Category Archives: Financial Advice

Financial Advice category

How safe are your savings?

With your capital tucked away in savings accounts, investments and mortgages, you’d assume that there is some kind of protection in place. But exactly how safe are your savings in the event of, for example, an authorised financial services firm going bust? That’s exactly what happened during the 2008 banking crisis, and UK taxpayers had to shell out £4.5bn to the people who had saved their money with Icelandic bank, Icesave.

You’ll be happy to hear that there is a safeguard in place for such an occurrence that can make such drastic means unnecessary, depending on which banks are affected. The Financial Services Compensation Scheme (FSCS) was established to provide you with a level of protection. Up to £85,000 worth of cash savings covered per individual, per financial institution, to be exact. Continue reading

The ‘ISA Cappuccino Plan’: Why it pays to start early

Picking up a cup of joe from your favourite coffee shop can be a great way to start the day, but if you’re spending £2.50 a day, five days a week, that soon adds up. You might say that £50 a month is a small price to pay for kicking off the morning with caffeine, but if you were to put that £50 into a stocks and shares ISA, you could see some real results.

In only five years, you could be looking at a pot worth £3,307.61, after 10 years £7,303.68 and with 15 years under your belt, that’s £12,131.51 – just think how much coffee you could buy with all that interest!

Researchers at Fidelity are putting this information out to encourage people to start what they’re calling an ‘ISA cappuccino plan’; a simple saving plan to help you properly invest in your future. It’s not just about trading your flat whites for a home-brew cafetiere though, as Emma-Lou Montgomery, Associate Director for Personal Investing at Fidelity International, explains; “We all are guilty of frittering away money without realising we’re doing it, whether it is on coffees or even Uber journeys. It’s important to stop and think about what you are spending your money on, identifying where you could make small changes to save some cash.”

It’s just not realistic to expect everyone to have a lump sum with which to start up their ISA portfolio, but by depositing cash little and often, it doesn’t take long to build up an ISA pot that can bring you some considerable interest. Emma-Lou Montgomery continues, “A monthly saving plan where you drip-feed money into your investments regularly is a great way to get the ball rolling. This approach will also mean that you benefit from a process known as pound-cost averaging; where you automatically buy more units in your investments when prices are low. The benefit is that you will be cushioning your ISA portfolio against dips in the stock market by buying a variety of prices and spreading your ongoing investments over a period of time.”

It’s starting to sound like a no-brainer, so why not think about where you might be frittering away any disposable cash. You might not be a coffee drinker, but if you’re buying your lunch every day, you could save £100 a month by preparing it at home, and we don’t need to tell you how much money can be saved and invested by cutting down or cutting out a smoking habit. The earlier you get started, the better your results will be!

Inheritance Tax – Could there be a better alternative?

Inheritance tax is enormously unpopular to say the least. A YouGov poll found that 59% of the public deemed it unfair, making it the least popular of Britain’s 11 major taxes. What’s more, the tax has a limited revenue raising ability, with the ‘well advised’ often using gifts, trusts, business property relief and agricultural relief to avoid paying so much.

 

As it stands, the tax affects just 4% of British estates and contributes only 77p of every £100 of total taxation. This puts the tax in the awkward position of being both highly unpopular and raising very little revenue. At the moment, the inheritance tax threshold stands at £325,000 per person. If you own your own home and are leaving it to a direct descendant in your will, this lifts the threshold by an additional £125,000 in the 2018-19 tax year (the nil-rate band), to £450,000. Anything above this is subject to a 40% tax.

Continue reading

November Market Commentary

October was, to put it mildly, an eventful month. It was a month which saw the majority of markets on which we report down steeply, as fears of higher interest rates in the US combined with worries about the US/China trade war. There was, however, one market that went up sharply: Brazil elected a new president – a man who, I suspect, will feature prominently in future commentaries.

In the UK, the Prime Minister survived the latest round of calls for her head, and the Chancellor delivered his Budget a month earlier than everyone had expected. Continue reading

What do ESG and impact investing mean for investors?

Sustainable investing has grown rapidly over the last couple of decades. Investors are increasingly committed to the social and environmental impact of where they put their hard- earned money. Getting good financial returns and having a positive impact on the world are not mutually exclusive. Impact investing and ESG investments allow investors to ‘kill two birds with one stone’, as they say

American financial association SIFMA estimates the market size of sustainable investments to be $8.72 trillion. That figure was calculated in 2016, so it’s likely to be substantially larger than this now. Continue reading

The longevity challenge and how to tackle it

In the UK, we are faced with the challenge of an ageing population. Many of us will live longer than we might have expected. Already, 2.4% of the population is aged over 85. Because of improvements in healthcare and nutrition, this figure only looks set to rise.

The Office of National Statistics currently estimates that 10.1% of men and 14.8% of women born in 1981 will live to 100. A demographic shift to an older population brings unprecedented change to the way the country would operate, from the healthcare system to the world of work.

In addition, a long life and subsequently a long retirement, bring challenges of their own from a personal financial planning perspective.

Continue reading

Could your business be claiming more tax relief?

Whatever your business, you might be eligible to claim more tax incentives than you currently do. Sometimes tax incentives are available on things you might consider to be mundane in your business, so it would be wrong to assume that your business won’t qualify.

Here is a list of the most common incentives you could be missing out on:

Research and Development

You might think this would only apply to companies with multi-million pound research operations, but this is often not the case. As long as your business researches or develops new processes, products or services in science or technology, you might be eligible.

SMEs with less than 500 staff and a turnover of under €100m or a balance sheet total under €86m can be eligible for R&D tax relief. If you qualify, you can deduct an extra 130% of your qualifying costs from your yearly profit, as well as the normal 100% deduction, to make an overall 230% deduction. As well as this, you can claim a tax credit if your company is loss making. This is worth up to 14.5% of surrenderable loss.

Annual Investment Allowance

You can get tax relief on the plant and machinery you purchase in the year before you purchase them. If you’re eligible, relief will be on 100% of the cost. You can also claim on the demolition cost and alterations to plant and machinery. It’s important to note that this tax relief doesn’t apply to repairs.

In his recent Budget, Philip Hammond announced the annual investment allowance has increased from £200,000 to £1 million. This comes into effect on January 1 2019 and is aimed at preventing investments in British businesses stagnating because of Brexit.

Tax relief on green equipment

In order to encourage businesses to be greener, the government’s Energy Technology List (ETL) and Enhanced Capital Allowances (ECA) offer relief on high-performance energy efficient equipment. Products on the ETL deliver a high standard of efficiency, defined as performing within the top 25% of all similar equipment available in the UK market. ECA lets you claim 100% capital allowance on products on the ETL.

Employment Allowance

Employers can get up to £3,000 a year off their National Insurance bill. The allowance will reduce your (secondary) Class 1 National Insurance payments each time you run your payroll until the £3,000 has gone or April, when the tax year ends (whichever is sooner).

Speaking to a qualified accountant will give you your best bet of finding what relief applies to you. Often the processes for claiming aren’t very transparent, so getting some expert help is recommended.

10 years on from Lehmans and what has the financial services sector learnt?

The financial crash after the Lehman Brothers collapse saw the biggest global monetary crisis since the end of WW2. It led to a lost economic decade for many – average incomes in the UK still languish far behind their 2008 peak.

15 September 2008, the fall of Lehman sent shockwaves around the world. It was (and still is) the largest bankruptcy of all time. The colossal investment bank fell with $639 billion in assets and $619 billion in debt.

Founded in Montgomery, Alabama by German immigrants in 1850, the firm grew towards the end of the 19th century as America became an economic powerhouse. For an investment bank that survived the railroad bankruptcies of the 1800s, the Great Depression of the 1930s and two World Wars, it was a reckless rush into the doomed subprime mortgage market that proved a fatal error. Continue reading

What do you need to consider regarding a defined benefits pension transfer?

Pensions freedoms introduced three years ago mean that people are able to do what they like with their retirement savings. If you are on a defined benefit (DB) pension scheme you may be offered the opportunity to transfer out of your pension scheme in return for a fixed sum.

DB schemes promise savers a certain level of income after retirement, such as a final salary. Transferring out means that you will usually be offered between 25 to 30 times your annual pension value as a lump sum. However, it could be as much as 40 times. For instance, someone on a £10,000-per-year pension could be offered between £250,000 and £400,000. Continue reading

Aretha Franklin: The ‘Queen of Soul’ who died without making a will

On 16 August, Aretha Franklin passed away, aged 76, in hospice care after battling pancreatic cancer. She didn’t leave a will. This leaves her four sons and other family members to work out her total assets and divide them amongst themselves.

After the mourning process, the practical concerns around a death take hold. When someone dies without a will, these are much more complicated to resolve. And when the person concerned is a celebrity, these complications have an unfortunate tendency to play out on the public stage. Continue reading