ISAs – End of Year (Part 1)

As the end of the financial year approaches in April, taking stock of the performance of your savings is an essential task for anyone who wants to see their personal wealth grow effectively year on year. This blog is a useful guide to savers who invest in ISAs and want more for their money.

 

Tax Efficient Savings

 

The annual allowance that a saver can invest in an ISA without incurring tax on their nest egg in 2014/2015 is £15,000 per year and it can be divided between cash and stocks and shares, depending on your preferred method of investing.

 

While most cash ISAs are free to open, a stocks and shares ISA will normally incur a fee.

If you invest in shares heavily, it is essential to check the overall annual cost of your ISA, as monthly charges over time can stack up

 

Savings Check

 

No broker, fund manager or financial advisor is a better guardian of your wealth than you are, since you are the person who cares the most about your savings.

 

As such, the only way to build your personal wealth is to keep a close eye on it and carry out at least an annual savings audit.

 

Checking up on your rate of interest, return and any costs that might be associated with the account you have is vital.

 

Money is easily lost by simply assuming that it is in safe hands or that your ISA is working for you as hard as it can.

 

Best Rates Available Coming Up To Tax Year End

 

The end of the tax year starts to resemble financial products ‘Black Friday’ as we move into February and March.

 

Banks and Building Societies know that you are likely to be scrutinising your investments and they offer attractive deals in the hope they can poach your custom.

 

With this in mind, don’t simply settle for the first ISA that comes your way as you are in a buyer’s market and you afford to hold out for a good offer.

 

These market conditions are unlikely to emerge for a further 12 months so it’s important to make the most of them while they last

 

Maximise Your Investment For This Tax Year

 

If you feel you missed valuable opportunities in the past twelve months to keep your hard earned personal wealth safe from the predations of the tax man, then the end of the tax year is a perfect opportunity to make a difference.

 

By being proactive about managing and monitoring your savings and shifting money out of ISAs that aren’t performing into ones that are, you can save a considerable amount on larger investments.

 

If you are committed to making your wealth count in the coming twelve months, don’t take the easy option and invest some time in your investments.

 

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED

 

LEVELS AND BASES OF AND RELIEFS FROM TAXATION ARE SUBJECT TO CHANGE

 

THE VALUE OF TAX SAVINGS ON A NISA DEPENDS ON THE INDIVIDUALS’ CIRCUMSTANCES

 

All Change For Pensions

The private pensions market has undergone a period of rapid and intensive change in the past year. In the next two years state pensions will also be transformed and inevitably there will be those who benefit from the changes and those who don’t.

 

This is written to give you the best chance of benefiting from the new pensions landscape…..those that are informed, pro-active and realistic about their circumstances / entitlements retire wealthier.

 

Annuities

 

Last year the Chancellor of the Exchequer made annuities non-compulsory on “defined contributions” pensions……meaning that when a saver wants to access their pension they can decide exactly how to spend it.

 

This gives some the flexibility to use a lump sum from their pension to pay off mortgages or other debt, contribute towards grandchildren’s education fees or buy a new property.

 

What does this mean for you?

 

If you are considering buying an annuity you need to make sure you compare the fees and charges of each annuity scheme.

 

State Pensions

 

Not only have “defined contributions” pensions undergone significant changes in the last year, but plans for state pensions have also changed.

 

The statutory pension in 2016 will increase to a uniform rate for all claimants of £148.40 per week. However, if you were to reach the age of 65 on or after April 1st 2020 you will have to wait a further year in order to be able to claim as retirement age will rise to 66 that year.

 

In 2028, people will only be able to retire at the age of 67 and it is this increase in retirement ages that has helped the Chancellor to appear ‘generous’.

 

That said, these calculations are all based on the fact that overall we’re living longer and healthier lives than ever before so there’s every reason to be positive.

 

What to do next…

 

At the start of each year it is important to audit your pension affairs. You need to find out how many pension pots you have and work out what is in them, how well they are performing and what the likely yield will be.

 

Will your pension be able to meet your financial needs?

 

Is your pension sufficient for the retirement you have planned?

 

If you are ten or twenty years away from retirement it is important to know whether there is a shortfall between what you can afford and what you can envisage.

 

Remember…… those that are informed, pro-active and realistic about their circumstances / entitlements retire wealthier.

 

Greece Is The Word (Part III)

And here we are again……update Part III

 

With crunch time for Greece and the Greek people fast approaching (it only has enough cash to last until the end of this week), options to overcome the stalemate became increasingly straight forward:

 

1. Greece can borrow further money from the Eurozone as part of the pre-agreed bailout and accept the severe austerity measures that come with it. This is effectively Greece borrowing from the Eurozone to then make their debt repayments back to Eurozone countries and financial institutions.

 

2. Greece could refuse the austerity conditions and no money will be offered. Greece will then default on all its loans / bonds / promises to many Eurozone countries and financial institutions, which is likely to cause financial meltdown.

 

Some would argue that Greece holds all the aces here……but Germany are flexing their economic muscles very strongly and won’t be dictated to. The ‘middle ground’ appears to be no ‘man’s land’ at the moment.

 

So what option was taken?

 

In short, all parties agreed to delay a decision for 4 months to allow some thinking time / head space / me time and Greece would be thrown some pocket money to keep them going.

 

Not so much a solution……more a ‘put off until tomorrow and worry about it later’.

 

The longer term issue is whether Greece remains in the Eurozone at all. A Greek exit (‘Grexit’….you’ll be sick of this term over the next few months!) could be a good thing in the long term if a favourable economic development plan for all parties can be agreed.

 

If only this had happened 5 years ago……Greece and the Eurozone would be in a much better place by now.

What’s Happening To The State Pension?

In the next few months with a General Election on the horizon, millions of voters and savers will be eagerly waiting for news of what provision there will be for them in their retirement.

The State Pension, which is currently capped at a maximum of £113.10 per week, has been amended, adapted, altered and changed by successive governments over the last half century or so. The result can be that State Pensions confusing, contradictory and often unfair.

New Government rules that will eventually come into effect from 2016 onwards have been drawn up in order to make state pensions simpler and fairer.

So......how will the new changes affect you?

Flat Rate

State Pensions entitlement is linked to how much National Insurance contributions an individual makes.

Currently, people who take a break from contributions such as new mothers on maternity leave are penalised and people who switch from full time employment to self-employment may find they have less in their State Pension pot.

The new State Pension that will be introduced in 2016 will be worth no less than £148.40 per week (this is based on current rates of inflation and might be higher in 2016). The final figure will be set in August this year.

Civil Partners

Since 2010 if a married man or woman had lower National Insurance contributions, they were able to increase the size of their state pension based on the contributions of their wife or husband.

Now in 2015 couples in civil partnerships will also be able to benefit in the same way, as the amount will be capped at the level of the basic State Pension, which is £67.80 per week.

Married couples and civil partners who benefit from this do not have to live with their partner or even wait until their partner has drawn their pension, as long as they are eligible to draw their own.

Life Expectancy

The increases in life expectancy across Britain have had a dramatic effect on the overall cost of State Pensions.

The number of years in which people are likely to be claiming has increased dramatically since State Pensions were introduced. In addition to this, the population itself is ageing, presenting the Government with a major dilemma.

The answer is to gradually increase the State Pension age. After 2020 retirement ages for men and women retiring after January 1st that year will increase to 66, rising to 67 by 2028.

If you were unsure what your State Pension age will be, there is a Pension Calculator accessible to everybody.

Review All Your Pensions

The three months before the end of the tax year in April are some of the most important in the financial calendar, particularly for savers.

If you have a number of pension pots, including your state pension, it might be a good idea in the coming weeks to review them.

Carrying out an audit of the overall value of your pensions is relatively straight forward and is especially important given the forthcoming changes to pension entitlement.

The most important task relating to State Pensions is to contact the Future Pensions Centre to find out exactly what you are entitled to and when you will receive it.

 

 

Bonkers Banking

Newspapers and media got their perfect recipe this week……tax evasion, politicians and banks all blended and then baked into one tasty cake.

 

The story broke thanks to a former HSBC IT worker who ‘released’ data to French authorities that HSBC were helping its UK customers to avoid significant tax using their offshore banking arms……and they were very active in this market in 2010 with some 3,600 UK tax payers avoiding tax.

 

There are a number of interesting points to come out of this.

 

1. The Government knew of this in 2010 and essentially brushed it under the carpet and threw the hot potato to HMRC.

 

2. Of these, 3,200 individuals have been traced by HMRC and, of the 1,100 most serious cases that HMRC has chosen to pursue, only 130 are now outstanding. As a result of this, HMRC has recovered £135m. Yet significantly, not one person has ever been prosecuted or even charged with wrong doing.

 

3. HSBC has never been investigated or fined for its involvement.

 

4. And here’s the political bit……there are allegations of offshore bank tax avoidance schemes being used by Conservative donors.

 

All in all, what a mess just 70 days before the General Election.

 

Whilst the taxpayers were bailing out the banking sector, it appears HSBC was quietly defrauding them.

 

Shameful

 

From Russia With (Not Much) Love

Anyone who knows me, knows I like a ‘stat’ on pretty much anything in life. And Russia is providing me with the ‘perfect stat storm’ at the moment. Here’s a belter to get you started……

 

Oil and gas energy represents 2/3rds of Russia’s exports (worth around $530 billion).

 

That’s a big deal……a very big deal. In fact, Russia’s political and economic system is dependent upon it. Public expenditure is almost completely supported by energy-related revenues. In their absence, the Government would be increasing its indebtedness by more than 10% a year!

 

The thing is, you don’t need to go to war with Russia to prove your power and put them in their place.  

 

Firstly, trade sanctions imposed to punish Putin for his Ukraine adventure make it all the harder for Russia to trade the country out of its mess.

 

Secondly, halving the price of oil by generating a massive oil supply (that’ll be the US back Saudi’s!) hits them where it hurts.

 

Little wonder then that the rouble has halved this year in line with the tumbling oil price.

 

All in all, what a Russian mess. Russia is leaking cash on a massive scale and it is challenging to see how the hole can be plugged.

 

Gripping stuff

Greece Is The Word II

The story continues……

 

European officials and Governments are growing more anxious by the day about the Greek drama.

 

The new radical-left Greek government said it would no longer negotiate with the officials from Troika - the International Monetary Fund (IMF), the European Union (EU) and the European Central Bank (ECB). That did not go down well with European officials and nerves have been left frayed.

 

Greece's Government also said it would refuse new loans from the EU and the IMF. That raised the question of how it would finance itself and created concerns that Athens was no longer sticking to the terms of its bailout agreement.

 

What a mess.

 

In short, Greece wants to write off some / all of its unsustainable debt that was restructured as part of the bailout, with the Eurozone unwilling to budge. The result……a tense political thriller.

 

The Greek Finance Minister is now on a charm offensive around Europe flirting with various Governments in an effort to gain support and allies for Greek restructuring of its unmanageable debt.

 

What can we expect the thrilling climax to be?

 

The most likely outcome will be both the Eurozone and Greece meeting somewhere in the middle and any default by Greece is managed in an organised ‘hair cut’ (you’ll be sick of this expression by Easter).  

 

Expect plenty of newspaper copy on the worst case scenario though……Greece refusing to repay any debt and investment markets going into meltdown. It will spark political unrest in Spain / Ireland / Portugal / Italy as they consider the merits of not repaying their financial support from the Eurozone as well.

 

What is also at stake here is not just the fate of Greece and whether it stays in the Eurozone, but the authority of Germany to define the narrative in Europe and in the Eurozone. The German’s are ruffled.

 

There is urgency to these talks though. Greece's bailout agreement expires on 28 February 2015. If it is not extended, the European Central Bank would have to stop lending Greece money. Also, Athens would not get €7.2 billion, the next tranche of bailout money without a review of its reform programme being completed. Expect it to go right to the wire.

 

Gripping. Intense. Thrilling.

 

Political and economic drama at its best.