the better.  Even putting a small amount away on a regular basis, if done long term, can make a difference.  Both occupational or company pension schemes and personal pensions are tax-efficient.

Your contributions to company pension schemes are deducted from pay before tax is calculated and for contributions to personal schemes, tax you have paid before you make your contribution is reclaimed for you by your provider.  In to each type of plan you can contribute up to £3,600, 100% of your net relevant earnings or £50,000 (for tax year 2011/12), whichever is the greater and you can then use your personal income tax allowances before calculating the tax you pay when that pension finally pays out.

If you work for more than one employer, a financial adviser can help you check your previous company schemes and work out what you are entitled to.  Your retirement planning might also include individual savings accounts (ISAs) which are tax-efficient ‘wrappers’ all profits earned on investments held inside them are paid out to you free of further tax.  The amount of money you can invest in an ISA is also subject to limits (£10,680, tax year 2011/12), but it is worth getting into the habit early.

If you think you could benefit from retirement planning we’d be happy to offer our services.  But don’t delay because the longer you put off planning for your retirement the less retirement income you’ll have.  Call us now on 0141 764 0040 and let’s see if you can help.  Contact Us.

Pension sharing on divorce Scotland

Thursday, September 15th, 2011

Pension Sharing on Divorce Scotland

To achieve your fair share of pension rights and a clean break you will need expert legal and financial advice, especially where divorce is taking place between older couples and a considerable pension fund built up over the life of the marriage.

The allocation of pension rights on divorce is a particularly sensitive issue mainly because women are likely to have much smaller pension pots than men.  This is usually for two main reasons – women on average earn less than men and they are more likely to have spent time out of the workplace raising children.  In the event of a divorce, it is as important to consider the fair split of pension provision as it is the division of any other assets.  If one spouse has no pension savings because they have stayed off work to support either house or family, while the other has worked and built a substantial fund, this should be taken into account when determining the settlement.

Pension Sharing

When pensions are to be shared, you may not actually split the pension fund itself but instead, offset your rights to it against the value of something else – perhaps some investments, business assets or even the marital home.  Where young children are involved, for example, the marital home may be a precious asset which will reduce upheaval in the short term.  However, the benefits of this need to be weighted against those more formally related to retirement.

If a longer term solution for pension assets is required, there are a number of available options. The first might be to earmark a portion of your ex-spouse’s pension fund, and defer receipt of that benefit until they retire.  However, such earmarking leaves one partner dependent on the other, reducing the chances of a clean break.  They may also have to wait years before benefiting – and, if your ex-spouse dies before retirement, it is possible you could end up with no formal pension provision at all.

To protect against such eventualities, it is now possible to split a pension at the time of divorce.  A dependent ex-spouse gains access to a specific portion of the main breadwinner’s pension fund which then allows them to move their share away and make a much “cleaner” break. Both parties can then move on and take full control over their own share. In addition, if the main pension holder dies or remarries, all pension rights for the ex-partner remain protected.

The allocation of pensions on divorce requires expert legal and financial advice to achieve a fair split for both parties.  If you could benefit from talking to our financial advisers on this matter please call 0141 764 0040 in complete confidence.  Contact Us.

Is NEST best for your business?

Thursday, September 15th, 2011

NEST, the National Employment Savings Trust launches in 2012.

All employers will be forced to set up a Company Pension Scheme for their employees or auto-enrol their employees into the new NEST pension scheme. Group personal pension schemes (GPPs) have emerged as one potential solution which could help employers keep control of what pension benefits are offered to different individuals.

NEST pension or GPPs?

The main attraction of GPPs is their simplicity. The employer passes contributions straight from payroll to the provider and this is then invested as per the employee’s instructions. Through a group scheme, each employee has their own plan so they benefit directly (and only) from their own contributions and can also decide how this is invested. Contributions benefit from tax relief at the employee’s highest rate and employers can also make contributions to top this up.

This not only helps the employee but also the company tax bill – and can also reduce national insurance contributions. In addition, an employer contribution of at least 3% (which will be phased in between 2012 and 2016) is a requirement demanded by the NEST rules. Note, however, the rules are still being finalised, so may be subject to change.

Finally, at the end of the employment, employees simply take their sub-plan with them and keep contributing themselves. This reduces the need for employers to administer retained benefits and also helps the employee keep their career pension savings in one place.

If you think your business would benefit from a group personal pension scheme rather than being forced to meet the requirement of NEST, our dedicated Corporate Pensions Advisor would be happy to help talk you through the pros and cons.  Call now on 0141 764 0040.

At what age do you want to retire?

Thursday, September 15th, 2011

Sooner rather than later?  But later may mean you have more money.

Age of retirement in the UK

The minimum retirement age is now 55 and the statutory age is 65 and this is increasing to 66, for men and women, by 2020.

Retiring later can increase your retirement income

As a general rule, it is better to hold off retirement for as long as possible. Deferring state, employment and/or personal pension benefits generally provides a larger income than retiring early because the older you get, the better annuity rates tend to be. Equally, if you choose to downsize your career but can still earn some income after your chosen retirement date, you may be able to ‘phase’ your retirement, using only a portion of your pension fund to begin with and leaving the remainder invested until later.

However, the most important choice you will make will be over the actual annuity, or unsecured pension product (Income Draw Down), as this will determine your ultimate retirement income. There is also the option of taking 25% as a tax-free lump sum, which could perhaps pay for a long holiday or be re-invested elsewhere to generate additional income. An annuity will provide you with an income stream for life, but this does mean you give up all right to the capital – and your descendants may not inherit anything of your investment if you die soon after retirement. You therefore need to weigh up the merits of guarantees in your annuity choice (thereby securing some of that fund value at least for the short term) against the rate being offered to you, particularly if you smoke or have certain health conditions which could lead to an increase in the amount you receive.

Alternatively, you can use an unsecured pension arrangement, which allows you to keep your fund fully invested and to draw an income directly from that. This income could be less or more than you might receive with an annuity, depending on your circumstances and requirements, but it does mean you preserve some of the value of your pension fund. This approach does, however, come with risks. Rather than consolidating your value as an annuity would, your retirement investment remains in the hands of the market so, whilst the value could go up, it could just as easily go down. Given the time it took to build that value, positioning your portfolio to minimise the risk of losing it is therefore essential.

Finally, you could do a little bit of both – take an annuity for part of your pension fund and leave the remainder invested. Such a combination could offer a decent half way house, but be sure to examine all the options before you make your move.

We’re happy to provide more information about planning for your retirement and you options will really depend on your own set of circumstances and wishes.  For professional advice tailored specifically to you why not call our financial advisers on 0141 764 0040.

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