A Financial Planner is for the long term….not just for Christmas….or a transaction

Some seven or so years ago, an elderly retired client was referred to me by their accountant to undertake financial, pension and investment planning. They had taken an active stance to investing, running various types of investment, including direct equity holdings, and had enjoyed the process. However, they were beginning to find the complexities of investment overwhelming and realised that as they were not getting any younger, their ability to manage their finances, both for themselves and for their spouse and family into the future was likely to diminish. We were pleased to help them at this time to clarify their position and where appropriate to simplify this as they grew older.

Regular financial reviews have been undertaken over the years and the process of ensuring that everything is tied down and in order has continued.

Now, as they have moved into later life, their short-term memory is becoming a significant issue and the family are now involved to ensure that they understand where all of the assets are held, what benefits and income they can provide and most importantly that their parents are protected in their later life to ensure that they are happy, financially secure and have the ability to have some fun.

With the written authorities in place, I received a call from one of the children to ask a few investment related questions with regards to the taxation of plans. They noted that they, along with the family, were so pleased that Chapters Financial took over the financial affairs of their parents some seven or eight years ago because everything is now running smoothly and that they are able to concentrate on the most important point of financial planning, which is looking after the owner of the assets for their needs. The striking point of the conversation was that the clients were happy. We have noted that the clients’ lifestyle is unlikely to allow them to ‘outspend’ their assets (even if long term care is needed) and they can afford to purchase luxuries to make their life more comfortable as they become less mobile. This is not an uncommon occurrence when dealing with those who grew up in a thrifty society in the 1940s and 1950s and maintain a long-held savings mentality.

They referred to the purchase of a new additional TV as a “Chapters moment” where they can hear me suggesting that if they have a need, go and purchase the item that they need to meet their objectives. A new vacuum cleaner was purchased and that was quite heavy, so when it was taken upstairs they struggled to get it down the stairs. I suggested that they may want to purchase another one for downstairs leaving the heavier one upstairs to ensure that they don't have the physical burden of moving such machines around the property when they really don't need to.

Above all, the client was happy and secure and it is the longevity of advice that has been provided over the years that gives both the client and their children the security of knowing that there is a third party that has been involved in the financial planning for many years and understands the intricacies of the situation and has solutions to meet needs when required.

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

As suggested in the title, a Financial Planner is for the longer term, not just for Christmas…..or just a financial transaction.

If you would like advice on long-term financial planning and all of its aspects including a provision of long-term care, then please do speak to the team at Chapters Financial Limited in either Guildford or Woking.

We wish all our clients, enquirers and professional contacts a peaceful Christmas and a prosperous 2015. Thank you for your support during 2014.

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.

Auto-Enrolment Staging Dates can be moved forward….and it may give you control!

2015 is going to be a big year for the enrolment of many employees by their employers into qualifying pension schemes. The Pensions Regulator is likely to write to many thousands of Small to Medium Sized Enterprises (SMEs) in 2015 to note that they are six months away from complying with the regulations and ensuring that the staff are notified, the scheme is in place to accept pension contributions and that it starts by the deadline. 2015 and 2016 are likely to see the largest volume of employers going through the system, mainly those with staff numbers at approximately 30-80 employees.

In our experience, many employers have had a good understanding of the legislation for some time, preparing for the extra costs in their budgets and embracing the change. With this in mind we ask….’Why wait?’

The Staging Date provided is usually matched to the company’s circumstances, based on staff numbers within the company on 01 April 2012. There is no reason why an employer cannot bring their Staging Date forward to a date that suits them if they are ready to start earlier. Indeed, this is an added benefit to the staff and may encourage greater loyalty to the business.

A list of dates that can be authorised by The Pensions Regulator for bringing Staging Dates forward is noted here:

http://www.thepensionsregulator.gov.uk/employers/bringing-your-staging-date-forward.aspx

Chapters Financial Limited is not responsible for the content of external webpages.

Waiting until the last minute to implement and meet this legislation may create an unnecessary burden from an administrative perspective, when taking into account the factors that need to be achieved such as selecting and presenting a scheme to the staff, including reporting to The Pensions Regulator that the business has complied with the various requirements. Getting it wrong could incur fines.

If your business would like advice and guidance on implementing your Pensions Auto-Enrolment scheme and to manage the implications and costs to your business then please do not hesitate to contact the team at Chapters Financial at our Guildford or Woking offices.

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

Keith Churchouse FPFS
Director
Chartered Financial Planner
ISO 22222 Personal Financial Planner

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

What to think about over the festive season/ 2014

Christmas, as the retailers will tell you, is just around the corner and many are starting to plan the festive season….with its associated costs.

Christmas is a time for family, and many think about what they can do for their families. With oil and associated petrol prices falling, the cost of getting around should be lower this year, and inflation is falling, seeing other increases being moderate.

As always, be careful on those credit cards, with Black Friday in late November (deals galore!) as you start your Christmas shopping, to ensure that you are not suffering with the effects of debt for the rest of 2015, especially if interest rates do rise.

But what else should you be thinking about as the year comes to a close?.......

1. Gift allowances are often considered by those that can afford to gift to their family at this time of year. The gift allowance can be helpful in gifting money away efficiently and reducing inheritance tax liabilities. You can give away £3,000 in this tax year, and if you did not give away last year’s allowance, you can go back one year, making the total gift allowance available £6,000. If you are a couple, this could mean you could give away £12,000 in total.

2. The Bank of England is now indicating that bank base rates may only increase in the 3^rd quarter of 2015, although not guaranteed. Good for those with variable rate mortgages and disappointing for those who rely on savings for income. Be ready for this increased cost if you have loans and mortgages in 2015.

3. Some relief will be available for savers over 65, who will be able to apply for Pensioner Bonds from very early January 2015. Two types of Bond should be available: 

• Fixed Rate 2.8% pa Gross Annual Equivalent Rate (AER) 1 year
• Fixed Rate 4.0% pa Gross AER 3 years (annual interest only)

Be quick, the allocation will not last long and remember to review your savings and the rates of return regularly.

4. Some of the devil may be in the detail for the above savings arrangements and more financial information will be made available from The Chancellor, George Osborne, in his Autumn Statement on 03^rd December. With an election only five or so months away, the cupboard is quite bare at this time so it will be interesting to see if he can provide any ‘giveaways’ to the public before the May 2015 elections.

5. Inflation (Consumer Prices Index/CPI) hit 1.3% pa (a slight rise from September of 1.2% pa in October). Inflation may be a good thing, because the alternatives of stagflation and deflation are worse, as our previous blog has already noted.   

6. Retirement benefits and the ways they can be accessed are likely to be the financial story of 2015. Much is changing in the pension world in April 2015. The government will be offering some support on information on the changes and some of the issues that a person drawing their pension benefits should consider. This will be called guidance, but will not be advice. So if you are thinking about re-arranging your pension funds next year and need advice, and most should, we would urge you to speak to an independent financial adviser early and plan accordingly.

7. In recent times some have found it harder to get advice on their finances because of changes in regulation.  The financial services regulator, The Financial Conduct Authority (FCA), is now encouraging alternative delivery of financial advice. The FCA published a guidance consultation paper in July 2014 focusing on retail investment advice and its future delivery. As we have seen in many other areas, digital delivery may be one solution, and there are some providers working on this proposition, with sites like www.Saidso.co.uk due to be available by the end of 2014.

Summary

2014 has been a busy year in financial services and most markets have experienced volatility from the end of the summer onwards. With the geo-political situation remaining tense in various areas, I am sure we will see more of this in 2015 and beyond.

Regulation has also had a significant impact on financial planning, particularly for companies that need to meet their pension Auto-Enrolment requirements. Many more small and medium-sized enterprises (SMEs) will reach their staging dates in 2015 and we can offer support to meet these needs.

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

If you would like financial planning advice for your individual circumstances for 2015 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.

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.

Chapters Financial Market View

The autumn of 2014 has kicked off with additional market turbulence due to many factors, each affecting sentiment in different ways. With market values falling at the time of writing this blog (10th October), I wanted to provide our blog readers with some views on the current conditions. 

Chapters Financial continues to advocate diversification of investment assets, with clients maintaining cash positions with other assets to cover unforeseen circumstances. Investors should hold risky assets only in the proportions they would be comfortable to maintain for the duration of a downturn, if this was to occur. 

Two issues that are causing the markets to focus in unison with each other are as follows.  

• The first is that, the Federal Reserve (Fed) will make its last purchase of treasuries and mortgage-backed bonds in October. When the first phase of Quantitative Easing (QE1) was paused in America, US equities fell, the same happened when the second phase was paused (QE2). With this current third phase now ending (QE3), we have seen US equities markets reacting with new falls. 
• The second factor is what some perceive to be relatively high equity market valuations. A possible correction of values to draw in line with historic norms (these are obviously not guides to future performance). 

Other factors, such as the various current geo-political situations, have a bearing on market sentiment and I cannot see this changing in the very short term. Europe remains an economic problem and we have advocated a small/limited allocation to this investment area for some time. Other areas, such as Japan, continue to weigh on investment returns and are actively avoided where possible. 

With investment diversification, the risk of exposure to volatility can be reduced, but not extinguished. We still see yields (dividends as an example) remaining high in coming months. The Chapters Financial view is to remain invested and to allow these issues to move through the system. This may mean that we see further volatility ahead; however, any overreaction may well cause detriment. 

If you would like to consider the points noted above further then please do not hesitate to contact the team at Chapters Financial, who will be able to help you further with your pension enquiries. No individual advice is provided during the course of this blog. If you would like to receive further information regarding your own individual situation and circumstances, please contact the Chapters Financial team in either Guildford or Woking.

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.

 

Are Your Children's Savings Invested Appropriately

How do you save for your children’s future, and are you saving with a particular goal – such as university fees – in mind? If so, are the funds invested in assets appropriate to the length of time until the money is needed?

With the current geopolitical situation causing stock market volatility, parents and grandparents may well be concerned over where best to save for the younger members of the family. However, it is important to bear in mind that most investments made for children are for a term of 10 years plus, and therefore investing in stocks & shares could well be a suitable route to take, on the basis that the investment is regularly reviewed.

It is interesting to note that three quarters of the £578 million subscribed to Junior ISA (JISA) accounts in 2013-14 is invested in cash, with only a quarter subscribed to stocks & shares arrangements. Although the interest rates offered on cash JISAs are superior to those offered to adults, with the majority currently paying between 2% - 3.5% gross AER per annum (source: Money Advice Service), any gains made are at risk of significant erosion by inflation over time. Investing in ‘real’ assets such as stocks & shares can help to protect against inflation and improve the overall return over time (not guaranteed).

Junior ISAs – a popular and tax-efficient way to save

JISA accounts have been available since 1 November 2011 to children under the age of 18 who do not own a Child Trust Fund (CTF) account (CTFs were available to eligible children born on or between 1 September 2002 and 2 January 2011).
According to recently published Government statistics, JISA account openings rose by 46% in the tax year 2013/2014, the second full financial year since the JISA took over from the CTF. £578 million was subscribed to JISA accounts in 2013-14 (source: HMRC ISA Statistics 2014 - http://tinyurl.com/n4l86sx ).

Chapters Financial is not responsible for the content of external websites

 

We expect this figure to continue to rise, with a boost from April 2015 when parents will be allowed to switch funds currently held in CTFs to JISA accounts. It is likely that JISA accounts will prove more flexible and better value than the older CTF arrangements and we would encourage parents to seek advice on the new options available.

Are you taking enough investment risk?

In the current tax year (2014/15), parents and grandparents can invest up to £4,000 in a JISA. Even if you don’t save to this limit, and choose to set aside a small amount each month, this can add up to a substantial amount over an 18 year timescale if invested appropriately.
Understandably, some people will not be comfortable with exposing their savings on behalf of their children to stock market volatility. However, given the long time period over which money is likely to be invested, sheltering the funds in cash may prove counterproductive. An (example) 18 year period provides enough time to absorb short-term stock market movements and investments in stocks & shares offer the potential for real capital growth (not guaranteed).

Maximising the tax efficiency of saving for children

Children are entitled to the same income tax personal allowance as adults (currently £10,000 in the 2014/15 tax year). Most children won’t have ‘earnings’ as such, so this allowance is applied to the income they may receive from sources such as deposit savings or investments. If the return the child receives in a tax year is less than the personal allowance for that year, no tax will be due.
An important point to watch is that if you give your children money outside a tax-efficient investment such as a JISA, and this generates interest of over £100 gross in a tax year, the whole amount of this income will be taxed as if it were your own income, at your highest marginal rate.

This limit applies to parental gifts only, not to gifts from other family members. With Christmas approaching, it may be a good time for grandparents to consider gifting money to their grandchildren, either into a JISA if contributions have not been maximised, or into a savings account or other arrangement. This gifting would have the added advantage of using the grandparents’ annual gift allowance, if not already used. Each individual is allowed to give away gifts worth up to £3,000 in total in each tax year and these will be exempt from inheritance tax from the date of the gift. Any unused part of the annual exemption can be carried forward to the following year.

Summary

If you would like support and advice on saving for your children or grandchildren’s future and maximising the tax efficiency of gifting and investing 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
Trainee Financial planner

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

Chapters Financial celebrates 10 years of Service in Surrey and the South East

Today Chapters Financial celebrates its 10th anniversary of financial planning service in Surrey, London and the South East.

I remember the planning and day that we opened our doors on 4th October 2004, and as you may remember, the world was a very different place at that time prior to the chill winds of the recession which were only some three years away.

As you know our business, Chapters Financial, has grown over the course of the last 10 years and in the last year, we welcomed our new Woking office to our repertoire to join along with the highly successful Guildford office.

Some will know that we have also been working on an online advice system, called AdviceMadeSimple.com over the course of the last seven or so years and this will be re-launched in December 2014 under the new heading of SaidSo.co.uk, we look forward to this development.

The team has grown from those early days and I would very much like to thank them for all of their hard work and loyalty over the last few years in ensuring that post-recession we grow and continue to grow successfully into the future.

The support from all quarters of our team, friends, family and connections has been fantastic over the years and we have been delighted to be able to give back time and energy to the community that we serve to add value.

Finally, a huge thank you has to go to our clients who have been most loyal over the last decade and we thank them for this.

We look forward to working with our many clients, professional connections and enquirers into the next decade.

No individual advice is provided during the course of this blog. If you would like to receive further information regarding your own individual situation and circumstances, please contact the Chapters Financial team in either Guildford or Woking.

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.