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Steve's Meon Valley News Column

Steven Blofield of SBA Financial Ltd is now working with us on our new financial section, addressing topical financial issues and providing an opportunity for you, our readers to ask questions and get a response. Steven is a truly independent financial advisor and his company, SBA Financial Ltd is Authorised and Regulated by the FSA (Financial Services Authority).

Important Note: Whilst Steven can provide generic information in his replies he stresses that no one should act on such general information before they have sought professional independent advice from their own advisor about their own personal situation.

The information contained within, including references to taxation, legislation, regulation, or any other issues or concerns may no longer apply.

 

October 2008 - Retirement planning

Question: I am 45 and have some pension savings and I pay £110 per month into my pension plan but I am worried that it will not be enough and need to know how to find out how much I should be saving?  I also have a small amount of ISA’s but my employer does not have a pension scheme, what would you advise?

J West

Answer: The best way to find out if you will have enough is to discuss your future needs with your IFA but make sure that you don’t just look at the pension fund you really need to discuss all of your assets and just as importantly all of your hopes and desires for your retirement years, I often find that this level of detail is not covered when I first meet clients.  If you have not set out a clear vision of what lifestyle you want when you retire then how can you possibly plan for it with any accuracy?  The fact is that with people living longer and longer there is a real problem with many people having nowhere near enough in savings for their retirement years.  Having done this and armed with the knowledge of what level of money and assets you will need, the next thing you need to do is decide what will be the best way for you to save for your retirement years.  I am not a great fan of personal pension’s in-fact more often than not I advise clients not to pay into a personal pension arrangement because in most cases they are not as tax efficient as they are made to look and they are nowhere near as flexible as other alternative savings methods.  I am of course a great fan of planning for a successful future but like most things in life there is normally more than one way of achieving your goals and it is important that your chosen route is the one that best meets your needs and priorities. Of course if you have access to a company pension scheme or your employer will fund a personal pension for you then it would be foolish not to take advantage of this.  If you need further help and guidance you can contact IFA Promotions who can help you find a IFA in your area by calling them on 0800 085 3250 or log onto  www.unbiased.co.uk or if you wish please feel free to contact us at SBA Financial Ltd and we will be happy to help you.

Regards
Steven

September 2008 - How To Tackle The Credit Crunch in 7 Steps!

Over the last few months I have had many questions about how best people can help themselves during these troubled times we currently face.  So for this edition rather than focus on just one question I hope some general advice and tips will be of better use for more readers, so with all the negativity that is around what should you do about it? And how can you help yourself?

Step 1:  Firstly if you have money invested DO NOT take it out without professional advice first, any gain or loss is only a paper one in theory until you actually encash, once you do then and only then do you make a real gain or loss.

Step 2:  If you have no debts and you have cash in a bank or deposit account you need to make sure that you are getting a decent rate of return, so have this checked out either by a professional or if you feel happy doing this for yourself then anyone of the following websites are quite good in giving basic information (but please remember they do not replace Independent Professional Advice) this you can only get from your own IFA or other suitably qualified IFA.

Step 3:  If you have debts and some savings consider using your savings to pay off your debts, it is highly unlikely that you will get a better return on money held on deposit than you will on your debts, so you will be better off in most cases paying off the debt and then using the freed up regular income saved from servicing your debts to build a capital sum back up.

Step 4:  Use as much tax efficiency as possible, such as ISA’s but remember if the savings are for the short term then use cash ISA’s if they are for the medium to long term then consider equity ISA’s but this is true investment and therefore should in my opinion should only be done for you by a professional.

Step 5:  If you have debts but no savings then look at how you can pay off these as quickly as possible. Overpay as much as you can on the smallest debt it will amaze you how quickly you can clear the first one and then you can use all of that to pay off the next one and so forth, using this method give you a great boost to keep going and you will see the debts come tumbling down.

Step 6:  Cut out the waste and save even more, now lets be honest we all do it spend money on things that we don’t need for a host of reasons from the classic “it seemed like a good idea at the time”  to the time honoured “I keep meaning to switch”.

So now to get started on making those savings use a spreadsheet if you have access to one as it will calculate everything for you automatically but don’t worry if you don’t because a sheet of paper a pencil and a calculator will do the job just as well.  Now this is what you must do and you must be honest with yourself and you must also be accurate do not guess.

Set yourself up 3 columns, the first is for essentials such as mortgage, utilities, food etc, the second is for important things but could be cut out completely if you had to and the third is for luxuries that could be cut out without any real impact on your life or your financial planning.  Of course everyone will have their own view of which should go into which column but lets be frank having say a full TV package should not be listed as essential in anyone’s book and really should not even figure in the important Colum but the choice is yours.

Now that you have done this you need to put in place every expenditure that you have in the relevant column, if it is not a monthly expense but say yearly then just dived the cost by 12 and use that figure.  Once you have done this you can then start looking at where the waste is and where you can reduce costs for your benefit.  Still look at the essential column because you may well be able to reduce costs there even if they could not be cut out.

If you need further help and guidance you can contact IFA Promotions who can help you find a IFA in your area by calling them on 0800 085 3250 or log onto  www.unbiased.co.uk or if you wish please feel free to contact us at SBA Financial Ltd and we will be happy to help you.
 

Regards
Steven

August 2008 - Saving for grandchildren

Question: For 2 years now my wife and I have been putting some money aside each month into stakeholder pensions for our two small grandchildren to give them a start in life when they grow up.  The returns have never been great and in the last year the funds have dropped quite a bit.  Can you recommend how we can improve the performance?

Mr & Mrs Duffield

Answer: Yes there is a lot that you can do with professional help to improve the potential returns of any investment irrespective of if it is help in a stakeholder, or any other type of investment.  The key things that need to be done are to firstly ensure that the asset allocation is right so that all of your eggs are not in one basket.  Then we need to make sure that you have a diverse number of funds which will again help to reduce the risk.  Finally regular reviews are vital because even if you have the perfect portfolio to start with as markets move and change then it will get out of shape and sop needs to be monitored and changes made when needed.  I would recommend that it is reviewed professionally every quarter.  That said I would urge you to re-consider looking at better ways of saving for your grandchildren’s future than a stakeholder pension.  To be frank there is very little in the way of tax benefits and the little that there is will be far outweighed by the restricting rules surrounding stakeholder pensions and I would normally never recommend these as a good way to save for your grandchildren’s future as there are many problems that can come with them.  I assume that you arranged this for yourself as I would be very surprised indeed if a professional advisor recommended this course of action.  I would suggest that you take professional advise on this matter so that you can be sure that you are using the best method for saving first and then once that is done you should ensure that you apply the key principles of good investment practice to your selected method.  If you are intending on using a professional advisor for this then I would question them on how they construct a portfolio and how they go about making sure that it is regularly reviewed to keep it on track.  If you need further help and guidance you can contact IFA Promotions who can help you find a IFA in your area by calling them on 0800 085 3250 or log onto  www.unbiased.co.uk or if you wish please feel free to contact us at SBA Financial Ltd and we will be happy to help you.
 

Regards
Steven

July 2008 - IHT and investments

Q: We currently have an Estate valued at considerably over the joint allowances available for Inheritance tax and we are concerned about doing whatever we can to protect our Estate so that it can all go to our beneficiaries and none of it goes to the Inland Revenue. In addition to that we also have a sizable amount of funds sat on deposit and would like to ensure that these are wisely invested in order to give us income and growth for the future but without taking too many risks, particularly in light of the sort of loses that have happened to many people during the first half of 2008. What would you advise?


Mr and Mrs Brady

A: There is a great deal that you can do and even though your Estate value is already well over £630,000 which is the current married couples inheritance tax limit, there are numerous methods that can be used to ensure that the minimum and indeed in many cases no inheritance tax at all will be payable on any surplus. However just as importantly for many people is what I call the other social impacts which can also attack your hard earned cash and Estate such as future remarriages and divorces, the possibility of long term care fees and the list goes on. Indeed even if you manage to miss all of those potential problems that life will throw at you and finally achieve an Estate plan which passes on all of the Inheritance in tax to your beneficiaries, they then of course have to navigate the way through the same maze of possible problems in their lifetime. With true advanced estate planning, many and in some cases all of these things can be taken care of, it does however require the services of specialised Estate Planners, such as ourselves.  Of course there are some others around the country but they are very few and far between that can deal with this level of Estate Planning and it would not normally fall within the remit of the average Solicitors practice. As this is such a detailed area, I would recommend a detailed consultation first with an advanced estate planner, in order to establish your full needs and objectives prior to taking any action.

With regards to the second part of your question on the issue of investments, the truth of the matter is that many people are invested in the wrong types of investments and they do not suit their needs or indeed their feelings and attitude towards investment risk and it is crucial that any investment portfolio or strategy put into place is tailored to meet each and every individual Clients needs. All too often I find that people have been advised to either split their investments between one or two different companies and often this also means that they will typically be placed into so called managed funds. This is in my opinion far from a truly professional portfolio investment strategy and again requires the services of a real specialist in this area that will not only construct the right type of portfolio for you but will also ensure that your investment portfolio is regularly reviewed. I have found over the years that many investments are not reviewed for years at a time and indeed in my opinion even once a year is not sufficient. A professional investment advisor should be able to provide a review service on a quarterly basis to really maintain the focus that is needed to reduce the risks and improve the potential growth of any investment portfolio.   If you need further help and guidance you can contact us fro an initial consultation or if you prefer you can contact IFA Promotions who can help you find a IFA in your area by calling them on 0800 085 3250 or log onto  www.unbiased.co.uk
 

Regards
Steven

June 2008 - SASS or SIPP

Question: I have been advised by my current IFA that I should consider transferring my SASS pension into a SIPP pension arrangement and I can not understand why this is being recommended to me I do hold commercial property in my SASS and can do so in a SIPP so I would like a second opinion.

Mr D Simon

Answer: There are in fact many different types of pension plans that can be used as part of a retirement plan but sticking with just the SASS and SIPP types for the moment it is true to say that normally the cost’s involved in running a SASS are higher than those of running a SIPP and yes both types can in fact hold commercial property, but there are other things that you can use a SASS for which would not be possible in a SIPP.  I certainly would not move from one to the other without good reason, there will of course be cost’s involved which could be quite high and so this should not be done without a proven case such as the cost to change will be more than worth it to you in lower charges etc.  I would recommend that you ask your advisor to clearly set out for you what the benefits are to you as well as the possible drawbacks and then if you are satisfied that there is good cause then you should consider a transfer.  If you are still unsure then I would recommend that you have a Pension Transfer Specialist review the case and the proposed transfer for you to give you an independent view on your own circumstances and give you a full and detailed second opinion and report of course they will charge a fee for unbiased advice but you will know then if you really should take action or not.  You can contact IFA Promotions who can help you find a IFA in your area by calling them on 0800 085 3250 or log onto  www.unbiased.co.uk or if you wish please feel free to contact us at SBA Financial Ltd and we will be happy to help you.
 

Regards
Steven

May 2008 - Investment planning

Question: I have seen my investment drop quite a lot during the last six months or so and I am becoming more worried about what I should do and feel that I want to cash them in and put the money in the bank to keep it safe until the markets settle down and return to normal, do you think that I should do this now or later?
Bill Lawrence

Answer: I understand completely your concerns indeed in the current climate there are many people with the same worries.  Firstly let me stress how vital it is that you take not just independent advice but also that the advice is relevant to your own personal situation because of course everyone is different.  That said as a general rule of thumb I would not recommend that you encash your investments and put them all in the bank because you have already missed the boat and have suffered the losses, worse then will be leaving the funds in a bank and then not returning to the market until they are rising well again because you will miss out on the initial growth.  We all know that when investing we should all put money in when they are low and take it out when it is high and what you are thinking about doing is the exact opposite.  In fact now would be a particularly good time to consider investing so long as it is handled by a professional who is able to create a bespoke portfolio for you and then regularly review it on a quarterly basis.  Of course your own investments may not actually meet your needs so it would be a good idea to have these looked at as there may well be some changes that could be made to them to create more stability for you but you do need to make sure that they are well versed in advanced investment planning solutions you can contact IFA Promotions who can help you find a IFA in your area by calling them on 0800 085 3250 or log onto  www.unbiased.co.uk or if you wish please feel free to contact us at SBA Financial Ltd and we will be happy to help you.

Regards
Steven

April 2008 - Estate planning

Question: My brother and sister have suggested that we arrange for our parents property to be put into our names as a guard against long term care as our parents are getting very old now and their health is not the best that it could be, but I am not sure what is best. I don’t want to see my parent’s property taken away but I have no experience of anyone who has done this and would it work anyway?

Answer: It will depend on lots of issues such as how much time has elapsed between transferring the property and your parents needing care if indeed they ever do, as well as if this was the only reason for making the transfer and just how aggressive your local authorities are in pursuing assets that used to belong to your parents.  What really worries me more about this type of approach to estate planning is all the other things that can go wrong for example if you take over the ownership of your parents property and any of the three of you were to divorce from your current partners then you would have a third of the property in your name and so this would form part of a divorce settlement, do you or your parents really want to take that sort of risk?  Also if any of you were to get into debt problems this would also put your parent’s home at risk.  Then there are tax implication’s you will all now be deemed to hold a third each of a property other than your main residence which opens up exposure to capital gains tax.  These are just some of the issues that need to be considered.  My advice is to arrange for all of you with your parents to meet with a Independent Advisor who specializes in advanced estate planning so that all of the issues can be addressed. There are a number of ways that you can protect your parents assets and yourselves without taking unnecessary risks, but you do need to make sure that whoever you speak to they are well versed in advanced estate planning solutions you can contact IFA Promotions who can help you find a IFA in your area by calling them on 0800 085 3250 or log onto  www.unbiased.co.uk or if you wish please feel free to contact us at SBA Financial Ltd and we will be happy to help you.
 

Regards
Steven

March 2008 - Retirement planning

Question: Every year I received a statement on with details on how my pension fund is doing and I was shocked this year to find that my funds had dropped by £7,536 compared to last years statement and I have also put another £2,400 into it as well so the drop is really almost £10,000 I contacted the pension company and they were polite but not of much use and in essence just blamed the drop on the markets.  As I now have just 9 years to go until I plan to retire I am wondering should I stop paying into a pension and put my money somewhere else?
Mr K James

Answer: I am sorry to hear about your problem but don’t worry there are things that you can do.  There are really two questions here firstly about should you pay into a personal pension anymore and second about whatever you use pension, PEP’s ISA’s etc how do you ensure that they are as safe as possible whilst getting a good return.  Taking the first question I am not a big fan of personal pensions as a rule, of course we all need to plan for our future but official pension plans are just one of the ways that this can be done.  I am not suggesting for one moment that no one should use a personal pension but just to make sure that as part of your retirement planning you have been advised of all the options including pensions before making a decision.  The next question is how to make the most from your retirement plan wherever it is, this is simply so long as you have access to some one who is very capable in designing and regularly reviewing a diverse portfolio approach based on asset allocation, diversification of funds and fund managers and balancing risk with potential reward.  The only way this is going to happen is by using the services of an investment expert and so you should make an appointment to see one or two different IFA’s and see what they can do for you, I have sent you an information sheet with the key questions that you need to ask any potential IFA to help you make sure that they really know their stuff when it comes to advanced investment strategies, or of course if you need your own Independent Advisor then you can contact IFA Promotions who can help you find a IFA in your area by calling them on 0800 085 3250 or log onto  www.unbiased.co.uk or if you wish please feel free to contact us at SBA Financial Ltd and we will be happy to help you..

Regards
Steven

February 2008 - General Debt

Question: I have total credit card bills of just under £12,000 spread over a number of cards which are all on interest free periods as I switch every time that the interest free period is up.  I have just applied for another one to continue this but have been turned down and can not see why as I always pay them all on time.  If I can’t change the cards anymore this will cause me a problem with the level of interest rates that they will charge what can you suggest?
Neil

Answer: Using credit cards in this way can be very useful as it is normally free borrowing, but many of the banks now charge a transfer fee when you move your balance so its not quite free anymore but still can be a very cost effective way of keeping the interest charged down, but I would recommend that you work towards paying off the entire amount each month then you will save even more.  There are normally only two reasons that you will be turned down either because you have some bad credit on your record which it sounds like you don’t think that you have or possibly because you have too many cards and so to much credit available to you.  When you finish the interest free period do you close the account down or just not use that card anymore?  If you don’t actually write to the card company and close the account down when you take a new card you then increase the level of credit available to you and of course you may be now applying to a card company that you already have an open account with.  Contact Either Experian or Equifax these are the two main credit reference agencies in the UK and they can provide you with your own report so you can see why this may be happening. 

If you need any further help and need your own Independent Advisor then you can contact IFA Promotions who can help you find a IFA in your area by calling them on 0800 085 3250 or log onto  www.unbiased.co.uk or feel free to contact us at SBA Financial Ltd.
 

Regards
Steven

January 2008 - BLT

Question: I have two properties that I rent out as well as my own home and I have mortgages on all three and want to pay them all off as soon as possible, but a friend told me that he had been advised to pay off the rented properties as soon as possible as the rates are higher and leave my own home mortgage on interest only until they were cleared is this the best way?
D Pullen

Answer: No its not the best way at all in fact it is the worst way, it is true to say that normally the rates on a private mortgage are normally lower than those on a buy to let property but you are charged tax at your highest rate on the rental income and for this reason you want to pay off the rental properties last not first for example:  If your rent income is say £20,000pa and you have no mortgage on the rented properties and you are a high rate tax payer then you will have to pay £8,000pa in extra income tax but if you have mortgage payments of say £15,000 (interest only) then you will only pay £2,000pa of income tax.  Of course it can be even better if you can extract enough capital from your main home and use this to pay off the rented properties mortgages as then you will have domestic mortgage rates and still be able to claim the tax relief.  In addition to that it can also save a lot of extra wasted money because if you have just one mortgage rather than three then you will be able to cut down on a lot of remortgage fees when your deal is due for renewal.  If you need any further help then and need your own Independent Advisor then you can contact IFA Promotions who can help you find a IFA in your area by calling them on 0800 085 3250 or log onto  www.unbiased.co.uk or feel free to contact us at SBA Financial Ltd
 

Regards
Steven

December 2007 - Debt

It is true to say that the majority of 2007 has been a turbulent year for the financial markets, with several interest rate rises and the widely reported credit crunch which started off in the US and then effected Northern Rock, UBS and  Citi Group to name a few on November 5th I was asked to give my expert view of the possible impact of this to the UK consumer by two radio stations and with Christmas now looming large I hope the tips below will help readers of this column to take some sensible steps to protect themselves.  So what will 2008 bring us?  As far as my own personal crystal ball can see I think that 2008 is likely to be another tough year for many people so what can you do now and in 2008 to protect yourself?  If you are borrowing money I recommend that you question yourself about how much you are spending on items that are not essentials and certainly don’t be tempted to go into debt for presents and non essential spending and don’t be tempted by those dreadful buy now pay later offers. If you are investing where are the safe havens for your money? With many financial institutions having problems you could be forgiven for thinking that the only safe place now is under your mattress?  Of course that’s not the answer but then what is?  That old and trusted advice of never put all of your eggs into one basket, take a look at where your money is held whether it is on deposit at the bank, in government backed securities or investment bonds, unit trusts stocks and shares etc.  Don’t be fooled into thinking that if you have spread your money around different financial institutions that you have not put all your eggs in one basket because you may well still have if they all hold the same underlying stocks in the same companies.  You need to take truly Independent Financial Advice so that your investments really are using asset allocation within a really diverse portfolio this will reduce your risk and maximise your potential gains.

If you are unsure that your current advisor is doing this for you or you don’t have your own Independent Advisor then you can contact IFA Promotions who can help you find a IFA in your area by calling them on 0800 085 3250 or log onto  www.unbiased.co.uk or contact us at SBA Financial
 
Wishing all the Meon Valley readers a very Happy Christmas and New Year

Regards
Steven

November 2007 - IHT Planning

Recently there has been a great deal made of some of the election promises made by David Cameron leader of the conservative party regarding what they would do if elected with improving the lot of us all with regards to Inheritance tax and I have heard a lot of talk from people thinking that this means that don’t need an estate plan now.  It is impossible to cram what can be very detailed and complex affairs into one reply with limited space, so let’s just consider one scenario which I hope will be of help to more than one reader.

First things first let’s get the Inheritance tax issue out of the way right now, whether you choose to believe what politicians say they will do or not it is really quite irrelevant to good sensible estate planning because sound estate planning will not only reduce or even wipe out what the taxman can get his hands on.  It will also at the same time if done properly it will also stop other undesirable people attacking your estate as well.  For example let’s assume that Inheritance Tax is abolished; now I know this is about as likely as you or I winning the lottery jackpot three weeks in a row but bear with me.

You could be forgiven for thinking that there is no need to write wills or set up estate planning or trusts but of course you would be wrong.  If you do nothing then when you die your estate will be distributed according to the laws of the land which may well not be what you wanted but worse still lets assume the stereotypical situation of Mr & Mrs with two kids just for ease wife dies husband remarries and then divorces his new wife who now wants her share of the estate is that really what you wanted for your kids? Or worse than that they don’t divorce but then the widower dies where does that leave your children now are you really going to be happy to hope that their stepmother will do the right thing by your children rather than hers? The facts are really simple do nothing and accept the consequences or take some sound advice and make an informed decision on what is best for you then you can make sure that the right money goes to the right people at the right time.

If you would like more information or advice on how to proceed then please feel free to contact my office and we will be pleased to help or come along to one of our estate planning seminars for more information.

Regards
Steven

October 2007 - Investments

Q: My investments have been hit quite hard over the last few months with what has been going on around the world and a friend of mine said that he had sold his shares and put all of his money in a high interest bank account for the time being and then intends to invest again when things are more stable.  This seems a good idea when I can get around 6% or even more with my money if held in such an account would you recommend this?
Mr A Clarke

A: No not unless you want to take more risk than ever!  Investments are medium to long term projects and fluctuations are normal and should be expected, by nature they should be ignored it is just part of the investment cycle.  It was not that long ago that interest rates were so low that everyone was looking for a better return on their money and of course it will happen again as it always does.  Of course cash on deposit in a high interest account should form part of any sensible investment strategy and you certainly should keep all short term funds there, but to try and time the markets is a recipe for disaster, what you need to do is have a professionally constructed investment strategy and portfolio based on asset allocation.  This will help to keep the ups and downs to a minimum for you, but of course it should be regularly review by your chosen professional ideally every quarter.  Don’t let yourself be tempted to play the markets you will most likely get your fingers burnt.  Even top professional experts such as us can not get it right all of the time, which is why we have our own unique process that reduces the risk and increases the opportunity for growth but only because we know what we are doing and we stick to the plan.

If you feel that you would like more information or advice on how to proceed then please feel free to contact my office and I will be pleased to help or contact the FSA which you can do by phoning them on 0845 606 1234 or you can log on via the FSA website which is www.fsa.gov.uk
 
Regards
Steven

September 2007 - Endowment

Q: I have received yet another red warning letter regarding my endowment which was supposed to pay off my mortgage in 7 years time this latest one is now saying that the potential shortfall is now £7,357 on an endowment that supposed to cover £45,000 am I too late to make a complaint regarding this as I do feel that I was misled when this was sold to me.
Ms A Spencer

A: The first point to take into account is that depending on which firm sold you the policy and indeed when you may possibly be too late but if you truly believe that you were misled then I would recommend that you at the least ask them to look into it.  The second point and a very important one is that whilst your letter does not confirm it I notice that you are an Ms which may mean that you were single at the time that the policy was sold to you as well?  If indeed you were at the time of the sale single with no financial dependents at all then I would suggest that you were definitely miss sold this endowment policy as part of your monthly premiums are being invested and part are paying for life insurance and of course if you had no financial dependents then there was no need at all for you to have life insurance and so all of those premiums could be considered to be wasted.

I recommend that you write to the company involved and tell them of your complaint and allow them to investigate it.  If you feel that you would like more information or advice on how to proceed then please feel free to contact my office and I will be pleased to help or contact the FSA which you can do by phoning them on 0845 606 1234 or you can log on via the FSA website which is www.fsa.gov.uk
 
Regards
Steven

August 2007 - IHT

Q: We have just written our new wills with our solicitor to take full advantage of the inheritance tax limits but there will still be a tax bill to pay by our estate our solicitor suggested that we ask an independent advisor if there is anything else that we can do to reduce this tax further.
Mr and Mrs Warren

A: Yes there are many different ways to further reduce the tax burden by using things like gifting, or discounted gift trusts, gift and loan trusts or indeed what we call  The IHT Trust which is particularly effective.  The list could go on and on but this is a very in depth subject which as much as I would like I can not cover in detail in a short column so my advice is two fold firstly you really do need to sit down with a qualified advisor and go through every aspect of your planning needs but also please check what has been done with your new wills.  I have personally checked wills & trust’s for many clients and in my experience and professional opinion, these are normally drawn up incorrectly because the trusts are not set up at the same time which is a fundamental flaw made by many advisors, will writers and solicitors.  Please check that as well as the two wills that you both have your solicitor has also set up your own individual discretionary trusts at the same time and that your estate has been split equally in terms of assets it is no good if you hold everything on a joint basis including your home.  If this has not been done and you have just drawn up new wills saying in effect to do this after the first death then I am afraid that you have not taken the right steps and I would then recommend you take new advice sooner rather than later.

If any reader would like an information pack on investment portfolios then please contact my office and ask for an investment bulletin pack to be sent to you.

Regards
Steven

 

July 2007 - Debt

This month I wanted to share with every reader something that I feel is very important indeed, it does not come from a letter but from a recent meeting I had in our offices with a new client it is a tragic story and one that I hope we can help others to avoid by education.

At an initial meeting with my new client she explained that the reason she had to cancel our original scheduled meeting earlier this year was because she had lost her father and had been supporting her elderly mother in sorting out his affairs, she then went on to tell me that things were now mostly sorted out including paying off all of her late fathers debts, but she felt that it was morally wrong that her poor old mum had to take savings from her own personal cash reserve to pay off outstanding credit card bills and a personal loan that were taken out by her late husband.

I then had the difficult job of explaining that her mum did not have to pay off her late husbands debts and that all the credit companies were entitled to was his own cash and personal assets  not that of his widow for unsecured debts such as loans and credit cards.

Unfortunately neither she nor her mother knew this and so when her mother notified the credit card companies of the death of her husband they simply requested payment of the outstanding balances and she drew funds from her own personal savings to pay them off and now not only has she tragically lost her husband but also now has used up her savings to pay his debts.

I have no problem with banks and credit card companies making money but when they year after year announce yet more record profits running into billions it really makes me very angry when they don’t do the right thing by people when they are at their most vulnerable.

If this has happened to you or someone you know then of course they can write to the company concerned and ask that the money is refunded although I would not hold out much hope and anyway as the saying goes prevention is better than cure so I sincerely hope that ever reader of this article will tell every one that they know so that this type of thing can be avoided.

To find a list of local IFA’s log onto www.unbiased.co.uk or call IFAP on 0800 083 0196.

If any reader would like an information pack on investment portfolios then please contact my office and ask for an investment bulletin pack to be sent to you.

Regards
Steven

March 2007 - Invetments

Q: Over the years I have had a number of very disappointing results from investments, they have not all been poor but there have been more downs than ups.  I watch the markets and things seem to have been getting better now, so I am thinking about investing again do you think the time is right? And what recommendations do you have for any particular investments.
J Smith

A: My first recommendation is STOP IMEDIATELY for heavens sake.  I make no apology for this rather bold statement but it is no surprise at all that you have had more downs than ups because from what you have told me you are trying to time the markets and that is a very risky business indeed.  The tragedy is that this happens all the time and the usual result is a loss, ok sometimes you can get lucky but that too is dangerous in its self because the tendency then is to pat yourself on the back for being so clever and convince yourself that you can do it again, every client I have ever met wants the same thing when it comes to investments.

“The best possible return with the lowest possible risk”
Now I don’t for one second recommend that you leave all of your money in deposit based accounts, of course keeping some deposit based savings for short term needs makes sense, but there is already far too many billions of pounds left to rot in bank accounts getting less than inflation after tax which of course means that you are losing money in real terms, but at least that is a slow loss, trying to time the markets is sure fire way of accelerating your losses.  Like everything else in life there is good bad and average, if you are constantly trying to get the best every time you will expose yourself to unnecessary risk and stand a high chance of losing a fortune, on the other hand if you just leave your hard earned cash to rot in a deposit account or poor performing funds then you can only expect to watch it lose its real value over time.

The key to successful investment is get a professional to do it for you, but you must ensure that they know what they are doing as well, because there are many that make the same mistake of trying to time the markets.  When talking to your IFA ask them how they will ensure that your portfolio will have the right asset allocation, then ask them how they will ensure that you will have a diverse portfolio of funds and fund managers.  The next thing to question them about is how often they will actively monitor and review the portfolio and make recommendations to you about any fund changes that you should make so that you’re hard earned cash has the best possible chance to stay on track.  In my professional opinion this should be at least four times each year.  What you should expect from a professional IFA is above average returns on a consistent basis year in year out.  If your current IFA can confidently answer these simple questions and also demonstrate that they have in place a robust system for regular reviews then change your IFA.  One last and very important point is that when fund switches are made there is always a charge involved but part of this charge is to pay yet more commissions to the advisor, check if your advisor takes these extra commissions or not.  In my opinion a truly professional advisor will refuse the commissions on fund changes and a fee on the fund performance.  This achieves tow really great things.  Firstly you know that there is no financial gain to the advisor to recommend fund changes so the benefit to you is that you can rest assured that any recommendations being made each quarter are only being made because the truly believe it to be in your best interests.  The other benefit is that if your IFA has a fee based on the success of your portfolio then their wealth is liked to yours and that cant be a anything but good.  There are very few IFA’s around who have the ability experience, knowledge and systems in place to do this properly so remember to ask these questions, you might also want to see more than one IFA before deciding which one you want to instruct. 

To find a list of local IFA’s log onto www.unbiased.co.uk or call IFAP on 0800 083 0196.

If any reader would like an information pack on investment portfolios then please contact my office and ask for an investment bulletin pack to be sent to you.

Regards
Steven

January 2007 - IHT

Q: I am a citizen of Eire. I am "normally resident" in the UK since 1986. I have inherited sums from the estates of 2 deceased relatives, one in 2003 and the other in 1998. Both bequests were from deceased estates in Eire, where the Dublin Revenue Commissioners applied inheritance tax prior to distribution to all interested parties. All disponements have long since been distributed (as you can imagine from the said dates).

It is my intention to bring the money to the UK, and invest it here. It never occurred to me that the inheritance would be any business of HM Revenue Commissioners. However, someone has to pay for John Prescott’s lunches, and as such, I would like have researched whether or not, technically speaking, a second portion of inheritance tax would become due to HMRC. I am aware there are double taxation treaties between the 2 states, but unaware of how the details may apply in this case.
Regards,

Joe

A: I can confirm that our taxation specialist has agreed with my view that there will be no further IHT to pay initially; however as you will be considered domicile in the UK for IHT purposes there would be further  IHT to pay on your death depending on your circumstances at the time.  Of course there is always planning routes that can be used to reduce this or indeed wipe it out completely.

Assuming that you are married and that your spouse is also considered to be resident in the UK then the normal allowances will apply.  Having already paid death duties on your inheritance in Eire it would be a tragedy to pay again on your death in the UK so I would strongly recommend that the next thing that you should do is to have a detailed review to consider your own personal planning needs and what other options that you have open to you.

Regards
Steven

November 2006 - IHT

Q: I lost my husband in July last year and our wills left everything to each other but I am now worried about inheritance tax.  I have three children and five grandchildren.  I know that I could make some gifts now which I believe would be subject to the seven year rule, but I read your letter last month with great interest and wanted to know if I use a trust would the seven year rule still apply?
Mrs Gray.

A: You really don’t need to worry about this as two years have not passed yet since you were widowed which means that you can arrange for what is called a deed of variance on your late husbands will, so that in effect you change his will retrospectively to leave any amount that you want up to the full allowance at the date of his death into trust, which should be a flexible trust and will mean that you will have achieved the benefits of the trust being able to make loans but that there is no seven year rule to worry about.

Your own advisor and solicitor can arrange a deed of variation and set up the trust for you, but if you do not have any there are a number of good solicitor firms I can recommend to you for this service, but please make sure that you keep enough capital for your own needs. have a great day next April.
 
Steven

October 2006 - Trusts

Q: Our daughter is due to marry in April next year and we want to help her with a  sum of money as the deposit for her first home, but we are a little concerned about what happens if they don’t stay together and then the assets have to be split.  Obviously we hope that this won’t happen but it is not a small amount and we would like to know if we can safeguard against this if it did happen.
Mr & Mrs Batcholer

A: I perfectly understand in fact this is becoming a bigger issue for many of our clients these days as often parents or other relatives are helping their children to get on the property ladder, but want to have a safety net and yes you can.  If you make it a loan rather than a gift then this will have the effect of achieving this as if they were to separate at a later date then this would be considered a debt and not a gift therefore it would not belong to your daughter.  We normally recommend that this is done through one of our trusts as it can then also be used as a great inheritance tax planning method as well, because you gift the money to the trust and then the trust loans the money to your daughter.

If you would like to discuss your needs in more detail please feel free to contact us and I do hope that you have a great day next April.
 
Steven

August 2006 - Endowments

Q: We read your article regarding endowment shortfalls with great interest as we have received every year for some time now one of these red warning letters. We did at the beginning of this year contact the endowment company and asked for a surrender value but have not yet taken any action.  We have now received another letter saying that our plan is now on track.  This is very confusing and we are unsure now what to do or indeed if we can trust what the endowment company is telling us and is this just their way of trying to stop us from cashing in the plan?  We would appreciate your advice.
 
Mr & Mrs T Wright

A: I can understand your confusion when you get these conflicting letters.  Firstly let me say that it would be highly unlikely that any life or investment company would knowingly tell you that the plan was now on track if it is not.  However the problem still remains that if it is now back on track how you can be sure that it will not slide back again.  Unfortunately your letter does not give us enough information to give a full and detailed reply, so I would recommend that you contact the insurance company and ask them to explain why this turnaround has happened, it may be that the funds that your endowment are invested into are high risk and have had a surge in value recently, of course if this is the case then they could fall again just as quickly.  Most endowments if they are unit linked will have a choice of funds so you could consider fund switching to bring the risk level down.  If it is a with profits fund then there is normally no fund switching option.  Fund choices are a vital part of investing along with regular reviews and if you no longer in contact with the original advisor I would recommend that you do find and select a new Independent advisor to guide you through this process as it can make a real difference in the returns that you may get, in addition they will be able to advise you on all of your options.  If you would like to discuss this in more detail then please contact us and we will be pleased to arrange a review for you.
 
Steven

July 2006 - Endowment

Q: I have received another letter regarding the shortfall of my endowment plan and I am now very worried about how I can deal with this problem.  I have already tried to get some compensation but my claim was turned down and now that I only have 6 years until I retire I don’t know how I am going to repay my mortgage or afford to meet the bills when I retire.

Mrs D Wade

A: Unfortunately your situation is very common indeed but there are still options that you have open to you, apart from using a firm to take up again the case for compensation on a no win no fee basis, there is a number of other options to consider which may help to clawback the situation for you, such as using some of your pension funds, other savings, reducing your current mortgage payments so that you save some extra money that can be used to offset the shortfall, you could also consider the options of either surrendering or selling by auction the policy, or even just having the fund choices that the endowment contains being re-balanced.  One of the biggest problems with an endowment shortfall is that there are so many different options to consider and indeed in some cases we may recommend using more than one as the perfect solution.  You really need to spend some time looking in detail at your entire current situation so that a plan of action can be drawn up that will help you to get back on track.  I would strongly recommend that you either speak in detail about your needs to your own Independent Financial Advisor or if you prefer contact our offices as we will be happy to help you where we can.
 
Steven

June 2006 - Equity Release

Q: I am 69 this year and have been considering for some time taking up one of these plans to release equity from my home as my pension income is small but I am worried that if I do then I might lose my home or have nothing left to leave to my children.  A friend of mine has one and says that it is wonderful but I have also seen a lot recently in the papers and on television warning people of these schemes.  I do need more income but I don’t want to risk my home is this method alright or is there other ways that I could arrange my affairs?

Mrs F Ball

A: Equity release schemes have become very popular indeed and they can also provide just the right solution to meet peoples needs in retirement, apart from providing much needed income for you they can also be very effective for planning against inheritance tax and long term care fees as well. However they can also become a problem if you are not careful and choose the wrong one.  There are many different companies offering these schemes now but a good first step is to ensure that any one that is considered is a member of SHIP Safe Home Income Plans which is an organisation that has a code of conduct for all of its members to ensure that they offer schemes with a great deal of protection for you the consumer especially a (No Negative Equity Guarantee).  Most reputable companies with be a member of the SHIP scheme.  There are also many other sources of information and I have enclosed for you a copy of the FSA Fact-Sheet with various contact details.  Of course even by making sure that the equity release scheme chosen is the right one for your needs and offers the best terms, it is important to establish first that this is really the best route for you.  To do this I would of course need more information about your circumstances because there may be better alternatives to consider first. If you would like to discuss your own situation in more detail, feel free to contact my office to arrange a consultation.

Steven

May 2006 - IHT

Q: What can we do to reduce IHT? We know that, like many people nowadays, we fall in the inheritance tax trap, but we are confused about what we can gift to our children that will be safe from the taxman. We have heard a great deal about using trusts as well, to reduce the tax burden when we die, but they all seem so confusing that we have not actually done anything at all. Can you explain what we can and cannot do?
Mr & Mrs Clarke

A: There is actually a lot that you can d a for a o right now!
This is a common question these days and it is no wonder with the numbers of people who keep getting caught by inheritance tax. The biggest problem is that, all too often there is no one to turn to who can give plain and simple answers to what can be complex estates and certainly, anyone who has tried to make sense of the governments websites will know that they would probably have passed on already by the time they have read it, let alone understood it.

The main point to bear in mind is to use as many of the allowances that are allowed, assuming that you can afford to (I will have a copy of the main relief’s that you can safely use for your reference). The next step is to make sure that you have a properly written will and, when needed use a discretionary will trust - this action alone can save up to £114,000 of tax. Finally, there were a lot of changes that were announced in the last budget so it is vital that everyone ensures they have and use the right type of trust to be effective for their IHT planning. As this is a complex area that cannot be answered in this readers section, I would strongly recommend that you make arrangements with a properly qualified advisor who can guide you through the maze and set you on the right path. If you would like to discuss your own situation in more detail, feel free to contact my office to arrange a consultation.

Steve

 

Send your questions to: SBA Financial Ltd, 1a Highbury Buildings, Portsmouth Road, Cosham, Portsmouth, Hampshire PO6 2SN. Telephone: 02392 325720 Fax: 02392 325559 Email: enquiries@sba-financial.co.uk Website: www.sba-financial.co.uk OR email them to the Meon Valley News at: cmiller@meonvalleynews.org.uk