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A Power of Attorney is just as an important part of estate planning as writing a will. Yet, it’s something that many people overlook, potentially leading to challenges for their loved ones and placing themselves in a vulnerable position.

Power of Attorney gives someone you trust the ability to make decisions on your behalf, if you don’t have the mental capacity to do so. This may be temporary, for instance, following an accident, or permanent, due to an ongoing illness.

It’s often overlooked because we think it’ll never happen to us. However, it’s estimated that there are 850,000 people with dementia in the UK, with the figure projected to rise to 1.6 million by 2040, and this is just one example of an illness that can affect mental capacity. There are many other examples of where an individual cannot make decisions entirely on their own. Having a Power of Attorney in place can ensure someone can make decisions for you.

One important thing to note is that a spouse or civil partner doesn’t have the automatic right to make decisions on your behalf. A Power of Attorney is still required.

There are two types of Power of Attorney. The first covers health and welfare, allowing a trusted person to make decisions about medication, life-sustaining treatment and your day-to-day routine. The second covers property and financial affairs and may include collecting pension benefits, paying bills or deciding to sell your home.

Thinking about handing over the ability to make potentially life-changing decisions to someone else, even those you trust, can be daunting. But the alternative is often far more complex, time-consuming and costly.

Applying to the Court of Protection

If you lose the capacity to make your own decisions and don’t have a valid Power of Attorney, the application goes to the Court of Protection. The court can:

  • Decide whether you have the mental capacity to make a decision
  • Make an order relating to health and care or property and financial decisions if someone lacks mental capacity
  • Appoint a deputy to make decisions on behalf of someone who lacks mental capacity

A deputy is a similar role to that of attorney, including the principle that they must make decisions based on your best interests. The ability of the Court of Protection is a useful safety net but it’s not one that should replace naming a Power of Attorney for three key reasons:

  1. The decision may not align with your wishes: The person appointed as deputy may not be your preference. Using a Power of Attorney means you’re in control of who will be making decisions on your behalf. This gives you a chance to discuss what you’d want to happen. 
  2. Initial and ongoing costs will usually be more: To apply to become a deputy through the Court of Protection costs an initial fee of £365, with a further £485 needed if the court schedules a hearing. On top of this, a security bond may have to be set up if someone is appointed a property and financial affairs deputy and an annual supervision fee will be due. The cost of this will depend on the size of your estate. In contrast, it costs £164 to register both types of Power of Attorney.
  3. It takes time to arrange: Once an application has been made, the Court of Protection aims to issue an order within four to six months. During this time, you may be left in a vulnerable position, with loved ones unable to make a decision on your behalf. 

Putting a Power of Attorney in place

The good news is that more people are naming a Power of Attorney. Between January and March 2020, the number of applications was up 5% compared to the same quarter last year. This is partly attributed to the government taking steps to make the process easier and faster.

You can access the online service to create a Power of Attorney here. Remember, you will need to register your Power of Attorney with the Office of the Public Guardian for it to be valid, this can take between eight and ten weeks.

As you name a Power of Attorney, it’s worth reviewing your wider estate plans too. It can help you have an open conversation with the person you trust about what your preferences are and how your wealth may change over time. Please get in touch with us if you have any concerns or questions.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate estate planning.

The Covid-19 pandemic has meant we’ve evaluated many areas of our lives and priorities. One area that’s now being reconsidered by the over-60s is their later life care plan.

Research suggests that the challenges and restrictions care homes faced during lockdown mean people are keen to explore the alternatives. With many care home residents being vulnerable to illness and the proximity to others, they faced higher infection rates. This sadly led to death and serious illness in some cases, with loved ones unable to visit to offer comfort.

On top of this, care homes stopped permitting visitors, in line with social distancing guidelines, which had an impact on the quality of life and relationships for residents.

As a result, it’s not surprising that one million over-60s that had originally planned to go into care homes later in life if needed, are now rethinking their plans due to growing concerns from family members. Nearly a fifth (19%) of Brits who would have previously been open to care homes as an option for family members, now wouldn’t consider it.

What are the alternative options?

Moving into an assisted living facility, which offers more independence than a care home, or moving to a more manageable property are two of the most popular options. Around a fifth of Brits would choose each of these as their primary option. Others plan to rely on family for the additional support they may need later in life. One in ten would consider moving into a spare room at a loved one’s home while 6% would opt for a granny annexe.

Whether staying in their own home or moving in with family, respondents recognised the need for adaptation. Two thirds (67%) believe they need to alter properties in some way. The most popular home improvements include:

  • Making modifications to the bathroom (34%)
  • Installing an emergency alarm (27%)
  • Installing a chair lift (22%)
  • Buying new furniture, such as a bed with rails (22%)
  • Installing mobility features like ramps (19%)

The number of people recognising the need for such modifications shows over-60s aren’t shying away from the fact that more support may be needed in their later years. However, there is one important factor that many have failed to overlook, and that’s the associated costs.

Planning for the cost of later-life care

Worryingly, 55% of over-60s haven’t considered how they would fund later-life care or necessary adaptations. What’s more, a fifth (21%) expect to use their State Pension to cover these costs, but at £175.20 per week (£9,110.40 annually), it’s unlikely to stretch very far.

If you moved into a care home, you could expect significant outgoings. In 2019, the average cost of a residential care home was £33,852 per year, rising to £47,320 if nursing care was included.

Alternative options may be cheaper, but the costs still add up. An assisted living facility will come with ongoing charges for the care provided. If you were to remain in your home but required the support of a carer for two hours a day, you can expect to pay around £20 per hour. That may not seem like much but adds up to £14,560 per year.

Even if you remain in your home and don’t require additional support, necessary adaptations can take a sizeable chunk out of your savings or income. In England, council support may be available if adaptations cost less than £1,000 if it’s been deemed necessary. Further support is typically means-tested, so the costs could fall to you.

Despite the sums of money associated with later-life planning, the financial aspect remains overlooked. But it should be part of your wider financial plan.

As you think about what type of support you’d prefer later in life, it’s worth reviewing your finances and overall goals. Financial planning can help you understand how your assets can be used to provide you with security for the rest of your life, including where some form of care is needed.

It’s a process that can also create a safety net for when obstacles derail your plans. You may intend to move in with a family member but circumstances outside of your control mean it’s not an option when the time comes. With a financial plan that’s considered this in place, you can rest assured that other options are still available. It can also help you understand how the potential cost of care could affect other priorities, such as the income you take during early retirement or the legacy you leave behind for loved ones.

If you’d like to discuss your plans for funding later-life care, please get in touch. We’re here to help you create a blueprint that considers your wishes and give you peace of mind.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Have you reviewed your pension lately? Even though we make regular contributions to pensions, it’s not often something we think about until retirement is approaching. However, keeping track of progress during our working lives is important too.

Figures show that pension savers have been using their time in lockdown to get to grips with their retirement pots. Some 37% of pension savers, the equivalent of seven million people, have taken action relating to their pension in the last few months. One in seven admitted that the lockdown has prompted them to think about their pensions more.

So, if it’s been a while since you looked at how your pension is growing, now could be the perfect time. But what should you focus on? These seven areas are a good place to start.

1. The total value of your pension

The headline figure is probably what draws your attention when you look at your pension, and it’s something you should keep an eye on. Yet, it’s a task just 15% have done during lockdown.

Keeping track of the value of your pension can help you understand whether you’re on target to meet goals and give an overview of how investments perform. The current value alone doesn’t provide you with all the information that you need, which is where the forecast comes in.

2. Check your pension forecast

It can be difficult to understand how the value of your pension now will affect your retirement. Pension providers will offer a forecast, indicating how your savings are likely to grow over time. Keep in mind, this isn’t guaranteed, but it can be a useful base to work from.

With a forecasted lump sum, you’re in a better position to understand the lifestyle your savings will afford you. A financial planner can help put this into the context of your goals, such as the annual income it will deliver.

3. Act if you have a pension gap

Acting if you find there is a gap between your pension forecast and the amount you need to meet aspirations can help set you on the right track. The sooner you act, the easier it is to close the gap or seek alternative solutions. Even a small contribution increase can have a big impact if it’s taken early in your career thanks to the compounding effect.

The figures found 5% of pension savers have increased their contributions during lockdown. It’s a step that could make your future more financially secure.

4. Understand where your pension contributions are coming from

Every month, you’ll probably see a portion of your salary go into your pension. But it’s likely you benefit from other contributions too. Understanding the impact these have on your overall savings can help to highlight why adding to your pot is important.

First, if you’re employed, your employer will need to make contributions on your behalf. An employer must contribute 3% of your pensionable earnings. Second, the government also provides tax relief on the contributions you make. Tax relief is set at the highest rate of Income Tax you pay.

In both these cases, your pension is effectively benefitting from ‘free money’ when you contribute.

5. How your pension savings are invested

How a pension is invested is often overlooked. But it’s an important part of managing your retirement savings and making the most out of contributions.

When you first start saving into a pension, your money will be invested in the default fund. However, pension providers will offer alternatives. These will often include a variety of risk profiles or the option to select an ethical investment fund. As with when you’re investing outside of a portfolio, you should consider your goals, investment time frame and capacity for risk.

Just 8% of people have checked where their pension is invested during lockdown. However, 5% have made a change to their pension investments, indicating that for many the default fund may not be the right option.

6. Your pension age

A pension provider will make an assumption about when you plan to retire, usually linked to the State Pension age. If you plan to retire earlier or continue working past this age, you should update your profile.

How your pension is invested may be affected by your retirement date. For instance, many pension providers will move savings to a lower-risk investment fund as your retirement date draws near to reduce the risk of volatility significantly affecting value. If your retirement date is wrong, this may not align with your plans.

7. Check if your employer offers additional pension incentives

Your employer may offer additional incentives to encourage you to save more into a pension. These can prove valuable and help your retirement savings grow faster.

Some employers will match your contributions up to a certain level. In this case, increasing your own contributions would mean you receive even more ‘free money’. A salary sacrifice scheme may also be an option that’s available to you.

Please get in touch if you’d like to discuss your pension and what it means for retirement. The research found 38% of people lack confidence in their financial situation, our goal is to help you feel secure about your future.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by interest rates at the time you take your benefits.

The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.

Even with careful financial planning, shocks can happen. Often financial crises are unexpected and out of our control, so it’s important to have a safety net to fall back on. However, research suggests that most people don’t feel confident in their ability to overcome a financial crisis.

Whether it’s unexpected property maintenance or redundancy, it’s essential that you feel confident in your financial situation. Research from Aegon indicates this isn’t the case for millions of Brits though. It found just three in ten men and two in ten women are confident they could financially handle a major unexpected expense. Money worries emphasised this lack of confidence too. 76% of women and 72% of men admitted they worry about money.

If that sounds familiar, here are five steps you can take.

1. Keep track of your spending

It’s easy to lose track of where our money is going. But it’s a sure-fire way to miss opportunities that could save you money.

Keeping tabs on a household budget can highlight were direct debits, such as utility bills or phone contracts, have crept up. A regular review will help you find the best deals and reduce essential living costs. It can also highlight where discretionary spending is adding up. Small expenses often go unnoticed when you look at the bigger picture, but they can have an impact. If you’re worried about money because you feel you’re not saving enough, for instance, cutting back here can help.

2. Reduce high-interest debt

If you have existing high-interest debt, such as credit cards or loans, you should prioritise repaying these.

Interest rates on savings are at a historic low. As a result, money in your savings accounts is likely to be offering significantly less interest than the amount you’re paying to service the debt. Reducing debt first can mean your outgoings are eventually reduced, allowing you to divert more to savings in the future.  

Not only does it make financial sense to pay off debt, but it can be a weight off your mind. People often find their financial wellbeing and their confidence improves when they are debt-free.

3. Build up a rainy-day fund

Having a financial safety net to fall back on can deliver more confidence too. It’s recommended that you keep three to six months’ expenses in an easy access savings account. This gives you a financial buffer should something happen.

It can seem like a large target if you’re starting from scratch. But you should make it part of your budget, transferring a set amount each month. As it gradually grows, you’ll hopefully start to feel more confident in your financial security.

4. Consider your long-term financial plan

Often when we worry about money, it’s the short term we focus on. However, looking ahead to the medium and long term is also important and can be a source of anxiety. Once you feel more confident in your current finances, turning your attention to goals further down the line is the next step.

This may include adding more to your pension, building up an investment portfolio or creating a nest egg for children or grandchildren. Knowing you’ve taken action to meet long-term aspirations can provide a confidence boost and help you feel more in control of your finances.

5. Seek financial advice

The research suggests employees would like additional financial support. 69% of women and 65% of men would find face-to-face financial advice useful, as it allows them to address specific concerns. Even if your workplace doesn’t offer these types of benefits, it is possible to get the type of support you could benefit from.

Some services can offer guidance on a range of financial wellbeing issues, from debt management to your options at retirement. Seeking financial advice can also help you create a holistic financial plan that addresses your concerns, goals and long-term ambitions. It’s a process that can give you confidence in your ability to weather the unexpected, including financial shocks. To discuss your needs, please get in touch.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

While the health concerns of the Covid-19 pandemic remain, some of the focus is now shifting to the economic impact. Measures taken to reduce the spread of infection and save jobs have cost the government a huge amount that will need to be recouped in some way.

The final Covid-19 bill is impossible to estimate, we don’t know how things will change over the coming months. However, the Office for Budget Responsibility estimates the cost for the current tax year is likely to be more than £300 billion. The government was expecting to borrow around £55 billion for the whole of 2020/21. But in the first two months of the tax year alone, it has borrowed £100 billion to cover the costs of the scheme implemented due to the pandemic.

Chancellor Rishi Sunak was appointed Chancellor in February this year. He’s already delivered a delayed Budget in March, as the pandemic was starting to take hold in the UK, followed by the Summer Statement in July. Both have focused on protecting people and the economy as Covid-19 spread. As the Autumn Budget is now approaching, his attention may be turning to how some of the costs can be recovered.

While nothing has been formally announced yet, speculation is mounting that some allowances will be reduced, some of which may affect you.

1. Capital Gains Tax

Speculation that changes to Capital Gains Tax (CGT) will come in are rife after the Chancellor commissioned The Office of Tax Simplification to investigate if it’s “fit for purpose”. Compared to previous levels of CGT, the current rates are relatively low. This provides plenty of scope for allowances to be reduced or rates to rise.

CGT is paid on the profit when you sell certain assets. This may include a property that isn’t your main home, personal possessions worth more than £6,000 (excluding your car), investments not held in an ISA, and business assets.

Individuals have an annual exemption of £12,300 per tax year. Profit beyond this allowance is taxed. Basic rate taxpayers have a CGT rate of 10%, this rises to 20% for higher and additional rate taxpayers. Where the profit is made on property, an additional 8% tax is added for all Income Tax bands.

2. Pension tax relief

A change in pension tax relief hasn’t been mentioned by Rishi Sunak yet. However, his predecessor Sajid Javid has called on the government to reduce the amount of tax relief paid to high earners. It could now be something the current Chancellor is exploring too.

Assuming you don’t exceed your annual pension allowance, you receive tax relief at the highest level of Income Tax you pay. As a result, higher and additional rate taxpayers receive far more through this incentive. The Pensions Policy Institute found workers earning less than £50,000 made up 83% of taxpayers, but they received less than a quarter of pension tax relief paid.

A change to pension tax relief is likely to make it ‘fairer’ by offering a flat-rate tax relief for all pension savers.

3. Pension triple lock

The pension triple lock guarantees that the State Pension will rise every year in line with either inflation, average wage growth or a minimum of 2.5%. It helps to protect spending power among pensioners. Maintaining the triple lock was a manifesto pledge, but some signs are pointing towards changes in the future.

The Chancellor told the Treasury Committee that it would be appropriate for the government to look at the triple lock at the “right time”. There are concerns that a spike in wages would make the guarantee to pensioners unaffordable in the coming years.

4. Pension tax-free lump sum

Currently, when you access your pension, which is available from the age of 55, you can withdraw 25% of the money tax-free. Any further withdrawals are subject to Income Tax, the same way your salary or other sources of income may be.

The tax-free lump sum has proved a popular option among retirees and it’s a decision that’s likely to be unpopular with those approaching their retirement date. Reducing the tax-free lump sum to 20% could add £1.8 billion of extra revenue, the IFS has suggested, making it an attractive option for the Chancellor.

5. Inheritance Tax

Again, any changes to Inheritance Tax rules would prove unpopular but there have been growing calls to reform the system to make it fairer and simpler.

At the moment, individuals can take advantage of two allowances when leaving wealth to loved ones. The nil-rate band is currently £325,000, with no Inheritance Tax due if your estate is below this figure. Those passing on their main home to children or grandchildren can also use the residence nil-rate band, currently set at £175,000. Unused allowance can be passed on to a surviving spouse or civil partner. In effect, this means couples can leave up to £1 million without worrying about Inheritance Tax.

Reducing the allowances or scrapping the additional residence nil-rate band could help raise tax revenue.

Rishi Sunak has some decisions to face before the Autumn Budget, and it’s likely some allowances will be affected. It may be appropriate to change plans when these are announced, but you shouldn’t act on speculation. If or when things change, we’ll be here to help you.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might have read in this article. All contents are based on our understanding of HMRC legislation which is subject to change.

Planning for retirement should be an exciting time in your life. You’re able to give up work and focus on the things you enjoy. But what if your aspirations and financial expectations don’t line up with your partner’s? Creating a balance can help both of you feel fulfilled in the next stage of your life.

It’s not uncommon to find that partners have conflicting views of what they want retirement to look like. While you’re both working, you may have discussed ensuring you have enough saved or even talked about some of the things you’d like to do. However, most of us don’t start considering retirement in great detail until the milestone isn’t too far off. Discussing your plans can help make sure you’re both on the same page as you move forward.

Before you start the conversation, it’s worth both of you separately thinking about the retirement lifestyle you’d like:

  • Are there any ‘big ticket’ experiences you’d like to do?
  • What would your ideal day-to-day lifestyle look like?
  • What are your priorities for retirement?

Understanding what you’d like, can help you identify shared aspirations and where you need to strike a balance between two views. Often when we first think of retirement, it’s the experiences we want in the initial years after giving up work that is the focus, such as travelling or helping to raise grandchildren, but your daily routine as you settle into retirement is just as important.

Understanding retirement finances

While couples may often discuss household expenditure, the same can’t be said for retirement finances. In fact, 24% of couples have never discussed their retirement income. It can mean you have widely different expectations for your income and approach to managing money as you enter retirement.

As with lifestyle goals, discussing what you want is important.

The first step should be to understand what income and assets you expect to have to fund retirement. This may include the State Pension, Final Salary pensions, Defined Contribution pensions, savings, investments, and property.

But understanding assets isn’t the only thing you need to do; you also need to understand how both of you approach retirement finances:

  • What assets will create your base income?
  • How would you create a financial safety net to cover the unexpected?
  • What level of income do you need for the day-to-day lifestyle you want?
  • How do you feel about investment risk as you enter retirement?
  • What kind of legacy would you like to leave behind for loved ones?

The answers to these types of questions will be linked to the lifestyle you want to achieve. However, they can highlight the differences in how you view money, even if it’s something you’ve agreed on before. In the past, you may have been happy investing in mid-risk funds to grow your wealth but in retirement prefer stability and financial security. Your partner, on the other hand, may be keen to increase investment risk as outgoings reduce and you have a base income for essentials. Looking at financial views now can help you strike a balance and understand the short and long-term impact of the options.

How financial planning can help

Financial planning can ensure your goals and finances align. But the process can also help you understand what your priorities are too.

A key part of financial planning is talking to clients to set out goals, lifestyle aspirations and more. We ask what it is you want your savings to do for you. It’s a chance to think about what is most important as you start planning for retirement. Having an outside perspective go through your retirement plan can help you see what your priorities are.

Where retirement goals don’t match up perfectly, there are often solutions that can ensure both of you are happy and confident as you give up work. Getting your finances in order can give you the freedom to do more without having to worry about the uncertainty of the long term. If you’d like to start your retirement planning with us, please get in touch.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change.

Just a few months after delivering his first Budget as Chancellor, Rishi Sunak delivered a Summer Statement, dubbed a ‘mini-Budget’ on Wednesday 8th July 2020.

Back in March, some of the measures announced in the Budget focused on supporting people and businesses as the Covid-19 pandemic was taking hold. Five months later, the focus has now shifted to recovery as lockdown and social distancing restrictions ease.

Rishi began by saying the government had taken decisive action to protect the economy earlier this year but acknowledged people were now worried about unemployment rates rising and economic uncertainty. This is against a backdrop of a global economic downturn, with the International Monetary Fund (IMF) predicting the deepest recession since records began. With this in mind, the Summer Statement set out the measures the government will be implementing.

It was also confirmed there will still be a full Budget and spending review delivered in the autumn.

Job Retention Bonus

With the furlough scheme set to end in October, which has supported nine million jobs, the Job Retention Bonus aims to encourage firms to re-employ staff. Any employer that brings back an employee that earns at least £520 each month from furlough, and keeps them in a job until January, will receive a £1,000 bonus.

If everyone on furlough were to benefit, the scheme would cost £9 billion.

Kickstart scheme

Noting that young people are around 2.5 times more likely to have been affected by Covid-19, Rishi announced the Kickstart scheme.

The Kickstart scheme will pay young peoples’ (aged 16 to 24) wages for up to six months, as well as some overheads. The employee must work a minimum of 25 hours a week and be paid the national minimum wage. It will amount to a grant worth around £6,500 per young person. Employers can apply to benefit from the Kickstart scheme next month and there will be no cap on the number of places funded.

In addition to this, there will be more funding for careers advice, more traineeships, and a new £2,000 payment for firms to take on young apprentices and £1,500 for apprentices aged over 25.

Stamp Duty

Property prices and transactions have fallen during the pandemic. In light of this, Rishi announced he was abolishing Stamp Duty on homes worth up to £500,000. This will take effect immediately and continue until 31st March 2021.

VAT rate

Over 80% of businesses in the hospitality and tourism sectors were forced to close during lockdown. VAT on tourism and hospitality will be cut from the current 20% to 5% until 12 January 2021. This will include eating out, accommodation and attractions, such as the cinema, theme parks and zoos.

Discount for eating out

The ‘eat out to help out’ scheme also aims to support the hospitality sector. Throughout August, customers will be able to take advantage of a discount up to 50%, worth up to £10 per head, including children, when they eat out from Monday to Wednesday at businesses that have applied to be part of the scheme.

Green homes grant

A new £2 billion green homes grant was announced. This will allow homeowners and landlords to apply for vouchers to make their homes more efficient and support local green jobs. The vouchers are expected to cover at least two-thirds of the costs up to £5,000 per household. For low-income households, the full cost will be covered, up to £10,000. It’s estimated energy efficiency could save families £300 a year.

A further £1 billion of funding has also been designated for improving energy efficiency in public buildings.

Questions?

If you have any questions about how the Summer Statement will affect your finances and plans, please get in touch. 

When investing, we all know that capital is at risk. We’ve often talked about understanding your risk profile and the level of risk you should take when investing. But what affects how risky an investment is?

Understanding the risk of an investment can help you gauge if it’s the right investment for you and how it’ll change the balance of your portfolio. Numerous factors affect how risky an investment is, fund managers will use multiple ways to analyse each investment. However, one of the simplest places to start is by looking at the asset class.

The four main asset classes of investing

When reviewing investment portfolios, there are usually four main asset classes:

1. Cash: This is the least risky asset, but also delivers low returns. As returns are often lower than inflation, the value of money can decrease over time in real terms.

2. Bonds: Both government bonds and investment-grade corporate bonds are considered relatively low risk. With a bond, you’re effectively lending money in exchange for a fixed rate of interest. While a lower risk than stocks, if a company defaulted on payments you could still get back less than you invested. Bonds with a higher yield are riskier as they have a higher risk of default.

3. Property: Investing in property is often seen as a sure way to deliver returns, but it still comes with risks. An investment portfolio may hold commercial property and rise in value either from rental income or rising property prices. Property can be harder to sell should you need access to capital.

4. Shares: Finally, shares are the riskiest asset class of the four, as markets are unpredictable. However, the risk of different shares varies hugely. As with bonds, those with higher potential yields are typically the riskiest. The unpredictability of stock markets means a long-term time frame is essential when investing.

A well-balanced portfolio will typically include a mix of these assets. This helps to spread the risk and limit short-term volatility. For example, if stock markets are experiencing volatility, holding some of your capital in bonds can reduce the impact. This is why when you read headlines claiming stock markets have fallen by a certain percentage, an individual portfolio is unlikely to have experienced a fall to the same scale.

Even ‘high risk’ portfolios will invest some of their capital in bonds and property to create balance, likewise, a ‘low risk’ portfolio is likely to have some exposure to stocks.

Specific risk vs market risk

When looking at individual assets, there are numerous risks to consider, these can be broadly split into two areas: specific risk and market risk.

Specific risk refers to the risks within a company and the volatility their shares experience. All companies will experience some volatility, but, once again, this can vary significantly. Established and mature businesses, for instance, are less likely to have severe bouts of volatility than firms that are still in the growth phase. Specific risk can be analysed by looking at the profits, areas of investment, sector it operates in and more.

On the other hand, market risk affects the whole market and can be far more difficult to track. For example, in March this year, whole markets fell as a result of the Covid-19 pandemic, even when the prospects of some companies within those markets remained unchanged. This is why we not only spread investments across companies but different sectors and geographical locations too, helping to reduce exposure to volatility.

Building a diversified portfolio that matches your risk profile

When you review your investments, you should start by looking at your own risk profile. This allows you to build a portfolio that suits your goals, investment time frame and overall attitude to risk. Diversifying investments, across asset class, sector and geographical locations helps to create a balanced portfolio that’s linked to your risk profile. When we work with you when investing, this is why we start with your aspirations.

Please contact us to discuss your investment options, including how risk can be managed within your own portfolio.

Please note: The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Whether you’re an employer that is considering offering group insurance to employees or a worker than benefits from group cover, it’s important to understand what it is, how it provides security and when it can be used.

Group Life Insurance is a popular benefit that’s usually offered by employers. It acts in a similar way to a Life Insurance policy, which an individual takes out. In the case of Life Insurance, the individual will pay regular premiums and should they die during the term of the policy, their loved ones will receive a lump sum. It’s a step that can provide peace of mind that your family will be taken care of financially should the worst happen.

As the name suggests, group insurance covers a group of people rather than just one and the ongoing premiums are usually paid in full by the employer. It’s a benefit that’s sometimes referred to as ‘death-in-service’ as rather than a fixed-term, employees will typically be covered while they remain employed with the company.

What would group insurance cover?

First, it’s important to note that group insurance policies can vary.

If you’re currently covered by a group insurance policy, you should review your employee handbook or talk to your employer to fully understand what’s covered. If you’re thinking about putting group cover in place at your business, there are different options to consider and weigh up how they’d suit your employees.

Typically, a group insurance policy will pay out if you die while employed, to either your family or a nominated beneficiary. The benefit amount is often linked to the employee’s income, such as two or four times their annual salary. So, an employee earning £40,000 with group insurance equivalent to four-times their annual salary would leave their loved ones a £160,000 lump sum if they were to pass away whilst employed with the firm.

This lump sum is usually paid free of Income and Capital Gains Tax. They also may be written into a trust, which will ensure the sum is considered outside of your estate for Inheritance Tax purposes. However, this isn’t always the case.

In some cases, group insurance provided by an employer may be extended to cover your spouse or civil partner and provide other benefits, such as bereavement counselling to loved ones. Again, this isn’t guaranteed for all group insurance policies so you should check your policy first.

The lump sum loved ones receive can help provide financial security while they grieve. It could, for example, be used to pay off an existing mortgage debt or ensure children’s school fees will continue to be paid even as household income is reduced or stops.

There are benefits to group insurance whether you’re an employer or employee.

Benefits of group insurance for employees

The key benefit of group insurance is knowing that your loved ones will be financially secure should something happen to you, without having to set up your own policy. However, it’s worth assessing if the policy offered by your employer would be enough and if other individual policies should support it.

Depending on your loved ones and plans, you may find that further Life Insurance is needed to cover the expenses they would face, such as the mortgage. However, with group insurance covering part of the necessary sum, the policy you take out can be for a smaller amount, lowering premiums. It’s also an opportunity to think about if you and loved ones would benefit from potential extras some policies offer.

While considering Life Insurance, you should also take the time to assess other forms of financial protection. This includes Income Protection, which would pay out regular amounts if you’re unable to work due to illness or injury, and Critical Illness Cover, which would pay a lump sum on the diagnosis of a specified critical illness.

You may not need all types of financial protection, for example, if an employer has a strong sick pay package, Income Protection may not suit you. However, understanding how these policies have the potential to provide security can help you choose the most appropriate ones.

The benefit of group cover for employers

As an employer, group insurance can form part of your benefits package to attract and retain key members of staff. During the recruitment process, it’s a benefit that can make your firm more attractive than competitors as a place to work. It’s a benefit that can help drive your business forward.

Group cover can supplement other benefits you may offer employees, such as a competitive pension scheme or sick pay policy. Taking steps to ensure that your employees’ loved ones would be taken care of should they die in service can help ensure employees know they’re valued and the company does the ‘right thing’. Although the scenario of an employee dying is rare, it can happen. By taking out group insurance now, you know that should something happen, the processes and support are already in place.

In addition, the premiums paid for the group insurance usually qualify as an allowable business expense for Corporation Tax purposes. 

If you’d like to discuss group insurance, whether as an employee or employer, please get in touch.

Pensioners transferring out of their Final Salary pensions, also known as Defined Benefit pensions, have made headlines recently as retirees seek more flexibility. But using other assets to create a flexible income throughout retirement can mean security and the ability to create an adjustable income to suit retirement plans.

Final Salary pensions are often referred to as ‘gold plated’ as they provide retirees with security. The amount you’ll receive at retirement and the age at which you’ll receive it are pre-defined when you become a member. This is usually dependent on the number of years you’ve been a member and either your final salary or a career average. The pension you receive isn’t linked to investment performance, it’s a guaranteed income for life.

While this is valuable, retirement lifestyles have changed enormously over the last few decades. Today, many retirees want a flexible income to suit their lifestyle, where income needs may change significantly over time. As a result, some retirees have chosen to transfer out of a Final Salary pension in return for a lump sum that can then be deposited in a Defined Contribution pension scheme, which can be accessed flexibly. However, this isn’t in the best interests of most people.

The benefits of a Final Salary pension

The key benefit of a Final Salary pension is the level of security it offers. You don’t have to worry about investment performance or ensuring pension withdrawals are sustainable. You know that you’ll have a regular income for the rest of your life.

What’s more, many Final Salary pensions have auxiliary benefits too. This could include paying a pension to a spouse or dependent should you pass away. Depending on your personal situation, these can be valuable in providing peace of mind and play an important role in your overall financial plan.

While a Final Salary pension does provide security, you may also want income flexibility in retirement. Assessing and using your other assets means you may be able to have the best of both worlds. Three options for creating flexibility with a Final Salary pension are:

1. Defined Contribution pensions

First, you may also hold a Defined Contribution pension. These types of pensions are more common than Final Salary pensions and if you’ve worked for several companies, you may have a mix of Final Salary and Defined Contribution Pensions.

With a Defined Contribution pension your contributions, along with employer contributions and tax relief, are added to a pension pot which is then invested. The value of the pension is dependent on contributions and investment performance. Once you reach age 55, this pension becomes available to access in a range of ways, including taking a flexible income as and when you need it.

Using a Defined Contribution pension to supplement the income of a Final Salary pension when you need it can create flexibility without having to sacrifice security. One thing to keep in mind with a Defined Contribution pension is that you’re responsible for deciding how it’s invested and that withdrawals are sustainable with your plans in mind. Having a regular income through a Final Salary pension can relieve some of this pressure but it’s still important to assess how you’re using pension savings.

2. Depleting savings

After decades of diligently saving, some retirees are reluctant to start depleting their savings, even if providing financial freedom in retirement has been what they are saving for.

It’s natural to worry about accessing savings. You may be concerned that you don’t have enough or that an unexpected expense will need to be covered. Having a strong financial plan in place can help put your mind at ease here. Using a range of tools, including cashflow planning, we can show you how your wealth will change over time, including if you begin to access your savings to add to your Final Salary pension income at certain points in retirement.

3. Using investments

Finally, investments held outside of a pension can also provide a useful boost to your retirement income when you need it. These may be investments that are held within an ISA or an investment portfolio.

Selling investments can provide you with a cash injection when you want it, for example, if you’re planning a once in a lifetime experience or big-ticket purchase that your typical Final Salary income wouldn’t cover. As with savings, it’s important to understand how accessing your investments at different points in retirement will affect your wealth and financial security to provide peace of mind.

Please contact us if you have a Final Salary pension and want to understand how it can fit into your retirement plans. By looking at your lifestyle goals and priorities during retirement, we can help you create a plan that matches your aspirations, including creating income flexibility where needed.

Please note: The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Transferring out of a Defined Benefit pension is not in the best interest of the majority of pension savers.

A Defined Contribution pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income will also be affected by the interest rate at the time you take your benefits.

The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulations which are subject to change in the future.