WHAT GUARANTEES CAN I GET ON MY INVESTMENTS?

Some guarantees are still possible. The dilemma for many is that they want to get a reasonable income from their investments but they do not want to take much of a risk.

The investment return on cash deposits is currently very limited – 1 to 2%. Better returns are available with annuities but lifetime annuities generally mean a loss of the cash in exchange for the income. But there are guaranteed funds which can provide a guaranteed income for life while still maintaining access to the capital. A client of ours, who is 70 has taken advantage of such guarantees, and has seen her £100,000 investment increase over the last 9 years to £120,000 while also having her guaranteed income for life increase from 5.0% per annum  originally to 6.5%. The funds are invested for growth in stocks and shares and are reviewed annually. If the fund values have improved above a certain point, the guaranteed income for life is increased, while she is still able to access the capital. If the fund values have gone down in that year, the income stays as it was. If she withdraws capital, then her income would reduce proportionately but would still have the lifetime guarantee. The theoretical worst case scenario is that her fund reduces to nil but she would still have the guaranteed income for life.

If you would like to discuss such a guaranteed investment approach to see if it would suit you, contact us.

MERGER – AVIVA AND FRIENDS LIFE

Two of the largest UK life assurance companies – Friends Life and AVIVA are planning to merge. Their strategy is to increase efficiency and savings by economy of scale. What the real result will be is more uncertain. Each of them already have commitments from having absorbed a number of earlier life companies. For example, Friends Life took over Friend Provident, F&C (Foreign and Colonial), BUPA, Resolution and others. While AVIVA have General Accident, Commercial Union, Norwich Union and others. Each of their subsidiaries brings past responsibilities and contracts to honour. At the moment the Stock Market considers it a good idea for Friends Life and a not-so-good one for AVIVA and their share prices have reacted accordingly.

THE NISA!

From the 1st of July 2014 all Individual Savings Accounts (ISA s) will become New ISA s

(NISA s).

It applies to all existing ISAs and to new accounts opened up after the 1st of July. The NISA has three major advantages over the previous ISAs:

First, it has a higher limit of £15,000 per tax year;

Second, the £15,000 can be made up of any combination of cash and stocks and shares, including investing it all as cash;

Third, the new ISA will allow for transfers from current Stocks and Shares ISAs into cash holdings and vice versa (up to now it was only possible for a Stocks and Shares ISA to transfer to cash; now it can go either way). Any payments already made in this Tax Year, i.e. from the 6th of April 2014, into an ISA will count towards the £15,000 total. If you have made payments so far this Tax Year into both a Cash ISA and a Stocks and Shares ISA, you can add to either or both of them as long as the total contribution made in the current tax year does not exceed the £15,000 limit. You can pay into only one Cash ISA and one Stocks and Shares ISA in this tax year, but you should speak to your ISA provider to establish what options they have available for existing ISAs.

Those aged between 16 and 18 can open up a Cash NISA and pay up to £15,000 into it. For those under 16 there is the Junior ISA which, from the 1st of July, will allow up to £4,000 to be paid into it each Tax Year.

INVESTMENT – BE GUIDED BY THE RISK YOU ARE WILLING TO TAKE!

The various Stock Markets are providing something of a roller-coaster ride with their ups and downs. While generally there has been a recovery over the last 6 months or so, the main problems of creating growth and repaying large national debts are likely to be with us for some time to come. Those investing in the Stock Markets should make sure they are comfortable with the risks and also understand that they should be investing for the medium to long term. Those approaching retirement in the next year or two, and who still have investments in managed funds through their pension funds, should consider moving to lower risk options, even Deposit Funds, to avoid being caught out by a sudden drop in the market just at the time when they want to take their pension benefits. If you are still interested in seeking a better return on your money even after considering the risks, and with 10 years plus until your expected retirement, then you should consider investing, or staying invested, in the Markets. There are a variety of Managed Funds that allow you to spread your investments both as regards types of businesses and geographical sectors. The Markets generally tend to take their lead from the United States but it remains our view that any meaningful growth is still likely to come from what are called Emerging Economies. In the past this has included China and India as well as other countries like Brazil and Russia and some Asian countries. Because of currency exchange rates and questions about political stability, such investments have to be considered higher risk. So do make sure the risk is one you are willing to take. Contact us if you would like to discuss your options – 01342 313302.

New “Buy Now” for your ISAs

With the beginning of the new Tax Year (2012/2013), there is the immediate opportunity for doing your new ISA savings/investment. You do not need to wait until the end of the Tax Year. In the case of a Cash ISA this gives you an extra 12 months of tax-free growth if you do it now. With a Stocks and Shares ISA you would be buying at what looks to be a low point in the Market and avoiding the end of Tax Year rush, which tends to drive up investment fund costs.

TIME FOR A FINANCIAL REVIEW

Review all of your cash deposit accounts
Find out what interest rate you are receiving. You may be shocked to find interest rates of 0.10% in monies held in a saving account with the glorified name of “Gold” or “Silver” savings account. Look for a better rate. You should be able to achieve at least 2.0% or better.

Use your Capital Gains Tax Allowance
If you have investments that have gone up in value you can realise tax-free profits of up to £10,600. As with your ISA allowance, you cannot carry this forward. So you use it or lose it!

Be aware of your Tax Allowances
Personal Tax Allowance: 2011/12 = £7,475; 2012/13 = £8,105
For those aged 65/74: 2011/12 = £9,940; 2012/13 = £10,500
For those 75 and over: 2011/12 = £10,090; 2012/13 = £10,660

Note: The Age Related Allowances above are only available to those whose total income is less than £24,000 (2011/12) and £25,400 in the new Tax Year.

Review Your Life Assurance Arrangements
Pull out the documents and see how much you are covered for, and for how long. You may find a policy is coming to its end, and you can also ask us to check the cost to ensure you are not overpaying for your life assurance or critical illness insurance.

Review Your Pensions
You may have pension pots in various places from previous employments or pension saving arrangements. Find out what the fund values are and what funds you are invested in. You can then look squarely at what you are likely to have available in your later years and act accordingly. We will be happy to help you work out what these might add up to eventually. Make sure that all of these pension providers have your current address so they do not lose track of you.

Review Your Mortgage Arrangements
If you on your lender’s Standard Variable Rate and paying more than 4.5%, find out what else your lender can offer and contact us to find out your other options.

UPS AND DOWNS

The world’s Stock Markets are moving rather wildly up and down as investors worry about the problems that many countries face in meeting their debt obligations. They include Spain, Portugal and Italy, as well as the United States. In these circumstances it is worth reviewing the following Investment Tips that have proven their worth in the past.

 Buy what’s right for you.
 Diversify (don’t put all of your eggs in one basket).
 Invest for the long term.
 If an investment has risen substantially, consider selling it (don’t be ashamed to take a profit).
 Never buy what you don’t understand.
 Know when to say goodbye to a bad investment.
 Be your own person – don’t follow the herd.
 Review your investments regularly.
 Don’t believe everything you read!

PROFITS!

The Stock Markets generally have gone up over the past 12 months. If you have money invested in stocks and shares, you may well be showing a profit on your investment. Each year you can realise a level of profits on such investments without paying any tax. In this Tax Year it is £10,100. So if you cash in your investments that have made a total profit of £10,100, you will come away with a useful tax-free return. And since it is true for all adults, a husband and wife could come away with £20,200 tax free! And a clever couple who have made substantial profits could get the £20,200 tax free before the 5th of April and then get the same on the 6th of April. That is a total tax-free income of £40,400.

If you have made profits on some investment higher than that, then you will still pay less than you would pay in income tax. A basic rate taxpayer would be charged at 18% and a higher rate taxpayer at 28%. It is important to get some advice on this in order to avoid paying more than you need to. You can also straddle the old and new tax years, to minimise the tax. If a husband and wife are in different tax brackets, e.g. one with a part-time job and the other a higher rate taxpayer, there are various strategies that you can use to reduce your tax. For example, if the lower earning spouse is earning less than the tax threshold (£6,475.00) in the current tax year, then any savings could be put in her sole name to avoid tax.