Post-Pandemic Finances

Post-Pandemic Finances

POST – PANDEMIC FINANCES:

STARTING AN INVESTMENT HABIT

18

AUGUST, 2021

Lockdown
Investing
Savings

UK households have built up over a staggering £117 billion of savings after being cooped up at home since the start of the pandemic [1].

The study also claimed we are planning to splurge on clothes, dining out and holidays.

While a spree will help the UK economy it’s important to make sure your money is working hard for the longer term.

That means investing it. There are, of course, no guarantees with investing. But if you don’t think you’ll need access to your money for at least five years, investing offers the chance of better returns than you could get from saving in a deposit account.

While many people have adopted investing as their new hobby during lockdowns, others will have put this off for fear of the unknown.

Entering the world of investments for the first time can be daunting. But those feelings might partly be down to the many myths that surround the sector. Here are a few of those common misconceptions:

Myth 1: Cash savings are risk-free

While the amount in a savings account will not fall, the value – or buying power – of that money can drop if the interest you earn on your savings doesn’t keep pace with the rising cost of living. That is certainly the case at the moment with interest rates low and inflation rising.

Myth 2: Investing is too risky

Stock market investing does come with risks, and you’ll need to be comfortable with the fact you could make a loss. However, along with this risk comes the potential for greater returns and it is possible to manage those risks within a portfolio.

Myth 3: Stock market investing is only for the wealthy

If you get into the habit of investing a small amount regularly, you could be surprised at how much it adds up to over time. You can build on the monthly amount as and when your income rises.

Myth 4: Now is a bad time to invest

The golden rule is that the sooner you start investing, the better. While the past 12 months has been challenging for investors, those with a long term view will have stayed invested and focused on their end goals.  Overall, it’s about making sure that your money spends time in the market.

Myth 5: Property is a better bet

There is an ongoing debate about whether property is a better investment strategy than the stock market. However, it is easy to underestimate the risks to becoming a landlord.

Buy-to-let investment has become much less desirable due to tax changes in recent years. You can no longer offset mortgage interest against tax bills and there’s now a 3% stamp duty surcharge for investment property.

There is also the risk you might not get the expected returns. The property could be empty if you can’t find tenants – during which time the mortgage still needs to be paid.

You are also at the mercy of house prices and the housing market, should you need to access the money and sell up.

Another important point is that homeowners already have substantial exposure to the residential housing market through their own home. Owning a buy-to-let means becoming heavily exposed to just one asset class.

“One study claimed that over three quarters of investors plan to keep up their investing habits post-pandemic”

Putting your savings to work

Not everyone has put off taking the plunge into the world of investing. It’s encouraging that of those who have started an investment habit over the last 12 months, many seem determined to continue this now that most restrictions are lifted. One study claimed that over three quarters of investors plan to keep up their investing habits post-pandemic[2].

Whether you plan to keep up and review your newfound habit or want to start a new one, there’s no time like the present.

An adviser can help construct or review an investment portfolio in the most tax-efficient manner that will fit in with your attitude to risk and goals.

PROVIDING NEWS AND VIEWS TO SUIT ALL NEEDS

This Blog is published and provided for informational purposes only. The information in the Blog constitutes the author’s own opinions. None of the information contained in the Blog constitutes a recommendation that any particular investment strategy is suitable for any specific person.

Abacus Associates Financial Services is a trading style of Tavistock Partners (UK) Limited which is authorised and regulated by the Financial Conduct Authority, FCA number 230342. Tavistock Partners (UK) Limited is a wholly owned subsidiary of Tavistock Investments Plc. Tavistock Partners (UK) Ltd trading as Abacus Associates Financial Services are only authorised to give advice to UK residents. Registered in England. Registered O­ffice: 2nd Floor, 1 Queen’s Square, Ascot Business Park, Lyndhurst Road, Ascot, Berkshire, SL5 9FE, Company Number 05066489, Company Number 04961992. Will writing and some aspects of tax planning are not regulated by the Financial Conduct Authority. Your home may be repossessed if you do not keep up repayments on a mortgage. The firm is not responsible for the content of external links.

Life Insurance

Life Insurance

LIFE INSURANCE: DO YOU KNOW THE INS AND OUTS?

20

April, 2021

Life
Assurance

What is life Insurance?
Life Insurance is a policy that pays out a benefit (usually a lump sum) on the death of the life assured.

Most Life Insurance policies are written to cover a specified term, hence the name given to it of Term Insurance.  With a Term Insurance policy, if the life assured dies during the term the policy pays out, but if the life assured survives the term then the policy simply ends with no cash value. Term Insurance policies are often used for mortgage and family protection reasons.

Sometimes a client needs a Life Insurance policy that will pay out whenever the policyholder dies. In these instances, a type of policy called Whole of Life Insurance is used. This is referred to as a “Whole of Life” assurance policy (assurance as you are “assured to die!”). These policies are often used to pay an Inheritance Tax liability.

SO WHO NEEDS LIFE INSURANCE? 

Typically, Life Insurance is used to give your family financial protection should you die within the specified policy term. It will leave a lump sum behind, which will help your family and loved ones maintain their living standards or pay mortgage costs.

Examples can include:

  • People with financially dependent children
  • People with debt (e.g. a mortgage)
  • People who have a potential inheritance tax liability upon their death
  • People whose death will cause financial hardship for their spouse (e.g. upon their death the loss of pension benefits will push a spouse into financial hardship)

HOW MUCH CAN IT COST?

Term Insurance is a relatively a low-cost type of insurance. Cost can vary from provider to provider but all providers take into account your health, lifestyle, term of the policy and level of cover ie the sum assured. According to MoneySuperMarket data*, those in the 31 to 39 age group will pay an average of £7.93 per month for £100,000 of level term life insurance only for a single policy, while those in the 40 to 49 bracket will pay around £13.12 per month. If an average latte costs £2.85, that is very good value to protect your loved ones.

So, if you are reading this and have financially dependent children, we would encourage you to speak to an Independent Financial Adviser to review your life insurance needs. Advisers will often rank life insurance as a significant priority when assessing a clients financial needs. It is worth bearing in mind that many of us with families spend hundreds if not thousands of pounds on a holiday but do not have life insurance. Could your family financially struggle if you had no life cover in place?

Whole of Life Assurance is a more expensive option because the Life Insurance company knows that there will be a pay out at some point (assuming the monthly premiums continue to be paid).

 

“Advisers will often rank life insurance as a significant priority when assessing a clients financial needs.”

WHAT IF I HAVE DEATH-IN-SERVICE? IS THAT NOT ENOUGH? 

It is probably best not to rely on Death-in-Service for your family’s protection needs. If you change job, then your Death-in-Service at the new employer may be less or possibly not offered at all.

Please get in touch if you have any questions, or want to discuss arranging Life Insurance.

 

*The average costs above were based on MoneySuperMarket customers looking for level term single life insurance only (without critical illness cover), with a total cover amount of £100,000, from October 2019 to September 2020

PROVIDING NEWS AND VIEWS TO SUIT ALL NEEDS

This Blog is published and provided for informational purposes only. The information in the Blog constitutes the author’s own opinions. None of the information contained in the Blog constitutes a recommendation that any particular investment strategy is suitable for any specific person.

Investing for all

Investing for all

Investing for all:
Top tips to explore the benefits this ISA season

23

MARCH, 2021

ISAs
ISA season
Investing

With just a couple of weeks to go until the tax year ends, many investors will be finalising their plans to use up their 2020/21 allowances, including the annual £20,000 ISA allowance.

While there is no one-size-fits-all for investing, an ISA is a tax-efficient and effective way to build a savings pot for the future. If you already have an ISA, you may already experience the benefits, however for those who are still deciding what is best for them, there may be many considerations for you to think about.

Everyone’s reasoning behind an investment is different and can affect the way they invest. Life stage can also have an impact on this, so if you are still considering how to fill your ISA portfolio, here is a guide to how you might approach it at different life stages.

Millennials

Britain’s millennial generation have suffered a bigger reversal in financial fortunes than their Baby Boomer counterparts over the past few years than ever before. *  Money may be tight for the younger generation; however, if you fall into this bracket, you do have the gift of time on your side. Naturally, the longer you save, the more chance your money has to grow, and the more time you have to benefit from the impact of compound interest (generating growth from previous growth).

Longevity in the market could provide a bigger opportunity to invest in cheaper shares; allowing younger investors to ride any market dips out until it rises again. For baby boomers, this is not always an available option.

With time on their side, younger investors may find shares a good place to put away their money, looking into emerging markets and smaller companies. These may come with a higher risk, however, could have the potential for better long-term returns. As your knowledge and experience grows, you can then supplement this approach with actively managed funds.

Stocks & Shares ISAs have seemingly replaced cash savings as the most popular choice, as savings rates continue to be catastrophic. These rates could mean more of us select stocks and shares ISAs this year and it seems this is proving accurate. Under 25- and 25–34-year-olds are subscribing more and more, with a jump of 92.3% investing in the last few years**. This compares to 60% of baby boomers who would feel comfortable to invest. ***

As many as 2.6 million young investors are planning to open a new or additional ISA this year, and another one in 10 of these 18- to 24-year-olds are contributing into an existing ISA, this could be the year of green tax-free investing. A massive 94 per cent of ISA holders under the age of 34 say they already have or would switch their money to an ethical provider, with almost three-quarters of over-35s agreeing with them.****

“94 per cent of ISA holders under the age of 34 say they already have or would switch their money to an ethical provider,”

Mid-Life: 40’s and 50’s

By this stage of life, it is likely that you will still have a fair amount of time until you need to rely on your investments as a main source of income. The older you get, and the closer you come to drawing on your investments, you may consider a conservative move to some multi-asset funds. These funds invest in a mixture of shares, bonds, cash, and property to give a little more protection against falls in the market.

You could also utilise this time to maximise your pension contributions. You may very well be at the highest point of earnings, and therefore more likely to benefit from a greater tax relief on these contributions.

If you pay a higher rate for tax, paying around £800 into your pension could be increased to around £1,000 with the tax relief rate.

Retirement

When you hit retirement, it is important to consider your income and where you will be receiving most of it from. At this stage of life, investing in assets that produce dividends and interest payments could help you to pull in money to support your lifestyle, alongside other sources of income.

Cash savings may not be able to provide you with the income you need to support you during this stage of life, so shares may be a more profitable way to invest. However, the capital and income provided from shares can be varied, so the older generation of investors are encouraged to be wary of the risk. Younger retirees, say at 65 years old, may be able to look forward to living for at least another twenty years, and therefore have enough time to seek out some growth from their investments.

Wherever you may be in life, having an expert of hand to guide you through tricky investment decisions can bring you peace of mind for a stress-free life. Abacus’ independent financial advisers are on hand to help you choose the best investment options for you and your circumstances. Get in touch before the ISA season runs out to maximise your existing accounts, or anytime throughout the year to set out new financial goals.

Source data:

*https://www.theguardian.com/money/2018/feb/19/uk-millennials-second-worst-hit-financially-in-developed-world-says-study

**https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/894771/ISA_Statistics_Release_June_2020.pdf

*** https://www.thisismoney.co.uk/money/diyinvesting/article-8362413/Young-people-likely-start-investing-amid-coronavirus-market-crash.html

****https://www.independent.co.uk/money/isa-cash-stocks-shares-innovative-finance-tax-free-ethical-b1817778.html

PROVIDING NEWS AND VIEWS TO SUIT ALL NEEDS

This Blog is published and provided for informational purposes only. The information in the Blog constitutes the author’s own opinions. None of the information contained in the Blog constitutes a recommendation that any particular investment strategy is suitable for any specific person.

ISAs

ISAs

ISAs

20

February, 2020

ISAs
Tax Year
Cash ISA
Stocks and Shares

It seems fair to suggest that everyone would like to put aside a bit of extra money when they can, and an ISA could be a smart way to do so. With the extra positive that they come with tax free interest, ISAs can be an efficient way of making your money work for you.

So, what is an ISA?

ISA stands for Individual Savings Account – it’s a tax efficient way of investing or saving your hard-earned money. Unlike a savings account where your savings are only tax free up to a certain point, an ISA is consistent in keeping any interest you make on your savings tax free.

The table below presents how the tax allowance has risen over the past decade, demonstrating the consistency in expansion which could only grow.

Which ISA is best for me?
ISAs are avaliable to anyone once you turn 16 and if you wait just that little bit longer, until you’re 18, you can open a Lifetime ISA. This ISA is the ideal option for a first-time buyer, if the property your looking into buying is worth £450,000 or less. Whatever you pay in, the government pays a 25% bonus monthly, meaning you see your money grow quicker. It does however have to have been open for a year minimum before you can use it, but if you aren’t in any rush to buy a property it could be a great option.

Although you are capped to £4000 annually, ISAs aggregate so you can still pay £16,000 into any other ISAs you have. If you’ve opened the Lifetime ISA but decide not to use the money for a property, you can also use it for your pension which you will be able to access when you reach 60.

One of the only drawbacks to this ISA is if you want to withdraw the money for something other than these two things you will be charged 25% to do so. To open this ISA, you must be 18-40 and can keep paying into it until you’re 50.  After this point, you will still receive interest on your savings, but no bonus will be given. If you die, the ISA terminates on the date of your death and there are no charges to withdraw the money.

But there are many types of ISAs available, so you have options and flexibility to find the right fit for your money.

“There are many types of ISAs available, so you have options and flexibility to find the right fit for your money.”

These other types of ISAs include:

Cash ISA
Like a normal savings account only the interest is tax free it comes in a few different varieties including:

Easy Access – which allows you the freedom to withdraw cash at any time.
Fixed Rate – Which guaantees you a fixed rate for a term that suits you, but withdrawing cash can be tricky.
Regular Savers Cash ISA – These are great for shorter term savings goals with the downside being the low interest rates.

Stocks and shares ISA
This type of ISA allows you to invest in stocks and shares. They usually have higher interest rates so you can grow your money quicker, however, there is also a chance of losing money as the value of your investment can fluctuate. 

This ISA is great for long term saving and the money becomes an investment.  A product such as this is available on i-stock, provides you with an easy, efficient way to monitor and protect your money.

Junior ISA
This is an ISA designed with your children in mind to help them start growig a nest egg of their own. Although you must be the parent/legal guardian to open the ISA, you’ll be happy to know it’s not just you who can pay into it, any relative or friend can. While the allowance for the Junior ISA is capped at £4,368, this stays separate from your own allowance of £20,000, so you can maximize their savings as well as yours. With help from our “Summer of Money” blog, you can teach your children to look after their own ISA savings, the best way.

How much can I put into my ISA? 
A tax year runs from April to April, this is the time that you must use up your ISA allowance of £20,000. If you don’t use it, you lose it – so if you were hoping to add on any unspent allowance into the next tax year, you can’t. However, you do get a fresh allowance of £20,000. You can then split this amongst multiple ISAs simultaneously, however you are limited to one of each type of ISA. For example, you could be paying into a Cash ISA but could also pay into Lifetime ISA, these would all be under the capped allowance of £20,000 for the tax year.

Can you withdraw money from your ISA?
Sometimes we need that extra bit of cash now that we wanted to save for later, and that’s something your ISA understands. Other than a Lifetime ISA you can withdraw money without losing the tax benefits. With some flexible ISAs you can even pay the money back in without it being deducted from your years allowance.

With the ISA available on i-stock, you can withdraw your deposit at any time with no penalties or fees.

Can you transfer your ISA?
An ISA transfer is when you decide to move your ISA from one provider to another which you can do as often as you like.

With some ISA providers, you could find yourself locked into a minimum investment period. But with a i-stock ISA, as well as being free to run, there is no minimum period and your cash is never ‘locked’. This means you can withdraw todays money, tomorrow, keeping you safe in the knowledge that your cash is always accessible to you. Why not transfer all your ISAs into one central account as it can minimize your cost of investing. You can do this quickly and simply through i-stock, eliminating any hurdles.

The end of the tax year is coming around fast. This is prime time to use your allowance up to get ready to open a new ISA. It could be a viable option for anyone looking to save long term.

They are one of the best options for the protection and growth of your savings keeping them far outside the reach of the tax man, with any interest earned on top of the savings you have already accumulated being yours, and yours alone.

PROVIDING NEWS AND VIEWS TO SUIT ALL NEEDS

This Blog is published and provided for informational purposes only. The information in the Blog constitutes the author’s own opinions. None of the information contained in the Blog constitutes a recommendation that any particular investment strategy is suitable for any specific person.

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