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By Balance team, Aug 21 2017 01:07PM

If you’re starting to feel that you’ve spent too much this summer, it’s probably a good time to take a look at your savings strategy. However, with so many savings options available, where do you start? This week, we give you the lowdown on various ways you can save – read on…

“The way to build your savings is by spending less each month.”

Suze Orman

Simple, right? Yes and no... It is pretty obvious to most that spending less will increase your savings. And yet, we all have outgoings, such as mortgages to pay and a lifestyle to lead. Before we look at ways to save, here are three top tips for checking your spend:

1. Check your bank accounts for any direct debits you might’ve forgotten about – for example, old magazines or online services, etc. Get rid of any unwanted outgoings.

2. Check your credit card statements and pay off any debt – there’s no point in paying high interest costs on outstanding amounts. This money could be going into savings.

3. Check whether you are better off overpaying your mortgage to off-set any interest. For example - if your mortgage rate is higher than the savings rate, overpaying your mortgage could be a sensible financial decision. However, penalties may apply, so always seek professional mortgage advice.

Now let’s look at the different accounts and financial products out there, which can help you make the most of your money…

Savings accounts

Do you have various bank accounts? Do you have a lot of money sitting in a current account rather than a savings account? Do you know the interest rates for all your accounts? High street banks tend to have lower interest rates, so it may be wise to switch to a specific account offering a higher interest rate.

For example, a Fixed-Rate Savings Account will guarantee you a rate of interest for a set period of time. Unfortunately, this also means your cash will be locked away until the stated time, which may or may not be helpful. But, if you are happy to save in this way, interest rates for a Fixed-Rate Savings Account can be as high as 2.2%, but this rate would mean locking your money away for 3 years.

If you are happy to stick to rigid terms and conditions, you could consider a Regular Savings Account. This type of account has a high rate of interest, possibly as much as 5%. However, you will be expected to pay money into this account every month, you may have a limit on withdrawals, and there may be other conditions that apply too – carefully check any terms.

Tax-free ISAs

ISAs are still a very sensible tax-free way to save. The ISA limit for this tax year (2017/2018) is £20,000. The main advantage of an ISA is the fact you don’t pay tax on any interest on your savings. There are Cash ISAs, Stocks and Shares ISAs, Help to Buy ISAs and, if you’re under the age of 40, the Lifetime ISA. The government incentivises people to save in ISAs by offering bonuses – for example, a 25% bonus is added by the government for a Lifetime ISA. See our detailed blog on ISAs for more information on the different types and benefits.

Pension check

Your pension should form part of your long-term savings strategy. Usually, you will be sent an annual statement: check the level of income matches the lifestyle you want to lead in the future. Recent pension freedoms have enabled people to access their pension at the age of 55; this can be both useful and risky. If you need help understanding your pension, talk to one of our financial planners who can review this for you.

Consider investing

If you do have various pots of money sitting in different accounts, you could look at investing your savings. There are hundreds of investment options out there: the main aim is to make your money work for you rather than stagnating due to low interest rates. You will need to decide your level of risk and the type of investment you would like to make, i.e. stocks and shares, trusts, bonds, etc. For more information, see our A-Z of Investment blogs.

Investing is a very complex area and can be very time-consuming. However, you could potentially reap great returns. We always suggest spreading your risk and choosing multiple fund options – this is known as ‘diversifying’. Talk to one of our financial planners for advice on investments.

“Why not invest your assets in the companies you really like? As Mae West said,

'Too much of a good thing can be wonderful'.”

Warren Buffett

Ultimately, the earlier you start on your savings journey, the more rewarding your destination will be later on in life. Whether you’re aiming for a comfortable retirement or you’re planning an extended luxury cruise, making the most of your money early on will help you to enjoy financial freedom. What’s more, an ongoing solid savings strategy will allow you to live your life to the full in the present, and not just the future…

If you are looking for a sensible savings strategy, please get in touch to speak with one of our financial planners. Our team will be more than happy to carry out a review of your existing savings to see where we can add value for you.

By Balance team, Aug 16 2017 07:24AM

Estate planning affects everyone. If you want your children or loved ones to inherit from you, the more planning you do now, the more likely your legacy will go to the right people. A combined approach using Wills and Trusts will enable you to plan effectively for the future. In this article, we focus on Trusts and Estate planning:

What’s included in your ‘estate’?

Everyone has an ‘estate’ and this is made up of ‘assets’, which include:

• Your home – and any other property you own including buy-to-lets and foreign property, such as apartments and villas.

• Your money - this includes money in bank accounts, savings and investments, as well as any life policies or pension benefits you may be receiving.

• Your possessions – this is where it can get complicated because everything you possess worth any value needs to be taken into consideration. For example - cars, boats, jewellery, paintings, ornaments, crystal glassware, ceramics, camera or video equipment, designer clothing and shoes – the list is endless!

• Your business interests – again, this can prove very complex if you have shares in a company or you own business property. Always speak to an expert to assess the value of your business interests.

How do I value my estate?

To protect your children from facing a huge Inheritance Tax bill, it is really important to have your estate valued. If your estate is worth more than £325,000 (Nil Band Rate), Inheritance Tax will be owed at 40%. Inheritance Tax will not be owed if your assets are passed between a married couple. Before you consider writing a Will, you need to understand what you own and how much it’s all worth. Once you understand the true value of your estate, you will be able to start planning to protect your assets – for example, by using a Trust. For accurate estate valuations, please contact our team for more information.

So, what’s a ‘Trust’?

There are several types of Trust available and it is important to choose the right Trust for your situation. In simple terms, Trusts allow you to secure and control your assets until a chosen time in the future – for example, after you pass away, to enable your children to inherit from you. Having a Trust in place can protect your estate from possible threats such as care fees and inheritance tax, and there can be certain tax benefits too.

• Asset Protection Trusts or Lifetime Trusts - you can place assets valued up to the Nil Band Rate (which is £650,000 for married couples) into this type of Trust. The benefits include protection against Inheritance Tax, care home fees, debt and insolvency, ensuring your assets are passed to the people you choose. Lengthy delays relating to probate, as well as costs, can also be avoided. You could be named as a Trustee, but you would need to also appoint another Trustee (someone you can, quite literally, trust implicitly!). An Asset Protection Trust also allows you to control how your assets are left, i.e. you may wish your children to have a share in your family home, but you could have a partner living at the property and you may not wish them to feel at risk of the property being sold while they’re living there.

• Family Protection Trust – similar to the above, this type of Trust protects your estate by ensuring it is passed onto the people you choose, avoiding disinheritance issues, reducing Inheritance Tax, helping to protect against care home fees and to reduce probate costs. You can benefit from your assets while you are alive, and then when you pass away, your assets will pass to the people you choose.

• Property Protection Trust – this protects your share in your property, i.e. your family home, so it can be inherited by your chosen ‘beneficiaries’, i.e. your children, partner, friends, and so on. The reason why this is so important is because most couples (married or civil partners) own their homes as ‘joint tenants’. This means that both people own all of the property rather than 50:50. This can make things very complicated should one person die and the deceased person intended the property to be passed to someone else. Usually, this becomes an issue when couples separate and remarry, and the family home is then passed on to the new spouse and their family. Alternatively, you may be ‘tenants-in-common’, equally owning a property, i.e. a shared buy-to-let. This poses a risk when one half of the property could then pass to someone written into a Will without the other person even being aware. See our recent blog on disinheritance for more details on this.

For more information on Trusts, Estate Planning, Wills and Inheritance, please refer to our previous blogs or visit our Inheritance page.

If you would like to find out more about Trusts and Estate Planning, please get in touch to speak to one of our financial planners.

By Balance team, Aug 8 2017 09:00AM

For most of us, gone are the days when you would visit the bank to withdraw large sums of cash to cover your monthly spend. With very few places (if any) demanding a minimal charge for contactless transactions, it’s easier than ever to pay for small items without having to carry any money around. Last year, contactless transactions doubled and many companies like Visa are encouraging UK businesses to go cashless too.

But why is it that we are moving towards being a cashless society? And how do investors really feel about the rise of digital currencies, such as Bitcoin? This week’s article explores these subjects in greater detail.

Are we becoming a Cashless Society?

These days, fewer people carry change in their wallet or purse. Most of us now rely on contactless payments to buy daily things like food, toiletries or clothes. Most large multi-storey car parking meters take credit or debit cards. So, why would you want to carry cash around? There are still some people who prefer cash to cards – and they may have a point.

“the Bank of England reckons as many as 5% of Britons rely almost entirely on cash”

Source: MoneyWeek - 21 July 2017

Some economists warn that removing cash from our society comes at great risk: control. In a cashless society, information replaces cash – therefore, how that information is used and interpreted depends on the way in which it is stored. Some argue that by removing cash from the individual, this also means removing their power and their freedom to control their money. With increased hacking crises, many believe that a large-scale ‘financial hack’ could put cashless countries in economic danger.

However, there are obvious benefits to online payments. Paying for a product or service online is easier, with an email receipt usually sent directly afterwards. Visa argues that cashless transactions are more secure and convenient for shoppers. Also, an increasing number of payment processing companies, such as Worldpay, are making it easier and affordable for businesses to transact online with their customers and suppliers.

For many small to medium-sized businesses (SMEs), the benefits of card payment systems are outweighed by the charges. Costs include ‘merchant fees’ to the provider processing the payment and ‘interchange fees’ (charges levied by the banks and credit card issuers operating the payment system). This will change to some extent when the government brings in a highly welcomed ban on charges for card payments.

“The new ban – which will take effect from 13 January 2018 – will mean retailers and traders are no longer allowed to charge you for using your credit or debit card when making a purchase.”

Source: Which online

One of the reasons HMRC is rolling out the new Making Tax Digital service is to decrease ‘tax errors’. However, this is also a way of decreasing the number of cash-based businesses, as an attempt to reduce tax avoidance due to unclaimed income.

What is Bitcoin?

If you’ve not heard of the infamous Bitcoin, we will bring you up to speed. Bitcoin is a ‘cryptocurrency’ – a ‘digital medium of exchange’ using cryptography (the art of writing/solving codes). In simple terms…

“…it’s as if the number of pounds in circulation were controlled not by the Bank of England, but by the algorithms running on an interconnected network of millions of computers worldwide.”

Source: MoneyWeek - 28 July 2017

Bitcoin was released in January 2009 as the world was still very much in the throes of the global financial crisis. Over the years, cryptocurrencies have evoked controversy as many people have lost great sums due to volatility: values can wildly fluctuate within a very short time. In 2014, there was a major collapse at MtGox, the world’s largest bitcoin exchange at the time - 850,000 bitcoins worth around $450m went missing.

Bitcoin is one of many cryptocurrencies; there is an increasing number emerging. The main danger of investing into cryptocurrencies is the fact that many are run by unscrupulous scamsters using sophisticated marketing schemes. Cryptocurrencies are used on the ‘dark web’ by criminals. Therefore, it’s no surprise that many investors have more than a few trust issues with this digital currency. Always seek professional advice before making any investment you are unsure of.

A recent move in cryptocurrency is the emergence of ICOs (initial coin offerings), which are being sold as tokens to raise funds for tech or business ventures. A bit like crowdfunding, it is an unregulated ‘initial public offering’. However, many ICOs appear to be fraudulent, so this really is the ‘wild west’ when it comes to investments. We expect the bubble will burst at some point with an inevitable regulatory crackdown.

Have you ever invested in a cryptocurrency? If you would like advice on creating a sound investment strategy, please get in touch to speak to one of our financial planners.

By Balance team, Aug 2 2017 12:00PM

Inheritance is a very complex area. Unfortunately, disinheritance can occur unknowingly for many reasons. What’s more, the probate process can be prolonged and very costly, if your estate has not been organised in the right way.

Disinheritance: preventing someone from having the legal right to receive your money or property after you die.

Have you considered all of the people you would like to inherit from your estate? Your estate comprises of property, money and possessions - it also includes vehicles and any business interests too. If you have children and you’ve recently remarried, or you’re unmarried living with a long-term partner, disinheritance can be a real risk. To explain this more clearly, let’s look at an example:

Jane and John

Jane and John have been married for twenty years. They have two children: Jack and Jill. Unfortunately, John passes away before writing a Will and his entire estate goes to Jane. Jane remarries. Her new husband is called Steve. Steve also has two children: Sarah and Sam. When John was alive, he had hoped that the family home would go to Jack and Jill, his children with Jane. However, as Jane has now remarried, the family home and estate is now shared between Jane and Steve. If Jane dies without writing a Will, the family home and her estate would be passed to Steve, and then onto Sarah and Sam. As a result, Jack and Jill could be disinherited from the family estate.

To avoid disinheritance issues, you can organise your estate in several ways. Making sure you have an up-to-date and legally recognised Will is a good starting point. If you have a complicated family situation, i.e. children from past marriages and new partners, you will need to make sure everybody you would like to inherit from you is recognised in your Will.

I’m not married!

If you are unmarried and living with a long-term partner, they will need to be recognised in your Will or they may lose out financially when you pass away. If you share a property and this is solely in your name, your partner could lose the right to live in your family home.

For advice on this and Wills in general, please speak to one of our financial planners.

A Will might not be enough…

There could be many risks to your estate that you haven’t even considered. One way of helping to secure your estate is by having a Trust. For example, a Family Protection Trust protects your estate by ensuring it is passed onto the people you name in the trust; this avoids disinheritance issues and can help to reduce Inheritance Tax (applies to estates worth over £325,000). Trusts can also be used to protect against care home fees and to reduce the cost of probate – for more advice on Trust planning, please speak to our team.

How does the Probate process work?

Most people will have to deal with probate at some stage. Any estates worth more than £5,000 will go through this process. When a person dies and if you have been named as the “Executor” of the Will, you will need to apply for a “grant of representation”, which is known as “probate”. This will give you the right legally to be able to deal with their estate. Otherwise, this would fall onto the deceased person’s next of kin. Sometimes people appoint a solicitor to do this on their behalf – talk to us for more information on this.

It is the responsibility of the Executor to collect all the assets from the estate (property, possessions, cars, money, etc.). They would also be expected to pay the Inheritance Tax bill and any remaining debts (including household bills). Lastly, the Executor would distribute the estate to people accordingly, i.e. passing any property, money or possessions to people named as “beneficiaries”. When you name an Executor in your Will, always check with them first to see if they are happy to do this for you.

For more information, please visit our Inheritance page.

If you are worried about disinheritance issues or you would like to discuss Wills and Trusts, please get in touch to speak to one of our financial planners.

By Balance team, Aug 1 2017 11:27AM

If you’re winding down over the summer, this can be a great time to think about the future. What would you really love to do with your pension pot after retiring? While you’re lying on that sun lounger or dozing in the garden, think about what you enjoy doing now – this could be hobbies, activities, travel. Some of us daydream about sailing around the world, writing a novel or buying a seaside home.

“The future belongs to those who believe in the beauty of their dreams.”

Eleanor Roosevelt

Having a dream is a good start, but making it a reality is another thing entirely. We’ve pulled together a few ideas to get you thinking…

What are your interests?

What do you enjoy doing now that you would like to do more? Or is there something you’re fascinated by that you’d like to have a go at? Many hobbies or interests involve some sort of kit. For example, you might be interested in pottery – if you’re into throwing pots, you might be thinking about owning your own potter’s wheel. You may want to set up a small home workshop. If this is your dream, will it be in your current home or are you likely to downsize in the future? Whether its arts and crafts or cricket you’re into, factor in how large a part your interests will play in your future. This is what your money is there to support and is, sadly, an often-overlooked side of retirement planning.

Will you want to move to a new house?

What are your plans for your current home? You may have already paid off the mortgage so you might make a tidy profit if you sell your house in the future to buy something smaller. Or perhaps you plan to keep your home in the family for the benefit of your children and future grandchildren. Perhaps you have a portfolio of properties in your estate. When did you last value these? A sale of multiple properties could really boost your retirement pot and enable you and your partner to live very comfortably, whether it’s by the sea in the UK or somewhere abroad. But be warned, selling property should be planned carefully so as to minimise the amount of tax you might have to pay.

“The biggest adventure you can take is to live the life of your dreams.”

Oprah Winfrey

Would you like to travel?

Whether its travelling coast to coast in a luxury motorhome, trekking in the Peruvian Mountains, or cruising the high seas – whatever floats your boat. Planning your future adventures can be truly exhilarating. If you’re planning to travel for more than a month, you could consider a base abroad by renting or even buying a foreign property. If you’re planning to travel to various places, consider your accommodation and daily living costs – food, spending money, etc. Remember to work out whether your savings will sustain your chosen lifestyle for a substantial amount of time. After all, you want to enjoy any escapades in comfort.

If your main aim for retirement is travel, with recent “pension freedoms” you might be able to start earlier than planned. You can now draw pension benefits from the age of 55. This could create an opportunity to see more places than you had previously planned, while you’re still earning an income from your salary. Think you can’t afford to retire early? Some of our clients thought the same thing when they first came to us, and in many cases were relieved to find their finances could be structured so they could retire sooner and start working on their bucket lists instead.

After recent announcements that the state pension age is rising to 68 for some age groups (between the ages of 39 and 47), it’s more important than ever to plan for your future. If your dream is to retire early then having healthy savings, including in a private pension plan, is essential. With the right mix of pensions, investments, ISAs, savings, and a sound investment strategy, we’re confident that you will be able to achieve your dreams.

For more information on pensions and retirement planning, please visit our Retirement page.

If you would like to talk to someone about your pension and your retirement plans, then please get in touch to speak to one of our financial planners. We can review your pensions and advise you on how to get the most out of your retirement.

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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