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On Balance...

By Balance team, Mar 22 2018 10:38AM

With more options than ever before, retirement is becoming an even more complex area. There are so many questions you need to ask yourself before you reach retirement age, including how much income you will need and deciding what you want to do in your later years. So, this week, we have pulled together a checklist below containing five important questions for you to consider:

“Retirement's the most wonderful thing. I get to enjoy all the things I never stopped to notice on the

way up. After an extraordinary life, it's time to enjoy my retirement.”

Patrick Macnee

1. How much money will you have?

Every person – or couple - will have different expectations when it comes to the amount of money they need to live on when they retire; some people’s idea of a comfortable retirement would barely support the lifestyle of others. When you are trying to work out how much money you will have, it is worth checking this against your desired level of comfort - and this means looking at your current lifestyle. Okay, so you may have pensions, savings and investments, you may have also paid off any debts, loans and the mortgage and by the time you come to retire you should be paying less income tax too. However, you may have plans to travel more frequently, take up new hobbies, or buy a second property/holiday home, which could all incur a considerable amount of additional spending.

Surprisingly, in retirement, many people find themselves spending roughly the same level of disposable income as when they were working and often forget to factor in the rising cost of living in the future on things like utilities and goods. If you are looking for a luxurious retirement, you need to make sure your numbers add up. Speak to our financial planning team, if you’re not sure whether you have enough money for your retirement.

2. Will you be able to retire early?

The answer to this depends on your findings above and what you want to do in your retirement (we explore this point further below). Recent “pension freedoms” allow the over-55’s to draw from their private pension income in a very flexible way (not including final salary or state pensions). You could potentially withdraw a lump sum, typically 25% of your pension is tax-free (the rest would be taxed at your marginal rate of income tax), but the obvious risk here is that you could end up spending all your pension. Interestingly, research shows that the greatest level of spending happens early on in retirement, which is called the ‘active’ phase. Spending then tends to fall during what’s called the ‘passive phase’ because people tend to travel less frequently and do less expensive activities after this point. Then finally, at a much later age, spending then tends to increase considerably as people start needing care – also known as the ‘supported’ phase.

3. What do you want to do when you retire?

This is the greatest question of all and maybe one that you won’t be able to answer fully at this stage. However, it’s important to start thinking about what you would like to do as early on in your life as possible. In simple terms, the earlier you plan, the better your retirement will be. Some possible ideas include travel, living abroad, buying a holiday home or second property, or maybe learning a new skill or taking up a new hobby. All these things will incur costs – some more than others – so we strongly advise taking some time out to think and reflect on how you would like your future to look. Read our previous blog, Setting goals for a successful future.

4. What will be your retirement income sources?

As well as pensions, savings and investments, you might consider other ways to generate income when you retire. This could involve becoming a landlord and renting out a property – perhaps even your own – while you downsize and move elsewhere. You might decide to continue working but on reduced hours, or you may even decide to start a new business; currently, there is a boom when it comes to the over-50’s starting new businesses. Many people are reshaping old or standard views on retirement. So, whether you have a personal project or a business in mind, the most important thing is to consider the amount of responsibility you would like, and any potential stress involved.

You could also consider consolidating your pensions, which may provide you with better returns. However, always seek professional advice when reviewing your pensions, savings or investments, so you can make the most of any potential tax relief.

Remember to double-check that you are up to date with your NI contributions as this will affect your State Pension income – this is especially relevant if you have taken a break from work to raise a child.

5. Have you protected your wealth and your estate?

As well as various insurance policies, there are many ways to protect your home and money, as well as your family’s future. Firstly, make your sure you have an up-to-date Will in place that covers every asset including any business interests. Many people choose a Trust-based Will as this can provide certain levels of protection for you and your family including inheritance tax relief – get in touch to speak to our team who can explain more about Trusts.

Ideally, everybody should have a Lasting Power of Attorney to allow key family members or friends the ability to act on your behalf should you lose the capacity to make important decisions. This does not necessarily mean dementia – you could lose capacity by having a stroke, heart attack, or even an accident. Without a Lasting Power of Attorney, if you lost mental capacity, your bank accounts could be frozen leaving a spouse without any access to your money. Please get in touch to speak to our team who can explain the different types of Lasting Powers of Attorney available.

On a lighter note, and most importantly of all, don’t forget to enjoy your retirement! This may sound strange, but without a successful retirement plan, money can become a real worry at a time when you should be relaxing. After all, you’ve worked hard all your life, so allow yourself a worry-free time in your golden years.

For more information, please read our guide to Retirement or visit the Which? website, which offers some insightful ways for you to calculate your retirement income.

If you would like to explore suitable strategies for a successful retirement, please get in touch and speak to one of our financial planners. We will carry out a full financial review and help you set some achievable goals, so you can meet your personal and financial targets.

By Balance team, Mar 7 2018 11:09AM

We all dream of where we would like to be in the future. So, how can you turn your dreams into reality? What goals do you need to set to help you realise your dreams? Dreams and goals often get confused, and they actually mean different things. Therefore, in this article, we take a closer look at these meanings, to help you plan for your ideal future.

What’s the difference between a dream and a goal?

The best-selling book, The Chimp Paradox by Prof Steve Peters, sums up the difference between dreams and goals brilliantly below:

• A dream is something that you want to happen, but it is not fully under your control. The dream has outside influences and therefore you cannot guarantee that it will happen; it is just a wish.

Goals are something that you can set and achieve because you have full control of them. Goals increase the chances of dreams happening.

We are all unique and our dreams can range from the superficial to the deeply meaningful: enjoying ourselves, having the latest things, giving our family the best chances, or helping others less fortunate. You might dream of sending your children to the best school, retiring on a Mediterranean island, buying a classic sports car or having a yacht! Or perhaps you dream about writing a book, creating a beautiful, peaceful garden or doing something that really makes a difference to others like building a school. If you want to fulfil your dream, you need to set a goal – or most likely a series of goals – to help you achieve this. It’s amazing just how much people can achieve when they start planning their future!

So, how can you set goals for your own life? First, you need to consider what it is that you want to achieve in life, and then work out the best way to get there.

Most of us already have goals that relate to ourselves, our family and our children – we all want to enjoy a happy, healthy life. You may have set a goal to buy a better car, bigger home or a place in the sun. Therefore, in this respect your ultimate dream could be to enjoy a secure, comfortable future, where you and your family can relax without any financial worries. Obviously, before you can make any large purchases, you need to make sure you have enough money saved! And, unfortunately, this is where many people lose heart because they cannot see a way of raising enough money to secure their view of the future, or they don’t know how much they really need to turn that dream into a reality.

With a little sensible planning and goal setting, you can achieve your dreams, but only if you start working towards them sooner rather than later. By this, we mean taking a long, hard look at your finances and working out how you can create your perfect future. Most of the time, it’s just a case of reorganising your finances, so you can make your money work for you, perhaps cutting back here and there. You might decide to move your savings into a higher interest account or an ISA. Or, you might decide to seek a better return on your savings by investing some of your money into stocks and shares. A few little changes can make a big difference. Always seek professional advice before you move large sums of money.

Once you have decided how you would like your future to look, you can start setting achievable goals to help you reach your destination. Unless you plan for the future, you are unlikely to achieve your dreams. It all starts with a vision and a solid plan.

For more information on goal setting, please read our previous blog, Goal setting – achieving what you want from life or visit our Big Life Events page.

If you need a strategy to help you achieve your goals, then please get in touch and speak to one of our financial planners. We help our clients to fulfil their dreams!

By Balance team, Feb 26 2018 10:18AM

In our previous blog, we discussed the importance of setting personal goals to achieve a desirable lifestyle. But what’s the secret behind setting goals for your business that can also lead to successful outcomes? In this article, we take a look at some high-profile UK business leaders to see the inspiration that lies behind their success.

“A passionate belief in your business and personal objectives can make all the difference

etween success and failure. If you aren't proud of what you're doing, why should anybody else be?”

Richard Branson

The importance of setting business goals

If you want to achieve business success, you will need to set practical business goals. This starts by having a genuine belief in your business and your capabilities. Most leaders create a vision of where they would like to see their business in the future. In all likelihood, you will need to set a series of goals to help you achieve success, and you will need to regularly monitor your progress along the way. This will include setting financial goals in terms of profit and turnover, as well as creating an exit strategy. For example, some people plan to sell their business as part of a retirement plan. Therefore, they would need to set a series of goals to create a robust business ready for sale when the time comes.

Other business owners, or director-shareholders, might set a series of goals relating to succession planning. This will include a plan where future potential leaders can be identified and developed to succeed existing leaders when they retire. Make sure that any succession planning is clear and agreed with all your partners. Related to that is the need to be well-protected if you or one of your business partners falls ill or passes away. It’s not a great idea to rely on passing on shares between business partners through wills – instead you should take legal advice, which usually leads to you having a shareholders’ cross option agreement in place. Hand in hand with that comes the need for insurance policies, so the surviving shareholders can actually afford to purchase your shares, and your family can be duly compensated. There are different types of protection available relating to the loss of a leader or key person within your business, Key person and Shareholder protection. Please talk to our team for more information about business protection.

Many of you will be familiar with the popular TV show, Dragons Den, so we thought we would see what some of the dragons have to say about goalsetting and the inspiration behind their success:

“Set goals for yourself and put actionable steps in place to ensure that you achieve them. Whether

you aim to get a promotion at work or set up your very own business, these ideas will only remain

dreams until you write plan out how you are going to reach them by writing down realistic steps

towards hitting your targets.”

Kelly Hoppen

“Passion, focus and an insatiable desire to succeed.”

Deborah Meaden

“Believe in yourself, never give up and go about your business with passion, drive and enthusiasm”

Peter Jones

Aligning business goals with your personal goals

Making sure that your business goals align with your personal goals is crucial, especially if you are seeking a better work-life balance, either in the present or the future. Your business decisions will have an impact on your personal life and vice versa, so it’s important to align all of your life goals.

When you started or bought your business, do you remember what your original motivations were? Are you on track to achieve the things you want from your business? Does your business have a big impact on your personal life? All of your goals need to be in balance for you to lead a happy and healthy lifestyle. Once your personal and business goals are aligned, you can then create a suitable financial plan for your future. If you need any help with financial planning, then please speak to our team.

“Believe in yourself, and make others believe in you and your ideas. Keep that up,

and one day you’ll find yourself the one making the decisions.”

Karren Brady

If you’re an aspiring leader, Karren’s website offers some great advice on her blog page.

Setting goals will lead to a successful retirement

Whenever you’re thinking of retiring, being able to achieve what you want from life starts with goalsetting. If you don’t have a financial plan in place that aligns with both your long-term personal and business goals, you may find it difficult to achieve your desired future lifestyle. You can also set short-term goals to help you lead a more comfortable lifestyle in the present too.

Our advice: create a vision of where you want your business to be in the future, check whether your plans and business goals align with your personal goals, and make a solid plan to help you reach your chosen destination.

For more useful tips on business goals, please see our previous blog, Setting Achievable Business Goals.

If you would like help setting business goals that align with your personal goals, then please get in touch to speak to one of our financial planners. We will carry out a financial review to help you achieve your goals and your chosen lifestyle.

By Balance team, Feb 13 2018 07:38AM

What has been going on?

As you will no doubt have seen, the investment markets have been back in the news over the last week. We’ve seen a familiar series of headlines of market wobbles, volatility and panic.

One of the most followed market indices in the world, the US Dow Jones, recorded its biggest fall since 2011, down roughly 4%, with markets across Asia and Europe following on with similar falls. As we have written about before on our blog posts, the globalised nature of economics means that when the US stock markets start to shake, the tremors are felt far and wide.

Global markets have rebounded somewhat in recent days, but some nervousness remains.

What has caused the moves?

The moves have been triggered, mainly, by fears of rising interest rates in the US. Interest rate rises are typically used by central banks as a way of controlling inflation. Data points released last week showed that average earnings in the US have crept higher which would typically lead to a continued rise in inflation. US unemployment is also at a 17 year low of 4.1%.

There are growing concerns that this stimulus provided by central banks, which have been in force since the 2008 financial crash, may be withdrawn. It’s important to highlight that raising interest rates to more normalised levels must be taken as a sign of health of not only the US economy but the global economy as well. Interest rates have been held low since the 2008 crash and so the prospect of them being raised is one that should be taken as a sense of things returning to some sort of normality.

Here in the UK on Thursday last week, whilst keeping the base rate at 0.5%, the Bank of England has indicated that the pace of interest rate rises will likely rise in the future. To many people, the notion of normal interest rates will look something nearer 5%, 10% or even 15%! This gives an indication of how ‘not normal’ things have been in recent years.

Should I be worried?

It’s important put into context just where this recent bout of volatility registers, from a historical perspective. The markets have been on a strong run since 2009 and anyone invested over this period will have enjoyed strong returns as a result.

Some will have fresh memories of the 2008 financial crisis, and with good reason. The major market indices are all a lot higher than they were before that crash, and the moves over this past week are nothing like the crash of 10 years ago, where on the worst day the US S&P 500 fell over 20% in one day.

The extended run of strong performance will not and cannot go on forever. Markets go up and down, and whilst some experts believe that valuations are high, market highs are normal in the same sense that corrections are.

Any removal of stimulus by central banks would be coordinated very slowly, and so the over-used term of ‘hiking’ interest rates should be taken with a pinch of salt.

During periods of volatility the more defensive asset classes like property, will fare better than others, which leads us to the same conclusion. An all-weather long-term approach to investing is always the most sensible. Diversity is the key.

Our advice to investors

The adage of time IN the market as opposed to TIMING the market is always a good one during times like this. Trying to be too clever by buying and selling at different points in time is rarely a successful strategy, even for the experts!

Our advice remains that investors should make sure investments are diversified and structured suitably for your long term financial plan. Investing as part of a sensible financial plan should not mean you having to check the stock market moves daily, if it does, then you’re probably not investing your money in a way that suits you.

If you would like to speak to us about any concerns you have over your own investments or overall financial plan, then please get in touch. We are always happy to discuss concerns people have in relation to their personal financial situation. We take a holistic approach, so don’t just focus on the market moves or your income, we look at your entire wealth and how planning can help achieve your lifetime goals.

By Balance team, Feb 6 2018 07:59AM

In today’s ever-changing economic climate, teaching your child to save for the future has never been so important. There are a range of savings options available – from government incentive schemes to helpful mobile apps. In this article, we take a look at some useful ways to help your child to save.

1. Pocket Money app - help your child manage their money

There are a few mobile apps available to help your child manage their pocket money. We really like the goHenry Pocket Money app. Suitable for children aged between the ages 6 – 18, the app helps parents teach their child ways to save and spend their money. As well as being able to set rules and limits, you can also create tasks to incentivise children to earn more pocket money. We think the goHenry app is an excellent tool to help children learn the true value of money and the consequences of debt, especially as parents can keep a watchful eye on any spending.

2. Have you considered a Junior ISA?

A Junior ISA is a government-backed, tax-free savings scheme for children. Similar to standard ISAs, you can choose between cash or stocks and shares – or, you can split your allowance between the two. In the Autumn Budget, it was announced that the annual Junior ISA allowance will rise to £4,260 from April 2018 (the allowance is currently £4,128 for this tax year, 2017-18). The main benefit of a Junior ISA is the fact that your child can only access their money when they reach the age of 18. Therefore, this savings scheme is a useful and secure way to grow funds for university fees or their first house deposit. If you have children’s bonds or Child Trust Funds - please see our previous blog, Children’s savings: Investing for their future, as new applications for these schemes have now ceased.

Whether it’s best for you to choose a Junior Cash ISA or a Junior Stocks & Shares ISA will depend partly on how much risk you feel comfortable in taking, but also when the money might eventually be needed.

3. Premium bonds – yes, they still exist!

Some people consider premium bonds from National Savings & Investments (NS&I) to be an outdated way of saving. However, we think there’s still very much a place for them, including as a useful way to save safely for their children. You can buy bonds in your child’s name if they are aged under 16. Although the bonds don’t pay interest, every bond number is entered into a monthly draw, so there is a (small) chance of winning between £25 and £1m (tax-free), which is thought to be around 30,000 to one! With average winnings at that level, the returns are similar to what you’d expect in a savings account, but of course there’s the chance that you might one day get the ‘big win’ and it’s a bit of fun as a result.

4. Children's savings accounts

There are a range of different children's savings accounts available. Some accounts allow you to add funds and withdraw money whenever you choose. If you are looking for an account with a higher rate of interest, the usual rule is that you would be expected to make monthly contributions and there may be limits on the number of withdrawals too. More restricted savings accounts require regular payments, so if you miss one (or ignore the withdrawal limit), this could cost you interest.

5. Income tax rules for children

Remember, tax rules do apply to children! The reason being is to avoid parents using their children’s savings as a way to off-set their own tax liabilities. However, as most children do not receive an income, they are able to save up to £17,500 without paying tax. If you go over this amount, then tax rules will apply. This includes the £5,000 starting savings allowance at 0% and the £1,000 personal savings allowance. There is a '£100 rule for parents' whereby if savings given to a child by a parent or step-parent generates more than £100 a year in interest (not including grandparents, other family members or family friends), this will be taxed at the parent's tax rate (basic, higher or additional). The tax-free personal allowance also applies to children (£11,500 during this tax year, 2017-18 and this increases to £11,800 for the next tax year, 2018-2019). For more information on children’s tax rules, please speak to one of our financial planning team.

6. Did you know that you can set up a pension for your child?

Yes, that’s right - you could consider taking out a pension on behalf of your child, and when they reach the age of 18, the pension will be under their control, so they can start making their own contributions too, when the time is right. This can be a useful long-term approach to children’s savings. At present, you are allowed to contribute up to £2,880 each tax year (boosted to £3,600 including tax relief). If you would like to find out more, please get in touch, as our financial planners will be able to provide you with suitable pensions advice.

For more information on children’s savings, please read our previous blog, Children’s Savings: Investing for their future.

If you would like to create a suitable savings strategy for your child, please get in touch and speak to one of our financial planners. We will explore a range of different options to suit every situation.

Regular news and views from the Balance team. You'll find our thoughts about pensions, investments, ways to save tax, facts about finances and plenty more.


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