Lloyd O Sullivan https://www.lloydosullivan.co.uk/blog Our Blog Tue, 25 Jun 2019 15:39:54 +0000 en-US hourly 1 Taxing times https://www.lloydosullivan.co.uk/blog/taxing-times/ https://www.lloydosullivan.co.uk/blog/taxing-times/#respond Tue, 25 Jun 2019 09:57:48 +0000 https://www.lloydosullivan.co.uk/blog/?p=1314
‘Top 5’ list of planning areas

Making sure you use up any allowances you are entitled to is the first step to reducing the amount of tax you may be liable to pay. We’ve provided our top five list of planning areas to consider before 5 April 2020, the end of the 2019/20 tax year. The rates given are correct for the 2019/20 tax year.

1. Your ISA allowance: don’t wait to use it

There are many different types of Individual Savings Account (ISA), including Lifetime ISAs, Junior ISAs and Innovative Finance ISAs, although the best known are Cash ISAs and Stocks & Shares ISAs.

If you invest your full allowance early on during each tax year rather than at the end, your money will have a longer time to potentially grow tax-efficiently. This can add up to extra money in your ISA if you invest the maximum £20,000 allowance. Of course, not everyone will be in a position to invest £20,000 every April – but the more you put in, and the earlier you do it, the better off you can be.

2. Top up your pension, but watch out for the lifetime allowance

Generally, the maximum amount that can be contributed tax-efficiently in total from all sources (for example, from you and your employer) each tax year is £40,000. Remember, to receive tax relief, your personal contributions can’t be any higher than your earnings (or £3,600 if more).

The lifetime allowance for most people is £1,055,000 in the tax year 2019/20. It applies to the total of all the pensions you have, including the value of pensions promised through any defined benefit schemes you belong to, but excluding your State Pension. If you take any excess amount above the lifetime allowance as a lump sum, it will be taxed at 55% (or 25% if taken as income or placed in drawdown).

3. Make use of gift allowances

If you have a potential Inheritance Tax liability, there are ways of reducing this by making exempt gifts that are immediately outside of your estate. You can give up to £250 a year to as many people as you like. You can also give away up to £3,000 tax-free a year (but not to those who have had the £250 gift). If you don’t use this annual exemption, it can be carried over for the following year, but only up to a maximum of £6,000. Gifts made at the time of a wedding or registered civil partnership are given tax-free allowances: £5,000 can be given to a child; £2,500 can be given to a grandchild or great grandchild; £1,000 can be given to anyone.

If you can show that regular gifts were funded out of surplus income, not savings, you won’t pay Inheritance Tax. But it’s a complicated matter to prove, and on your death your personal representatives will need to provide evidence of your incomings and outgoings to demonstrate that the gifts were paid for out of surplus income, not from savings or investments.

4. The personal allowance: how not to lose it

Everyone has a basic personal tax-free allowance. This is the amount of income you can receive tax-free each year. You do not normally need to do anything in order to receive this, as it should automatically be applied when you are paying tax. If you earn over £100,000, this will be reduced, but otherwise it is £12,500 (2019/20 tax year).

If you are married and have used up your personal allowance, but your partner has not, it may be beneficial to transfer some savings or other assets into their name, but you need to bear in mind they will then legally own those assets. Or you can make use of the Marriage Allowance, which allows 10% of a non-taxpayer’s personal allowance to be transferred to their basic-rate taxpaying spouse.

5. Don’t forget capital gains

The annual exemption is £12,000 for 2019/20. If you have unrealised gains, you may decide to dispose of some before the end of the tax year to use up your annual exemption. Married couples are taxed individually on capital gains, so transferring an asset from one spouse to another before realising a gain can be tax-efficient as long as the transfer represents a genuine gift from one to the other. As far as possible, it is important to use the annual exemption each tax year because, if unused, it cannot be carried forward.

When you sell a property that qualifies for the main residence tax relief, you do not have to pay Capital Gains Tax (CGT) on it. This main residence relief is extended for 18 months after you vacate the property. What this means is that you can sell your family home within a year-and-a-half of moving out of it and still qualify for the main residence relief (that is, pay no CGT).

Minimise the amount you pay in taxes, now and in the future

The goal of tax planning is to arrange your financial affairs so as legitimately to minimise the amount that you or your family will pay in taxes, now and in the future. Although it shouldn’t drive your overall financial planning strategy, it’s a key part of the process. We can help you decide what’s right for you. To find out more, please contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk.

A PENSION IS A LONG-TERM INVESTMENT.

THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

PENSIONS ARE NOT NORMALLY ACCESSIBLE UNTIL AGE 55. YOUR PENSION INCOME COULD ALSO BE AFFECTED BY INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS. THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION, WHICH ARE SUBJECT TO CHANGE IN THE FUTURE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

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Retirement longevity https://www.lloydosullivan.co.uk/blog/retirement-longevity/ https://www.lloydosullivan.co.uk/blog/retirement-longevity/#respond Tue, 25 Jun 2019 09:56:30 +0000 https://www.lloydosullivan.co.uk/blog/?p=1312
Your destiny is now in your own hands

If you are in your 50s or 60s, your thoughts are probably turning towards retirement. When should you retire? How much money do you need?

In trying to answer these questions, you face a problem. Because of longevity trends, we are on average living longer. With longevity increasing, your wealth may have to provide you and your spouse or partner with an adequate income for 30 or even 40 years.

Britons aged 30 today have a 50% chance of living to more than 100, while 50-year-olds have an even chance of reaching 95[1]. Longer lifespans, however, raise financial challenges – for individuals as well as for families and society.

The idea of a retirement lasting many decades may seem appealing, but longer retirements mean more years of living off your pension and savings. Will yours be enough?

Extra benefit of compound interest

How much money you need to save depends on when you actually start saving and how much you want to save in total. The earlier you and potentially your employer (if they match your contributions) start adding to your pension pot, the less you will need to save each month because the cost is spread over a longer period.

Moreover, if you start saving earlier, your funds will accrue the extra benefit of compound interest throughout the duration of your savings. Making money from the interest means you can actively save less but still end up with the same amount.

Much more freedom and flexibility

The good news is that changes to pensions also now mean you have much more freedom and flexibility over how to take your benefits – whether as tax-free cash, buying an income for life, leaving your pension fund invested while drawing an income, or a combination of all these options.

Unless you believe the Government is likely to become more generous with the State Pension and other retirement benefits, individuals will almost certainly need to save more to enjoy the standard of living they would like in retirement.

Building a retirement nest egg

Over the last few decades, employer pensions have become generally less generous. Today, people starting a new job in the private sector are very rarely offered a traditional defined benefit pension – where the employer guarantees you a certain level of pension based on your salary and length of service.

Most employer-based pensions now depend on how much you and your employer have contributed and the investment returns achieved by that money. That said, for most people, saving via a workplace pension still remains the correct approach to take for building a retirement nest egg – not least because the employer contributions are effectively free money.

A number of attractive tax breaks

Importantly, pension savers benefit from a number of attractive tax breaks, including Income Tax relief on contributions and up to 25% of the proceeds being tax-free. For 2019/20, the annual limit on tax-relievable personal contributions is 100% of your salary (or £3,600 if more). In addition, there is a limit on tax-efficient pension funding called the ‘annual allowance’ (£40,000 for most people) – this applies to both contributions paid by you and contributions paid by your employer and, if exceeded, means you will pay tax on the excess (an annual allowance charge).

We’ll help keep track of your pension contributions so that you know if you’re getting close to your annual limits.

Maximum tax-free retirement savings

In some cases, we may be able to ask your pension provider to pay the charge from your pension benefits. You may not be subject to an annual allowance charge (or a lower charge may apply) if you have unused annual allowances from the previous three tax years that can be carried forward.

Increasingly, more people are also being caught by the ‘lifetime allowance’, which puts a limit on the total value of their pension funds that can be accumulated without suffering a tax charge. From 6 April this year, the pensions lifetime allowance increased to £1,055,000. The pension lifetime allowance is the maximum amount that you can accumulate in your pension plans without suffering a tax charge (lifetime allowance charge).

Live the lifestyle you want when you retire

Saving more, working longer and having the right financial plan – this combination is likely to be much of the solution for the longer lifespans that many of us hope to enjoy. We’re here to help you make good decisions so you can live the lifestyle you want when you retire. To find out more, or to discuss your situation, please contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk.

Source data:

[1] The 100 Year Life: Living and Working in an Age of Longevity, by Andrew Scott and Lynda Gratton September 2018

A PENSION IS A LONG-TERM INVESTMENT.

THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

ACCESSING PENSION BENEFITS EARLY MAY IMPACT ON LEVELS OF RETIREMENT INCOME AND YOUR ENTITLEMENT TO CERTAIN MEANS TESTED BENEFITS AND IS NOT SUITABLE FOR EVERYONE. YOU SHOULD SEEK ADVICE TO UNDERSTAND YOUR OPTIONS AT RETIREMENT.

PENSIONS ARE NOT NORMALLY ACCESSIBLE UNTIL AGE 55. YOUR PENSION INCOME COULD ALSO BE AFFECTED BY INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS. THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION, WHICH ARE SUBJECT TO CHANGE IN THE FUTURE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

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Choppy waters, not full-on gale https://www.lloydosullivan.co.uk/blog/choppy-waters-not-full-on-gale/ https://www.lloydosullivan.co.uk/blog/choppy-waters-not-full-on-gale/#respond Tue, 25 Jun 2019 09:55:27 +0000 https://www.lloydosullivan.co.uk/blog/?p=1310
Wait for the bad weather to pass and stay the course

Volatility fluctuates based on where we are in the economic cycle, but it is a normal feature of markets that investors should expect. When stock markets start correcting, daily injections of bad news may sound as though it will never end. This can spark anxiety, fuel uncertainty and trigger radical decisions in even the most seasoned investors.

From the unfathomable Brexit playbook and the continued prominence of populist ideology, to unconventional US foreign policy and the retirement of Draghi, the highly respected European Central Bank president, uncertainty prevails. But it’s essential not to panic and to keep perspective when markets are turbulent.

Whether it’s rough seas or a volatile stock market, the same rules apply. When storms rock the boat, don’t jump ship. Wait for the bad weather to pass and stay the course.

Here are some strategies to consider when volatility strikes.

Keep calm – short-term volatility is part and parcel of the investment journey

Markets can fluctuate depending on the news flow or expectations on valuations and corporate earnings. It is important to remember that volatility is to be expected from time to time in financial markets.

Short-term volatility can occur at any time. Historically, significant recoveries occur following major setbacks, including economic downturns and geopolitical events.

While headline-grabbing news can affect short-term market sentiment and lead to reductions in asset valuations, share prices should ultimately be driven by fundamentals over the long run. Therefore, investors should avoid panic-selling during volatile periods so that they don’t miss out on any potential market recovery.

Remain invested – long-term investing increases the chance of positive returns

When markets get rocky, it is tempting to exit the market to avoid further losses. However, those who focus on short-term market volatility may end up buying high and selling low. History has shown that financial markets go up in the long run despite short-term fluctuations.

Though markets do not always follow the same recovery paths, periods after corrections are often critical times to be exposed to the markets. Staying invested for longer periods tends to offer higher return potential.

Stay diversified – diversification can help achieve a smoother ride

Diversification basically means ‘don’t put all your eggs in one basket’. Different asset classes often perform differently under various market conditions.

By combining assets with different characteristics, the risks and performance of different investments are combined, thus lowering overall portfolio risk. That means a lower return in one type of asset may be compensated by a gain in another.

Stay alert – market downturns may create opportunities

Don’t be passive in the face of market declines. When market sentiment is low, valuations tend to be driven down, which provides investment opportunities. In rising markets, people tend to invest as they chase returns, while in declining markets people tend to sell. When investors overreact to market conditions, they may miss out on some of the best-performing days.

Although no one can predict market movements, the times when everyone is overwhelmingly negative often turn out to be the best times to invest.

Invest regularly – despite volatility

Investing regularly means continuous investment regardless of what is happening in the markets.

When investors make fixed regular investments, they buy more units when prices are low and fewer when prices are high. This will smooth out the investment journey and average out the price at which units are bought. It thus reduces the risk of investing a lump sum at the wrong time, particularly amid market volatility.

The longer the time frame for investment, the better, because it allows more time for investments to grow, known as the ‘compounding effect’.

Organising your wealth to support your needs and goals

We take a personalised approach to assessing your needs, which allows us to provide you with long-term, bespoke solutions. To discuss your future investment plans, goals and dreams, please contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED. INVESTMENT SHOULD BE REGARDED AS LONG TERM AND FIT IN WITH YOUR OVERALL ATTITUDE TO INVESTMENT RISK AND FINANCIAL CIRCUMSTANCES.

THIS CONTENT IS FOR YOUR GENERAL INFORMATION AND USE ONLY AND IS NOT INTENDED TO ADDRESS YOUR PARTICULAR REQUIREMENTS OR CONSTITUTE ADVICE.

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Healthy, wealthy and well advised https://www.lloydosullivan.co.uk/blog/healthy-wealthy-and-well-advised/ https://www.lloydosullivan.co.uk/blog/healthy-wealthy-and-well-advised/#respond Tue, 25 Jun 2019 09:54:20 +0000 https://www.lloydosullivan.co.uk/blog/?p=1308
Financial complexities of passing on wealth

Passing on wealth is a sensitive subject, not just because of the financial complexities of it all, but also the emotion and family politics involved.

Having built up your business or wealth, many families often wish to enjoy it whilst also ensuring that it is passed on to the next generation in their families. Passing on what you have accrued in the most efficient way is of paramount importance. But some people find the idea of discussing passing on wealth uncomfortable.

Making decisions on your behalf

For those people that are healthy, wealthy and well advised, it is often said they rarely pay Inheritance Tax – or rather, their estates do not. As part of the planning process, it is essential to make certain that you have a current Will in place. Your Will ensures that when you die, your wishes are clear.

Also, give consideration to arranging a Lasting Power of Attorney, a legal document that lets you appoint one or more people to help you make decisions or to make decisions on your behalf.

Your wealth over the years

Dying without a Will could leave your partner without any rights or protection if you’re not married. If you don’t have close family, your estate could pass to a distant relative you do not wish to benefit or do not know, or even to the Crown. If you already have a Will, you should consider reviewing it at least every five years.

It might be the case that you have built up your wealth over the years, or perhaps you have had a windfall or inherited a sum of money. Whatever your individual circumstances, setting up a trust could be the right decision for the future, with the added flexibility of tax-efficiency.

Potential Inheritance Tax liability

With our help, we can work out if you have a potential Inheritance Tax liability. Once we have this information, we’ll make recommendations about how you could reduce your Inheritance Tax by reviewing all the different allowances and options available. By funding your expenses from assets that are subject to Inheritance Tax, this will also help reduce your taxable estate.

A trust may also help you protect your wealth, making sure the people that matter to you most are the ones who benefit in a way that you want them to at the right time. Even though the current climate is less favourable, following major Inheritance Tax reform in 2006, there are still a number of instances where trusts can be created without an immediate Inheritance Tax charge.

Significant degree of asset protection

Putting taxation to one side for the moment, the separation of legal ownership of an asset from its beneficial ownership creates great flexibility and offers a significant degree of asset protection. This can be valuable in a range of situations, such as providing for children or grandchildren, dealing with assets on death, and on marriage breakdown.

In thinking about passing wealth down the generations, another concern is whether your property may have to be sold to pay for nursing home fees. If a couple, whether or not married, own their home jointly, then it is normally possible by way of their Wills to ensure that if the longer-lived member of the couple eventually has to go into a home, the share of the house which was owned by the other member of the couple is ring-fenced by means of a trust, so at least that part of the value of the house does not end up going on home fees.

Tax legislation and allowances constantly evolve

If you are a farmer, you are probably aware that agricultural property relief on agricultural property, including the farmhouse, can be claimed to reduce or avoid an Inheritance Tax bill after death. You should also be aware, though, that if before your death you retire, in the sense that you are no longer actively farming the land yourself, then the relief may be lost, particularly on the farmhouse.

Making sure that you can pass on your wealth to the right people, at the right time, will be one of the most valuable things you can do for you and your family. Tax legislation and allowances are constantly evolving, so it is essential to review your financial and investment arrangements to ensure unexpected tax bills won’t jeopardise any wealth intended for your family.

Protecting what is yours

You have worked hard throughout your life to accumulate and preserve your wealth. We can give you peace of mind of knowing that you have laid the firmest foundations for your family’s future. Please contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk if you would like to arrange a meeting to discuss your situation – we look forward to hearing from you.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS.

ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

THE RULES AROUND TRUSTS ARE COMPLICATED, SO YOU SHOULD ALWAYS OBTAIN PROFESSIONAL ADVICE.

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Goldilocks economy https://www.lloydosullivan.co.uk/blog/goldilocks-economy/ https://www.lloydosullivan.co.uk/blog/goldilocks-economy/#respond Tue, 25 Jun 2019 09:53:15 +0000 https://www.lloydosullivan.co.uk/blog/?p=1306
How to prepare your portfolio for inflation

Very low or very high inflation is damaging to the economy. The aim is usually to try and keep CPI at 2% in order to maintain a ‘Goldilocks Economy’ – not too hot, not too cold.

Over time, inflation can reduce the value of your savings because prices typically go up in the future. This is most noticeable with cash. Inflation is bad news for savers, as it erodes the purchasing power of your money. Low interest rates also don’t help, as this makes it even harder to find returns that can keep pace with rising living costs. Higher inflation can also drive down the price of bonds. These become less attractive because you’re locked in at interest rates that may not keep up with the cost of living in years to come.

Offset inflation loss

When you keep your money in the bank, you may earn interest, which balances out some of the effects of inflation. When inflation is high, banks typically pay higher interest rates. But once again, your savings may not grow fast enough to completely offset the inflation loss.

The UK’s Consumer Prices Index (CPI) measure of inflation tracks how the prices of hundreds of household items change over time, and there are several different factors that may create inflationary pressure in an economy.

Stronger economic growth

Rising commodity prices can have a major impact, particularly higher oil prices, as this translates into steeper petrol costs for consumers. Stronger economic growth also pushes up inflation too, as increasing demand for goods and services places pressure on supplies, which may in turn lead to companies raising their prices.

Detrimental performance impact

The falling pound since Britain’s vote to leave the EU contributes to higher inflation in the UK, as it makes the cost of importing goods from overseas more expensive.

The impact of inflation on investments depends on the investment type. For investments with a set annual return, like regular bonds, inflation can have a detrimental impact on performance – since you earn the same interest payment each year, it can cut into your earnings.

Strong economic growth

For stocks and shares or equities, inflation can have a mixed impact. Inflation is typically high when the economy is strong. Companies may be selling more, which could help their share price. However, companies will also pay more for wages and raw materials, which will impact on their value. Whether inflation will help or impact on a stock can depend on the performance of the company behind it.

On the other hand, precious metals like gold historically do well when inflation is high. As the value of the pound goes down, it costs more pounds to buy the same amount of gold.

Inflation risk indexation

There are some investments that are indexed for inflation risk. They earn more when inflation goes up and less when inflation goes down, so your total earnings are more stable. Some bonds and annuities offer this feature for an additional cost.

Index-linked gilts are government bonds whose interest payments and value at redemption are adjusted for inflation. However, if they’re sold before their maturity date, their market value can fall as well as rise and so may be more or less than the redemption value paid at the end of their terms.

Putting a strong investment strategy in place

Inflation is a market force that is impossible to completely avoid. But by planning for it and putting a strong investment strategy in place, you might be able to help minimise the impact of inflation on your savings and long-term financial plans. To discuss any concerns you may have, please contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS.

ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

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Smart investments https://www.lloydosullivan.co.uk/blog/smart-investments/ https://www.lloydosullivan.co.uk/blog/smart-investments/#respond Tue, 25 Jun 2019 09:52:06 +0000 https://www.lloydosullivan.co.uk/blog/?p=1304
Should I invest into a pension or an ISA?

Investors looking for tax-efficient ways to build a nest egg for retirement often look to both Individual Savings Account (ISAs) and pensions. Tax-efficiency is a key consideration when investing because it can make a considerable difference to your wealth and quality of life.

However, the type of investment and tax-efficiency is a common dilemma faced by many people. Which is better – an ISA or pension? In truth, there’s a place for both, and it’s easy to argue the case for each of them.

ISAs allow you to invest in the current 2019/20 tax year up to £20,000 each year, providing tax-efficient growth and income. Withdrawals are tax-free because the money paid in was from after-tax income.

Pensions are also very tax-efficient. All contributions receive tax relief from the Government payable at your highest rate of tax. For example, it would only cost a basic-rate taxpayer £80 to contribute £100 into their pension because they would receive tax relief at 20%. This is added to the £80, representing the 20% tax they would have paid if they had earned that £100.

For higher earners, it is even better, with higher-rate taxpayers only needing to contribute £60 in order to boost their pension fund by £100, and additional-rate taxpayers only needing to pay £55.

So, pensions give you tax relief on money going in, but when it comes to drawing on your pension, tax will be payable at your marginal rate.

ISA investments don’t allow for tax relief on the money being invested, but they do give you total tax exemption on any gains made within the ISA. So with an ISA, when you come to withdraw funds, you will not pay a penny of income or Capital Gains Tax.

Put simply, the right option will be different for different people. There will be some for whom the right answer is a pension, others for whom the right answer is an ISA. If it was clearly one or the other, it would be far simpler.

Increase your wealth by making your money work harder

If your goal is to live an idyllic retirement lifestyle, we can help you build wealth with a clearly focused strategy. To find out more, please contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk – we look forward to hearing from you.

A PENSION IS A LONG-TERM INVESTMENT.

THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

PENSIONS ARE NOT NORMALLY ACCESSIBLE UNTIL AGE 55. YOUR PENSION INCOME COULD ALSO BE AFFECTED BY INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS. THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION, WHICH ARE SUBJECT TO CHANGE IN THE FUTURE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

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Why do you want to invest? https://www.lloydosullivan.co.uk/blog/why-do-you-want-to-invest/ https://www.lloydosullivan.co.uk/blog/why-do-you-want-to-invest/#respond Tue, 21 May 2019 10:35:26 +0000 https://www.lloydosullivan.co.uk/blog/?p=1286
Reaching specific life goals requires planning

If you don’t know where you want to go, you’ll find it tricky getting there! Investment goals cover everything from the old adage of saving for a rainy day to planning for a comfortable retirement.

Goal-based investing, which emphasises investing with the objective of reaching specific life goals – such as buying a house, saving for your child’s education or building a nest egg for retirement – instead of comparing returns to a benchmark.

Whatever your personal investment goals may be, it is important to consider the time horizon at the outset, as this will impact the type of investments you should consider to help achieve your goals. It also makes sense to revisit your goals at regular intervals to account for any changes to your personal circumstances, for example, the arrival of a new member to the family or salary increases.

Investment strategies should often include a combination of various fund types in order to obtain a balanced approach to investment risk. And maintaining a balanced approach is usually key to the chances of achieving your investment goals, while bearing in mind that at some point you will want access to your money.

Short Term

Lifestyle planning

Knowing you’re prepared for life’s surprises can take a burden off your mind – and your bank balance. An emergency fund is a pot of money set aside to help you cover the financial surprises that life throws at you – surprises such as losing your job, needing to make unexpected home repairs, replacing your car or unplanned emergency travel. These events can be stressful and costly, but preparing in advance can be a big help.

Medium Term

School and university fees planning

School and university fees planning may involve the same idea of buying a mix of equities, bonds and other investments in order to build enough capital to pay for future fees. Most are geared to begin paying out after a fixed-term horizon, usually ten years, with withdrawals allowed incrementally after that to meet the fees. In this way, they need to be more flexible than pension plans that pay out on retirement.

For this reason, many parents and grandparents often start planning when a baby is born, which provides a better way to pay fees in monthly payments, making the cost of an independent education or university education more manageable.

Long Term

Retirement planning

The importance of shifting goals can be seen in pension plans, where it is quite common for funds to be more geared towards equities in its early stages to try to build capital growth. As the individual grows closer to retirement age, the pension plan will tend to lean more towards bonds to reduce volatility. Exposure to other riskier sectors may also be gradually reduced as the individual ages.

Factors to help you develop your investment goals

Your goal
What are you investing for, and how much are you hoping to get back?

Your attitude to risk
How comfortable are you with taking risk with your money, as you may get back less than you invested?

Your time horizon
How long are you prepared to put your money away for?

Income, growth or both
Do you want to look at funds that aim to make regular payments through dividends or interest (like an income), or at those that aim to increase in value over time?

The important thing is to do something

Setting goals makes it more likely that you’ll save for – and achieve – every goal. You’ll also be more motivated to reach a goal since you can gauge its progress. To discuss your future plans and discover how to achieve them, please speak to Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS.

ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

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Bank of Mum and Dad https://www.lloydosullivan.co.uk/blog/bank-of-mum-and-dad-2/ https://www.lloydosullivan.co.uk/blog/bank-of-mum-and-dad-2/#respond Tue, 21 May 2019 10:32:10 +0000 https://www.lloydosullivan.co.uk/blog/?p=1284
Innovative products to be created for would-be home owners

The Building Societies Association (BSA) have recently published a raft of recommendations as to how the mortgage industry can support the Bank of Mum and Dad in their endeavours to help first-time buyers onto the property ladder.

They have called for more innovative products to be created to enable parents and grandparents to loan or gift money to family members who are would-be home owners. The BSA also wants building societies to provide clearer communication to help explain all the options, and it wants regulatory and tax barriers to be broken down.

Helping younger homebuyers climb onto the housing ladder

The BSA’s report recognises the contributions of the Bank of Mum and Dad to date, highlighting the billions of pounds that have been gifted and lent to help younger homebuyers climb onto the housing ladder.

They also confirmed that 90% of all building societies expect this form of financing to play an increasing role in helping first-time buyers over the next five to ten years. Their priority now is to help create an environment whereby the financial well-being of the older generation is not put at jeopardy due to their generosity in helping younger family members achieve their housing objectives.

• 86% of people surveyed wanted to own their own home, but the financial challenges facing first-time buyers meant many thought they would never achieve this aspiration
• In 2017, there were 360,000 first-time buyers – but the minimum should be nearer 450,000. The ability to buy was increasingly concentrated on dual-earning households and those with higher incomes
• More than half of aspiring first-time buyers expected the Bank of Mum and Dad to support them onto the housing ladder

Support between generations remains a fundamental ambition

The report also highlighted how the Bank of Mum and Dad wasn’t just about family members handing over cash in the form of gifts and loans – many customers wanted support between generations through guarantees or using their property or savings as security. Indeed, it also identified equity release or downsizing from larger properties as ways to support the younger generation.

Robin Fieth, Chief Executive of the BSA said: ‘Home ownership remains a fundamental ambition for the majority of people…against the challenging backdrop of high prices, a woefully inadequate supply of homes and a growing intergenerational divide, new ideas and strong debate are essential. Family help – the so-called “Bank of Mum and Dad” – is great for those fortunate enough to have this option, but innovations in underwriting could help all potential first-time buyers.’

Mums and Dads – are you planning to lend money to your children?

It goes without saying that lending money to your loved ones shouldn’t endanger your own financial status. But if this is your plan, then it requires professional financial advice to assess all of your options. If you would like to discuss this subject with us, please contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

APPLICATIONS ARE SUBJECT TO STATUS AND LENDING CRITERIA.

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Wealth creation https://www.lloydosullivan.co.uk/blog/wealth-creation/ https://www.lloydosullivan.co.uk/blog/wealth-creation/#respond Tue, 21 May 2019 10:30:21 +0000 https://www.lloydosullivan.co.uk/blog/?p=1282
Spreading risk by accessing different types of assets

Investing for the long term means persisting through market swings. History shows that when people invest and stay invested, they’re more likely to earn positive returns in the long run. When markets start to fluctuate, it may be tempting to make financial decisions in reaction to changes to your portfolio.

Investing in a pooled investment, also known as a ‘collective investment scheme’, provides investors to access investments through a fund, rather than buying direct assets on their own. Investing in a fund, such as a unit trust, an Open-Ended Investment Company (OEIC) or an investment trust, can give investors exposure to a wide range of companies and enables the spread of risk by providing access to different types of assets. Fund managers make the decisions about when to buy and sell assets.

Higher or faster growth

Different funds take different levels of risk. Some are relatively low risk – for example, they might invest mostly in cash. Others are very risky, investing in new, uncertain companies or markets with the aim of higher or faster growth. And there’s everything in between. By obtaining professional financial advice before you invest, you can ensure that your fund choices offer the right level of investment risk.

Dipping in and out of the market and trying to pick the best times to invest is an extremely risky strategy, as no one knows for certain which way markets are likely to move next. One aspect of long-term investing is that it almost entirely removes your emotions from the equation.

Avoid making unwise decisions

Staying invested over the longer term, preferably five years but ideally longer, gives investments a greater chance of positive returns, though there can be no guarantees. This means investors don’t need to focus on daily or short-term volatility that might occur. By monitoring performance only occasionally, investors should avoid making unwise decisions to cash them in earlier than necessary. Instead, the focus should be on the long-term growth potential of the investments.

Investing on a regular basis not only suits most people’s income streams, but it also helps to create discipline. Making a commitment to set aside an affordable amount each month is unlikely to affect someone’s lifestyle. Regularly investing money into the stock market rather than putting in a lump sum could also smooth returns over time, because investors can benefit from so-called ‘pound-cost averaging’.

Smooth out market volatility

Investing regularly enables investors to take advantage of pound-cost averaging. By investing each month, investors benefit from times when the markets are falling and are able to buy more units in a fund. This means the investment can acquire more shares when prices are low, and less when they are more expensive, with the theory being that investors effectively pay the average price over a fixed period, which can help smooth out market volatility. However, this strategy, as with any other, won’t always work and could lead to lower returns than if the investor had invested one lump sum at the outset.

Investors should consider investing in a variety of assets – including cash, fixed-interest bonds, equities and property. This provides diversification and avoids relying on one particular investment to produce gains. This also helps reduce the risk of losing money, as the asset types that are performing well can hopefully offset those that at the same time are experiencing a period of lower performance.

Reviewing your investment portfolio

Building a diversified portfolio can seem an onerous task. Successful investing isn’t just a question of allocating your savings to various assets and then sitting back to wait for the profits to roll in. If only it were that simple. To discuss your investment goals, please contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk – we look forward to hearing from you.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

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Why silence isn’t necessarily bliss https://www.lloydosullivan.co.uk/blog/why-silence-isnt-necessarily-bliss/ https://www.lloydosullivan.co.uk/blog/why-silence-isnt-necessarily-bliss/#respond Tue, 21 May 2019 10:29:15 +0000 https://www.lloydosullivan.co.uk/blog/?p=1280
Over six million adults refuse to discuss their Will with loved ones

Making a Will is very important if you care what happens to your money and your belongings after you die, and most of us do. But have you tried to talk with your parents about their Will? If that conversation isn’t happening, you’re not alone.

And it’s not only parents that are the only ones who are uncomfortable. Adult children may also be nervous about raising the topic of their parents’ finances for fear they appear greedy or nosy. Understandably talking about dying can be seen as ‘taboo’, and it is not always easy to bring it up. However, discussing your Will with beneficiaries means they are better prepared when the time comes.

However, worryingly almost six and half million adults refuse to discuss their Will with loved ones according to new research[1]. A quarter (26%) of people with a Will say they will not discuss it as they do not want to think about dying and one in four (27%) do not want to upset beneficiaries by discussing the contents of their Will[2].

It is also hugely important for family members to be aware of vital decisions in your Will, such as who will look after your children. By overcoming ‘death anxiety,’ the natural fear of talking about death and the emotions associated with it, these important conversations can ensure your beneficiaries are aware of your wishes and understand them.

Nearly half (45%) of UK parents, the research identified, with adult children believe their Will is ‘no one’s business’ but their own or a partner’s. But sharing the contents of a Will makes the financial and practical consequences of death easier for those left behind. Losing someone can have a huge impact on finances for months or even years to come, so it is crucial for families to be prepared.

‘When I’m gone’ conversation with your partner or family

• Avoid talking to someone when they’re busy. Look for opportunities to broach the subject such as when you’re discussing the future or perhaps following the death of someone close to you

• Consider beginning the conversation with a question such as, ‘Have you ever wondered what would happen…?’; ‘Do you think we should talk about…?’

• Think about how you would manage financially should the worst happen. What impact would losing a partner or family member have on your household income and your expenses? Be aware that your financial situation may change in the future

• Make sure you know where all important documents such as Wills, bank details, insurance policies, etc. are kept, so that you have all the information you might need

• Prepare in advance – would you know how to manage the day-to-day finances? If not, consider how you could start to learn about them now so this doesn’t come as a shock

In the event of an illness, loss of capacity or death, are your plans in place?

Many of us will eventually reach a point in our lives when we require specialist assistance to ensure that our family will be able to cope better and manage their affairs in the event of an illness, loss of capacity or death. If you would like to review your particulate situation, contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk to arrange an appointment.

Source data:

[1] Royal London – six million figure is based on ONS adult population stats of 52.8million. Our research shows 47% of UK adults have a Will – 26% of this figure equates to 6,458,535.05

[2] Opinium on behalf of Royal London surveyed 2,006 adults between 26 and 29 October 2018. The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+).

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