Budget 2015: Key Highlights

The Chancellor, George Osborne, delivered an upbeat Budget at 12.30pm on 18^th march 2015. This was his sixth Budget as Chancellor, and the last of the current Parliament. He announced ‘record employment’ in the UK, living standards at a higher level than in May 2010 and economic growth of 2.6% in 2014 – faster than any other advanced economy. Petrol duty is frozen too, and you can celebrate this with a very slightly cheaper pint of beer (1p off duty)….but not wine!

This positive message was continued in some of the Chancellor’s announcements, although not all (see pensions Lifetime Allowance…). We have listed below the main points that could affect your financial planning and your household income. These are as follows:

Pensions

• Pensions Lifetime Allowance to be reduced from £1.25 million to £1 million from April 2016…although the Chancellor did announce that the new Lifetime Allowance will be indexed to inflation from 2018.
• This will be the third reduction in the Lifetime Allowance since 2012, at which point it was brought down from £1.8 million to £1.5 million. It was then lowered again in 2013 to the current rate of £1.25 million. It may be cold comfort, but no change to the Annual Allowance for pension contributions, which remains at £40,000 gross (from all sources) for the tax year 2015/2016.
• Pensioners to be allowed to access their annuities (full details of how to be confirmed) – 55% tax charge to be abolished and tax applied at highest marginal rate.

Personal taxation

• Annual paper tax returns to be abolished. The current tax return system will be phased out and replaced with individual digital accounts which can be accessed online.
• Tax-free personal income tax allowance to rise from £10,600 in 2015/2016 to £10,800 in 2016/2017 and £11,000 in 2017/2018.
• Higher rate tax threshold to rise at a rate above inflation, from £41,865 in 2014/2015 to £42,385 from April and £43,300 in 2017/2018.
• The transferable tax allowance for married couples (also see new Marriage Allowance) will rise to £1,100.
• There will be a review of legal loopholes that help people to avoid Inheritance Tax (IHT). Of particular interest to the Government is the use of a Deed of Variation to avoid IHT. A Deed of Variation changes a will after the death of an individual and allows the beneficiaries of the estate to change how it is distributed.

Savings

• ISAs will become ‘fully flexible’ – savers will be allowed to withdraw and replace cash ISA money during a tax year without affecting the overall tax-free ISA limit.
• New ‘Help to Buy’ ISA: first time buyers will be able to save up to £200 a month towards their first home with a Help to Buy ISA. The Government will boost their savings by 25%, giving an extra £50 on savings of £200. Accounts will be available from autumn 2015 and savers can make an initial deposit of £1,000 when opening an account, in addition to their monthly savings.
• New personal savings allowance: the first £1,000 interest earned on savings income will be tax-free for basic rate taxpayers from April 2015. Higher rate taxpayers will have a £500 allowance.

Small businesses and charities

• Corporation tax to fall to 20%
• Abolition of Class 2 National Insurance Contributions for the self-employed
• Automatic gift aid limit for charities to be extended to £8,000 from £5,000
• Review of business rates – further details to be confirmed

As always, no individual advice is provided during the course of this blog. If you would like advice on the changes announced in the Budget then please contact the team at Chapters Financial Limited at our Woking or Guildford offices.

Keith Churchouse
Director of Chapters Financial Limited
Certified Financial Planner
ISO 22222 Personal Financial Planner
Chartered Financial Planner 

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899

Inflation is good...the alternatives are not!

The UK has seen inflation rates gradually falling in recent times, with recent falls appearing to accelerate. There is no guarantee that this trend will continue, but with current inflation rates standing at 2.3% RPI (Retail Prices Index) and 1.2% CPI (Consumer Prices Index) in the year to September 2014 (source: Office for National Statistics), the possibility of stagflation, and even deflation, and their consequences, need to be revisited. 

As you will see, inflation, believe it or not, can have its benefits.

Stagflation

The term 'stagflation' refers to a combination of ‘stagnation’ and ‘inflation’. Stagflation is an economic phenomenon characterised by slow economic growth and rising prices. The term was first coined in the 1960s in the UK to describe the combination of a stagnant economy, increasing unemployment and rapidly rising inflation owing to dramatic upward movements in world oil prices. Stagflation hit the UK hard in the 1970s, as rising inflation and lack of employment opportunities stifled economic growth. 

There are a range of theories about why stagflation occurs. Keynesian economists cite supply shocks as the cause, for example rapidly rising oil or food costs. Others blame excessive growth in the supply of money – as Milton Friedman described, “too much money chasing too few goods”. It has also been argued that stagflation is just a natural part of the modern economic cycle or that political and social structures are responsible for the phenomenon.

Whatever the cause, stagflation raises serious dilemmas for economic policy because actions designed to reduce unemployment may exacerbate inflation, and vice versa.

Deflation

Deflation is the opposite of inflation - a general decline in the price of goods and services. It occurs when the inflation rate becomes negative, i.e. when the inflation rate falls below 0%. Deflation is often caused by a reduction in the money or credit supply, although it can also be caused by a decrease in spending by the state, the consumer or the financial community. Deflation increases the real value of money over time. This is because consumers will hold back on purchases of goods and services with the expectation that the price of these will fall over time. This fall in demand, combined with an increase in the real value of debt, leads to increased unemployment, which in turn can lead to economic depression, as seen in the US between 1930 and 1933 when the rate of deflation was rapid, banks failed and unemployment peaked at 25% of the population. 

Japan: 20 years of deflation

Japan has experienced deflation and its effects since the mid-1990s. The initial shock came in the early 1990s with the bursting of the economic ‘bubble’ of super-inflated property and stock market prices. The subsequent collapse lasted for more than a decade, as the slump in demand caused by the bursting of the asset bubble resulted in Japanese firms being unable to raise sales prices and cutting wages and employment as a consequence. From the late 1990s onwards, wages began to fall faster than prices and deflation became entrenched. With no incentive for firms to invest, the economy became trapped in deflation, with falling prices, falling wages and falling investment combining to maintain the downward pressure.

Is there a lesson here for Europe and the UK?

Firms in the Eurozone are responding to the lack of demand and their inability to impose price rises with a conviction that cutting labour costs is the route back to competitiveness. This is worryingly reminiscent of the vicious circle in which Japan became trapped in the 1990s and the threat of deflation is therefore of real concern to Eurozone leaders.

Summary

It will be interesting to see how the next few months pan out for the UK economy and the way that the Bank of England uses its financial tools to control, where possible, the outcomes. Inflation, against its alternatives noted above, can have its ‘benefits’. With many now suggesting that Bank Base Rates (currently 0.5% pa) will stay at this level until summer 2015, the effect of inflation or stagflation….or worse, could have a real effect on the value of the money we have to spend over time.

No individual pension/ financial advice is provided during the course of this blog.

If you would like guidance and advice on your income planning for the future then please contact the team at Chapters Financial at either our Guildford (01483 578800) or Woking (01483 330800) offices.

Keith Churchouse BA Hons FPFS
Director, Chapters Financial Limited
Chartered Financial Planner
Certified Financial Planner
ISO22222 Personal Financial Planner

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899.

Back to school, back to school fees

Ah! The start of a new school year – the joys of trying to gather together all the sports kit and school books that you stowed away in July thinking that September was weeks away. There’s nothing like last-minute preparation. Great for uniforms, but not for planning school fees.

If you are considering independent / private schooling as a future (or current) option for your children, achieving careful financial planning as early as possible will help you to gauge affordability, maximise your options for fee payment and could save you substantial amounts of money in the future. If your children are already at private school, you will no doubt have had school fees on your mind way before the start of the new term.

School fees, pupil age and inflation

The Independent Schools Council (ISC) Annual Census 2014, which is based on data gathered in January 2014 from the ISC membership of over 1,250 independent schools, states that the overall average termly fee across the membership is currently £4,998 (excluding nursery fees). The average boarding fee is £9,596 per term and the average day fee is £4,241 per term. Fees will of course vary depending on factors such as geographical location and reputation, and the differences can be extreme.

It is also important to bear in mind that school fees do not remain level. The amount you pay will increase in two ways. Firstly, the fees will increase by school year/pupil age – i.e. you will pay more for a child in Year 6 than for a child in Year 2. Secondly, fees across the board are likely to increase every year by far more than inflation.

ISC figures suggest that the cost of sending a child to private school has risen by approximately 40% since 2007. In its Annual Census 2014 the ISC notes that the average fee across its member schools (excluding nursery fees) has risen by 3.9% from January 2013. This is the lowest annual fee rise since 1994. However, it is still significantly higher than the rate of inflation over the same period which was 1.9% as measured by growth in the Consumer Prices Index/CPI (source: Office for National Statistics).

The ISC Annual Census 2014 may be viewed here:

http://www.isc.co.uk/Resources/Independent%20Schools%20Council/Research%20Archive/Annual%20Census/2014/ISC_Census_2014_11Apr14%20v2%20(2).pdf

Chapters Financial is not responsible for the content of external websites

School fees are usually not inclusive of extras

When parents try to assess the affordability of private education, or work out a savings plan for future fees, the figures used are often the basic fees quoted in the prospectus or on the school website. The ‘extras’ are often left out of the calculation and can bump up the cost considerably. From personal experience, the main potential areas of additional expenditure are as follows:

• Uniform: the biggest single outlay takes place when the child joins a new school and requires a whole new set of uniform and sports kit. Bought new, it can be cripplingly expensive, especially if the school has a dedicated shop from which all uniform must be purchased. In this situation, an initial outlay of £400 would not be unexpected. It is worth checking whether any generic items can be bought through other sources and it’s definitely worth looking at the school’s second-hand uniform shop. It’s also important to bear in mind that many private schools change the uniform requirement or design fairly regularly, so you should be prepared to replace items of clothing /sports kit that are ‘out of date’. Particularly frustrating when the ‘old’ kit still fits…
• Out of hours care: many schools now offer wrap-around care (e.g. breakfast and after-school clubs), which are particularly useful where the parent(s) work full-time. However, this service comes at a cost, which is often forgotten in budget planning. As an example, the cost of putting a Year 6 child in one local private school into breakfast and after-school clubs every day (care from 7.30am to 6.30pm) would currently amount to nearly £700 per term.
• Trips: in many cases, the cost of outings and residential trips offered by private schools is charged on top of the basic fees. It is sensible to plan in another £100-£200 per term to cover these eventualities, and potentially more for senior school children.
• Lunches: some private schools charge extra to provide lunch, whereas for others this is a service included within the basic fees. If lunch is not included, this could add in the region of a further £100 per term to the bill.
• Extracurricular lessons and clubs: there will often be a wide range of additional activities available, from music lessons to sports clubs. Again, most of these will cost extra - for one-to-one piano lessons alone, for example, I would suggest factoring in another £120 per term.

 

It’s easy to see, therefore, how the ‘extras’ can mount up – for a child entering a new school and requiring wrap-around care five days a week, the additional costs over and above the basic fees could well amount to over £1000 in the first term. 

Funding 

 

Early preparation is key. Paying for school fees out of net income (after-tax income) can have a significant impact. For example, a year’s school fees of £15,000 would be £25,000 before tax for a 40% taxpayer. However, with some forward planning, this situation can be at least partially improved. Strategies to consider include:

 

• Saving / investing: As early as possible. ISAs (or New ISAs/NISAs as they are now known) are a tax-efficient way to put aside money every year for future private education commitments. The NISA allowance for the 2014/2015 tax year is currently £15,000 and this can be invested in stocks and shares, cash or a combination of the two, according to your needs and your attitude to risk. Obviously the earlier you start saving, the more you can accumulate before school fees begin.
• Scholarships and bursaries: It is sensible to investigate the availability of scholarships and bursaries. Bear in mind, though, that bursaries are generally means-tested, although every school will have a different system in place. Scholarships are awarded for prowess in a particular academic or other area, such as music or sport.
• Family help: It may be the case that grandparents or other family members are willing to help out with school fees. If this is the case, a ‘bare’ trust arrangement could be a tax-efficient way for them to provide support. A ‘bare’ trust can be set up by anyone for a specific child or children. The trustees will withdraw money as required to pay towards the school fees. Gifts to the bare trust are usually treated as Potentially Exempt Transfers (PETs) and will usually fall out of the estate of the donor for Inheritance Tax purposes after seven years.

 

Summary 

 

Private school fees can be a significant drain on your household income and advance planning is the key to assessing affordability and minimising the financial impact as far as possible. If you would like support and advice on planning for school fees then please do not hesitate to contact the team at Chapters Financial, who will be able to help you further. No individual advice is provided during the course of this blog. If you would like to receive further information regarding your own family situation and circumstances, please contact the Chapters Financial team in either Guildford or Woking.  

 

 

Vicky Fulcher Dip PFS

Trainee Financial Planner

  

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899.

 

 

Financial Review, but also re-balance

At Chapters Financial, we have always noted the benefits of clients reviewing their finances on a regular basis to ensure their existing planning meets with their needs and objectives. Individual circumstances change, markets change and the asset allocation of funds can also change. A review may occur once a year or more regularly, dependent on the needs of the client.

The asset allocation of an investment portfolio is informed by the risk profile of a client and the returns that are sought. Over time, market movements can cause one or more asset classes to drift from their initial targets, resulting in the investor holding a portfolio that may not reflect either their attitude to risk or their investment goals. Rebalancing, as one financial planning solution, is about controlling risk and ensuring that your portfolio is not overly exposed to the success or failure of one particular asset class.

Rebalancing can be an important part of financial planning. Simply put, the process involves periodically buying or selling assets in a portfolio to bring it back to its original asset allocation level. However, there is no accepted industry-wide ‘best practice’ on how and when to rebalance a portfolio. Some providers offer an automatic rebalancing model as part of a passive investment approach. There is much data to suggest that this can work, particularly if fairly wide tolerance bands on both the upside and the downside are in place to avoid excessive trades and associated charges which could erode returns. However, automatic rebalancing is just that – automatic – client portfolios are rebalanced once they drift beyond set tolerance bands. If this is set to occur at pre-determined times over the year, e.g. quarterly, it will take place even if market conditions at the time are not optimal.

Chapters Financial prefers to take a more active approach to investment management and review. Our view is that calendar-based rebalancing alone is not the best approach – at each review, it is important to consider the prevailing market conditions, the specific circumstances of the portfolio in question and to tailor the solution to the needs of the client. We are all different and our investments are likely to mirror this.

At a review, we would anticipate examining the performance of the funds, recommending changes where required to improve the potential to meet the client’s investment objectives and also re-allocating fund balances to meet with a client’s attitude to investment risk. Our active approach means that we can take a view on the ongoing performance of each asset class within a portfolio, rather than just following a set of systematic rules for rebalancing. Given the levels of volatility that all financial markets can experience, we believe that this individual and ‘hands-on’ approach offers the best way to work towards our clients’ investment objectives within agreed risk parameters. This does not mean that at a review you would anticipate a wholesale change of your holdings. However, areas of underperformance can be addressed and areas of good performance may see a ‘profit-take’ situation.

As suggested, each of you is individual and your investments are likely to be the same. No individual advice has been provided during the course of this blog. If you would like financial advice on the allocation of your funds/ investment strategy, then please contact the Chapters Financial team in Woking (01483 330800) or Guildford (01483 578800).

Keith Churchouse BA Hons FPFS
Director, Chapters Financial Limited
Chartered Financial Planner
Certified Financial Planner
ISO22222 Personal Financial Planner

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899.

Kicking the US fiscal ‘Can’ down the road

There is a saying of “Kicking the can down the road”, which means to delay a decision in the hope that the problem or issue will go away or that someone else will make the difficult decision easier to swallow, the later it is made. This saying has also recently been applied to the ‘Fiscal Cliff’ of the American fiscal deficit and the ways that it can be brought under control. A hard path to negotiate if ever there was one.

The US ‘Fiscal Cliff’ is the deficit which would have been caused by simultaneous changes in proposed tax rates combined with government expenditure. This was due to occur on 31 December 2012 until the US politicians (Senate and House of Representatives) finally agreed to extend the US Government’s borrowing limit/ debt ceiling. However, they only extended this by a matter of months and effectively “kicked the can down the road”.

You may have noticed in the media recently that the US government has started a partial shutdown after both Houses of Congress failed to agree a new budget. This has meant that the federal government has to save running costs and to achieve this has partially shut down non-essential departments and their related personnel. This could potentially affect more than 800,000 federal employees who will be on unpaid leave until the budget can be agreed. The knock-on effect to America’s GDP could be significant if the situation is sustained for a long period. The shutdown is significant, but is not the ‘main event’. The debt ceiling is.

Effect on the US Economy and Dollar

The planned budget agreement to resolve borrowing limits was meant to be ratified by both Houses of Congress by 30 September 2013. As you may know, this was not achieved. One consequence of the first shutdown in 17 years has seen an initial weakening of the dollar on 01 October 2013. Some commentators in the media are suggesting that these recent events could derail the world’s largest economy. I believe this is somewhat of an extreme view and do not hold this opinion. But the short term impact will be felt by the markets while uncertainty remains.

Outlook for US Economy

I believe that the main thrust of this impasse is partly due to President Obama’s health care bill and this is effectively being seen by some as a game of poker between the Democrat held White House and Senate, and the Republican held House of Representatives. Who will blink or fold first? As is usual in politics, I expect that some hurried negotiations will take place in some corners of Washington which will allow a new budget to be in place with a revised healthcare bill and the proverbial can will be kicked down the road again – possibly until there is a change of occupier in the White House or balance of power in the Houses of Congress.

At Chapters Financial Limited we remain optimistic for the outlook of the US economy and financial markets, although allocations to this area should be invested as part of an overall investment allocation process.

Past performance is not a guarantee of future performance. Fund values and currency values can fall as well as rise and are not guaranteed.

It should be noted that as financial planners, Chapters Financial remain positive about North America as an investment area and of the dollar as a currency.  

Each investment and its allocation/ recommendation is different and individual to the Client. To consider your circumstances with regard to savings and investments, you should take individual financial advice. No individual advice is provided in the content of this Blog. The team at Chapters Financial can help you with your planning and look forward to working with you.

Simon Hewitt

Financial Planner
Chapters Financial Limited

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899.

The continuing conundrum for savers / 'Forward Guidance'

The new economic tool deployed by the new Governor of the Bank of England, Mr Mark Carney, in August 2013 was heralded as the opportunity to manage economic, and to some extent financial, expectations into the future. 'Forward Guidance' as it is known, provides all those affected by the economy with the opportunity to know how the Bank of England predicts the future, and more importantly, what they plan to do if these expectations are met.

As we have seen, Forward Guidance has linked the Bank Base Rate (currently 0.5%) to UK unemployment levels (currently 7.8%) with the plan that Base Rates will remain at their current level until the unemployment level falls below 7.0% (Subject to anything unexpected happening, which it can). With this plan in mind, the Governor does not expect the target of 7.00% being reached for around 3 years, and therefore does not expect Bank Base Rates to move either in this time.

This new direction provides the benefit of certainty for some (such as businesses and mortgage borrowers as examples), but also provides the negative certainty of continuing low returns for savers.

Many savers have seen returns falling in recent times, with Premium Bond returns also falling from August 2013 onwards. Many are resigned to this situation, sensibly using their tax efficient ISA allowances where possible to reduce the tax take on any gross savings earned.

Against this backdrop, some clients and enquirers are reviewing their attitude to investment risk, where appropriate, and applying this review to their future investment decisions. As an example, UK Dividend returns have remained relatively firm over the last year and these have typically been between 3.00-4.00% gross pa (Not guaranteed, past performance is not a guarantee of future performance). Obviously, by moving into this investment area, the risk to the capital invested increases significantly, with the value of funds varying daily. This volatility (and overall investment risk) is detailed on our Investment Risk Scale further here (Link). However, if an investor is prepared and able to accept this level of investment risk, this investment alternative may be suitable in some investment cases. It should be noted that diversifying any investment is usually worthwhile and we have noted that committing smaller sums initially may be worthwhile to get used to the chosen investment medium before committing larger sums.

Each investment plan and recommendation is different and individual to the Client. To consider your circumstances with regard to savings and investments, you should take individual financial advice. No individual advice is provided in the content of this Blog. The team at Chapters Financial can help you with your planning and look forward to working with you.

Keith Churchouse FPFS
Director
ISO22222 Certified Financial Planner
Chartered Financial Planner
Chapters Financial Limited

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899.

From capital growth to income. The possible life phases of Investment & Savings

Everybody tends to move through their personal life phases over time. It would be natural for their money to do the same as their needs develop and evolve.

This usually requires some financial planning and I have considered below some of the issues that might need to be considered through the phases of a lifetime.

Starting the savings process 

Capital accumulation usually needs (amongst others) time and money. This might sound a bit obvious, but the sooner you can start saving the better, and the more you can put in at the earliest points usually creates the most capital (not guaranteed ) for the future. This might start with smaller amounts in your early working years and build as the pressures of household and family expenses come under control and household income rises as your career develops.

The desire to save can be fuelled by any number of objectives, from buying a house, to saving for a wedding, to paying for school fees, to name just a few examples. It might be simpler than that, just paying for this year’s summer holiday.

Accumulation phase / Capital Growth 

As you move through your working life, and savings are invested, many will focus on capital growth as the objective. They have no real need for additional income and their investment objective is capital growth, with any income produced being re-invested accordingly.  Savings might be invested in tax efficient plans, such as ISAs and pensions, and also balanced across spouses/ partners to ensure that annual allowances are maximised where possible. This last point also has the potential to help balance income using income tax allowances in later years, such as retirement.

Attitudes to investment risk might be balanced or aggressive in this phase to endeavour to maximise returns, accepting that this is likely to import volatility in returns. More information on investment risk (and notes on volatility) can be found on our website here. The important issues of volatility can be considered further at our Investment Risk Scale here.

Income Phase 

It is possible that at the end of a working life (and usually the end of the accumulation phase), savings and investments would be re-balanced with the emphasis being focussed on income generation (rather than capital growth previously targeted) to boost income in retirement.  Attitudes to investment risk should also be checked at this time to re-test tolerance to risk and capacity for loss (ability to withstand falls in the value of the investment and/or reductions in the amount of income it can generate). Some may want to reduce their previous investment risk ratings, becoming less accepting of significant volatility in the capital they have accumulated.

This income phase may sometimes be deferred if not needed, being initiated when higher costs are incurred in later life, such as Long Term Care. More information on this topical point can be found on our website here.

Summary 

As the notes above indicate, a regular review of the allocation of your investment assets is worthwhile, partly to ensure that they continue to match your attitude to investment risk and partly to ensure that they match the life phase (and its requirements) that you reach. Past performance is not a guarantee of future performance.

No individual advice has been provided in the content of this blog. For individual advice on your pensions, savings and investments needs, please contact the team at Chapters Financial on 01483 578800.

Keith Churchouse FPFS
Director
Chartered Financial Planner, ISO22222 Certified Financial Planner Chapters Financial Limited

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899.

Where it stops, nobody knows!

It's been an interesting few weeks in various investment markets. With much optimism in the lead up to the American election and with President Obama safely re-installed into the White House, the hangover from the party seems to have set in. With various hopes and fears once again emerging from Europe, there seem to be many 'jitters' in a few of the major financial indexes. Overall, the markets have remained relatively constant over the last 6 months, and using the example of the FTSE 100 (not always the best measure) as a reasonable UK local market equity index, we can see the results.

We can see that from 01 May 2012, the index stood at 5,812.20 and by 10 November 2012 this had moved to 5,769.70. For additional past reference, the FTSE 100 stood at:

Date	FTSE 100 Index Value
10 November 2011	5,444.80
10 November 2010	5,816.90
10 November 2009	5,230.50
10 November 2008	4,403.90

Approximate Figures (Source uk.finance.yahoo.com)

You will note from these results that past performance is no guarantee of future performance and that fund values can fall as well as rise.

I am sure that within the next 4-6 weeks we will see the usual seasonal speculation as to where the FTSE 100 index will be at the end of 2013. I have to admit that I think that 'UK Plc' looks in far better condition, with its various austere fiscal policies, to face the significant and continuing challenges that I believe the global economy has to share with its many contributors over 2013 and beyond. Bearing in mind that the highest peak of the FTSE100 (on 30 December 1999/ 6,930.20 points) was now some 13 years ago (although it got close again to this level in late 2007), it does raise the question as to when the current Index 'value' mould that we have become very accustomed too will be broken, if at all.

Only time will tell, however, it is interesting to note (although not a direct comparison) that the American Dow Jones Index's highest point in past years was 14,164.53 points (09 October 2007) and this was nearly reached again in 2012 (13,610.15 points at 13 October 2012). With the fears of a post-election 'Fiscal Cliff' looming (seems to be the latest buzz phrase) I am pleased to see that this past index high milestone has been approached again in such an economic climate.

Is it time for the UK and its various Indices to do the same. As the title suggests, 'Where it stops.........'

Past performance is not a guarantee of future performance. Fund values can fall as well as rise and are not guaranteed. No individual advice or fund recommendation has been provided in the content of this Blog.

Chapters Financial Limited can help you with your savings and investment allocation and planning.

Keith G Churchouse, Director
Chartered Financial Planner
ISO 22222 Certified Financial Planner
Chapters Financial Limited is authorised and regulated by the Financial Services Authority, number 402899.

Half-Time! for the tax year 2012/2013....Using Annual Allowances

The tax year starts on the 06th April each year and this is usually a busy time in UK retail financial services. The last minute pension and Individual Savings Account (ISA/Maximum £11,280 in 2012/2013) deposits are invested in time to use the annual allowance before the opportunity is lost. Many also look at any potential gains that have been made during the year to see if, where applicable, capital gains tax allowances (£10,600) can be used.

As we approach the halfway point of this tax year (2012/2013), we normally suggest that these annual allowances where unused, are visited to see if now is a good time to use them up? The gain for Chapters Financial is that we are spreading the years’ workload, but the gain for our clients to look for opportunities that may or may not be there when that annual tax year end rush occurs.

An example might be the recent rise in equity values/markets (past performance is not a guarantee of future performance and fund values can fall as well as rise and are not guaranteed) where gains on existing Unit Trust/Open Ended Investment Companies (OEICs) may be available and could efficiently be taken to use up the current capital gains tax allowance of £10,600. If you have capital losses available that could be bought forward, these may be used at the same time, however, we would recommend that you check this addition with your Accountant before proceeding. If you have not used your ISA allowance in this tax year and a gain is taken, you may choose to re-invest some of these proceeds into an ISA, up to the maximum of £11,280 in 2012/2013. If your spouse/partner has not used their allowance, this may provide an additional tax efficient opportunity.

Reviewing pension contributions is always worthwhile (standard limit £50,000 gross contribution pa/ total employer/employee) and it is not uncommon for Director/Managers to make single top-up contributions to pensions at this time of year. This timing may also be a reflection of their business year ends. 

As you can see from the notes above, a mid-year review may well be worthwhile in looking at the opportunities that may present themselves as we start the autumn 2012 season.

No individual advice has been provided during the content of this Blog and Chapters Financial Limited can help you with your tax year annual allowance planning both now and throughout the tax year(s).

We look forward to working with you. 

Keith Churchouse, FPFS, Chartered Financial Planner, ISO22222 Personal Financial Planner

Chapters Financial Limited is authorised and regulated by the Financial Services Authority, number 402899.