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Last updated by William at November 22, 2013.

Financial Planning and Important Divorce Advice

No one who is going through a divorce finds the process easy: it’s long, messy and painful. Even if there are no children involved, divorce is a procedure that takes its toll on both sides; the acrimony, the paperwork, and the inevitable meetings with your solicitor.

It’s understandable that many people involved in a divorce want to minimise the number of meetings they attend and simply let the solicitors get on with sorting it out.

Unfortunately, trying to cut down on meetings could be a serious mistake. Divorces are not just about broken relationships, dividing up the family home and arranging custody of the children. Sadly, they’re about financial planning as well – and meetings with your independent financial adviser may turn out to be even more important than meetings with your solicitor.

A Guide to Investing in Property

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.

Europe, the final frontier

All investors are taught early in their careers that the two dominant emotions in financial markets are fear and greed.
Cold rational analysis of facts is all well and good but when emotion takes hold it over-rides everything else; to paraphrase one of the most important adages, JM Keynes preached that the markets can remain irrational longer than anyone can remain solvent.

It is also a truism though that every scare story that has ever spooked markets has been highly credible at the time.
Whatever story it is that is driving sentiment has to be based in reality. Like a good horror film, the greatest terror comes from what is unseen, unsaid and implied. The markets have not recovered from the trauma of the 2007-2009 crisis and still carry the baggage of that great banking disaster. This has become their Achilles Heel and any mention or suggestion that we are heading to another banking meltdown triggers hyperventilation and a panic attack.

The summer months have seen global markets of all descriptions running scared by Europe. The argument is terribly and deceptively simple: the debt can has been kicked down the street for too long and a number of European countries can no longer meet their obligations.
Defaults on sovereign debts, it is argued, are inevitable and will lead to losses on these bonds, the majority of which are held by European financial institutions. These losses in turn will lead to bank insolvencies as national governments can no longer afford to fund further bail outs, the banking and insurance system will collapse and the world will again run out of money. This, so the theory runs, will result ultimately
in the breakdown of civil order.

Financial Advice Market Commentary for April 2011

financial-advice-market-commentary-april-2011

Measured progress

There is much to be gleaned from the performance of markets over the first quarter of 2011. Ever since equity markets hit their most recent low point in March 2009 many have questioned the rationale for and the resilience of the rises in global share prices, arguing that markets were in denial about the continued parlous state of Western economies and their financial systems. Over the early stages of this year however, markets have withstood the very considerable headwinds of high inflation in both developed and developing economies, tightening monetary policy across most of the world, an oil price at near record levels, widespread civil unrest across much of North Africa and the Middle East, plus the Japanese tsunami and associated radiation leaks. A mere twelve months ago it would have been inconceivable that markets could have absorbed all of these with barely a wobble; but despite the Japanese Nikkei Dow Index registering its worst two-day fall since the crash of 1987 in the immediate aftermath of the Fukushimanuclear incident, that is what we have seen. This shows a large and significant increase in confidence.

In many ways this has been a very old fashioned start to the year. America has taken up the running in terms of both equity market performance and economic growth. With the notable and considerable exception of the housing market, the world’s largest economy is in robust health. The two key monthly indicators of economic activity that we use, the Institute of Supply Management surveys for both Manufacturing and Services, have been showing impressive growth for many months. Importantly the most
widely used measure of employment, non-farm payrolls, are at long last registering steady if unspectacular job creation and the rate of unemployment has fallen below 9% (source Bloomberg). The one remaining cold spot is the housing market. Sales of both new and existing homes are at rock bottom levels and, although the magnitude is still small, average house prices have fallen for the past seven consecutive months (source Bloomberg). It may be that housing will be the last domino to rise in this economic cycle; affordability is the best for a decade and employment is rising, but neither will drag prices upwards until the overhang of oversupply is dealt with.

You can download this Market Commentary as a PDF file by clicking here or continue reading online

Market Commentary for February 2011

financial-advice-market-commentary-feb-2011

The nuclear option

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

Pension Drawdown Is Changing

As promised here is an article on the changes to Unsecured Pensions( also known as drawdown).

Summary of the proposed changes

The age 75 rules on annuitisation, value protection lump sums, pension commencement lump sums (PCLS) and trivial commutation lump sums will be removed.

The age 75 rules on contributions and Lifetime Allowance checks will remain.
Pension funds will be able to remain in an Unsecured Pension (USP) indefinitely. This is referred to as “capped drawdown”.

Alternatively Secured Pensions (ASPs) will cease to exist.

The USP maximum withdrawal limit may be reviewed. The current limit of 120% of GAD rates is regarded as probably too high at older ages and may have to be less than 100% to avoid the risk of people exhausting their funds.

A USP customer will be able to access additional flexibility through “flexible drawdown” provided they have met a minimum income requirement (MIR). This minimum income will need to be a secure pension income for life and escalate by the lower of 2.5% or inflation. The customer would then be able to withdraw up to 100% of the remainder of their fund. This will be taxed as income.

The minimum income required is not set out in the consultation paper. However, it is expected to take account of not just current means-tested benefits, but also potential health costs and future expenditure needs.

Lump sum death benefits will be taxed at 55% to counteract tax relief given – this includes value-protection payments. The only exception is for pension savings where no part has been used for an income when the saver dies before 75, where the fund will be tax free.

Importantly, the Government has already announced on 22 June 2010 that in
anticipation of the drawdown rules changing, clients may remain in USP until
age 77 as an interim measure. At present any Pension Commencement Lump Sum
(PCLS) must be taken by age 75.

The main things that will cause concern to existing Drawdown customers is the extra 20% charge on lump sum benefits from the scheme. This will automatically change in April so it is vital that you review your situation. The changes to maximum income are not so straightforward because if you are in an existing contract and taking maximum income (120% GAD) then you can continue with this until your first review date which is normally 5 years after the contract was taken out. Again though it is probably wise that you do contact your adviser to discuss these changes.

CONCLUSION

As I have already alluded to it is vital that if you are in a drawdown contract that you regularly review your situation because it may not be the contract for you anymore. Decline in health for example means that you may want to purchase an impaired life annuity and the 10 year guarantees offered by annuities may be more appealing, given the 55% tax charge on death in USP. Your attitude to risk may also have changed as there is obviously an investment element to these contracts, so reviewing your options here is vital.

If you require a review of your situation or if you are considering drawdown for the first time please just drop me an e-mail or contact me on 0800 321 3508 – free from a landline.
Alternatively call me direct on my mobile at 0757 679 1009.