Lloyd O Sullivan https://www.lloydosullivan.co.uk/blog Our Blog Wed, 20 Nov 2019 15:03:16 +0000 en-US hourly 1 Every journey starts with a destination https://www.lloydosullivan.co.uk/blog/every-journey-starts-with-a-destination/ https://www.lloydosullivan.co.uk/blog/every-journey-starts-with-a-destination/#respond Mon, 18 Nov 2019 07:00:34 +0000 https://www.lloydosullivan.co.uk/blog/?p=1435
Looking at the bigger picture for your wealth and security

Every plan starts with a goal, just like every journey starts with a destination. Planning your financial future is not only important for your security, but it also provides peace of mind. Financial planning should be viewed as a long-term approach to managing your finances.

Creating your financial plan will help you see the bigger picture and set long and short-term life goals, which are crucial for mapping out your financial future. When you have a financial plan, it’s easier to make financial decisions and stay on track to achieving your goals.

Robust and practical financial plan

Everyone’s situation is unique, but creating a coherent, robust and practical financial plan is crucial if you want to take control of your financial future. We often meet people who suddenly realise that they took their eye off the financial ball.

When this happens, the impact of an unexpected situation or emergency can be much more intense, because there are money issues on top of a very stressful situation. So we look objectively at your plans to provide solutions that work as your priorities change over the years.

Time out to consider your financial position

Procrastination is the greatest enemy of achieving financial independence. Creating your financial plan doesn’t have to be a daunting process. It is more about taking the time out to consider your financial position and what changes you need to make. And it’s built on a close analysis of your entire financial position, requirements, prospects and objectives.

The first step is to identify your financial goals in the short, medium and long term. This could include buying a property, paying off the mortgage, retiring by a certain age or setting up your own business. There is no right or wrong financial goal – they are unique to you and what you ultimately want to achieve.

Meeting your needs today and in retirement

A financial plan will help you meet your needs today and in retirement and help protect you from the unexpected along the way. It includes the right mix of income, savings and insurance protection products to help you meet your financial goals.

Once you have identified your financial goals, it is important then to consider your current financial position. What assets and liabilities do you have, and what is your income and expenditure? You need to determine how much can you afford to save or invest on a regular basis to assist in achieving your goals.

Establishing the plan

Once you have determined your current position and your goals, the next stage is to develop your plan. Creating your road map will help you understand the financial structure you need in place to achieve your goals and reach each destination successfully. Any effective plan also needs to have tax planning as its foundation.

What should you consider for your financial road map?

Your goals

Where do you want to be or expect to be in 10, 20 and 30 years? Remember that you may be living in retirement longer than you think.

Your emergency fund

How do you plan on paying for unexpected events such as a career break, an extended illness or a job loss?

Your longevity

People are living longer, so there’s a chance that you could be living into your 90s. Be optimistic. How much money will you need?

Your lifestyle

Consider the kind of lifestyle you have now and think about what you will want or need later on. How much will this lifestyle cost?

Your protection

How will you keep safe all that you hold dear if you were to die unexpectedly? What would happen if you were diagnosed as suffering from a serious illness? Could you continue to pay the bills?

Your current savings plan

How much money are you saving now? Is it enough to help fund your future short, medium and long-term goals? At what point do you expect to start using your savings for living expenses?

Your level of investment risk

Are you comfortable with the level of risk you’re taking with your investments? Does it need to change to better reflect your own situation or the state of the economy?

Your income in retirement

Take a look at any income you may have in retirement. Are you ready for life beyond work? How much money do you need to retire? How long will your money last? How much will you need to spend?

Your estate plan

More than a Will, an estate plan can ease the burden on your loved ones, ensure your assets are distributed as you wish, reduce taxes, and plan for future personal care and health care needs. How do you want to pass on your wealth?

Review the plan

Effective financial planning is about much more than simply coming up with an initial strategy. Regularly going back to your plan and reviewing it is crucial to ensuring it remains suited to your needs and aspirations. As with all of life’s plans, things can go awry and opportunities can present themselves.

Finding time in our busy schedules to review our financial plans is not always easy. You should review your plan at least annually, or when your circumstances change, to ensure that you remain on course to meeting your goals. It’s also a time for reviewing the performance of your investments and changing these where appropriate.

It’s all about what you want

Whether building a financial plan with you from the start, or reviewing your existing arrangements, we can give you the expert and professional financial advice that can help you meet your goals. To find out more, or to arrange a meeting, please contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk.

]]>
https://www.lloydosullivan.co.uk/blog/every-journey-starts-with-a-destination/feed/ 0
Health fears https://www.lloydosullivan.co.uk/blog/health-fears/ https://www.lloydosullivan.co.uk/blog/health-fears/#respond Mon, 18 Nov 2019 07:00:27 +0000 https://www.lloydosullivan.co.uk/blog/?p=1445
Barrier to employment and retention of older workers

Older workers are an invaluable component of the UK workforce, given their extensive industry knowledge and expertise that all colleagues – particularly younger generations – can benefit from.

They also represent a valuable talent pool for employers as Britain struggles to counter a growing skills shortage. It’s an unfortunate fact of life that health concerns tend to become more frequent as we age, and they will become more common in the workforce as we live and work for longer.

Potential for poor health to act as a barrier

Nearly three quarters (71%), or 23 million employees[1], plan to work beyond the age of 65, but two in five of these (41%) – equivalent to 9.5 million workers – are concerned their health will make it difficult to do so, according to new research[2].

Over a quarter (27%) of UK employees think their boss views older workers as a ‘hassle’ because of these possible health struggles. This highlights the potential for poor health to act as a barrier to employment and retention of older workers.

Older workers bring tangible benefits to the workplace

Employees also believe their boss perceives older workers as stuck in their ways (30%) and technologically inept (30%). Among the biggest concerns of those intending to work beyond the age of 65 is that they will be treated differently because their boss or colleagues perceive them as being ‘old’.

Despite these negative perceptions, a significant proportion of employees recognise the tangible benefits that older workers bring to the workplace. Three in ten (28%) UK workers believe that a mix of older and younger workers is desirable because it creates a wider range of skills in the workforce.

Opportunity to tap into the value of this underused talent pool

Meanwhile, two in five say that their employer values the experience (43%) and loyalty (40%) of older workers. Demonstrating the latter, among survey respondents aged 55 and above, almost two thirds (62%) have been with their employer for ten years or more. A third (32%) of UK employees also acknowledge that older workers help younger staff by coaching and mentoring them.

The UK’s ageing population means that the number of older workers in the country is set to increase in the coming years, providing employers with the opportunity to tap into the value of this underused talent pool. For example, if half a million keen and able older workers who are currently out of work returned to employment, the UK’s GDP would increase by £25 billion per year[3].

Not doing enough to support older employee health

Employers have a duty of care towards older workers, particularly as a majority (68%) of those planning to work beyond 65 intend to stay in the same job. However, some employers could lose out on retaining valuable older workers because they do not do enough to support employee health.

Among the 14% planning to switch jobs when working beyond the age of 65, a fifth say it is because their current job is either too physically demanding (22%) or too stressful (20%).

Help to resolve issues such as a stressful or excessive workload

Employers keen to retain older workers must address these issues, especially considering it costs an average of £30,000 to replace an employee[4]. The research reveals that flexible working (32%) and appropriate workplace benefits (16%) are the best ways to attract and support older workers and can help to resolve issues such as a stressful or excessive workload.

Employees planning to work beyond 65 indicate that income protection (17%) and life insurance (16%) would be the most highly valued benefits, while one in ten value critical illness cover (13%) or an Employee Assistance Programme (10%).

Peace of mind and providing security

We can help you put your financial plans in place. We’ll enable you to achieve your goals and ambitions while at the same time giving you peace of mind and providing security in times of uncertainty. Contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk to discuss your goals and ambitions.

Source data:

[1] ONS Labour Market Statistics, May 2019. There are 32.70 million people aged 16 years and over in employment in total

[2] Canada Life Group Insurance. Based on a survey of 1,002 full and part-time employees, carried out in April 2019

[3] RSPH, That Age Old Question

[4] Oxford Economics, The Cost of Brain Drain

]]>
https://www.lloydosullivan.co.uk/blog/health-fears/feed/ 0
Time to update your planned retirement date? https://www.lloydosullivan.co.uk/blog/time-to-update-your-planned-retirement-date/ https://www.lloydosullivan.co.uk/blog/time-to-update-your-planned-retirement-date/#respond Mon, 18 Nov 2019 07:00:20 +0000 https://www.lloydosullivan.co.uk/blog/?p=1437
Savers risk missing out on money from their final pension pot

Millions of savers risk missing out on money from their final pension pot if their provider doesn’t have their correct planned retirement date. The analysis[1] revealed that workplace pension savers in the UK could miss out on thousands of pounds in retirement because they haven’t updated their planned retirement date.

Recent changes to State Pension age, and the removal of the default retirement age, means people are now free to work for as long as they want or need. Previously, women would receive their State Pension at age 60 and men at 65. Now, anyone aged under 41 won’t receive it until they are 68.

Consequences in terms of retirement income

If someone is planning to retire later and fails to notify their pension provider, there can be consequences in terms of retirement income. This outcome can occur because every default investment solution has a de-risking element.

This means that as savers get closer to their retirement date, investments are switched from higher-risk (higher return) funds to lower-risk (lower return) funds to protect their retirement savings from sudden market moves.

Average earner in an automatic enrolment scheme

The analysis shows that an average earner in an automatic enrolment scheme could miss out on more than £4,000[2] in their pension pot by sticking with a default retirement age of 65 when they actually intend to retire at 68.

But anyone whose retirement age is still set at 60 could miss out on almost £10,000. This is a situation that is more likely to affect women, due to the way default retirement ages were set in the past.

Moving investments to less risky assets too early

If a provider holds a retirement age that is too young, they will move investments to less risky assets too early. This means people lose out on investment growth when their pension pot is the largest.

If they hold a retirement age that is too old, they will keep the money invested in riskier investments for too long. If investments lose value too close to the planned retirement age, there may not be time for them to recover their value. This means less money, or perhaps a last-minute delay to retirement plans.

Setting the default retirement age for all employees

With 47% of all workers saving into defined contribution pensions[3], and around 90% of those invested in default funds, this issue could affect a significant number of people.

Employers typically set the default retirement age for all their employees when they first set up their workplace pension. Members can then contact their provider and set their own retirement date.

Retiring at a different age than was originally assumed

De-risking profiles have been carefully designed to balance risk and return in the approach to retirement. But this balance is thrown out of kilter if someone wants to retire at a different age than was originally assumed when they started their pension.

Changing your retirement age is a really simple way to maximise the potential returns of your pension investments. Plus, it’s an opportunity to check how much is in your fund and if you’re on course to achieve the type of retirement you want.

Helping you make the right decisions

There are a range of choices and options available when it comes to setting realistic retirement goals. We can provide expert professional financial advice to help you make the right decisions. To find out more, please contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk.

Source data:

[1] Aviva Life 11 September 2019

[2] Loss for an individual earning £27,664 automatically enrolled at age 22 into an AE minimum scheme invested in Aviva’s My Future default fund, contributions assumed to increase annually at 2.5%, figures discounted for inflation at 2.5% p.a.

¥ Retirement age set to 68, life styling begins at 53 – total fund value at 68 is £137,600
¥ Retirement age set to 65, life styling begins at 50 – total fund value at 68 is £133,500
¥ Retirement age set to 60, life styling begins at 45 – total fund value at 68 is £127,700

[3] Employee workplace pensions in the UK: 2018 provisional and 2017 revised results. Office for National Statistics

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.

]]>
https://www.lloydosullivan.co.uk/blog/time-to-update-your-planned-retirement-date/feed/ 0
‘No, thanks’ to downsizing https://www.lloydosullivan.co.uk/blog/no-thanks-to-downsizing/ https://www.lloydosullivan.co.uk/blog/no-thanks-to-downsizing/#respond Mon, 18 Nov 2019 07:00:19 +0000 https://www.lloydosullivan.co.uk/blog/?p=1443
More baby boomers plan to stay in their own home

A growing number of ageing baby boomers are saying, ‘No, thanks’ to downsizing, choosing instead to remain in the same house in which they raised their family and created lifelong memories.

Over two thirds of people say they plan to stay in their own home during their retirement, according to new research[1]. The findings suggest nearly 14 million people plan to remain in their current home when they retire. Typically, people look to downsize or move to retirement housing following a negative event, such as health issues or the death of a spouse.

Generating income through equity release

Of those who say they will stay, an increasing percentage will use their property to generate income through equity release. The research highlights that 69% of adults say they will remain in their current home in old age when asked what they are most likely to do with their main property in retirement.

There has been a 5% increase in three years, compared to when the survey was last carried out in 2016. The second most popular option was downsizing at 24%, with less than 4% of those surveyed saying they would sell or rent their house when they retire.

People who want to grow older in their homes

Of the respondents who said they would remain in their home, 6% plan to release cash from the property, up from 5% in 2016. This increase is in line with the growing popularity of equity release options, which includes lifetime mortgages.

The latest figures from the Equity Release Council[2] reveal that in the first two quarters of 2019, £1.85 billion was lent to customers using equity release, more than double the amount in the first two quarters of 2016 at £908 million. Equity release may be an option to consider for some people who want to grow older in their homes and need to make improvements to make life more comfortable and their property more accessible.

An increasingly popular form of equity release

Lifetime mortgages are an increasingly popular form of equity release because, for many people, a large proportion of their wealth is tied up in the value of their home. A lifetime mortgage involves taking a type of mortgage that does not require monthly repayments. However, with some plans, rather than rolling up the interest, you can opt to make monthly repayments if you wish.

You retain ownership of your home, and interest on the loan is rolled up (compounded). The loan and the rolled-up interest is repaid by your estate when you either die or move into long-term care. If you are part of a couple, the repayment is not made until the last remaining person living in the home either dies or moves into care, meaning that both you and your partner are free to live in your home for the rest of your lives.

It’s good to talk

The reality is that increasingly fewer people are budging in retirement. Instead, they are ageing in place, preferring to remain in their own homes for as long as possible, whether to keep the family home, stay close to friends or remain in comfortable and familiar surroundings. To discuss your situation, please speak to Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk for further information.

Source data:

[1] Canada Life 08 October 2019

[2] The latest edition was produced in Autumn 2019 using data from new plans taken out in the first half of 2019, alongside historic data and external sources as indicated in the report. All figures quoted are aggregated for the whole market and do not represent the business of individual member firms.

EQUITY RELEASE MAY INVOLVE A HOME REVERSION PLAN OR LIFETIME MORTGAGE WHICH IS SECURED AGAINST YOUR PROPERTY.

TO UNDERSTAND THE FEATURES AND RISKS, ASK FOR A PERSONALISED ILLUSTRATION.

EQUITY RELEASE REQUIRES PAYING OFF ANY EXISTING MORTGAGE. ANY MONEY RELEASED, PLUS ACCRUED INTEREST, TO BE REPAID UPON DEATH OR WHEN MOVING INTO LONG-TERM CARE.

EQUITY RELEASE WILL AFFECT POTENTIAL INHERITANCE AND YOUR ENTITLEMENT TO MEANS-TESTED BENEFITS BOTH NOW AND IN THE FUTURE.

]]>
https://www.lloydosullivan.co.uk/blog/no-thanks-to-downsizing/feed/ 0
A long life needs a smart retirement plan https://www.lloydosullivan.co.uk/blog/a-long-life-needs-a-smart-retirement-plan/ https://www.lloydosullivan.co.uk/blog/a-long-life-needs-a-smart-retirement-plan/#respond Mon, 18 Nov 2019 07:00:16 +0000 https://www.lloydosullivan.co.uk/blog/?p=1441
Reaching the big 50 can be a financial wake-up call

Your 50s are a crunch time when saving for your retirement. If you’ve already set a retirement savings target but have been neglecting it, the reality is that now you can’t afford to delay your planning any further – and it’s time for a careful review.

Are you on track to retire when you want to? Do you have enough in your pension pot to retire comfortably? A comfortable lifestyle means different things to different people. If you’re in your 50s, it’s important to make retirement planning a priority if you haven’t done so already. At this age, retirement is no longer a distant concept, and time is short if your plans aren’t on track.

Will you have enough money for retirement?

One of the advantages you have in your 50s is that you are no longer relying on very long-term projections to determine if you have enough for retirement. The decision to retire will also depend on how financially independent you are, how healthy you are and even perhaps whether you have hobbies or goals you’ll want to pursue.

Now is the time to think about your retirement income goals and the steps that you need to take to achieve your goals. One of the most important things to do in your 50s is to work out how much money you’ll need to retire comfortably.

There are many variables to consider, including the age that you plan to retire, your life expectancy, your income requirements in retirement, your expected investment returns, inflation, tax rates and whether you qualify for the State Pension.

Given the number of variables, this part of the retirement planning process is not always straightforward.

Do you know the answer to these questions?

Q: When do I want to retire?

Q: How much income do I want in retirement?

Q: Do I have previous personal or company pension plans that need reviewing?

Q: Can I work part-time and take some of my pension?

Q: How much will my State Pension be?

Q: Where is my pension money invested, and is it growing?

Q: Can I retire early?

Providing you with more clarity

Nowadays, it’s common for many people to have accumulated an array of different pension agreements throughout their working life. By the time you have been working for a decade or two, you may have accumulated multiple pension plans on your career journey.

If appropriate, it may be worth considering a pension consolidation at this stage of your retirement planning process. This could provide you with more clarity in relation to your overall pension savings and make it easier to plan for your retirement. You may also benefit from lower costs.

But not all pension types can or should be transferred. It’s important that you know and compare the features and benefits of the different pension agreements you are thinking of transferring. It is a complex decision to work out whether you would be better or worse off combining your pensions.

Alternative way to grow your pension savings

In your 50s, one alternative way to grow your pension savings is to save money regularly into a Self-Invested Personal Pension (SIPP) account. This is a government-approved retirement account that enables you to hold a wide range of investments and shelters capital gains and income from HM Revenue & Customs (HMRC).

SIPP contributions receive tax relief. Basic-rate taxpayers benefit from 20% tax relief, meaning an £800 contribution is topped up to £1,000 by the Government, while higher-rate taxpayers and additional-rate taxpayers can claim an extra 20% and 25% tax relief respectively through their tax returns. Please note that the tax relief claimed from your tax return won’t be automatically added to your SIPP.

There is a limit to how much tax relief you are entitled to. It is currently applicable to contributions up to £40,000 or 100% of your earnings – whichever is lower. Another special feature is the three-year carry-forward rule. This rule allows you to carry the last three tax years’ annual allowance into the current tax year.

This is a useful feature for people who were unable to use up their annual allowances in the past but have the ability to do so for the current tax year. You must use this year’s allowance before using the carry forward rule.

There is also the option to invest within a Stocks & Shares ISA. Like the SIPP, this type of account allows you to hold a wide range of investments, and all capital gains and income are sheltered from HMRC. Each individual can contribute £20,000 per year into a Stocks & Shares ISA.

Good time to review your asset allocation

Your 50s is also a good time to review your asset allocation. You’ll want to ensure that your asset allocation matches your risk profile now that you are getting closer to retirement. As you move closer to retirement, and if appropriate to your situation, it may be sensible to begin reducing your exposure to higher-risk assets such as equities.

You need to pay close attention to your asset allocation and consider de-risking your portfolio. With retirement just around the corner, you don’t want to be overexposed to the stock market, as there is less time to recover from a major stock market correction.

If retirement beckons in the short to medium term, you may look to build a sustainable portfolio with perhaps an emphasis on greater income and reduced volatility and risk. However, moving away from an exposure to growth assets entirely or too early can be very expensive, so it’s essential you obtain professional financial advice before taking any action.

Unless your situation is unusual, some retention of these growth assets is going to be required during a retirement that could last more than 30 years. It’s important to balance the need for liquidity and an exposure to growth assets.

Review your retirement planning on a regular basis

Finally, in your 50s, it’s important to review your retirement planning on a regular basis. As with any other aspect of your personal finances, it’s essential to conduct regular reviews of your pension arrangements to ensure that they fit best with your current situation.

A regular review will ensure healthy progression towards retirement by checking that you are firmly on track with your retirement goals. This is the time to adjust your plan to fit any evolving needs and desires for your post-retirement years. We all change as people over time, and our pension pot needs to reflect our most current reality.

Retirement planning is a continual process, and the more often you review your progress, the more prepared you’ll be for retirement and the more in control you’ll feel. At a minimum, aim to review your retirement planning at least once annually to ensure that you’re on track to achieving your retirement goals.

We’re with you every step of the way

Are you already saving into your pension or just getting started? Whatever stage you’re at, we’ll give you a clear idea of how much you’ll need to afford the lifestyle you want after you retire. To find out more or to discuss your requirements, please contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk.

A PENSION IS A LONG-TERM INVESTMENT.

TRANSFERRING OUT OF A FINAL SALARY SCHEME IS UNLIKELY TO BE IN THE BEST INTERESTS OF MOST PEOPLE.

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.

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.

]]>
https://www.lloydosullivan.co.uk/blog/a-long-life-needs-a-smart-retirement-plan/feed/ 0
Tax-efficient shelters https://www.lloydosullivan.co.uk/blog/tax-efficient-shelters/ https://www.lloydosullivan.co.uk/blog/tax-efficient-shelters/#respond Mon, 18 Nov 2019 07:00:14 +0000 https://www.lloydosullivan.co.uk/blog/?p=1439
Use your ISA allowance or lose it forever

Even though the Individual Savings Account (ISA) deadline may be a number of months away, and despite the tax year date remaining the same year in year out, somehow it always creeps up on us. A tax year runs from 6 April one year to 5 April the next.

So rather than subjecting yourself to the mad rush of deciding how to fully utilise your 2019/20 ISA allowance, now is a good time to start preparing how you intend to use it. You also need to remember that if you don’t use your current ISA allowance by 5 April 2020, you’ve lost it forever.

You can shelter returns from tax

ISAs are a means of saving tax-efficiently and were introduced by the Government to encourage more of us to save and invest. Each tax year, the Government sets a limit on the amount you can contribute to an ISA (currently £20,000).

A married couple could invest £40,000 before 5 April 2020, followed by a further £40,000 on 6 April 2020 – a total of £80,000 invested with all profits or dividends completely free from UK Income Tax and Capital Gains Tax.

Time to consider your ISA options?

There are six different types of ISA, and they each have slightly different features:

Cash ISA

Basic and higher-rate taxpayers receive a Personal Savings Allowance (PSA) that sets the amount of interest they can earn tax-free in any year. The total amount you can save in a Cash ISA in the current 2019/20 tax year is £20,000. Using a Cash ISA gives you further flexibility to earn interest from the ISA without paying tax on it. Different accounts are available, which can offer easy access to your money – useful for short-term savings. When deciding what to do with any spare money you have, it’s worth bearing in mind the effect of inflation on what your money can buy. If inflation is higher than the interest you’re earning, then the cost of living is going up faster than the rate at which your money is growing.

Stocks & Shares ISA

In the current 2019/20 tax year, you can invest up to £20,000 in a Stocks & Shares ISA, which is generally considered a medium to long-term investment. You have complete flexibility as you can choose to invest your money in a wide range of different investments, and any money you make in profit or dividends is completely free from UK Income Tax and Capital Gains Tax. You can invest a single lump sum or smaller amounts, but must you remember that once the tax year is over, if you have not used all your ISA allowance, you will lose it.

Junior ISA

Junior ISAs are a way to save tax-efficiently for your children. There are two types of Junior ISA: a Cash Junior ISA and Stocks & Shares Junior ISA. Family and friends can put up to £4,368 into the account on behalf of the child in the 2019/20 tax year. There’s no Income Tax or Capital Gains Tax to pay on the interest or investment gains. Junior ISAs are available to any child under 18 living in the UK. The ideal festive gift this year!

Help to Buy: ISA

A Help to Buy: ISA was introduced to help first-time buyers save towards the cost of buying their first home. You can make an initial deposit of £1,000 when you open a Help to Buy: ISA, and then receive £50 for every £200 saved up to a maximum of £12,000. The tax incentive is capped at £3,000. You also earn tax-efficient interest on your savings as with a standard ISA. These ISAs are limited to one per person rather than one per house. You can’t contribute to a Cash ISA in the same tax year. The Help to Buy: ISA scheme closes on 30 November 2019. After that date, they won’t be available to new savers anymore. However, if you opened your Help to Buy: ISA before then, you can keep saving into your account until 30 November 2029 when accounts will close to additional contributions. You must also claim your bonus by 1 December 2030.

Lifetime ISA

The Lifetime ISA is a longer-term tax-efficient savings account that will let you save up to £4,000 per year and receive a government bonus of 25% (up to £1,000). As with other ISAs, you won’t pay tax on any interest, income or capital gains from cash or investments held within a Lifetime ISA. It’s designed for first-time buyers between the ages of 18 and 40 to use towards a deposit for their first home or towards future retirement savings once they hit 60 years of age.

Innovative Finance ISA

An innovative finance ISA (IFISA) lets you use your tax-efficient ISA allowance while investing in peer to peer (P2P) lending. They work by lending your money to borrowers, and in return you receive interest based on the length of time and the risk of your investment. However, they are considered higher risk than other types of ISA due to the risk of default by borrowers and the lack of a secondary market for these types of assets.

Take the complexity out of investing

If you’re new to the world of ISAs or have an existing portfolio, and you want to make the most of your allowance, please contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk before it’s too late – 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 TAX BENEFITS RELATING TO ISA INVESTMENTS MAY NOT BE MAINTAINED.

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.

]]>
https://www.lloydosullivan.co.uk/blog/tax-efficient-shelters/feed/ 0
Money lessons https://www.lloydosullivan.co.uk/blog/money-lessons/ https://www.lloydosullivan.co.uk/blog/money-lessons/#respond Thu, 24 Oct 2019 15:04:29 +0000 https://www.lloydosullivan.co.uk/blog/?p=1419
5 tips that add up to teaching your child about money matters

Understanding how money works is an essential life skill. Unfortunately, for a lot of people, these lessons come later than they should, and often as the result of something going terribly wrong.

Not enough people make financial education a priority for children, which results in young adults entering a surprisingly complex financial world without the tools necessary to survive and thrive. Even if your children are very young, remember that the sooner you start teaching them money and personal finance skills, the more adept they’ll be at applying those skills when the time comes.

Instilling a few basic principles early on

Educating, motivating and guiding children and grandchildren to become regular savers and investors will enable them to keep more of the money they earn and do more with the money they spend. Everyday spending decisions can have a far more negative impact on children’s financial futures than any investment decisions they may ever make.

Finance is often perceived as complicated and remote, but this can be a costly impression. Understanding money matters is a valuable life skill. What children learn about money in childhood will shape their own attitudes and behaviour later on. By instilling a few basic principles early on, you could help influence for the better how they manage their money in adulthood.

1. Communicate with children as they grow older about your values regarding money

How to save it, how to make it grow and, most importantly, how to spend it wisely. Financial lessons must be age-appropriate to be meaningful and beneficial. Young children are not miniature adults. Lessons should be tailored for their age, rather than just made simpler.

Start as soon as they are able to count, and make money the topic of regular family discussions. Time these around dates (for example, a birthday or Christmas) when they are due to receive a cash gift so that you can talk about saving versus spending.

2. Help children learn the differences between needs, wants and wishes

Help your children avoid spontaneous purchases by setting goals and prioritising what they spend their money on. This will prepare them for making good spending decisions in the future.

While a child will naturally ask for the latest games console, making them understand the difference between needs and wants will help them make sensible spending decisions from a very young age.

If they want the latest Pokémon video game that costs nearly £400, explain how long it would take an adult to earn that amount of money. Create a specific example to put it into perspective.

3. Setting goals is fundamental to learning the value of money and saving

Help your children to set a goal and track their savings and their spending. Young or old, people rarely reach goals they haven’t set. Nearly every toy or other item children ask their parents to buy them can become the object of a goal-setting session.

Such goal-setting helps children learn to become responsible for themselves. A great way to visualise goals for children is to create a savings chart you can display somewhere prominent (for example, on the fridge).

Create a table and put a picture of what they are saving for. Then, each week, they can colour in the box as they move closer to their savings goal. That way, they can track their own progress easily by simply counting the number of boxes filled in, to see how much they have saved up to that point and the number of weeks still to go.

4. Introduce children to the value of saving versus spending

Explain and demonstrate the concept of earning interest income on savings. Consider paying interest on money children save at home. Children can help calculate the interest and see how fast money accumulates through the power of compound interest.

Later on, they will also realise that the quickest way to a good credit rating is a history of regular, successful savings. You could even offer to match what your children save on their own.

5. When giving children a ‘pocket money’ allowance, give them the money in denominations that encourage saving

Providing pocket money in lower denominations makes it easier to allocate a proportion of income to different goals. Labelled jars work to separate money – one for saving, one for spending and one for donating.

Any time they make money by doing chores or receiving birthday gifts, encourage your child to divide the cash equally among their jars.

It’s not a huge act, but it does show that it’s okay to spend some money, as long as you’re saving as well. Once they’re older, their bank and investment accounts can mirror the split. Keeping good records of money saved, invested or spent is another important skill young people should learn.

Looking to maximising your children’s wealth?

Teaching children about money isn’t currently on the UK school curriculum. The sooner you teach your children or grandchildren about the value of money, the more prepared they’ll be for adult life. Small steps can set them on the path to money maturity, enabling them to survive and thrive financially in adult life. To discuss the different saving and investment options for your children or grandchildren, speak to Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk for further information.

]]>
https://www.lloydosullivan.co.uk/blog/money-lessons/feed/ 0
Women’s State Pension age changes https://www.lloydosullivan.co.uk/blog/womens-state-pension-age-changes/ https://www.lloydosullivan.co.uk/blog/womens-state-pension-age-changes/#respond Thu, 24 Oct 2019 15:03:39 +0000 https://www.lloydosullivan.co.uk/blog/?p=1417
Government’s bid to ensure ‘pension age equalisation’

On 3 October, campaigners lost a significant legal battle against the Government’s handling of the rise in women’s State Pension age. Up until 2010, women received their State Pensions at the age of 60, but that has been increasing since then.

The retirement age for women has increased from 60 to 65, in line with men, and will go up to 66 by 2020, and to 67 by 2028. Nearly four million women have been affected by these changes. Women born in the 1950s claim the rise is unfair because they were not given enough time to make adjustments to cope with years without a State Pension.

Fast-tracked changes

Plans to increase the State Pension age were announced firstly in the Pensions Act 1995, but the changes were fast-tracked as part of the Pensions Act 2011. The Government decided it was going to make the State Pension age the same for men and women as a long-overdue move towards gender equality. Campaigners have argued the changes are discrimination, but the judges disagreed.

In a summary of the High Court’s decision, the judges said: ‘There was no direct discrimination on grounds of sex, because this legislation does not treat women less favourably than men in law. Rather it equalises a historic asymmetry between men and women and thereby corrects historic direct discrimination against men.’

Pension age entirely lawful

The Court also rejected the claimants’ argument that the policy was discriminatory based on age, adding that even if it was, ‘it could be justified on the facts’. The State Pension age has been increased by successive governments in a bid to ensure ‘pension age equalisation’ – so that women’s State Pension age matches that of men.

A spokesman for the Department for Work and Pensions said: ‘We welcome the High Court’s judgment. It has always been our view that the changes we made to women’s State Pension age were entirely lawful and did not discriminate on any grounds.’

Financial hardship for many

Up until 2010, women received their State Pensions at the age of 60, but that has been rising since then. While most campaigners support pension age equality, they argued that the Government was discriminatory in the way it has introduced it. The judges said there was nothing written into the law that ordered specific notification about the pension age changes.

The result has been that some women who thought they would retire and receive a State Pension at 60 found that they would have to wait longer – for some, a wait of more than five years, which has resulted in financial hardship for many.

Focus of much of the campaign

Those affected were born in the decade after 6 April 1950, but those born from 6 April 1953 were particularly affected and have been the focus of much of the campaign.

In June, the judicial review in the High Court heard the claim from two members of the Backto60 group who said that not receiving their State Pension at the age of 60 had affected them disproportionately. They argued that many women took time out of work to care for children, were paid less than men and could not save as much in occupational pensions, so the change had hit them harder.

Disadvantaged millions of women

The Backto60 group is seeking repayment of all the pensions people born in the 1950s would have received if they had been able to retire earlier. It argues that the speed of the change and what it calls the ‘lack of warnings’ has disadvantaged millions of women.

However, the Government has estimated that a reversal of the pension changes in the Acts of Parliament of 1995 and 2011 would cost £215 billion over the period 2010/11 to 2025/26. About £181 billion of that would be money potentially owed to women, and the rest to men.

‘Bridging’ pension to cover the gap

The Backto60 group has taken this legal action to demand ‘the return of their earned dues’. The separate Women Against State Pension Inequality (WASPI) group is calling for a ‘bridging’ pension to cover the gap from the age of 60 until their State Pension is paid.

Commenting, the group said: ‘We can’t simply follow in our parents’ footsteps as the social norms that worked for them are unlikely to work over longer lives. We will all have to start doing things differently. This is particularly apparent in retirement planning.’

What will your retirement income be?

Increasingly, people now feel saving for a pension is right, sensible, worthwhile and – above all – a normal part of working life. The fact that we are generally living, and remaining healthy, for longer than ever before is welcome news. If you have any questions or require any further assistance to find the right pension strategy for you, don’t delay – 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.

]]>
https://www.lloydosullivan.co.uk/blog/womens-state-pension-age-changes/feed/ 0
For richer, for poorer https://www.lloydosullivan.co.uk/blog/for-richer-for-poorer/ https://www.lloydosullivan.co.uk/blog/for-richer-for-poorer/#respond Thu, 24 Oct 2019 15:02:46 +0000 https://www.lloydosullivan.co.uk/blog/?p=1415
Pension and asset advice should be part of the divorce process

Divorce – it’s one of the most difficult subjects to talk about. The emotional upheaval of divorce can be difficult to deal with, but so too can the financial implications. When relationships come to an end, there are so many things to consider. Children, home and support are naturally the first things you focus on.

When you begin the process of separating a shared life, the sheer number of things to deal with is daunting. On top of that, the settlement may come with its own financial pressures, having a lasting impact on your plans for later in life.

Divorce rates are increasing for men and women over 55

A study from Research Plus[1] shows that divorcees retiring in 2018 expected to receive up to 18% less in retirement income. And with the Office for National Statistics[2] confirming that divorce rates are increasing for men and women over 55, it’s an issue likely to affect a growing number of the baby-boomer generation.

One of the most difficult assets to split

Divorcing spouses are often unaware of their rights and still less aware of how to begin to approach the issue of a fair split of pension assets. While it may not be the first thing you need to think about, a pension fund is likely to be one of the most difficult assets a couple will have to split in the event of a divorce, so it’s best to start early.

The stress of getting through a divorce can mean people understandably focus on the immediate priorities like living arrangements and childcare, but a pension fund and income in retirement should also be a priority.

Advice is crucial as early as possible in any separation

A pension fund is one of the most complex assets a couple will have to split, so anyone going through a divorce should seek legal and professional financial advice to help them do so. For many more couples, the increase in the value of pensions means that it is often the largest asset.

It goes without saying that this advice is crucial as early as possible in any separation where couples have joint assets. The law on divorce is different across the UK. Taking legal advice in the early stages of separation is important.

How much money you think you’ll need to live on later in life

Before planning how to separate your pension assets, you may want to consider how much money you think you will need to live on later in life. It’s never easy when things come to an end, but support and advice can make this clearer.

So what are the options available when you are ready to look at separating your assets? Firstly, it’s important that you both list the different pensions you and your ex-civil partner or spouse have. Then you can start to explore the options.

Across the UK, there are three core options to consider when you’re separating pension assets. These are pension sharing orders, pension attachment orders (called ‘pension earmarking’ in Scotland) and pension offsetting. Some of these options need to be administered by the courts, and not all of them will be suited to your individual circumstances.

Pension sharing order

Pension sharing is one of the options available on divorce or the dissolution of a registered civil partnership. Each party owns a share of the pension fund but is able to decide what to do with their share independently. This provides a clean break between parties, as the pension assets are split.

Pension attachment order

This redirects some or all of the pension benefits to you or your ex-civil partner or spouse at the time of payment. When the person who owns the pension receives their benefits, the pension provider makes a payment to their ex-civil partner or spouse. With this option, you don’t get the clean break as you would from the pension sharing order.

Pension offsetting

With pension offsetting, the total assets are considered and then divided up. For example, if your ex-partner has a large pension pot, they may keep this as you may agree to receive an asset of similar value (the house, for example). This may be an appropriate option if there are overseas pension assets that need to be split, as these cannot be shared via a UK court order.

When contemplating divorce, many people put themselves under undue stress worrying about their financial well-being. Much of that stress is due to the fear of the unknown before, during and after divorce. It is important to focus on your financial situation realistically, since doing so will give you a sense of control over your life, which in turn can reduce your stress level.

Protecting your pension and assets in a divorce

A divorce is never something people plan, but it should be something to plan for. There are so many assets to consider and so much legislation to understand. If you are considering a divorce and want to know more about the options available to you regarding your finances, please contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk.

Source data:

[1] Research Plus conducted an independent online survey for Prudential between 29 November and 11 December 2017 among 9,896 non-retired UK adults aged 45+, including 1,000 planning to retire in 2018.

[2] Divorce statistics from the Office of National Statistics, published 26 September 2018

A PENSION IS A LONG-TERM INVESTMENT. 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.

]]>
https://www.lloydosullivan.co.uk/blog/for-richer-for-poorer/feed/ 0
‘Sleepwalking’ into retirement https://www.lloydosullivan.co.uk/blog/sleepwalking-into-retirement-2/ https://www.lloydosullivan.co.uk/blog/sleepwalking-into-retirement-2/#respond Thu, 24 Oct 2019 15:01:53 +0000 https://www.lloydosullivan.co.uk/blog/?p=1413
How much will you need to save to afford a comfortable retirement?

There is a widespread and common-sense-based perception, backed to some extent by evidence, that planning and preparing for later life is associated with increased well-being in older age. Despite this, it’s concerning that some people at mid-life have not thought much about their later life nor taken fundamental future-oriented actions, such as engaging in financial planning or writing a Will.

New research[1] highlights the fact that millions of mid-life UK employees are sleepwalking into retirement. The study, which looked into mid-life[2] employees’ financial preparedness for later life, revealed that 64% of employees aged 45 and over – the equivalent to nearly nine million people – do not know how much they will need to save to afford a comfortable retirement.

Eligible for the State Pension

In addition, over five million mid-life employees (37%) do not know how much is already saved in their pension. Question marks also hang over the State Pension, with two in five (43%) respondents unaware of how much support they will receive from the Government. A further 26% do not know at what age they’ll be eligible for the State Pension.

If you’re entitled to the full new single-tier State Pension currently valued at £168.80 per week, this adds up to a retirement income of £8,777.60 per year[3]. Most employees (62%) aged 45 and over also do not know what the pension freedoms mean for them, while 37% do not know what type of pension scheme they have – for example, whether it’s a defined contribution or defined benefit scheme.

Never too late to save

The analysis highlights that it is never too late to save. But without a clear picture of what you currently have saved or might need to save for a comfortable retirement, the findings show that many UK employees are approaching retirement with their eyes closed – with no realistic idea of how near or far they are from their retirement destination.

As a first step, mid-life employees who are mystified by their pension savings should try to get a clear picture of what they have saved so far and how much of an income this can provide them with over the course of retirement.

Pensions in need of a boost

For some, this may be a pleasant surprise, while for others, it could be the wake-up call that’s needed to spur them to take action. People whose pensions are in need of a boost shouldn’t be disheartened, however, as it’s never too late to save. Your retirement should be something to look forward to, so it’s good to make sure you’ll have financial security for when you decide to stop working.

There are various ways to save for your retirement. Putting your money into a pension is one of the most tax-efficient ways to save for the kind of life you want in retirement. With the tax breaks you receive, it can mean that building up your retirement savings could cost less than you might think. What’s more, your pension is invested, which gives your money the potential to grow.

Helping you save for your future

It’s important to make sure you keep an eye on your pension value and understand if the amount you’re putting away will be enough to fund the future you want. We’re here to help you make good decisions so you can live the lifestyle you want when you retire. If you would like to discuss your particular situation, please contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk – we look forward to hearing from you.

Source data:

[1] Research of 1,036 UK employers and 2,020 employees aged 45+, conducted on behalf of Aviva by Censuswide, January 2019. All figures are based on this research unless otherwise stated. 8.9 million figure scaled up according to the latest ONS Labour Market Stats – calculated as 64% of UK employee population aged 45+

[2] Employees aged 45+ are defined as ‘mid-life employees’ throughout the release

[3] UK State Pension Allowance – weekly allowance of £168.80. £168.80 multiplied by 52 = £8,777.60

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.

]]>
https://www.lloydosullivan.co.uk/blog/sleepwalking-into-retirement-2/feed/ 0