Posts Tagged ‘isa’

Investment Portfolio Health Check

Thursday, October 4th, 2012


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.

A pension or an ISA?

Thursday, September 15th, 2011

Our financial advisor explains that while a pension is one of the most common ways to save for retirement, it may not be your only option for retirement income and that an individual savings account (ISA) may provide an alternative.

Difference between a pension and an ISA

One of the main differences between a pension and an ISA is in the way they are taxed. Your pension payments will qualify for tax rebates up front, at your highest rate of income tax, but then the retirement income you receive later on will be taxed. With an ISA, the money you contribute will have already been subject to tax, but any withdrawals you make will be tax free. It’s also useful to be aware that your pension income counts towards your personal tax-free allowance, while your ISA withdrawals do not.

You might think that, thanks to the tax relief, a typical higher rate taxpayer saving the same annual amount into both an ISA and a pension plan over their working life will find that by the time they reach retirement age the pension fund is larger. This is obviously fully dependent on their investment choices and tax regulations remaining consistent but the tax rebates are important as they add to the value up front and therefore influence the size of annuity that can be bought. However, the retirement income from your annuity is likely to be taxable, unlike ISA withdrawals. But, your annuity payments are guaranteed for life and withdrawing the equivalent from an ISA may eat into your capital. It is therefore possible that the ISA capital eventually runs out.

Other pension benefits include the fact that employers can pay into a company or stakeholder pension scheme, and the annual contribution limits for pensions are much higher than for ISAs. Nevertheless, an ISA is much more flexible. With a pension, you have to wait until you are aged 55 to make withdrawals, whereas an ISA can be accessed pretty much whenever you like.

With longer life expectancies, as well as some high profile issues concerning the way in which a minority of pension funds have been managed, many investors’ funds will not provide quite as much retirement income as expected. As a result, some people are now looking to boost their pension funds by topping up their company pension, or by using additional investment vehicles. One other solution however, could be to use the ISA option and help ensure your retirement income is as healthy as possible.

Your options for retirement can be complex and will depend entirely on your own personal circumstances. If you’d like to speak to one of our financial advisors about pensions or ISAs they would be more than happy to take your call on 0141 764 0040.

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