Mortgage Enquiries Continue to Build

Mortgage

Mortgage borrowers have been coming to terms with the new lending rules which came into force last month.

The changes were part of the regulators, the Financial Conduct Authority (FCA), tough stance and serious clamp down on irresponsible lending. Essentially it requires any lender to pay close attention to a potential borrower’s income, their expenditure and ultimately their affordability.

Initially we thought that the new rules were an added layer of complexity and disclosure that could slow the housing market down. In reality these fears have been unfounded.

One area that has become apparent is the amount of time it takes to organise a mortgage. The big name lenders’ in-house advisers have struggled to come to terms with the additional compliance requirements and the increased workload.

Happily, Platinum IFS have always operated under the strictest code of conduct so the changes are welcome from our point of view, because the rest of the market place is now forced to comply to the same high standards we have always set ourselves.

This has meant we have seen a substantial increase in enquiries from our clients. Our dedicated mortgage adviser, Nick Moynihan, has been very busy ensuring our clients manage to arrange the finance package they need on a ‘mortgage deal’ suited to their needs.

If you have any queries or would like to discuss the options further please do not hesitate to get in touch. Equally don’t hesitate to call if you are concerned with potential interest rate changes.

How To Boost Your State Pension

pension income

From next year legislation comes into force which allows pensioners to top up their state pensions. This new scheme is revolutionary in that it is the first to apply to existing pensioners.

In simple terms it allows those born before a set date, to buy an extra weekly pension of up to £25 per week (£1300 per year) by paying a lump sum contribution.

More importantly, this income is index linked which means it goes up with the rise in inflation or state pensions. There is also a spouse’s pension payable should the claimant predecease their spouse.

The costs are dependent on age. For example, at age 75 the cost of a weekly £1 top up is estimated to be £674 (broadly equivalent to an index linked return of 7.7% per annum). For those who are younger the costs increase slightly.

The Government has produced a calculator which allows people to work out the costs of a likely top up. This can be found here gov.uk/state-pension-topup

The only downside of the scheme is it will only be a limited time offer.   It is due to run for just 18 months from October 2015, therefore it will be imperative for anyone interested to take advantage within this timescale.

Our initial impression is that this scheme is a great opportunity for many clients. In particular it will suit those who have monies saved, but are having to use these monies to top up their income.

As always we are happy to answer any queries on this opportunity. For our existing clients, we will be able to discuss the scheme in our next review meeting.

Market Update – Good News!

financial markets

Recently we have seen quite dramatic steps in the Budget and continued positive statistics – both offer great prospects for the UK economy and investors.

As outlined in previous articles and updates the Budget was particularly encouraging for savers and investors. As well as tax savings, everyone will have greater access to their pension savings too. This is good for two reasons – it encourages people to save and also allows the economy to benefit from savers as they release capital.

Alongside the Budget changes, there has also been a stream of positive news regarding GDP, reductions in the number of unemployed people. Furthermore there have been several positive endorsements from areas such as the International Monetary Fund (IMF).

The question is then, where does this leave us?

It means that in the UK – the economy, various companies and investors can look ahead to a year of positive steady growth which shows no sign of a dramatic fall.

The main risk to this positive outlook is interest rates. Throughout the UK and across the EU rates are very low but likely to change. As these increase, it could have a dramatic effect on the huge debt mountain that every country is carrying. It could also influence exchange rates and money spent on the high street.

However the potential risks of interest rate changes can be overcome by using a well-constructed and diversified investment portfolio, which we always encourage our clients to hold.

Platinum encourage a greater weighting towards equities and commercial property. Within fixed interest we still favour corporate bonds over sovereign debt, such as gilts.

In line with this we have been ‘tweaking’ clients’ portfolios to ensure a stronger position and benefit from the positive economy.

As always, we encourage you to contact us about any financial matter – even if you simply want to discuss your pensions or investments further.

Equally do not hesitate to get in touch with Platinum if you want to discuss how the Budget changes affect you.

Who would like money for nothing?

money

The recent Budget was great news for many people, with one key area where rules will have a swift, positive, impact – the changes to Triviality Rules within pensions.

The Trivial Benefits rules allow individuals to access their pension funds immediately as a lump sum if the value of those pensions are small.  Many of the budget rules don’t kick in until 2015 however the Triviality changes are already in place.

Once you are age 60, if your pension fund is valued less than £10,000 then you can access this fund as a lump sum, irrespective of any other pensions you may have.  Furthermore 25% of this encashment will be tax free.

This has created a clear opportunity for savers.

It is possible for someone to save £8000 into a pension, receive tax relief of £2000 to create a fund of £10000.  A Higher Rate tax payer will receive even more tax relief.

The saver can then take the benefits immediately.  If you are a non-tax payer when taking the lump sum then the £10,000 fund would effectively be tax free.  If you are a basic rate tax payer, then the fund after tax would be £8500.

The rules allow this Triviality option to be exercised three times, separate from and in addition to the rules for commutation of combined funds under £30,000.

Whether you are a non-tax payer, basic rate tax payer or higher rate tax payer the rules could allow you to make between £1500 and £6000 tax free.

The Budget has introduced many encouraging changes and we are happy to help our clients maximise their position to take advantage of any quirks.

Please contact Platinum to discuss your current situation and how you can take advantage of the new rules.

Budget 2014 – Food for thought

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For the majority of our clients the budget was great news.  Over the next few blog articles we will focus more on specific items, but for now here’s a brief summary

Ahead of next year’s General Election, Chancellor of the Exchequer George Osborne delivered a Budget that provided considerable food for thought. Focusing in particular on support for business, savers and pensioners, the Chancellor hailed the UK’s economic recovery but warned there was still more to be done.

The UK economy is now predicted to grow more strongly than previously forecast and, over the course of this year, the Office for Budget Responsibility expects the economy to expand to a level greater than its pre-crisis peak. Meanwhile, the UK’s budget deficit during 2014 is likely to be lower than envisaged at 6.6%, and is now expected to continue its decline until 2018/19, when it is predicted to achieve a surplus of 0.2%.

 

  • The  Chancellor increased the income tax personal allowance to £10,500 – a move that will reduce the typical UK taxpayer’s bill significantly. The higher-rate tax threshold will increase from £41,450 to £41,865 during the 2014/15 tax year and will rise by another 1% to £42,285 in 2015/16.

 

  • From 1 July, cash Individual Savings Accounts (ISAs) and stocks & shares ISAs will be merged and simplified into a single ISA with an annual tax-free contribution limit of £15,000.

 

  • The confusing 10p tax rate for savers was scrapped so now anyone with earnings and savings interest of less than £15,000 needn’t pay tax.

 

  • The Chancellor also announced a new Pensioner Bond, available to everyone aged over 65 from January 2015. The Pensioner Bond will be offered by National Savings & Investments.  We wait to see how attractive the rates will be.

 

Meanwhile, in what was probably the most controversial measure within the 2014 Budget, the Chancellor announced plans aimed at removing all tax restrictions on pensioners’ access to their pension pots.

 

  • In particular, pensioners will no longer be obliged to purchase an annuity to fund their retirement. The measures will give retirees more freedom to decide how to use their pension pot but have also raised fears some individuals might fritter away their money and have to be supported by the state.

 

  • From 2015 pension savers will be able to access their entire fund at age 55 although access will be subject to income tax.   For those over 60’s who already have secure pension income of £12,000pa, they can access their funds      immediately.

 

  • The positive news for retirement planning continued with immediate changes to income limits for those clients in ‘Drawdown’.  The maximum income allowed has immediately increased by 25%.

 

  • As well as the above the definition of ‘trivial benefits’ has been dramatically changed.  With immediate effect many more retirees with small funds can access their entire funds immediately.

On the wider economy, business rate discounts and enhanced capital allowances in enterprise zones were extended for a further three years. The Annual Investment Allowance was extended to the end of 2015 and doubled to £500,000. As a result, 99.8% of companies are expected to pay no tax on money used for capital investment. Export finance was doubled to £3bn and interest rates on this lending were slashed by one-third.

The combination of the above should ultimately reinforce equity markets as they see the UK economy move forward.  This will have an encouraging effect on all savers and investments.

Although we will provide more details on each area over the coming weeks we would urge any and all clients who have any queries or concerns to get in touch with the team at Platinum.

 

For parents whose employer offers Employer-Supported Childcare

The Government is introducing Tax-Free Childcare, to help parents go out to work if they want to so they can provide greater security for their family. This will be available to all eligible employees from autumn 2015. However, it is important to note that you will not lose your ESC entitlement. You will be able to choose whether you continue receiving Employer-Supported Childcare or move to Tax-Free Childcare, although a household cannot be in receipt of support through both schemes at the same time.

The Government will provide clear advice and guidance to allow you to decide which support best suits your individual circumstances.

You can carry on in the current scheme for as long as your employer continues to offer the scheme. If you move employers after autumn 2015 you will no longer be entitled for Employer-Supported Childcare – although you will be able to join the new scheme if you meet the eligibility requirements.

Workplace nurseries will not be affected by the introduction of Tax-Free Childcare.

For parents whose employer does not offer Employer-Supported Childcare

The Government is introducing Tax-Free childcare, to help parents go out to work if they want to so they can provide greater security for their family. This will be available to all eligible employees from autumn 2015. You can register for the scheme direct with Government, open a childcare account, and receive 20 per cent support towards qualifying childcare costs, up to a limit of £2,000 Government support per child per year.

Tax-Free Childcare will be introduced in autumn 2015. The scheme will be rolled out to parents with children under 12 within the first year of the scheme’s introduction. The Government will set out further details of the scheme’s rollout in due course, in good time for you to factor in to your childcare plans. Further advice is available at GOV.UK

Stay Tax Efficient

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As life expectancy in the UK continues to increase, financial planning is becoming even more important. When thinking how best to save for your retirement, you might consider a pension to be the most effective way to ensure you have enough to live on comfortably when you are older. However, a pension is not the only way to achieve your retirement goals and Individual Savings Accounts (ISAs) may provide a particularly useful solution.

Pensions and ISAs are taxed differently. Your pension payments will qualify for tax rebates up front at your highest rate of income tax (subject to certain limits) after which, once you have taken out your tax-free lump sum, the income you receive will be taxable. ISA contributions are made out of taxed income, however, although any withdrawals are tax-free. Also, it is important to remember your pension income counts towards your personal tax-free allowance while your ISA withdrawals do not.

As such, the choice between pensions or ISAs could seem to boil down to the relatively straightforward question of rates, although the reality can be less clear-cut. The tax rebates on pension contributions are important because they add value up front yet an ISA offers much more flexibility. Ultimately, however, it is not necessarily a question of whether an ISA or pension is better but of how to structure a portfolio using both.

As Platinum clients know, we consider a diversified approach essential and encourage everyone to consider all options to maximise their returns.  If you want to discuss any area of your savings further then please get in touch.

The benefits of regular saving

pca

In the complex world of investment, timing is crucial. But without the benefit of hindsight, no-one can predict what the market will do – or when. This presents a problem for investors – not just when to invest, but also when to eventually pull their money out of the market.

This is where the benefits of ‘pound cost averaging’ – regular saving – comes into play. Pound cost averaging works on the basis that putting smaller amounts of money into a fund or other investment reduces the overall risk of investing at the wrong time. Compared with sinking one large sum in a single transaction, the risk is mitigated by the fact your smaller, regular sums will buy in over a period of time at a variety of prices.

Of course, in a rising market, regular savings will underperform the growth of a single lump sum because the later investments will miss out on the increase of the early days. However, in an up-and-down or falling market, the opposite is true. Later investments will buy in at lower or alternating prices – some lower than the original price – and will therefore gain a little more when the market finally does rise.

Similarly, regular saving is a great way to build up a lump sum from nothing. A lump sum of £5,000 is a tall order for plenty of people. However, putting aside £100 a month from your income might easier – and the addition of investment growth or interest means you could quickly build up a reasonable amount without necessarily noticing. The longer you can leave that growing amount alone, the more impressive it becomes.

Most investment products offer regular savings as an option, including investment funds, Individual Savings Accounts (ISAs), life assurance and pension plans. If you are considering equities for the first time, this is also an ideal way to start – if prices fall, your regular sum will buy a greater number of units in your chosen fund, which will then generate higher proportionate gains when prices start to rise again. Moreover, the small amount you invest every month should have a minimal impact on your cashflow and your lifestyle, and will also reduce your sensitivity to the short-term ups and downs of markets.

Speak to us at Platinum if you’re thinking of starting to save.

Noticed Anything Different?

change

A change is as good as a rest they say, but the credit crunch and a volatile money market illustrates just how quickly our economic environment can change. Your personal circumstances can alter quickly too – moving house, changing jobs or having children. Sometimes, things just don’t happen quite the way you planned.

Planning for change

Any significant changes in life should always prompt you to reconsider your investments. A well planned portfolio will toil away on your behalf for years, working towards your objectives and riding out most of what the market can throw at it.

However, when your circumstances change, your needs and objectives can transform too – and your portfolio may no longer be able to keep up. Such adjustments can mean you modify your attitude to risks or need to reconsider the use of certain asset classes.

Even if your core investments might remain the same, there could be some higher risk holdings which need to be assessed. Or it could simply be time to take the profits and move on to better opportunities.

Helping you meet your needs 

A review of your portfolio will not take much time but could more than pay for itself in money saved – or put to better use.  

We are happy here at Platinum to help our clients minimise the time taken to review matters but maximise their opportunities.

If you would like to take advantage of an impromptu review, then please get in touch….

Stocks & Shares Investments

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The entire Individual Savings Account (ISA) allowance of £11,520 can be invested into a Stocks & Shares ISA during the 2013/14 tax year. Investors can choose from a vast and ever-increasing array of options, ranging across global equity to bond markets.

If you are an investor who knows what they want then Platforms offer the most flexible approach, allowing you to self-select your own shares or funds.  Platforms cover a range of asset classes and markets, so you can create your own portfolio or use your ISA allowance to target one specific investment.

However, choosing your own shares can be risky and unless it forms part of a wider share portfolio, this approach can concentrate your investment around the fortunes of just a few companies. Many investors therefore choose to put their ISA allowance into something more diversified, such as collective schemes or a range of investment funds, which reduces risk by accessing a wide selection of shares.

There are many funds from which to choose – some prioritise income, while others focus on capital growth. Over the long term, funds with relatively high equity content have tended to offer better returns than equivalent investments in cash, bonds or commercial property. However, the value of equities can go down as well as up and they can be volatile. Funds are grouped into categories to give you an indication of their aims – for example, the ‘Mixed Investment 20-60% shares’ category will have no more than 60% in shares, while more aggressive funds can be found in, for example, the UK All Companies, UK Smaller Companies or Global Emerging Markets sectors.

If you want your ISA to generate an income stream, you might wish to consider funds that deliver regular dividend or rental income, or interest payments. The three principal income-generating asset classes are equity income, commercial property and bonds, and there are a number of funds that combine these asset classes together, thereby generating income from a diversified portfolio.

Ultimately, your ISA choices should not only reflect your aims and goals, but also sit comfortably within your wider portfolio. If you want to make sure you have covered all the options available, you should seek professional advice. Please also remember past performance is not a reliable indicator of future results.

Platinum continue to help our clients create balanced portfolios of investments suited to their individual attitudes to risk.  If you would like to know more please get in touch…