December 2011 - Page 3 of 3 - Financial Planning in Wimbledon

Premiums Rising – Run for Cover

1955: Run for Cover – Nicholas Ray

The cost of new life assurance, critical illness and income protection policies is expected to rise. This is due to the European directive forcing insurance companies to hold more reserves (known as Solvency II). The planned implementation date is 1st January 2013, but it is widely expected that there will be a 12-month delay due to the current economic conditions. Premiums are expected to increase between 4% and 10%. So it would seem that reviewing any cover you have now may be cheaper than delaying a protection review.

Currently a £500,000 level term assurance policy lasting until age 65 for a non-smoker male aged 45 is quoted between £50.93 a month to £71.88 a month. A difference in cost of £5,028 over 20 years for exactly the same cover. This is for a policy without any commission (which is how we arrange protection policies). Alternatively another IFA – even an RDR compliant one, can still receive commission on these products. This would increase the cost on standard commission terms to a range in quoted premiums from £67.23 to £95.22 a month (32% more). In hard cash costs, that’s an extra £3,912 – £5,601 for exactly the same thing. I take the view that clients would prefer to pay a fee, reduce the premiums and pay as little as possible for protection and use the savings more productively.

DT

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
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Premiums Rising – Run for CoverDominic2023-12-01T12:48:27+00:00

Christmas Turkey – Measure and Weigh

1948: Sorry Wrong Number – Litvak

First Direct have published some research into Christmas present plans. The danger of any survey is what is read into the data, which in this instance was a survey of 1,000 people. The survey revealed that 280 people (28%) were expecting to receive money this Christmas – with an average sum of £83 each. This is a higher sum and greater proportion than the same survey last year.

The financial services industry, being keen to find a headline, interpret this as £1.2bn in cash gifts this year. However, by my maths I make 28% of a 62.3m population 17.4m people, each in receipt of an average £83 makes a sum of £1,447,852,000. A British £bn is meant to be a million, million or 1,000,000,000,000 (12 zeros). An American billion is a thousand million (1,000,000,000). So I guess the survey is either £247m (American) off the mark or if you use the British £bn, then £1,198,552,148,000 off the mark… but hey what’s a few million in the detail!

Payyourway.org produce a similar survey but with rather different results – claiming that Christmas cash will be worth £2.4bn. Their survey found that 57% of the population plans to give an average gift of £88. Again, using 57% of a 62.3m population is 35.5m people with an average gift of £88 is £3,124,968,000. Ok, so not all of the 62.3m population is old enough to give money, but assuming an American £bn and an average of £88 given then that’s 27.272m people (43% of the population).

So as I hope I have demonstrated, I don’t pay much attention to surveys and believe that small surveys can be very misleading when attempting to apply the data nationally or globally. This is one of my main gripes about how the economy is valued, measured and planned. I know this may seem like splitting hairs when it comes to surveys about cash gifts at Christmas, but sadly when it comes to the information about the Eurozone and global economy we cannot afford to make such a hash with the numbers, the consequences are rather serious. After all, cooking a 4lb Christmas turkey will have a different impact on your family than a 40lb turkey and no one wants to look like one on the day!

Whilst I’m on the subject here are some recipes for Christmas turkey

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

Christmas Turkey – Measure and WeighDominic2023-12-01T12:48:28+00:00

How to Improve Your Investing Skill (and how to avoid crashing a Ferrari)

1954: Race for Life – Terence Fisher

I’m sometimes asked why someone that is successful in their field (by which is meant, financially successful) would need a financial adviser. The question really being asked, is why would you be able to help me, I’ve done well enough on my own.

I suggest that one considers some of the top sports players – in any field. The best invariably have a coach, which on the face of it may seem rather odd – surely if the coach was any good, they would be a competitor not a partner. Being a coach or an adviser is about being trusted to challenge and to take the subject further. Possessing something does not make one a master of it. A great coach will help ensure that perfect practice is achieved, that fine-tuning is conducted and that the overall objectives are clarified. A great financial planner will help you to identify what is truly important and help demonstrate what is needed to get there. Of course the partnership needs to work and be of benefit, delivering better results – but results may be a broad term – perhaps simply being better.

I was reminded of this as I across a story of some luxury sports car owners, who managed to crash their convoy of top end Ferrari’s at the relatively modest speed of 80mph (if you believe that was the speed they were travelling at). Having the Ferrari did not make them good drivers, just the owners. That’s not to say that perhaps they were not good drivers anyway – but I would suggest that without someone that is interested in the long-term welfare of these drivers, this probably would not have happened.

Having a set of golf clubs and a knowledge of golf sadly does not turn you into a Pro. Having a Ferrari does not make you a good driver. Having money does not make you good at managing it. Great coaches are like great financial planners – they help protect you from… you.

DT

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

How to Improve Your Investing Skill (and how to avoid crashing a Ferrari)Dominic2023-12-01T12:48:28+00:00

European Union – Playing without Instructions?

1939: Rules of the Game – Jean Renoir

At the risk of being political, I am going to express my views about mooted changes to the European Union. We might all have a wish or desire for peace and goodwill to all and are perhaps reminded of this as we write and open the Christmas post. We wish for these things, because we would like them to become true (well most of us anyway). However, we are not fool enough to think that peace and goodwill to all is something that occurs with the turn of a calendar date, it is something that it desired, worked towards, but in reality is illusive. We may genuinely want these noble things, but we know that deep down that our own peace is a pre-requisite.

So whilst we might wish for the Europeans to work well together, get along and all be prosperous anyone with an ounce of wisdom knows that wishing is not the same as achieving. Greater European integration of economic and social policy would solve the Eurozone crisis, but only if everyone accepts and adopts the same rules, which they won’t. The self-interests and differences in culture are too significant to overcome with rules. It will fail. Politicians are optimists and often delusional to believe that significant change can be made quickly and an electoral system keeps them needing to believe the optimism rather than dealing with the reality. A single European state cannot police its own rules, having more will not make it easier.

Until politicians recognise that the Euro should be a currency to price international trade, but no more, we will continue to pour more money into a system that will not work. The Euro is only 10 years old, yet to the way the media report on it one would think that national currencies did not exist. We cannot even get our own small scale local Governments to agree so why would this be achieved on a bigger scale? Arguments about pension inflation and accrual rates are inconsequential when considered in light of a homogeneous welfare state, social, taxation and economic policy across Europe.

The way out of the Eurozone problem is painful. It means acknowledging failure and rebuilding. In my opinion it means returning to national currencies. If the Eurozone were a house, a surveyor would be warning that the foundations are faulty. They will not be improved by knocking down a couple of walls and doing some re-wiring.

Sorry, but I do not believe that more rules and greater integration will work and whilst there may be short-term relief (because something is being done) the long term problems will remain. So I remain considerably concerned for Europe.

DT

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

European Union – Playing without Instructions?Dominic2023-12-01T12:48:29+00:00

Safe as Houses?

1971: The Burglars – Henri Verneuil

I’m sometimes asked if I know anyone that can help with general insurance queries or renewals. I’m not an expert in general insurance and it is not something that I’m qualified to advise on, however I know enough to know that the comparison websites are, to put it bluntly, not the entire market. General insurance, like many other things in life is one of those costs that we would all like to keep to a minimum, but as is so often the case, price is merely one factor. When it comes to insurance claims and the inevitable stress that is almost certainly experienced, having a good insurer that handles and pays a claim quickly is worth additional cost when compared to the additional stress that more “competitive” companies may generate. I cannot tell one from the other until I experience a claim, but this is where a general insurance broker is ideally placed.

If you have a home that would cost over £500,000 to rebuild or have contents worth more than £75,000 then you would automatically be considered for “high net worth home insurance”.This type of policy provides much higher levels of cover than a standard household policy, including worldwide all-risks cover for all your contents (including pet damage, which is excluded by most other policies), high single item limits for jewellery, fine art and collectables, plus useful extras like identity theft cover, family legal expenses cover and emergency assistance.

Additionally, the security conditions are not onerous and the premiums are lower than you might expect. Underwriters can be very flexible in terms of what they can agree to cover and in most cases it is actually cheaper to arrange a high net worth policy than to cover the same sums insured on a standard household policy. You can also include cover for up to 6 properties – ideal if you have a second home or holiday homes you also need to insure.

So if this is something that would be relevant to you, I would suggest giving Phil Heard of 1Stop Insurance a quick call or email. Let me know if you would like his contact details.

Property crime has generally fallen fairly dramatically since 1993 according to the UK National Statistics from roughly 1.75m reported incidents to about 0.75m reported incidents. This is information for trends in domestic burglary to 2008/09. The more recent report for 2009/10 reveals that of the various types of reported crime, burglary accounts for about 12.5% of all incidents which is approximately a total of 542,375 reported burglaries. This is the fourth ranking form of criminal offences behind, (1) theft and handling stolen goods, (2) violence against the person, (3) criminal damage.

DT

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

Safe as Houses?Dominic2023-12-01T12:48:29+00:00

Squeezing The Middle – Tax is the Clue

1941: Ladies in Retirement – Vidor

We have heard discussion about the squeeze on middle-Britain, with politicians being typically vague at defining what they mean by middle-Britain. My guess is that it is anyone that has an income between £30,000 and £250,000 – yes quite a range I know, but in the big scheme of things, probably representative of who is actually paying the most taxes to HMRC. Anyone with declared earnings under £30,000 is paying 20% unless they are over 65 and caught out by the age allowance trap (which is where the additional, age-related personal allowance is gradually reduced back down at a rate of 50% for every £1 of income over £24,000 in 2011/12).

So by way of a “heads up” from April, the scheduled changes to the tax system that will most likely effect you are as follows:

1. The standard personal allowance rises from £7,475 to £8,105

2. The age related allowance 65-74 rises from £9,940 to £10,500

3. The age related allowance 75+ rises from £10,090 to £10,660

4. The age related reduction trigger rises from £24,000 to £25,400

So if you are retired and you can adjust your income to £25,400 you will be better off. You can only “adjust” your income if you have assets that produce income that you can turn on and off, which probably means that you have had some very good financial planning advice. This would involve use of ISAs and using capital gains as income and so on.

Sadly, whilst the standard personal allowance rises, the band on which basic rate tax is levied is reduced from £35,000 to £34,370. Also don’t forget that if your declared income is £100,000 or more you begin to lose your personal allowance anyway. The good news? well the 50% tax rate will remain unchanged on any income over £150,000 – if indeed this is good news.

If you would like to have a look at a little more detail, here is the link to the HMRC tables for 2012/13.

DT

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

Squeezing The Middle – Tax is the ClueDominic2023-12-01T12:48:30+00:00

Rumour Mill – Attack on Tax Free Cash and Tax Relief?

1941: Nothing But The Truth – Nugent

In one of the quality industry papers today I have read that the Government had considered announcing an end to higher rate tax relief on pensions in the Autumn Statement this week. However, it is alleged that the Chancellor decided against it, but is rumoured to be seriously considering this for the Budget. The Government is quoted as saying “The Government is committed to providing clear incentives to save in a pension, up to generous allowances, and has no current plans to restrict tax relief on pension contributions or to cap relief on the tax-free lump sum.”

So I guess who you believe is rather central to how to act on this “information”. Wouldn’t it be great just to have some rules that actually last and aren’t constantly amended? rather than everyone having to guess what might happen next.

For the record, in the current tax year 2011/12 the Annual Allowance is capped at £50,000 and the Lifetime Allowance is £1.8m. This will be reduced to £1.5m from 6th April 2012.

DT

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

Rumour Mill – Attack on Tax Free Cash and Tax Relief?Dominic2023-12-01T12:48:30+00:00

Nest: The Long Wait Continues…

1954: The Long Wait – Victor Saville

I wonder if you have your advent calendar? As the traditional countdown to Christmas begins, it seems that we will have to wait until next year for further clarity on the dates for NEST (or auto-enrolment of workplace pensions). The Government (well Steve Webb) announced that they were delaying the implementation for small firms – which coincidentally puts the date beyond the life of the current Government. This measure is an acknowledgement that the economic conditions are not terribly favourable to small businesses and additional costs may be unhelpful. However, the entire planned implementation is also under question as it had originally been intended that employers contribute a minimum of 3% of earnings, but only after at least 12 months paying 2%. So we now have to wait for the revised schedule which is promised early next year.

As a consequence there is now a row in process about the merits of delaying, which some argue is poorly thought through. My own experience of this matter is that many small businesses are not well prepared for NEST and would probably welcome the opportunity to have more time to get prepared. Those most aggrieved are those intending to supply the pension products and Labour Shadow Pensions Minister Greg McClymont who raises concerns about the impact of the delay on NEST’s ability to repay its £120m set up cost. I still find myself wondering why these things become so needlessly complicated.

DT

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

Nest: The Long Wait Continues…Dominic2023-12-01T12:48:31+00:00