SBA Financial - Solving the financial puzzle... ...piece by piece

Monthly Update - March 2011

Pension scheme closures increase

It has been reported that a record number of final salary pension schemes have closed their doors to future contributions from existing members, the National Association of Pension Funds revealed today.

The NAPF's latest Annual Survey showed that one in five (17%) schemes have shut their pension to both new and existing members. This was a record jump from 7% in the previous survey in 2009, and just 3% in 2008.

Joanne Segars, NAPF Chief Executive, said:
"The pressures on final salary pensions are relentless, and their rate of decline seems to be shifting into a new gear. The rate of closures to new staff seems to have levelled off, but now those who are already in a final salary pension increasingly find themselves being locked out."

Steve's Comment:
Over the last decade, I have seen more and more clients who are increasingly worried about how they are going to be able to afford to live a reasonable lifestyle in their retirement years and in the last five years, there has been a particularly high increase in those people worried that they will have to work well beyond the age they had originally planned to retire.
The bottom line is everyone needs to take control of their own retirement planning and sooner rather than later, or be prepared to accept the alternative, which for most people will be a much poorer retirement, than they had hoped for.

If you don't know exactly what you're retirement plan is going to achieve for you, then contact us for an initial meeting now! By calling our office on 02392 325720.

Savings and Investments Getting the Balance Right

One of the most important, and often misunderstood, aspects of financial planning is, RISK.

The dictionary defines risk as:

'The possibility of suffering harm or loss; danger'.

When most people think of risk associated with money they think of the negative. This is probably because we are conditioned to think of risk in terms of loss. After all, if someone says something is risky they don't tend to see the positive side!

However, there different types of risk! When it comes to investing your money, it's useful to know the different types of risk.

Capital risk: The risk that all or part of your capital, your original investment, might not be returned.

Inflation risk: The concern that your money will lose some of its purchasing power through inflation. Often this type of risk is not focused on and is a grave mistake.

Recently, when talking to a new client who could not initially understand the risk to her cash sat on deposit, I asked the question how much is your house worth today? Her reply was around £850,000. I then asked her how much did you paid for the house? Her reply was £95,000, 25 years ago, so the value had increased by almost a factor of 10 over a period of 25 years!

We then agreed that 2% per annum growth on any deposit bank account would probably be a reasonable estimate. I then explained that if she had actually put £95,000 into such a bank account, during the last 25 years then today, with compound interest, she would actually have a little over £155,000.

It was at that point we decided it was high time that she started to only keep short-term and emergency money on deposit and we actually made sure that her medium to long-term money was invested professionally.

If your money is not working hard enough to you then contact us for an initial meeting now! By calling our office on 02392 325720

PROBATE RIP OFF!

"I'm not afraid of dying – I just don't want to be around when it happens!" Woody Allen.

Reading some of the recent newspaper reports of fraud, deception and family feuds, it's not surprising that Woody Allen does not want to be around when he dies. It can be a most unpleasant experience!

Martin Lloyd, an ex Northampton Borough Councillor, who was convicted and jailed for two-and-a-half years for probate fraud in May 2010, stole £81,000 from an estate to which he was the executor so that he could take his wife on a luxury cruise on the QE2 and pay for £25,000 he lost on the horses.

In Lincoln, David Nash and Nicholas Butcher of the Will-writing firm Will Makers of Distinction Ltd have appeared in Court. They had pocketed half a million pounds in cash from a number of estates, intended to be paid out to relatives and friends as well as to charities.

As a result of the greed of the professional executors (an accountant and an ex-solicitor), in July 2010 the two principals were locked up for three and a half years. The investigating officer said: "The convicted men took advantage of people who were often grieving for close family members or friends. They plundered large sums of money from the estates of deceased people." Welcome to the real world of probate!

Steve's comment:
Appoint an executor you can trust and don't get tied into paying future high fees for administering the estate. Do not rush into appointing a professional executor in your Will, whilst you will have to name an executor(s) in your Will, give consideration to appointing a family member or trusted friend instead. If you appoint a professional executor, check their policy for charging for probate and estate administration. Additionally, obtain assurance from them that they will renounce the executorships, if requested, if their fees or estimate fees are too high when the actual time comes to administer the estate.

I have been advising many satisfied clients, for more than a decade on their estate planning needs and solutions, including their Wills, trusts, inheritance tax planning and lasting powers of attorney and in all of that time, I have never once recommended to one of my clients that they appoint professional executors and trustees.

Sadly, I have seen far too many cases in my time where so-called professional executors and trustees have stripped thousands and thousands of pounds from the estate of their deceased clients, which could so easily have been avoided.

If you would welcome a review of your own estate planning including your existing will then contact us for an initial meeting now! By calling our office on 02392 325720.

The new tax year ISA allowance is almost here!

Last April, the maximum level of investment that adults under 50 could put in an Individual Savings Account (ISA) was increased to £10,200 a year, the same as for over-50s.

Within this overall limit, up to half can be invested in cash and the balance in stocks and shares. Those aged between 16 and 18 are limited to the cash element only (up to £5,100). Younger people have no ISA allowance at all, although there may soon be a 'Junior ISA' version to replace the soon-to-disappearChild Trust Funds.

Steve's comment:
As a general rule of thumb, when the Chancellor of the Exchequer gives us an allowance on anything that is tax efficient we should all try our very best to use that full allowance. The reason is simple. If the Chancellor puts a limit on it, that's because it's normally good news for us and bad news for tax revenues.

Whilst of course, taking into account that all of us should maintain a certain amount of cash on secure deposit, arguably, if you can use up your full ISA allowance, then you really should seriously consider whether this should be held in equity ISAs, as opposed to cash ISAs, remember that even in a Tax Efficient Cash ISA, it is not likely to even be close to keeping pace with inflation, so in essence you will be losing money every day!

If you would like to review your current investment planning arrangements, then contact us for an initial meeting now! By calling our office on 02392 325720.

Book your own expert speaker!

Over the years I have been delighted to help many groups by delivering presentations on a whole range of financial planning areas of importance, ranging from Wills, trusts and estate planning to pensions and retirement planning, savings and investments and many more.

Apart from our own regular workshops, which of course are open to the public, we regularly provide an expert speaker to a number of organisations for their group meetings. If you would like to book an expert speaker for group you belong to, then contact us at our office on 02392 32570.

Regards

Steve