Your home may be repossessed if you do not keep up repayments on your mortgage. There may be a mortgage arrangement fee.
The following article is designed to give individuals an insight into the different ways we can invest in property. Whether it’s a direct investment into residential or commercial property or putting your faith in one of the many retail funds out there, there are many routes you can choose if you want to get access to this particular asset class.
As well as focussing on the various methods of investing, we shall also look at the benefits and drawbacks of putting your money into property, as opposed to different asset classes such as gilts, fixed interest, cash or equities. As this article was written specifically for your accountant’s publication, we shall also have a comprehensive look at the various tax implications of investing in property.
The article will also partly focus on the type of returns that property has provided in the past, so that by the end of this article you should have a much clearer understanding of the nature of investing in property and will be a much better position to decide if this type of investing is for you.
As time rolls on and the date for the beginning of the possibly the biggest ever changes to our pensions system, I thought it was a good time to speak out to all you employers and employees out there who will be effected by this.
Make no mistake about it, employers are going to face additional cost and administration burdens under this new pension regime. However, the good news is that there is time to plan and prepare, but time is running out.
There are four basic steps that can help employers plan.
1. Find out when the staging date is
This will give employers a deadline for implementation and a point to work back from. The staging date will be based on how many workers an employer has or, if there are less than 50 workers, the last two characters of the employer’s ‘Pay As You Earn’ reference.
There are more than 40 staging dates spread over four years from 2012. Larger employers will go first, smaller employers last.
You can find out your corporate client’s staging date by using this handy staging date calculator from Scottish Life.
2. Find out the duties that are likely to apply
Every employer will have some duties to perform but the duties will be different depending on the types of worker they employ. As a rule of thumb, any worker over age 22 and under state pension age, and who earns more than around £7,500 a year, will be treated as an ‘eligible jobholder’.
These workers will need to be automatically enrolled into a pension scheme by their employer. As long as these workers stay in the pension scheme, the employer will have to pay contributions. Those workers who don’t fall within this category will still have to be offered a pension scheme by the employer, and in some cases the employer will have to pay into it.
3. Review pension provision
Employers who already offer some form of pension provision will need to make sure that their existing scheme meets a minimum standard. This generally means that there must be a minimum contribution rate, made up of both employer and employee contributions.
If the scheme isn’t up to scratch contributions will have to increase. Building up these contributions to the minimum standard slowly could be preferable to employers rather than waiting until the last minute and facing a high up-front bill.
Employers who don’t have a pension scheme will have to set one up sooner or later. Again, starting to do this as early as possible would help employers to build the scheme up at their own pace.
4. Consider the impact on the business
There is no doubt that automatic enrolment will have cost implications for every employer, large or small. Employers will need to consider how they will meet these costs.
Can they simply absorb the costs, potentially reducing profits?
Will the costs of their goods or services need to increase?
Will staff remuneration structures have to change?
Will HR processes and systems need to change?
Will business plans need to be adjusted to reflect the increase in costs?
These are just some of the questions that finance directors and business owners will need to address. Planning ahead, well before the staging date, could help smooth any cost increases, avoiding last minute shocks.
It’s clear that employers will face a major challenge when their employer duties start. With the economic climate as it is, it is probably even more important to plan as early as possible. It won’t be easy but help is out there. If you wish to have a free initial consultation with us please just get in touch and we’ll be more than happy to have a chat about your situation.
I am increasingly talking to clients who have pensions, but who aren’t being given regular financial reviews or who aren’t having their attitude to risk assessed regularly. It is absolutely vital that you receive regular financial reviews on you pension and that you have your attitude to risk assessed at least annually to ensure your pension is performing in a way you want it to and that when you get to retirement you receive the amount of income you want and need to live a comfortable lifestyle.
How much investment risk is right for you?
Every investment involves risk and, generally speaking, the greater the return (or growth) being sought, the greater the risk that needs to be taken. The problem is that while it is easy to measure return, it has been very difficult to accurately measure the amount of risk being taken. We’ve seen many examples in recent years of investors not fully understanding the level of risk they were taking until it was too late - gold, commercial property and residential buy-to-lets spring to mind. On the other hand, there are many investors who are so risk averse that they fail to meet their long-term goals. Understanding the right amount of risk to take is possibly the most important aspect of any financial plan.
Matching your attitude to risk to your investments
The good news is that it’s now possible to accurately assess not only the level of risk of an investment, but also your individual attitude to risk. By matching the two, we are now able to give you the peace of mind of knowing that you are neither taking more risk than is comfortable for you, nor too little risk and so reducing the chance of meeting your goals. Financial markets are becoming ever more volatile, the array of investment products is becoming more and more complex and, over time, your own personal circumstances will change so it’s more important than ever to correctly understand the amount of risk you are taking. What’s more, the sophisticated tools now available not only allow us to assess your attitude to risk and recommend the right initial mix of products, but mean we can keep your investments on track over time.
What could the consequences of not having regular financial reviews be?
Black Monday – October 1987.
By the end of October the UK Stock Market had dropped more than 26%, the US Stock Market dropped more than 22%, Hong Kong and Australia both dropped more than 42%. To this day the reason it happened is still argued about.
(Source: On this day BBC website)
Between February 2006 and February 2011 the difference in performance in the best and worst funds in the IMA UK All Companies sector was 140% (the equivalent of 28% per year).
(Source: Lipper Hindsight 22nd March 2011. Bid to Bid with income net of UK tax reinvested)
Over the last 5 years, the Canada Life/ Henderson Multi Manager 4 fund has given an annualised return of (– 1.2%) meaning £1,000 invested 5 years ago would be worth £942. This fund had a volatility (a measure of the amount of risk the fund manager has taken) of 4.1
Over the same time period the Phoenix R Sol/ Newton Balanced fund has given an annualised return of 8.5% meaning £1,000 invested 5 years ago would be worth £1,503. This fund had a volatility of 4.2
(Source: Money Management May 2011)
If these statistics worry you, if you don’t know how your fund has performed in relation to its benchmark, if you don’t receive regular financial reviews on your pension or if you just want to talk through any concerns you may have please contact me on 0800 321 3508 – free from a landline, call me direct on my mobile at 0757 679 1009. Or drop me an e-mail.
The speed at which markets can shift direction is a constant source of amazement. It was only last autumn that the great fear was that the western world was following Japan into a multi-decade period of low growth and persistent deflation. Debts had to be repaid, it was argued, and the only way for this to be done was slowly and steadily. And until this was done there was no basis for a resumption sustainable growth in the UK, United States or Europe. But now this is all forgotten. Markets are instead abuzz with inflation, food prices, commodities and the timing of interest rate rises. There are no guarantees that this phase will last any longer than the previous Japanese obsession and we expect that these sudden and severe changes in sentiment will characterize the year ahead. We thus retain our diversified strategy, leaning towards a cyclical recovery but not to the exclusion of any other potential eventuality.
The trends in markets we are seeing in the early stages of 2011 can be traced back to the announcement of the restarting of quantitative easing in the United States last autumn. Since that time we have seen investors globally rebuilding their protection against inflation; prior to then the relative valuations of equities and bonds showed that deflation was seen as the greatest threat facing markets. UK equities yielded more than gilts for the first time since the 1950s, other than at the bottom of the market crashes in 2003 and 2009. This time it was not the result of the text book irrational selling at the bottom of a crash, but came instead from the lowering of bond yields. The Federal Reserve Bank’s insistence however that it will add up to $1 trillion to its purchases of treasury bills has shaken investors’ confidence in these extreme valuations. Almost to the day of the announcement we have since seen equities given renewed life, commodities surging, bond yields rising and gold underperforming.
You can download this Market Commentary as a PDF file by clicking here or continue reading online
Well probably not but there have been enough changes in the last few months to cause more than a few heated debates amongst interested parties. Pensions are headline news and trust me that is not going to change anytime soon!
Over the next week or two I’m going to be putting up a series of articles which will highlight stuff that could well be relevant to you. Changes such as the scrapping of the need to take annuity by age 75, the limits to how much you can put in a pension, proposed auto-enrolment, the big changes to drawdown contracts etc etc etc.
I’ll start tomorrow with the changes to drawdown and this effects those who are currently in an unsecured pension and those considering entering into drawdown.
Maybe not the new rock’n’roll but these changes are going to effect each and everyone of us. Until next time…
Your retirement could last decades.Life expectancy after retirement
Retirement could last
longer than you imagine…
People often think of their pensions as a bit like savings accounts. So they pay money in while they’re working, and when they retire they think they can take that money out, as and when they need it. But that’s not actually how pensions work. Unless you have a “Defined Benefit” or “Final Salary” pension scheme, the reality is that you will have to purchase a retirement income using your pension savings.
There are a range of retirement income options available. Choosing the right retirement income is one of the most important decisions you’ll make, especially as once set up, the majority of retirement income options cannot be changed. There are many important factors to consider and to discuss with your financial adviser to ensure the option you take is right for you. It’s a fact that people are living longer than they used to. Someone aged 60 retiring today can typically expect to live more than 20 years.
This article is available as a downloadable PDF file, click here to download and is also available to read online.
NOTE: I have been writing articles here since 2007 so please take note the date of the article, because obviously, things like laws or tax allowances etc may have changed since then.
I do try my best to keep up to date, but I'm only an humble advisor and there are hundreds of my financial articles here! Please call or email if you need to double check something. I'll gladly help.
"I have introduced many clients of mine to Billy as I have complete trust in his professional ability." Tom Queen, Solicitor - Thomas Queen & Co. Dunfermline, Fife.
"I've found Billy a personable yet professional practitioner who offers sound advice and realistic proposals backed up by facts. I'd wholeheartedly recommend Billy." Rory Paterson, Director - Mediacom Scotland Ltd
Retirement could last
