Age Allowance

The Effectsof the 2012 Budget on the elderly and the Age Allowance

A group that is being pressed financially by the latest budget proposals are those who are entitled to what is known as the “age allowance”.

People aged 65-74 and those aged 75 or over enjoy a tax free allowance of £10,500 and £10,660 respectively as long as the level of income does not exceed £25,400.

Where income exceeds the £25,400 the amount of age allowance is clawed back by £1 for every £2 of extra income until it reaches the standard personal allowance of £8105.

The Budget announced that those who attain the age of 65 after 5th April 2013 will not benefit from the higher tax free allowance.

Those who are already entitled to the extra tax free income will retain it but find that the age allowance will be frozen and replaced by the standard personal allowance when it matches the level of the higher figure.

People who find themselves in these groups therefore have the greatest need to nurture everything that they have accrued.

Financial planning may not bring financial freedom but can “make do” and mend resources that have not received the attention they deserve.

The results are often surprising and invariably put people in an improved financial position.

In austere times everyone has a responsibility to make the most of their finances.  If you would like to know more about how to presenrve your tax free Age Allowance

Give your independent financial adviser a call now.

Extra Income

 “Shopping for Extra Income”

There are a great number of people who, when it comes to deciding how best to derive an income from their retirement savings, may not get the best deal if they do not shop around.

The wrong choice at a time when financial pressures should be reducing can result in less income being paid than could actually be achieved.

This can easily be avoided.

It is estimated that many retirees are entitled to a better retirement income than they are currently being offered – in other words even though they could qualify for a better income they don’t know how to get it. One of the reasons for missing out could be that this group is not given enough information about how to use their pension fund on which they can make an informed decision.

During the course of their working lives many people have saved money into one or more pension plans. As they approach retirement there are a range of options available to use these funds to generate an extra income.

The most simple of these is to understand that there is no obligation to have to take the retirement income from the pension company where the money has been saved. The service that is known as Open Market Option (OMO) is a facility to shop around for a better rate and this can help improve retirement income significantly.

It has been estimated that up to an extra 19%* extra income could be generated through researching for an annuity (income) rate that is better than the one offered by the original pension company. Nearly 750,000* people will reach retirement age this year and many will be wasting the opportunity to get the best out of their retirement savings. This puts them at risk of having a less financially secure retirement than they deserve.

The choices that people face when having to decide how best to benefit from the pension savings that they built up through their working lives is challenging.

This is a complex matter because beyond shopping around for the most competitive rate, there are 11 different income options and each of these can be tailored to a meet a retiree’s particular circumstance.

Make the wrong choice and not only could there be less income but more tax than is necessary could have to be paid. Some people can find themselves locked into an option where once committed there is no way back or not having made adequate provision for dependents.

Shopping for extra income is as simple as searching any annuity comparison website, getting advice on an appropriate at retirement income option however needs input from a specialist independent financial adviser.

For an initial consultation about acheiving extra income at our expense please contact Gordon Tate Associates on Tel: 023 92 571183

 

* Information supplied by Just Retirement.

MYTHS ON EQUITY RELEASE MORTGAGE

It often amazes me as to the number of telephone calls I receive from solicitors and accountants that relate to the following theme:-

“Gordon, you know I don’t like or believe in  the Equity Release Mortgage, BUT, I have racked my brains for an alternative, suitable answer to my client’s financial problems and Equity Release seems to be the only logical solution.”

I usually reply “that Equity Release mortgages are only bad when the wrong product is mis-sold to the wrong people, in the wrong circumstances at the wrong time”.

There are circumstances when these loans can help clients resolve financial pressures. I only investigate whether they are appropriate having exhausted looking at all other options.

Equity Release Mortgage case studies:-

The following case studies give examples of where equity release really helped to improve these clients financial position.

  1. An accountant contacted me as his clients in their 70’s had taken on so much debt that all of their income were taken to service the debts. They had not gone into arrears but were having difficulty in servicing the loans, in fact the pressure was so great they could not afford to live and would soon have credit arrears problems. 
    • With the agreement of their only child, I arranged an Equity Release mortgage. This repaid all of their debts and released income to fund their lifestyle.
    • The clients were so relieved with the outcome and the accountant was kept informed during the whole process.  The client’s, their son and the accountant were all made aware that the lifetime mortgage has not eradicated the debts, and that interest is still being added annually which will obviously reduce the eventual inheritance that their beneficiary will receive.  However, they now no longer have to worry about mounting debts and lack of income to live on.
  2. A solicitor contacted me with a client, a widow, with no living relatives.  She had a large bungalow, had developed arthritis and was therefore unable to maintain her beloved garden.  She couldn’t afford a gardener or pay for much needed repairs to the property. The property had been her marital home and she could not bear to sell leaving her memories behind.
    • The first thing we did was to ensure that she was receiving her full state benefit entitlements, then, we arranged an initial release of money so she had sufficient funds available to carry out the repairs, enjoy a holiday and provide a reserve from which she could draw to pay a gardener.
    • The result was wonderful for this lady who is now so relaxed knowing that she has sufficient money to fund her lifestyle. A satisfactory outcome. She was made fully aware that the interest would be added to the loan every year, thereby reducing the amount of inheritance that would be left to her beneficiaries, however, as she assured me that she had no living relatives she and her solicitor were happy with this outcome believing that whoever inherits her estate should be glad to receive whatever is left.

I do come across some horror stories. I met a lady who had gone direct to a lender some years before. She has found that Equity release can be a nightmare. The lender in question did not have a suitable product to meet her circumstances yet pressed her to take a product which was not really suitable. The lender is now no longer trading so she finds herself locked into a loan that doesn’t suit her circumstances and causes her considerable stress.

Going direct may have attractions to some clients, yet this experience emphasises the need for clients to seek independent advice when investigating whether an equity release mortgage is the right solution.

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The key to financial wellbeing in later life

What are you looking for out of retirement? Relaxation away from office worries, financial wellbeing in later life,  time and money for new interests and holidays, being able to help out your children and grandchildren …

In short, financial wellbeing.

Whether it’s Tuscany, a visit to the garden centre or supporting younger relatives in tough economic times, retirement should be the time when you can make the most of the savings you have built up over years of work.

If you’re like me you’d like cash for cinema trips, eating out and buying clothes, as well as bigger sums that might go towards a grandchild’s university fees or first-home deposit.

Sometimes a grown-up child might appreciate a stop-gap contribution towards this month’s mortgage or a family holiday.

But to draw the best income from your hard-earned savings you need specialist advice when you’re on the point of retirement.

It is essential to choose the right annuity and retirement income option from the array of complex offers available in the process known as ‘pension crystallisation.’

Those who get it wrong may find they are stuck with less income than they expected or a higher tax bill than necessary. A rotten result all round.

Financial Wellbeing In Later Life

Gordon Tate Associates are specialists in helping you to financial wellbeing in later life. We are qualified, independent and passionate about what we do.

We want to make sure you enjoy the retirement for which you have worked so hard, so we’ll talk through all your plans and needs to find the retirement income option that suits you best.

Then it’s up to you. College fees or a trip to Costa Rica … or both? You decide if you want financial wellbeing in later life!

 

 

 

 

 

When interest rates pay out 0.01%

 

We’ve all seen bank and building society advertisements promising savers attractive headline rates of interest, only to find these returns can later tumble, perhaps as low as 0.01% per annum in some cases.

Such figures are derisory by anyone’s standards and mean savings are constantly eaten away as inflation runs above 5%. This is understandably a big worry for many, particularly those facing retirement on a fixed income.

It was very sobering to see in a report from Saga how one in five over-50s fear they will have to sell their family home to meet the cost of rising energy, petrol and food bills. Another survey found a 30 per cent rise in the number of homeowners aged 66 – 70 selling their houses and becoming tenants.

What can be done about rock-bottom interest rates at a time of rising inflation?

Consulting an independent financial adviser is a sensible step. Qualified, experienced advisers specialising in helping clients to financial wellbeing in later life are able to search the whole market place and can tailor solutions to individual circumstances.

The answer to providing a reasonable income while interest rates are derisory can often come through a blend of different products, funds and accounts.

If a client was able to expose their capital to some risk, they could consider stock market investments that might offer the potential for better returns:

  • Investment in funds that hold cash-rich companies offering decent yields may be one option.
  • Fixed-interest investments could be another option.
  • Holding a proportion in property funds could be a good strategy.

Getting the mix attuned to a client’s tolerances while balancing the need for the potential of a reasonable return requires specialist advice.

We can help you find this balance.

Lessons from Downton Abbey

Lessons from Downton Abbey

 

As fans of Downton Abbey know all too well, inheritance is an issue that can split families, cause emotional upheaval and require heart-rending decisions.

A glorious stately home may not be at stake for many of us, but the question of inheritance is still a very important, and sometimes difficult, matter.

So it was with interest that I read a recent report suggesting that coming generations will experience an ‘inheritance crash.’

Less money will be handed down from one generation to the next because of poor pensions, rising living costs and increased life expectancy, according to the study from HSBC.

As more people live to be 100 (Britain now has more than 12,600 centenarians and there will be 100,000 in 25 years’ time) they are likely to spend their way through their savings and investments in their final years, leaving little for their children to inherit.

Now that we are forewarned, what steps can young families take to prepare?

  • Think about investment options so that money saved now works as hard as possible for you. Consider expected rates of return and risk assessments.
  • Take retirement planning very seriously, even if the day you hang up your business suit for the last time seems far off.
  • Consult an adviser about the right options depending on your personal case: your age, your commitments (school fees, mortgage…)
  • Don’t just choose a pension fund and forget it. Make sure you get ongoing advice as markets and circumstances change.
  • Write a Will and act to minimise inheritance tax.

An independent financial adviser will be able to give qualified, unbiased advice.

 

 

How to avoid a pitiful pension

Neither of my children has saved a penny.

That might sound like a surprising admission for a financial adviser, but sadly it’s not that unusual.

I’ve offered to put them in touch with colleagues who could give them confidential advice, and warned about the difficult old age facing those who don’t save for a pension.

Nothing.

It seems to me that the younger generation live in the fast lane and spend all their money then expect mum and dad to bail them out.

I recently advised a big company based near Heathrow where all the staff had opted for private medical insurance rather than a pension.

The young HR manager told me she’d rather have private medical cover she could use now because she wouldn’t be drawing her pension until she retired – and that was years away.

It’s true that it’s never too late to start financial planning for retirement, but the sooner you start the better:

  • The more you save, the more likely you are to have enough when you retire to enjoy life to the full.
  • With no private pension you will have to manage with a state pension that at the moment can only be described, in my view, as pitiful. No living in the fast lane then.
  • Millions of over-50s worry they will have to sell their family home to make ends meet because of rising inflation, according to research from Saga.
  • Savings accounts may offer poor interest rates but if you were able to expose your capital to some risk you could consider stock market investments which might offer the potential for better returns.

Seeking advice from an independent financial adviser should be the first step. To hear more of my thoughts on this subject
[wpaudio url=”http://www.gordontate.co.uk/wp-content/Gordon_Tate-Radio_Surrey.mp3″ text=”listen to my interview on Radio Surrey” dl=”0″]

When life is one long holiday …

How many of us haven’t sat back on a summer holiday and looked forward to the days when we can give up work altogether?

The thought of having the leisure time and money to treat ourselves to a cruise, go on a city break or enjoy a later-life ‘Gap Year’ is very seductive!

So my heart sank when I read the following headline on the BBC website: ‘Workers facing a bleak old age says pension review.’

The article explained how a review by the Workplace Retirement Income Commission had concluded that up to nine million people faced a ‘bleak old age’ because they were falling through the cracks of private sector pension provision.

The study, led by Lord McFall, found that a third of all the current UK workforce were at risk!

It said many people were not saving enough for their retirement years, did not think pensions were a good deal and thought charges were too opaque.

Yet the picture does not have to be so gloomy. With good, independent financial advice it is possible to make sure your money and/or assets are working as hard for you as they could be so you can make the most of your retirement.

It’s my belief that it’s never too late to look at boosting your retirement income – especially if you do see yourself holidaying or simply enjoying a few luxuries in your golden years.

Whether you’re in your 30s or already retired, an independent financial adviser will be able to help you with sound retirement planning that matches your particular circumstances.

Far better, in my book, than facing that ‘bleak old age.’

Beat the OAP poverty trap

How do you envisage your retirement? Putting your feet up with a good book in the comfort of your snug home – or gallivanting around the world on a later-life Gap Year?

I know what I have in mind (give me a call and I’ll tell you!), but how grim it is when reality bears no comparison to these dreams.

I was struck by a recent report highlighting how OAPs are unfairly penalised by inflation.

According to an analysis by the Institute for Fiscal Studies, a typical pensioner is facing an annual rise in the cost of living of 4.6%  compared to a “real” inflation rate for the young of just 2.9% and an average of 3.5% for all age groups.

How can this be? It’s largely down to the fact that the retired are particularly badly hit by the doubling of fuel bills in the past decade. On the other hand, they get little benefit from the recent plunge in mortgage costs because most have already paid off their home
loans. For me this underlines the importance of preparing properly for the financial imperatives of retirement. I’d advise thinking hard
about the two important aspects to pensions planning. Firstly, selecting the right type of retirement pension for your circumstances, and secondly, seeking ongoing investment advice so your pension fund continues to deliver the income you want.

Independent financial advisers can arrange pensions in line with your retirement income expectations, monitor progress and manage their return on investment  – all from an honest, unbiased viewpoint.

And just as it’s never too early to start saving,  it may be never too late. With the right strategy, that retirement idyll (be it book or beach BBQ) could be within reach.