Wednesday 29 December 2010

New Year’s Resolutions 2011, Some Financial Planning ideas

With the memory of Christmas still fresh in our minds, the New Year is nearly upon us and many of us are making plans as to what new challenges we would like to achieve in 2011. From a financial perspective, 2010 was a tricky year for many businesses and individuals and there are likely to be a few more challenges in 2011 as the year unfolds.

I have penned a few notes in this blog to allow you to consider some of financial issues you may want to consider when looking at your financial planning over the next 12 months. This is not an exhaustive list because each of us will have different circumstances. You will already know that VAT is going to rise from 17.5% to 20.0% from the 04th January and this seems certain, bar any last minute change in Government policy. What is not certain is what will happen to Bank of England base rates over the coming period. With the base rate having reached a historic low of 0.5% some 21 months ago (March 2009) many are predicting that this will rise in the spring of 2011 and this may have an affect on savers and those with mortgages, loans and credit card debts.

Some financial planning ideas for your 2011 Resolutions:

1. VAT increase: If you are planning a purchase of a large capital item, such as a car or caravan and are ready to buy, you might want to try and beat the VAT increase of 2.5% from 04th January. This is not a large increase, but on larger sums, it may make a significant difference.

2. Review your borrowing costs and conditions: With the possibility of borrowing costs increasing in 2011, check you borrowing costs and charges to see if they offer value and if they need to be changed. Look out for redemption charges and set up fees if you are thinking of switching providers.

If you are in a position to pay down debt, then have a look at this to keep your costs down.

3. Check your deposit savings rates: Some reasonable savings rates are still available from many institutions, although you do have to hunt around. With the deposit protection/compensation limit increasing to £85,000 from £50,000 from 31/12/2010 (announced by the FSA in December 2010) those with larger savings amounts should find it easier to protect their savings. One of the most impartial comparison sites is from the FSA at www.fsa.gov.uk/tables.

It is still prudent for individuals to hold 3-6 months income in readily accessible savings to protect against unforeseen events as an emergency deposit fund.

4. Make a Will: Always has to be on this list, however, make a Will if you have not already done so. You may not think that you have much to leave, but making it easy for your loved ones with a simple Will is always worthwhile. I would recommend that you use a professional solicitor to achieve this. If your budget does not allow this, then think about a Will Kit from any good stationers, cost about £15-£20.00.

5. Pension changes: Every year we talk about this year’s proposed changes to the way you can save for your retirement, and this year is no different. The amount you can save into a pension is changing in the next tax year to try and simplify the rules for many investors. This may mean that for some who prefer to save a lot into their pensions, they will be restricted to £50,000 in the tax year. Also, the age to which you have to buy an annuity has already increased to 77 from 75 and for those with pension incomes above £20,000 per annum, you may not have to buy an annuity at all. With these and other changes in mind, review your retirement savings strategy both now and regularly in the future.

6. Use your tax allowances: You have tax allowances available each tax year that are lost if not used within 06 April-05th April (The tax year). A simplified example list is noted below.

ISA (Individual Savings Account):

  • Cash ISA maximum £5,100
  • Stocks and Shares ISA £10,200

Capital Gains Tax(CGT)

  • £10,100 tax free gain allowed in this tax year

Annual Gift Allowance

  • £3,000 can be gifted away by an individual in a tax year and the gift falls outside their estate for inheritance tax (IHT) purposes.
  • If they did not use last year’s allowance of £3,000, they can go back 1 year, making a total possible gift of £6,000 for both years.

7. Protecting the family: When is the last time you checked your life assurance protection and your protection in the event of ill health and inability to work because of this? For many, these subjects may come low on the priority list, but they can be vital in protecting the wellbeing of the family if something goes seriously wrong.

8. Monthly budgeting: Many of us budget every month to ensure that our income covers the costs of our outgoings, hopefully with some left over to enjoy. If you have not looked at this recently, then now is a good time to look at your bank statements and payslips to make sure that everything is in order and is balancing. If not, make sure that you make changes to balance the books.

As noted before, this is not an exhaustive list because we are all different and therefore, this article should not be seen or used as individual advice. Seek Independent Financial Advice (IFA) for your circumstances.

Churchouse Financial Planning Limited wishes you a happy and prosperous New Year!

Further details of our service are available at our website, www.churchouse.com

Keith Churchouse, Chartered Financial Planner

ISO22222 Certified Financial Planner

Director of Churchouse Financial Planning Limited, Guildford, Surrey. 01483 578800

Churchouse Financial Planning Limited is Authorised and Regulated by the Financial Services Authority

Tuesday 21 December 2010

Some good news for savers at the end of 2010? Well, possibly!

2010 and the end of 2009 has not been a vintage season for savers with the Bank of England’s base rate remaining at 0.5% for all this year and part of last year. An unprecedented period of around 20 months (05 March 2009 to 0.5%) has elapsed since the based rate sank to this low level. With inflation on the rise (the Consumer Prices Index (CPI) rose to 3.30% in November 2010 from 3.20% in October 2010) the real capital value of savers deposits in most cases is falling in real purchasing value.

For those with higher levels of deposit, there is also the problem of maintaining levels of deposit that enjoy the current deposit compensation/protection limit of holdings below £50,000 in the UK. Those deposit taking institutions that use the European protection system see those limits increase to €100,000, which is about £70,000 in sterling, although this fluctuates all the time with currency movements.

From 31 December 2010, The Financial Services Authority (FSA) has announced this month (December 2010) that the current UK deposit guarantee/compensation limit is to increased to £85,000, from £50,000. This will at least have the beneficial effect of reducing the need to open various accounts and spread deposit funds around for those investors with significant funds to invest wishing to stay below this limit.

Further details of this announcement can be found at the Financial Services Authority website here: http://www.fsa.gov.uk/pages/Library/Communication/PR/2010/181.shtml

The way you deal with your deposit funds is a key point to financial planning and this planning needs to be considered carefully, especially with this new deposit protection limit change in mind. A regular review of savings strategy is always worthwhile to ensure that the best is being made of your capital with historically low bank base rates and rising inflation. The beginning of a New Year might be a good opportunity based on your circumstances and needs?

At the same time, you may wish to check your position with regards to the use of this year’s Cash ISA allowance of £5,100, if you have not used this in full.

With this in mind, it should be noted that we are all different and your savings strategy will be individual to your needs, such as access and your overall tax position. Therefore, this article should not be seen or used as individual advice.

Seek Independent Financial Advice (IFA) for your circumstances. Have a great New Year.

Churchouse Financial Planning Limited can be contacted in Guildford, Surrey on (01483) 578800.

Keith Churchouse

Director of Churchouse Financial Planning Limited

Churchouse Financial Planning Limited is authorised and regulated by the Financial Services Authority. The Financial Services Authority does not regulate taxation advice.

Friday 17 December 2010

All I want for Christmas is…….?/2010

All I want for Christmas is…….?/2010

First of all, I would like to thank our clients and enquiries for their business over the course of 2010 and the team at Churchouse Financial Planning Limited look forward to serving you further in 2011 and beyond.

The year of 2010 and beyond…

In reflecting on the year, it seems a long time ago since a night’s sleep was lost for the General Election and the hazy summer days of the World Cup. Snow seems to be a rather too regular feature of the year at both ends and of course, ‘Austerity’ was another buzz word that we have all endured and are likely to endure for some months to come. With the VAT rise from 17.5% to 20.0% due to appear on the 04th January and Bank of England base rates seemingly frozen (excuse the topical pun) at 0.5% savers and borrowers will feel the effects of these issues in 2011.

Inflation has also to figure in these thoughts and the Consumer Proces Index (CPI) rose to 3.3% in November 2010 (from 3.2% in October), with a continued target of 2.0%.

Christmas spending and debt

Before we get to the New Year, Christmas is nearly upon us and many will feel the financial stress of funding what can be an expensive period. Clearly, this year will see the availability of credit potentially reduced and this may well be a good thing in keeping debts under control. As most are aware, the bills for credit cards usually arrive around the 20th January in the following year and this needs to be borne in mind when you are queuing at the till this month. Remember, many employers pay staff early in December to meet the demands of the extra Christmas costs, which means that you then have around 6 weeks before you are paid again.

Protecting the family

This leads me to think further about other issues for financial planning. I am not referring to buying a pension policy for your spouse for Christmas , as noted in my book, Sign Here, Here and Here!…Journey of a Financial Adviser. I am referring to other issues to protect your family, such as making sure your life assurance planning covers your liabilities, such as mortgage and loans, leaving some excess to ensure that your family has some cash in the event of your death. If your employment offers benefits, such as death in service cover, then make sure that your nomination in the event of your death is correct and documented accordingly.

Protecting income and capital

Also, you should think about protection of your income in the event of a critical illness or inability to work due to ill health. This can be covered by plans such as Income Protection plans (sometimes known as PHI cover) or, as a compliment to this type of cover, a Critical Illness type cover. Again, you employer may protect your income if you are unable to work, but you should check this with your HR department. You don’t want to find out too late that you are not covered. The premiums for both types of plan vary and will be affected by your medical circumstances, age, sex and other things, such as smoker status or occupation. These types of cover are subject to medical underwriting and this can take a little while to arrange. If you are planning to start cover in the New Year, you might want to start the application process early to make sure you have time to ensure cover is ready for you.

Take advice

Talk to an Independent Financial Adviser (IFA) to help you understand your existing cover and, as the title of this blog suggest, what you want (maybe not just for Christmas!)

We are all different and therefore, this article should not be seen or used as individual advice. Seek Independent Financial Advice for your circumstances.

Further details of the book and our service are available at our websites, www.signherehereandhere.co.uk or www.churchouse.com

Keith Churchouse, Chartered Financial Planner

ISO22222 Certified Financial Planner

Director of Churchouse Financial Planning Limited

Churchouse Financial Planning Limited is authorised and regulated by the Financial Services Authority. The Financial Services Authority does not regulate taxation advice.

Monday 6 December 2010

University Education and School Fees…..Only for those who planned financially?

This week’s vote in the House of Commons on the issue of further tertiary education costs will be critical to the future of many of our young people and their ability to attend university in the future. The cost of tuition has always been controversial and the proposals to increase student fees from around £3,000 per annum to £6,000 and even £9,000 per annum at some top education institutions.

At Churchouse Financial Planning Limited, we receive many enquiries each year from Clients, usually parents and grandparents, about the issues of planning both for school education costs and then for university costs thereafter for children and grandchildren. I am sure the number of these enquiries will increase, possibly based on the vote on Thursday, 09th December 2010. Whichever way the result goes, I am sure that the issue will increase fears that education will rise in the future. Sadly, I believe that this is an issue in England that it not going to go away.

In addition to this potential rise, there is also the concern that the rate of inflation in School/education fees may be higher than the standard rate applied in the Consumer Price Index (CPI).

This raises the question about what can be done to ease this situation if you are thinking about helping your children or grandchildren. Clearly, some good financial planning may well go a long way to help the future of your loved ones education.

In financial planning, there are many ways that an investor can approach this topic and, as ever, early planning is part of the key in building sufficient funds to meet the future liability. There are a few steps to this process, and these are detailed below:

  1. First of all, we maintain an education cost modeller to predict the total liability into the future, applying an assumed inflation rate into the future to predict the real cost, based on the anticipated education path in the future.
  2. With this knowledge, it is then possible to project the anticipated capital to meet these fees and then roll these back to your current financial planning to look at the amounts that need to be invested to meet these education costs into the future.
  3. This then leads to the way that these funds are invested, using any available tax wrappers where available, such as the ISA allowances of parents and grandparents. It should also be noted that the young people involved also have their own tax allowances, such as nil rate income tax allowance (currently £6,475 pa, tax year 2010/2011) and their own Capital Gains Tax (CGT) allowance (currently £10,100 in this tax year 2010/2011). Based on your needs and the circumstances, investments can be made in their name, whilst keeping control of the funds for their purpose. Clearly important!
  4. Finally, some Clients like to insurance their liability to future education fees with Life Insurance to make sure that no education opportunities are lost, even in the event of death. Some chose to write this type of cover in Trust to place the proceeds outside their estate for inheritance tax.

There is a lot involved in this planning and we can go into detail with you when you enquire. We are all different and the needs of education costs will vary, dependent on where the student wants to go and when in the future. Therefore, this article should not be seen or used as individual advice.

Seek Independent Financial Advice (IFA) for your circumstances.

Churchouse Financial Planning Limited can be contacted in Guildford, Surrey on (01483) 578800.

Keith Churchouse, Chartered Financial Planner

Director of Churchouse Financial Planning Limited

Churchouse Financial Planning Limited is authorised and regulated by the Financial Services Authority. The Financial Services Authority does not regulate taxation advice.

Wednesday 1 December 2010

December 2010, a time for giving….and snowing!

Finally December 2010 has arrived. The shops have been anticipating Christmas for some weeks now, but few expected the snow falls that most have seen at the end of November and the very early days of December.

November is a busy month for the team at Churchouse Financial Planning and 2010 has been no exception. With many seeing December as a deadline, they have focussed on finalising many aspects of their financial planning, from pension contributions, ISA investments, Capital Gains Tax, IHT (Inheritance tax planning) and, in line with this, the use of their annual allowances in time for Christmas.

It is this last point that I wanted to focus on in this blog. For many, the next month will be a time for family and for giving. Some like to sprinkle in some tax efficiency into this mix by gifting away their annual gift allowance of £3,000 in the tax year. This limit is per donor and if you did not use last year’s allowance, you can go back on year and gift this away at the same time, making your total gift £6,000 (for that first gifting year). If you are married/in a partnership, and in a position to gift away significant fund, both spouses/partners can undertake this process and gift away a total of £12,000 between the two of them (providing it was not used last year). Some find that the end of December is a focal point for them achieving this planning. This places the gifted proceeds outside your estate for inheritance tax purposes from the date the gift is made. You should check this with your independent financial adviser or accountant before proceeding.

I would normally recommend that if you were to consider this type of gifting, you might want to ensure the recipient has some documentation to confirm why this gift is being made and we can help you with this.

Taking this a stage further, after making these gifts, some still have surplus to gift away and another allowance that can be employed is the use of the ‘Surplus Income’ allowance. This is a more complicated process than the normal gift allowance and may need a regular gifting pattern to make it viable. You should take advice from an independent financial adviser (IFA) on this issue to see if this is achievable, if you want it to be.

As the snow thaws over the coming few days, you may want to have look at these allowances to see if they could be useful to you and your family in the coming weeks.

We hope that you have a great festive season and look forward to helping you with your financial planning in 2011.

This article should not be treated as individual advice. Individual advice is only available based on your individual circumstances. Further information, advice and contact details are available at our websites, www.churchouse.com or www.planmypension.co.uk

Keith Churchouse, Director of Churchouse Financial Planning Limited, Chartered Financial Planner.

Churchouse Financial Planning Limited is authorised and regulated by the Financial Services Authority.

www.planmypension.co.uk is a trading name/style of Churchouse Financial Planning Limited. CHURCHOUSE is a trademark of Churchouse Financial Planning Limited.