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Essentially Wealth Winter 2019

13th February 2019

FIVE TOPICS YOU SHOULD THINK ABOUT IN 2019

As we embark on a new year, although it’s likely to be overshadowed by uncertainty surrounding Brexit, it’s important to keep your personal financial goals in mind and ensure you continue to plan for the future.

Revisit your investment goals

It makes sense to take stock of your investment goals. Over time your priorities can change and your appetite for risk may alter too. Arranging a review will help ensure that your portfolio remains well diversified and provides a good opportunity to see if any of your holdings need rebalancing.

Plan for the future

If you made your Will a while ago, does it still reflect your wishes? You might want to review its contents to ensure that everyone you want to benefit is included.

If you have concerns about what might happen if you can no longer manage your finances, you should consider putting a Lasting Power of Attorney (LPA) in place whilst you have the mental capacity to do so. Many people wrongly believe that their family could simply step in and take charge. However, they wouldn’t have the legal authority to do so, and would need to apply to the Court of Protection. An LPA gives you the opportunity to appoint in advance someone whom you trust to manage your financial affairs and / or your health and welfare on your behalf.

Think about your IHT position

Each year, more families find themselves drawn into the Inheritance Tax net. There are a number of ways that you can legitimately dispose of your estate to reduce the tax payable. Taking professional advice will help you assess your liability and put appropriate plans in place.

Don’t fall for scams

The sad fact is that scams are becoming more sophisticated every day. Many involve bogus or unauthorised investments or promise to liberate your pension savings before age 55 and are backed up by glossy brochures and authentic-looking websites. As has often been said, if it looks too good to be true, then it probably is. Many scams start with a telephone call, so be very careful and don’t give out financial or personal information to people you don’t know.

Get good advice

Before making any major financial decisions, it pays to talk to us; we are experienced and qualified to provide you with a range of solutions tailored to your individual circumstances.

IT MAKES SENSE TO TAKE STOCK OF YOUR INVESTMENT GOALS. OVER TIME YOUR PRIORITIES CAN CHANGE AND YOUR APPETITE FOR RISK MAY ALTER TOO



HOW BEING ABSENT-MINDED IS COSTING YOU MONEY

We can all be forgetful on occasions, we’re only human after all. However, when it comes to our finances, losing track of what we have can be a costly mistake to make. It’s been estimated that a staggering figure of £15bn is tied up in old bank accounts, pensions, life assurance and investments1.


Bank Accounts

Tracing old bank accounts can be done by searching a website called My Lost Account. This site is maintained by UK Finance, the Building Societies Association and National Savings & Investments (which covers Premium Bonds too).

Pensions

People change jobs more frequently nowadays, meaning that they can often have small pension pots with past employers that they fail to keep track of. Incredibly, there are around 1.6m2 pensions that have been forgotten about by UK workers. If you’ve lost track of a pension from a previous employment, then the Pension Tracing Service will help you find an up-to-date contact for the scheme.


Child Trust Funds

These were available for babies born between September 2002 and January 2011. Parents received a government voucher for £250 to invest (up to £500 for lower income families) and could add further funds within limits. Figures from HMRC estimate that around 700,000 Child Trust Fund accounts are dormant. HMRC has a dedicated page for those looking to track down these accounts.

Other assets

For help in tracking down lost investments in unit trusts, the Investment Association can provide help. Experian run an Unclaimed Assets Register which allows you to search the 4.5m records it holds from 75 different providers covering insurance policies, pensions or shareholdings.

1MSE, Nov 2018
2Research carried out by Pensions Policy Institute on behalf of ABI, Oct 2018


PEOPLE CHANGE JOBS MORE FREQUENTLY NOWADAYS, MEANING THAT THEY CAN OFTEN HAVE SMALL PENSION POTS WITH PAST EMPLOYERS THAT THEY FAIL TO KEEP TRACK OF



ARE YOU DUE A RETIREMENT REALITY CHECK?

Recent research3 shows that some people could be sleepwalking their way towards a financially-bleak retirement. A survey conducted by Aegon4 found that less than a fifth of adults aged 55-64 have more than £300,000 in their pensions – the approximate amount widely considered to be necessary for someone on an average salary to maintain their current lifestyle.


In addition, a survey by Prudential5 shows that the average target retirement date for UK workers is before their 62nd birthday. However, more than one in 10 workers have yet to start a pension and won’t do so, on average, until they are 46 years old. Worryingly, amongst those not yet saving, one in 10 are in the 51 to 65 age-bracket.


Looking at the figures

In order to put an effective retirement plan in place, it helps to have some idea about the amount of money you’ll need to fund the lifestyle you want to enjoy in your later years. Drawing up a budget that covers what you anticipate your likely spend will be and setting that against the income you can expect to receive from your pension(s), savings and investments is a good place to begin.

You should think not just about the income you’re likely to need during the first few years of your retirement, but also plan for a time when you might need to pay for help around the house and for the likelihood of needing medical and nursing care in your later years.

The steps we all need to take

It seems that many people put off finding out how much they have saved and what that will equate to as an income in retirement because they fear the worst. However, there are some simple practical steps that can really help:

  • Make pension saving a priority. Consider topping up your contributions whenever your financial circumstances allow. Remember, within limits, they attract valuable tax relief.
  • Know your state pension age and get a forecast of how much you’ll receive.

However, carrying out a reality check and scheduling a review is the best way to overcome worries.

The pensions dashboard

At the end of last year, the government announced its plans to give millions of people online access to their pension facts and figures, giving them information about their pension savings, including their state pension. The roll-out is due to start sometime in 2019.

3Aviva, Sep 2018
4Aegon, June 2018
5Prudential, 2016

IN THIS ISSUE

HOME INSURANCE
A CLOSER LOOK AT ADD-ONS

Home insurance acts like a financial shock-absorber and protects thousands of families each year from unexpected and unwelcome loss, damage and expense. Whilst standard policies can cover buildings and all the things kept in a home such as TVs, furniture, carpets and personal belongings, your adviser can also help you choose additional cover for specific risks and tailor the policy to meet your needs.

Accidental damage

As the name suggests, this provides cover for unintentional one-off accidents that harm your possessions. So, if paint gets spilt on your carpet, or you drop your laptop and smash it, then you’d be able to make a claim.

Personal possessions away from home

This cover protects portable items such as cameras, laptops or jewellery away from home, up to a specified limit. It can provide useful protection if, for example, your children take their phones or iPads to school, or you lose your watch on the way to work.

Home emergency cover

This covers misfortunes like burst pipes, boiler breakdown, blocked drains or electrical failure. It can provide access to a 24-hour helpline, and also pay towards the cost of accommodation if it’s not safe for you to stay in your home after an emergency.

Legal expenses

This type of insurance typically covers legal proceedings relating to your home, employment, death or personal injury, as well as any award of the other party’s legal costs.

Jewellery, antiques and musical instruments

Many people wrongly assume that these will all be automatically covered on a standard home contents policy. Some insurers restrict the cover for high-value items, so it pays to ask us to help you put the right cover in place.

Remember, while price is important, it can be a false economy if you don’t get the right level of cover you need. Your adviser can help…

DON’T FORGET TO USE YOUR TAX ALLOWANCES

Using up any allowances you are entitled to is the first step to reducing the amount of tax you are liable to pay. With the tax year-end approaching now is the time to act – don’t risk losing out.

Savings

You can save up to £20,000 tax-free in an ISA this tax year. If you’re saving for a child, the tax-free allowance for 2018-19 is £4,260 (increasing to £4,368 in the 2019-20 tax year).

Pensions

Most people will be able to pay up to £40,000 into their pension this tax year. Pension contributions within that Annual Allowance normally receive Income Tax relief; this means that it only costs basic rate tax payers £80 to save £100 (20% tax relief) while higher rate tax payers only need to pay in £60 to save £100 (40% tax relief). The Lifetime Allowance was increased by £30,000 for the 2018-19 tax year and now stands at £1,030,000 (rising to £1,055,000 for 2019-20).

Gifts

Don’t forget that for Inheritance Tax purposes there’s a tax-exempt allowance of £3,000 per donor per tax year for gifts.

Capital Gains

For individuals, the annual Capital Gains Tax (CGT) allowance is £11,700; taking regular gains can make sense as a part of a tax reduction strategy. The CGT allowance increases to £12,000 for 2019-20.

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK.
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