Planning For The Best Years Of Your Life

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Research shows that an average £15,000 a year is needed to fund holidays, motoring and hobbies in retirement.  How close will you be to achieving this ‘magic figure’?

Holidays and weekends away… clubs and classes… days out and trips in the car… it all adds up. How much would it cost you to fund the kind of retirement you’re hoping for?

A study of people over age 40 found that two thirds have some idea how they would like to spend their retirement years – and an annual income of around £15,000 is needed to support the lifestyle they’d like. For a couple, this means nearer £30,000 a year is required.

We’re not talking about expecting to live the high life. Researchers found that the average Brit intends to go on three holidays a year – one of them abroad – run a car and enjoy some activities and hobbies in their new-found spare time.

Great expectations?

The study looked at what you might expect from a typical year during their retirement and how much this could add up to:

  • One holiday abroad – £950
  • Two breaks in the UK – £634
  • A further three mini-breaks – £532
  • Hobbies such as attending classes, playing golf or joining a gym –  £2,114
  • Visiting family and treating children and grandchildren – £1,156
  • Running a car – £2,044
  • Healthcare and insurance – £308
  • Household bills, food and essentials – £6,447


Your state pension is unlikely to cover everything you want to do during your retirement, so it’s important to have a financial plan in place to provide these additional funds.  

Are you on target for the kind of retirement you want?

We can help you gain an idea of the estimated future value of your personal pension plans – and also help work out how much more you might accumulate by changing the amount you save each month.

It is essential to try and focus your thoughts – you do not need an accurate picture of your income during retirement, but it is important to have a rough idea of whether your expectations are realistic.

Don’t Waste It On The Tax Man

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Recent research carried out by Prudential shows as much as £530 million is set to be wasted in inheritance tax (IHT) this year by people not placing life protection policies ‘under trust’ – an increase of £58 million on last year.

Not putting the policy ‘under trust’ could reduce a £100,000 life insurance pay out by as much as £40,000 if an estate is worth more than £325,000 (the IHT threshold) leaving a loved one at risk of a sizeable tax bill.

With rising house prices and an improved economy set to leave more and more taxpayers exceeding the threshold, now is an ideal time to consider good IHT planning, gifting to loved ones and getting advice.

It is often said that inheritance tax is a voluntary tax due to the number of different ways it can be avoided. However, Government statistics show that the amount of tax paid and number of families affected has been increasing over the last few years.

There are several possible approaches and a wide range of solutions available to help people maximise the amount of wealth they pass on to their loved ones, varying in complexity so professional advice is always worth seeking.

If you want to look at the potential implications for you then please do not hesitate to get in touch with Platinum.

Pension reforms take a step closer

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In this year’s Budget the Chancellor announced major changes to pensions and potential access to your entire pension fund from age 55.  Last week the Treasury announced more details on how the various changes will work from next April.

Putting the Guidance Guarantee into action

The initial statement regarding free advice for all retirees has been amended to free guidance.  This same guidance will no longer be provided by financial advisers but will be provided through existing organisations such as the Money Advice Service (MAS).

As part of this guidance, customers will be given key facts about their options and consequences of any actions.  It won’t however replace the personal advice you could receive by consulting an independent financial adviser (IFA).

In line with this, any person wishing to transfer monies from a defined benefit pension will have to demonstrate they have received independent advice –  and in all practicality they will have to use the services of an IFA.

Accessing more than 25% of your pension fund as a cash lump sum

The Treasury has also announced the results of their consultation on ‘Freedom and Choice’ which discussed how the changes announced in the Budget would be put into action. Of particular interest rules around accessing to pension funds which are designed to give ‘Freedom and Choice’, but also protect the Treasury from abuse around tax relief.

You can, of course, save as much as you like towards your pension each year but there’s a limit on the amount that will effectively get tax relief. This is called the annual allowance, currently standing at £40,000. It has now been made clear that:

  • If someone over 55 chooses to take more than the 25% of their pension fund which they’re normally allowed to take tax free, their annual allowance will be reduced to £10,000 unless their pension funds are below a specific level. This is to mitigate the possibility of tax avoidance.
  • If you’ve already taken flexible drawdown you aren’t currently allowed tax relief on any contributions you pay into your pension. But from April 2015, you’ll effectively receive tax relief up to an annual allowance of £10,000 a year.
  • If you’re already taking income using capped drawdown you’ll still effectively receive tax relief on contributions into your pension of up to £40,000 a year, provided you don’t take more income than you’re allowed to do under the current regulations. Exactly how this will work has yet to be confirmed. Capped drawdown won’t be available for anyone taking their pension for the first time after 5 April 2015, and anyone who draws more than their tax free lump sum will be subject to the reduced annual allowance of £10,000.


What will it mean for you?

There’s plenty to think about – and there’s no doubt that the changes to pensions will have very far-reaching effects, offering a much greater degree of freedom in the way people can choose to take their pensions.

It will also be key to see which companies and plans are willing or capable of embracing the new rules, although there will be some form of change in statutory law allowing providers to comply with the rules if they choose to do so.

At Platinum we continue to consider all your options and help our clients take advantage of the new rules.  If you have any questions or concerns please do not hesitate to contact us.

Market Update – A Summer Of Sun?

Sunshine or Cloudy

As we approach the summer holiday season, it is worth reflecting on the past few months to see if the future is overcast or full of sunshine.

Throughout the past quarter financial and economic news has been has been dominated by Interest Rates.

In a clear demonstration of how different the UK economy is compared to our European colleagues, we saw the relevant heads of banking giving totally different announcements.

The European Central Bank cut interest rates to a record 0.15% for savers.  At the same time the rate of interest paid to national banks holding monies on deposit was cut to less than zero; essentially charging the European banks for leaving their monies on deposit and not helping the economy.  Both measures could be considered a desperate attempt to kick start the Eurozone economy.

In contrast Mark Carney, as head of the Bank of England, gave his first indications that he envisages interest rates rising as the UK economy continues to move forward and reinforce its recovery.

What does this mean for investors?

The majority of our clients are UK based and have a large holding of equities as well as large amount of other Sterling denominated assets.  The recent news is positive for these clients.

The UK and it’s sterling currency has re-asserted itself as a secure home for investors, which means companies can plan ahead.  Accordingly the relevant stock markets have enjoyed a period of stability and low volatility whilst values continue to climb steadily.

Combining this news with the recent legislative changes announced in the budget certainly gives us an optimistic Sunny outlook.

We are continuing to catch up with clients and help them take advantage of the new rules and outlook.

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

We are here to help.

Congratulations! Another Step Forward…

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We are pleased to announce Duncan has passed with flying colours, the latest in a series of qualifications focused on estate planning.

The Society of Trust and Estate Practitioners (STEP) is the worldwide recognised professional body of those advising families on long term wealth planning. Members are required to pass a series of exams and commit to a number of professional standards.

As an accredited member of STEP, Duncan’s qualifications further endorse his work and professional focus with clients over a number of years.

Our clients are always our primary focus however endorsement from professional bodies is always welcome news. As a member of STEP Duncan is looking forward to working with more clients with their financial planning requirements.

NISAs – Convenient ISAs!

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Not to be confused with the local chain of convenience stores, Individual Savings Accounts (ISAs) enter a new phase from 1 July 2014.

At present, ISA contributions for this tax year are capped at £11,880. The entire amount can be invested in a stocks & shares ISA, or up to £5,940 can be saved into a Cash ISA. However, from 1 July 2014, the ‘New ISA’ (NISA) limit will increase to £15,000 and you can invest as much as you like of this allowance in cash, stocks & shares or a combination of the two. Investors will also be able to transfer ISA savings from previous years freely between stocks & shares and cash.

Moreover, from 1 July, any interest on cash held within a stocks & shares NISA will be free of tax. This means that from this date you could have just one NISA, rather than separate NISAs for cash and stocks & shares. This simplicity might be attractive to some investors, although you should not assume you will receive the best rate of interest on the cash element and it might be worth having a separate cash NISA if you want a competitive rate. You can also transfer your NISAs freely between providers – subject to any penalties that might be applied by your existing provider – but you can only have one cash NISA and one stocks & shares NISA in any single tax year.

Any ISA subscription made between 6 April and 30 June 2014 will be counted against the £15,000 NISA subscription and you will not be allowed to open up a new NISA for the current tax year from 1 July. Instead, you will have to top up the existing account. Do check with your provider’s terms and conditions – particularly if you have already opened a fixed-rate cash ISA.

The range of investments that can be held within a NISA is also expanding – for example, investors will be able to hold corporate bonds with less than five years left to maturity. This expansion is likely to lead to an increase in new products and investment funds that, in turn, will provide greater choice for savers and the potentially higher returns for less risk or volatility.

Is My Pension Big Enough?

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Recent Budget changes and Workplace Pensions focus people’s minds on retirement planning – and one of the most common questions asked is “how much pension do I need and how much should I be saving?”

There’s lots of research on this topic and one of the most recent studies is by the National Employment Savings Trust (NEST).

Their report suggested that for most, a comfortable pension income is between £15,000 and £20,000 a year, per person.

Although the upcoming state pension changes will cover some of this income requirement, individuals will need to cover the remaining shortfall and this will require a sizeable pot of savings.

To give you some idea, a person in their mid 60’s who needs a top up income of £10,000 at today’s interest rates would require a pension fund between £200,000 to £300,000, dependent upon how much protection you wanted against the savage effects of inflation.

This then leads to the question of how much to save?

Unfortunately there is no simple answer because it is impossible to predict the future. We cannot say how much a person is likely to earn for the next several years.

Some pundits would say you need to contribute a proportion of your earnings equivalent to half your age at the time you start seriously saving. For example, a 40 year old just starting savings into pensions would need to put aside 20% of their income whereas a 20 year old would probably aim to save 10% of their income.

At Platinum, we take a more calculated approach that takes into account your personal circumstances as this allows us to give an ideal monthly contribution to hit your target.

There are some interesting statistics that have come out of the NEST research as they attempt to encourage greater savings. With figures based upon a 30 year old, working to state retirement age (68);

  • Cutting out one takeaway coffee per week could allow you to save a pot of £11,800

  • Switching mobile phone tariff can enable savings of £16,100 over the same period

  • For smokers, cutting out just one packet of cigarettes per week would enable savings of £31,400

  • Cut out a takeaway each week and you could save £50,900

  • Taking a packed lunch to work could save you a huge £63,700

One thing is certain – everyone needs to take control of their savings and retirement planning, so contact us if you want to find out more about how you can be on track. Because achieving a comfortable retirement is not a luxury.

Mortgage Enquiries Continue to Build

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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

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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!

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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.