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By Balance team, Jun 12 2017 01:28PM

The results of the General Election are out – we are facing a hung parliament. Prime Minister Theresa May’s gamble did not go as planned, with the Conservatives winning 318 seats (they needed 326 for a majority) and Labour’s Jeremy Corbyn winning 262 seats. Over the weekend, the Conservative party have been discussing a deal with the controversial Democratic Unionist Party, who have 10 MPs, to create a minority government. So, what does this mean for your business and your investments?

How has the pound fared?

As the news unfolded with the exit poll predicting a hung parliament, the pound plunged by 2.34% overnight, trading at $1.2635 against the US dollar, which is a seven-month low. However, the following morning it had climbed, and is now trading at $1.27320. Despite heavy losses on Friday for housebuilders and mid-caps (who derive a large proportion of earnings from the UK), international, blue-chip exporters experienced a boost due to the weaker pound.

What about the FTSE 100?

The FTSE 100 gained 1.1%, surging above 7,500. Major housebuilders such as Barratt, Persimmon and Taylor Wimpey fell from 2.4 to 3.5%. Bovis Homes also dropped by 3.1%. The energy sector saw Centrica breathe a sigh of relief as they jumped up by 3.2% due to the possibility that the Conservative’s previous plan to cap energy prices may not happen.

What about our credit rating?

Standard & Poor Global has warned that the UK’s credit rating could be downgraded. This happened last year following the vote to leave the EU. When a credit rating changes unexpectedly, it can affect investor confidence. However, it is of more importance to check the companies you are investing in to see how creditworthy they are.

Expect market volatility

Due to the uncertain political landscape ahead, we can expect great volatility in financial markets. To manage your level of risk, review your investment strategy and consider diversifying across stocks and shares including assets, commodities and currencies. Wise investing relies on sensible risk management. If a company finds themselves directly affected by the results of the general election, e.g. the housebuilders mentioned above, or by new policies affecting their cash flow, this will affect their share price. With Labour winning a sizeable proportion of seats in last week’s General Election, they are now challenging the Conservative’s position on securing a minority government. At this stage, it is still very unclear whether the UK will be looking at a soft or hard Brexit in the future; both approaches will have a direct effect on investor attitudes.

Save, save, save

While the political shaking of our nation continues, it is more important than ever to make sure you have a robust, long-term financial plan in place. In the short-term, there may be potential investing opportunities, but short-term trading can be a risky strategy to take, with many investors who attempt it being left licking their wounds afterwards. It’s easy to face losses due to sudden changes in financial markets. Most importantly of all, it is vital that you have a strong savings strategy in place to provide you with a solid financial buffer for the unchartered waters that lie ahead.

If you are worried about how last week’s General Election results may affect your business or investment strategy, please get in touch and speak to one of our financial planners.

By Balance team, Jun 5 2017 11:05AM

The Serious Fraud Squad issued a warning last week relating to people who have invested their pension money into self-storage units. It now appears that money invested into such schemes is likely to have been lost, and an investigation has been launched. We’re not talking about physically storing money in these units (also known as ‘storage pods’), we’re talking about bogus firms luring people into investing into something that often just doesn’t exist, usually with the promise of ‘guaranteed’ double digit returns.

What’s the problem with investing in self-storage units?

There’s nothing wrong with the idea in principle and no doubt some units make great investments. But what’s happened in this case is that people have been persuaded to invest their pension money into specific schemes, having been told they will see an 8% - 12% pa return on their investment. And the investment is a scam. It is now apparent that at least 1,000 investors may have lost their money due to the bogus firms who are promoting the investment. What’s more, the Serious Fraud Squad thinks the real number could be much higher, warning that more than £120m may have been lost through self-storage investment schemes.

On top of that, many people are being persuaded to transfer their defined benefit (also called final salary) workplace pensions so the transfer value can be invested. This is contentious, because for many people their defined benefit pensions offer a guaranteed income and they would not be advised to move their money somewhere else. However, because transfer values of these types of scheme are so high at the moment, it is easy to be persuaded to take the money and invest it somewhere else. Unscrupulous firms are not helping pension savers understand the full picture and exactly what they could be losing.

How does a self-storage unit scheme work?

Known as a “pension liberation” scam, people are persuaded to either cash in their pension pots or transfer their money into certain investments. In this case, someone might receive a cold call and then be sent a brochure offering the opportunity to buy individual self-storage units on a long-term lease. The unit would then be sublet to a management company. The cost of these units could be anywhere between £3,750 and £30,000. The problem arises when investors realise they cannot get their money back out of the scheme and the promised returns aren’t materialising. In the meantime, the original company that promoted the scheme has long gone.

It’s not always self-storage investments to watch out for. Usually, these scams tend to be fairly exotic, e.g. investing into foreign hotels, development land, wine or tropical plantations. One of the ‘selling points’ for luring people to invest in self-storage units, could be the fact that such sites are typically based on industrial parks, which is a lot closer to home and gives the impression of being a more secure investment. However, this is far from the truth.

Since the 2015 “pension freedoms”, which now allows over-55s the chance to use their pensions before they retire, pension scams have been on the rise. You may even have noticed more warnings in the literature you receive from your own pension provider.

How is this being dealt with by the authorities?

The Pensions Ombudsman investigated a case where a person transferred his whole NHS pension into a self-storage unit pension scheme. There were two bogus companies involved in a joint venture where one paid commissions of up to 46% to the other. Both firms were eventually wound up by the High Court after an investigation was conducted by the Company Investigations of the Insolvency Service. It is highly unlikely that this investor will ever see his money again which is, unfortunately, a typical story. Read more about this…

The Serious Fraud Squad has now launched a full investigation into self-storage unit investment schemes. If you have invested into this type of pension scheme between 2011 and 2017, the Serious Fraud Squad has a questionnaire on their website for you to complete.

How do you protect yourself?

Firstly, if you have been approached by any company that you don’t know (no matter how reputable they look) with “an offer you can’t refuse”, think twice. If it looks too good to be true, it probably is. If they are putting pressure on you to commit, if there’s a limited window of opportunity before the offer closes, or if they offer to expedite matters by sending forms by courier to your home – these are all warning signs.

Secondly, do your homework. Is the firm you are dealing with authorised and regulated by the Financial Conduct Authority? Their literature will say if they are, and show their individual reference number. Look them up on the Financial Conduct Authority register. Check how long they’ve been in operation, who the principal people are and if they have had disciplinary issues. There is no reason to be dealing with any firm that is not FCA registered.

Lastly, have everything in writing. All reputable financial planners will give you a written advice report or letter before you sign anything, accompanied by a prospectus, factsheet or booklet about the investment being recommended. The same goes for recommending that you move your defined benefit pension, or take benefits out of your pension – everything should be clearly set out in writing, with a full analysis of the pros and cons. Don’t commit to anything until you see that. And check the literature of the investment shows that the investment is also regulated by the Financial Conduct Authority. Almost all ‘collective’ investments are. Not only is that a comfort that the investment must stick to the rules and regulations, it also means you are protected by the Financial Services Compensation Scheme if it all goes wrong.

If you have a defined benefit pension scheme Download our pension guide to check the different options and what you need to consider before you transfer your pension plan.

For a more general guide to retirement planning, please visit our Big Life Events – Retirement page.

If you are worried about the pension scam or any other aspect of this article, please get in touch to speak to one of our financial planners for advice. We will be more than happy to help you make the most of your pension plan and your retirement.

By Balance team, Jun 1 2017 03:00PM

If you are about to inherit money, property or possessions, you may find yourself conflicted with mixed emotions. You’re likely to be grieving, which is a very difficult time for most people. Despite your bereavement, you may have the opportunity to pay off debts or create a level of financial security for you and your family. It is natural to feel guilt, as well as a sense of gratitude. If you do find yourself acquiring a large level of wealth, what do you do next? Our guide below gives tips on what to consider so you can make the most of your inheritance.

“In this world, nothing can be said to be certain, except death and taxes.”

Benjamin Franklin

Will I need to pay any tax?

The first thing you need to consider is whether you will need to pay any inheritance tax (IHT). If you have inherited an estate worth more than £325,000, you may need to pay 40% inheritance tax. If you have inherited a family home and you are a direct descendent, you may be eligible for the recently increased ‘main residence’ allowance, which adds £100,000 to the value of an estate – see our previous blog for more details on this: Property – Top Tips for Effective Estate Planning. If an estate is comprised of property, possessions and any other assets, your inheritance may be complicated, especially if there are others involved. Inheritance tax may apply to the following:

• Money including cash in bank accounts

• Property including the home of the deceased and any business-related property

• Cars, vans or other vehicles

• Investments of the deceased

• Life insurance policy pay-outs

If the deceased’s Will isn’t clear, or was made several years ago it should be reviewed urgently. If property has been left into a Trust on death then the enhanced allowance will not apply and you should seek expert advice. It is worth talking to the solicitor acting on behalf of the deceased and a financial planner.

If there isn’t a Will in place, and you decide to sell inherited property during probate - and the value of the property has increased since the person died - you will be liable for Capital Gains Tax. Probate can prove to be a lengthy and costly process, so it is vital you understand any potential outgoings at the very outset. Always seek professional advice before you make any big decisions.

Do I share my inheritance?

If you have a partner or children, you may decide to share your inheritance with them. Depending on the sum of your newly acquired wealth, it might be worth securing their future inheritance by looking at a Family Protection Trust, which is a bit like a ‘safety deposit box’ to protect your own wealth and assets. The trust would be in your name, but would pass to your family after your death and can help to protect against inheritance tax. It is worth noting that if you transfer everything over to your family, they may be liable for Capital Gains Tax.

If you decide you would like to give money away to charity, the inheritance tax will reduce to 36%, if you give 10% of your wealth away. This could be a worthwhile way to use part of your inheritance, as you would be giving money to causes that are important to you, rather than letting the government decide how to spend your money.

Financial planning

Once you have learned the full extent of your inheritance in terms of money, property and possessions, your next step would be to create a financial plan. This will help you make the most of your money. Consider the following:

Mortgages or any property-related debts – could you pay these off?

Savings – could you put some of the money into a savings account or an ISA?

Investments – are you interested in investing some of your wealth to potentially see your money

grow further?

If you would like more information on inheritance, please visit our Big Life Events – Inheritance page.

If you have recently found yourself inheriting money, property or other assets, and you would like advice, please get in touch and speak to one of our financial planners

By Balance team, May 30 2017 08:30AM

10 Things to Consider When Writing Your Will

If there’s one thing that’s guaranteed never to come up in conversation on a night out with friends, it’s what you’ve put in your Will. Not only is death a subject we’re not too keen on discussing as a culture, another big taboo is wealth. And they aren’t always easy. With families increasingly changing shape through separations and new partners, it can be difficult to consider what you want to happen with your wealth after death. With that in mind, it’s hardly a surprise that more than two thirds of UK adults don’t have a Will at all. As we age, we start to take more action, but still a third of over 55’s are yet to organise a will.

We’ve pulled together a list of the top 10 things to consider when making a Will:

1. Do you have any business interests?

If you own a business or you have shares in a company, this will be included in the value of your estate. It is vital you state in your Will exactly what you would like to happen to any business interests after you pass away. Do you really want your shares to pass to your children, or would you like them to be bought by your co-owners for a fair price? If that’s the case, do you have a shareholders agreement in place, and will they have the funds outright to buy your stake, or will they need life insurance in place? Our financial planners can help discuss this further with you.

2. Decide on your Executor and Trustees

An Executor is the person responsible for dealing with your affairs and arranging how your Will is carried out after you die. Usually, they will be appointed as a trustee of your assets. It is important to ask your chosen person whether they are happy to be your Executor – and make sure they are up to the job. To prevent any family disputes, you could instruct a solicitor to become your Executor. We provide that service too.

3. If you already have a Will, when did you last review it?

Life changes, relationships change, and your estate may have grown bigger since you first wrote your Will. It’s important to review your Will after any major lifestyle changes, and on an annual basis in case the value of your estate has increased, due to your wealth or rising property prices.

4. Have you checked any Inheritance Tax (IHT) liabilities?

If your estate is worth more than £325,000, Inheritance Tax will be owed at 40%. From April 2017, a ‘main residence’ allowance of £100,000 was added to the inheritance tax 'nil-rate’ band, where the family home passes to a direct descendant – see our blog for more details on this: Property – Top Tips for Effective Estate Planning.

5. Do you have any children?

This is one of the most important points of having a Will - especially if you have children from a previous marriage. Don’t assume each child will naturally inherit your wealth. There have been cases where children from previous marriages have not inherited from a parent due to the absence of a Will where funds simply go to the new spouse. Furthermore, make sure you state who will look after your children as guardian if you pass away.

6. Who will inherit your property, possessions, or any gifts of money?

If you’re not married to your partner and you die without a Will, your partner may find themselves without a right to stay in your shared home or any money. If you have recently divorced, make sure your Will has been updated accordingly. If you have a joint mortgage, check the terms – are you ‘joint tenants’ or ‘tenants-in-common’? ‘Joint tenant’ mortgages will pass to the other owner of the property. ‘Tenants-in-common’ mortgages are more complex – you will need to state what happens to your share of the property. What’s more, if you share property overseas, you may need to check the inheritance law in that country. See our Inheritance guide.

7. Do you want to give money to any charities?

Did you know that if you leave 10% of your wealth to charity, your estate will only be taxed at 36%? There was a recent case in the news where a mother left her entire estate to an animal charity, and this was challenged by her daughter. If you do decide to leave money to charity, then you must state this in your Will.

8. Have you written a Letter of Wishes?

This gives your executor guidance on how your Will is to be carried out. It is not legally binding, but is a very useful document because it can be kept confidential (if you have a sensitive family situation) and it can be easily updated, as and when required.

9. Having a Will prevents costly probate fees in the future

Without a Will in place, did you know that it could cost up to £20,000 to sort out a person’s money, property and possessions after they die? Parliament has recently been debating probate fees, which were set to rise - however, this has been blocked (for now). The probate process can take months, even years – don’t let this happen to your nearest and dearest, especially when they will be grieving for your loss.

10. Have you thought about where you will store your Will?

Your Executor must know where your Will is stored, as well as any friends or family members in case anything happens to the Executor. Many companies provide storage (sometimes free) as part of their services. You could keep a copy of your Will with your solicitor. If you are currently storing your Will at home, make sure it is safe and well-protected.

Having a sound Will in place gives you peace of mind that your estate will go to the right people when you die. It will also ensure that your wealth isn’t drained by needless probate, court and solicitor fees. A Will is one of the keystones for successful wealth management, so that your legacy can be enjoyed by future generations to come.

If you need to update your Will, or you’re going through a major lifestyle change and need advice on your estate, then please get in touch and speak to one of our financial planners.

By Balance team, May 19 2017 10:34AM

An Individual Savings Account (ISA) is a tax-efficient way to save money. As we move forward into the new financial year 2017 – 2018, there is a new ISA allowance of £20,000. There are two types of ISA: Cash and Stocks and Shares and you can split your allowance between the two types. If you’re already paying into an ISA, you might want to consider increasing your direct debit payments. It’s worth noting that you cannot sign up to more than one type of ISA during a tax year, but you can transfer from one type of ISA to another.

If you are unsure on which ISA to choose, we have pulled together a list below to help you choose the right option for you and your situation:

Cash ISA

Basically, a cash ISA is a simple savings account. Any interest you receive on your savings is tax-free and the interest does not count towards the ISA allowance. This means you can effectively protect your money from tax. There are various types of cash ISA available including flexible cash ISAs and easy-access ISAs just like ordinary bank accounts. Of course, the less your money is tied-in, the lower the interest rates will be and it’s hard to find good rates at the moment. Try to avoid a cash ISA that you can’t get money out of quickly, even if that does mean you will lose a bit of interest. Some ISAs are marked as ‘flexible’ cash ISAs and these allow you to withdraw money and then pay it back in during the same tax year without it counting towards the ISA allowance again. All cash ISAs may have either variable or fixed interest rates. To open one, you need to be over 16 and a UK resident.

Stocks and shares ISA

A stocks and shares ISA allows you to invest your money into individual company shares, investment funds, corporate bonds and government bonds. But that doesn’t have to mean you are taking lots of risk with your money. Investments in a stocks and shares ISA can range from only slightly more risky than cash right up to the very highest levels of risk. So don’t let the idea of investing put you off if it’s not something you have considered before.

Once your money is within a stocks and shares ISA, there is no capital gains tax on profits from investment growth, and no tax on interest earned on bonds or dividend income. Managed by a fund manager and usually available online, there is usually a fee for opening this type of ISA and possible charges for withdrawing or moving your money. There is an element of risk here, as your investments may go up and down over time, so this type of ISA should be considered as a long-term strategy (at least 5 years). Depending on the provider, you might be able to split your annual allowance between a cash ISA and a stocks and shares ISA. To open this type of ISA, you need to be over 18 and resident in the UK.

Innovative finance ISAs

Started in 2016, this recent type of ISA works as peer-to-peer lending, enabling people and companies to lend cash to other businesses, as well as property and crowdfunding. Credit checks and repayments are managed by a large-scale online website. Although there are very attractive rates for savers, this should be considered as an investment rather than a savings account, because there is always a risk that the borrower won’t repay the money. Any interest gained from lending money to others is not taxed but, similarly to the stocks and shares ISA, this should be considered as a long-term strategy and you need to have a solid financial buffer behind you in terms of managing the level of risk.

Lifetime ISAs (LISA)

Launched on 6 April 2017, this new type of ISA is designed to help younger people to save for their retirement and to get onto the property ladder. Savers can put £4,000 into a LISA every year tax-free, and the government adds a 25% annual bonus – e.g. £4,000 will become £5,000. A LISA can comprise of either a cash ISA or a stocks and shares ISA, but the bonus will only apply to contributions, not any interest gained on stocks and shares. Once the bonus reaches £32,000 it will cease, and you will only be able to save into this type of ISA until you reach 50. To open a Lifetime ISA, you need to be aged between 18 and 39. There is some doubt as to whether these types of ISA will be around for long as they have not be well-received.

Help to Buy ISAs

Designed for first-time buyers, the Help to Buy ISA began in December 2015. The idea is to use these funds to buy a home and, when you are ready to pay your deposit, the government will give you a 25% bonus (£3,000 max.) to top up your savings. If you’re a couple and you’re both first-time buyers – you must not have owned a previous property – then you can both have a Help to Buy ISA and double your savings. People can save up to £1,200 in the first month and then pay in £200 each month moving forwards. This is a type of cash ISA, which means you would have to choose one or the other, as you cannot hold both in the same tax year. Plus, the property value must not exceed £250,000 (£450,000 in London). Again, it is possible that this type of ISA will not be around for long as the government seeks more ways in which to cut costs.

Although in this article we have focused on ISAs suitable for adults, there are also Junior ISAs available for children - see our recent blog on children’s savings strategies.

If you need help choosing an ISA, then please get in touch and speak to one of our financial planners. We will look at your lifestyle, goals, and help you get your finances into good shape.

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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