The end of the Euro, but not Europe?

As we draw towards the end of 2010 many are turning to the prospect of all manner of festive things and as I write this, the prospect and forecast of snow is on the horizon. Sadly, for those in the Emerald Isle of Ireland, the realisation of an economy in significant trouble is at the forefront of many minds.

Amongst other economic measures, a Bi-Lateral loan of around £7.0-£8.0 Billion has been offered by the UK to Ireland to help with its problems and with the International Monetary Fund (IMF) busy in its halls of power, the political power of the existing administration looks weaker by the day, with the election polls beckoning in January. Their austerity plan due to be released in Dublin later today will make interesting reading.

Ireland is far from being alone in this situation, and many other nations such as Greece and Portugal have suffered similar fiscal situations and other nations, such as Spain, are not looking as healthy as many would want. Other nations in the Euro-Zone, such as Germany, are not seeing the same economic problems and, in a contrary fashion, are seeing sustainable growth going forward, although time will tell if this remains constant. As with all of these things, past performance is not a guarantee of future performance. This imbalance is creating some economic friction. With some nations fiscally falling behind others, the pockets of the wealthier countries that have been dipped into to help out are, as the saying goes, beginning to get deeper with shorter arms, causing concern that this may undermine their own economies. Remember, this has been a painful time for all countries financially and attitudes are changing to the protection of their own countries rather than that of the Euro-Zone.

This has led to some speculation on the future of the Euro as a currency for the Euro-Zone. Some now suggest that the Euro in its present format will not survive. That some of the northern countries will form their own Euro currency, introducing a two tier Euro-Zone or simply revert back to their old currency from whence they came. However, there seems little speculation on the Euro-Zone as a whole, just the currency it uses.

Where does this trouble, concern, comment and speculation leave us as investors?

In my opinion, the answer lies in one word, which is ‘diversification’. The future for Europe as an investment area remains reasonable, although it is likely to go through some change going forward. By diversifying your investments (Pensions, ISA’s, OEICs, Portfolios) to ensure that you are not overly exposed to one investment area and taking regular advice from your Independent Financial Adviser (IFA) you should maintain the potential of reducing exposure to investment risk.

When looking at an individual investment area, you should also do this in conjunction with your overall attitude to investment risk. This should provide a more encompassing approach and Churchouse Financial Planning Limited has prepared an Investment Risk Scale to help with your considerations and this can be found here.

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

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

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.

National Employers Savings Trust (NEST)

The last administration proposed a wide-ranging review of pension saving in the UK and introduced the concept of the National Employers Savings Trust or NEST for short. Much work was done on this subject prior to the election in May 2010 and some felt that NEST would not survive the new Coalition Government. After some consideration NEST seems now to be proceeding at pace with a trial pilot (through Volunteer employers) starting next year (2011) and full implementation with the full scheme being launched in 2012 and most employers being tied into the arrangement in 2014.

It is clear that the public in the UK is not saving enough for its retirement income because many individuals will fall short of their target income at retirement. With the pressures on the State Pension increasing, many people will know of the proposed levelling off of State Pension benefits for all at a level of £140.00 per week from 2015. We are also aware that the State Pension age is increasing from 65 to higher ages, such as 66 for both men and women from 2020 with further changes to follow.

To help with this situation, NEST is being introduced. It is proposed from the start date the contribution level to the scheme of a minimum of 2.0% pa, with 1.0% pa being paid by employers and 1.0% pa by employees (0.8% pa net contribution and tax relief of 0.2% ).

I have listed a link below for the phased start dates based on the number of staff that you have within your organisation.

http://www.thepensionsregulator.gov.uk/pensions-reform/duty-dates-timeline.aspx

There will then be a phasing of increased contributions with a minimum total level of 5.0% pa being introduced between October 2016 and October 2017 and then from 2017 a contribution level of 8.0% pa, with 3.0% pa coming from the employer, 4.0% pa coming from the employee and the balance as tax relief (subject to any changes). It should be noted that the percentage is of all income including basic salary, commission, bonus and overtime. Therefore if an employer is looking at the cost to their company of NEST then it should be looking at the total salary cost including all of these items rather than base salary.

Employee Opting in and out

All employers will be required to automatically enrol (on their Automatic Enrolment Date/ AED) their eligible workers into a qualifying pension scheme and to make the relevant contributions to the qualifying scheme selected. NEST is one option available to all employers. Employees will have the facility to opt-out of their employer's qualifying scheme after being automatically enrolled within a prescribed time period if they do not want to join in. They have one month from the date that they have been given prescribed information to opt out and they may do this by contacting the scheme. They will then be put back in the position they would have been in if they had not joined the scheme. This may involve a refund of any contributions taken following automatic enrolment into the scheme. They can opt out after the a enrolment period, but this may mean they are given a preserved pension. Some trust based schemes may provide a refund less tax under short service refund rules applicable to some occupational pension schemes within two years of joining. If an employee opts out the employer will not have to make their required contribution but the employer cannot induce the employee into doing so.

They can opt back in later at the employer/qualifying scheme’s discretion and will be automatically re-enrolled every three years. The employer will then have to contribute again in accordance with the phasing above.

Administration & Existing Schemes

An employer can decide to run a scheme within its own arrangements or use the NEST arrangements put in place by the Government to collect contributions and to administer them accordingly. Some employers already have pensions schemes in place and an employer will need to designate these schemes with The Pension Regulator to join them into the NEST programme. If an employer wants to do this they will need to look at the cost to them and the scheme in doing this.

Dates and Contribution Phasing

The employer will be notified by The Pensions Regulator 12 months prior to the date they have to implement their phase of the NEST funding. The contribution level will be phased from the outset with larger employers starting in October 2012. The initial contributions will be as follows (Contributions to be made on a band of earnings between £5,715 pa and £33,540 pa (the lower limit to be linked to the National Insurance LEL and the higher limit in 06/07 terms and up-rated in line with National Average Earnings)

• Employer: 1.0% pa of earnings
• Employee: 0.8% pa of earnings
• Tax relief: 0.2% pa of earnings

Second Phase - October 2016 to October 2017
From October 2016 the second phase starts and will see an increase in funding/contributions to 5% of earnings (salary/bonus/overtime, etc within band earnings) divided as follows:

• Employer: 2.0% pa of earnings
• Employee; 2.4% pa of earnings
• Tax relief: 0.6% pa of earnings

Third Phase -October 2017 onwards
From October 2016 the second phase starts and will see an increase in funding/contributions to 8% of earnings (salary/bonus/overtime, etc within band earnings) divided as follows:

• Employer: 3.0% pa of earnings
• Employee: 4.0% pa of earnings
• Tax relief: 1.0% pa of earnings

You can see that there are some significant consequences to this legislation and therefore many employers need to start planning now to ensure that they are ready for the changes in their cost projections, and also the requirement to ensure that they are ready to meet their responsibilities.

It should be noted that the level of tax relief, the way contributions are calculated based on income levels or ‘Band Earnings’ and some other issues may vary and are open to consolation at this time.

Churchouse Financial Planning Limited is well placed to help employers with this and we would be pleased to speak with directors of your company to ensure that you meet the requirements needed. This should not be seen or used as individual advice and you should seek independent financial advice for your own circumstances.

Contact Keith Churchouse on 01483 578800 or via churchouse.com

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

2010 and The FTSE 100 Index

2010 has proved to be a very different year for many of us. With snow disruption causing havoc in January, a late Spring election, Quantative Easing, the football World Cup and finally and more recently, the Comprehensive Spending Review which has bought into sharp focus the economic position of the UK and the cuts required to achieve balance going forward. We have not seen the true effects of these cuts yet, although we now understand how tricky they may be. We are all different and each change may vary the outcome for each of us.

With all of these issues occurring, I thought it might be worth noting what has happened to the FTSE 100 index (the UKs top 100 shares) over the same time. Opening at the start of January (open 04/01), the index stood at 5412.9 points. By 01 June, we had fallen to 5188.4 points this year and at the time of writing this blog on the morning of November 10th 2010, (opening), the index stood at 5875.1 points. Past performance is not a guarantee of future performance, however, is interesting to see what has happened to an index that affects many clients’ investments.

If you would like an independent (IFA) review your pension, retirement planning or investments in light of these changes then please let us know.

As noted in this text, we are all different and this information should not be used or relied on as individual financial advice. The Financial Services Authority does not regulate Taxation advice.

Further details of this are available at our website, 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

November Notions…..Your financial planning month?

With the sky alight at the weekend with the beautiful colours of fireworks and the air thick with the smells of bonfire, I know that it is going to by a busy month in financial planning. For those of you who know that I complete 25 years in the profession in 2010, I would note that this experience has always taught me that November is a key (if not the key) business month in the annual calendar to seal off the years production. Can I add that this is not me suggesting this, but our clients usually requiring it.

I don’t know if this is because it is the last month on normality in the year before all things Christmas descend upon us, with the corresponding time and monetary commitments, or whether the first month of truly dark nights, providing more time to focus on financial planning, independent advice (IFA) and getting all things money in order. Whatever the reason, we always ensure that we are ready to help.

Like all financial planning, each client’s requirements, needs and aspirations are different and this variety is inspirational in making our work so enjoyable. I have given some examples below.

Pension Planning:

With many changes in the way the limits on pension tax relief have been applied or restricted and more changes proposed for lifetime allowances (LTA) , this is an area that is regularly changing and many find needs regular attention for contributions to Personal pensions (PPPs), Stakeholder Pensions and Executive / Employer schemes.

For employers, the effects of NEST (the National Employers Savings Trust) on the immediate horizon, this is taking up significant thinking time on the approach to the overall outcome of these plans.

Retirement Planning

I always recommend that a client starts to plan their retirement income planning around 6-12 months out from the date they plan to retire. This is because many want to know what they are likely to get in terms of tax free cash and the final income they can draw, either via an annuity purchase (Open Market Option/ OMO/ Impaired Life Annuity) or, for those prepared to take some additional risk, an income drawdown plan. As with most pension issues, the rules applicable are regularly changing and the increase in the age to which annuities have to be bought from 75 to age 77 is a good example. More changes are proposed for the future.

Early advice and guidance will provide retirees time to think about how the retirement options available and what will suit their needs both at retirement and into the future. Time is a key point here because there is usually a lot of information to take on and digest.

To help with this, we do offer a simple Retirement Options guide free of charge and this can be found here.

Investment Planning:

As we pass the half way stage in the fiscal year (April-April) many chose to invest in ISA’s rather than wait for the deadline of April 05^th. This seems to be another popular deadline that clients focus on. With the full ISA allowance at £10,200 each (2010/2011), this is a valuable tax efficient allowance that many use each year to shelter their investments. In addition, most have a full capital gains tax allowance (CGT) of £10,100 in a tax year (2010/2011) and again many find this of significant advantage in their overall planning. With the highest tax charge above this allowance at 28% as a flat tax rate, this can work well for high rate taxpayers.

Many also start to plan to use their gift allowances in the next month or so, such as the annual gift allowance of £3,000 each or gifts from surplus income.

Summary

You can see that there is usually a lot to think about in financial planning for many around this time of year, whether that be one individual topic or a combination of these, along with other areas of planning, such as inheritance tax.

As an amusing aside, I was horrified when I found out that ‘Santa Claus’ was following me on Twitter the other day (follow me as ‘Onlinefinancial’). At least he had waited until November to start. Either I have been a very good boy in the year or it is just a marketing gimmick. Sadly, I fear it is the later and not because I have not been good.

As we lead up to the festive season, please remember that it is not too late to get your finances in order and ready to face Christmas, 2011 and beyond.

As noted in this text, we are all different and this information should not be used or relied on as individual financial advice. The Financial Services Authority does not regulate Taxation advice.

Further details of this are available at our website, 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

Anniversary/ 25 years or a quarter of a century in Financial Services?

It all comes to pass in December 2010

It is hard to believe that in the winter of 1985, a spotty teenager (namely me!) joined a bank in a small branch in Surrey and began his career in Financial Services. As we draw towards the winter of 2010, I can look back over a quarter of a century of unbroken service in UK retail financial services.

25 years later, the world has changed since that cold December morning when I rolled up for my first day, having experienced my first dose of redundancy the week before. We have moved from the Margaret Thatcher era with the promotion of financial services, Big Bang and Black Monday, through the Blair/Brown ‘New Labour’ years of ‘no more boom and bust’ to what appears to be a time of austerity under the Coalition Government of Messer’s Cameron and Clegg.

In financial services, we have seen everything from the PIA to the FSA to MIRAS to LAPR and QE to the banking crisis, recession and now, as already noted, austerity. We seem to love our acronyms, don’t we! I have gone into more detail about my personal journey through these changes in my first book, Sign Here, Here and Here!…Journey of a financial adviser (Available from Waterstones/Amazon)

It has been a pleasure to serve the public in such a diverse and dynamic role and I am looking forward to the next 25 years. I will be aged 68 by the end of this time and based on the way the minimum State Pension age is increasing, I should be just in time to sign off after 50 years and collect my State Pension at that stage, if it still exists. With careful planning, most should be able to enjoy a comfortable retirement.

The best part of the journey for me has been the customers and clients that I have looked after in that time. They make the whole profession worthwhile and I thank them for the trust that they have placed in me and my company, Churchouse Financial Planning Limited, over the 6 years that we have been offering our financial solutions. A big thank you to you all, both past, present and future and I look forward to the next few decades and the challenges that these will bring.

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.

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.

Don’t forget your State Pension Benefits when getting divorced

When you are going through a divorce and considering your financial settlement then you should not forget the benefits available under the State pension scheme.

This might seem to be the least of your worries, but with a current value of £97.65 per week (2010/2011) without any additions (that’s just over £5,000 per annum gross to you and me!), it could have high value in your dotage.

Considering that most of us will make to around our mid eighties, this means that we could get this benefit for around twenty years. We also have to take into account the news from the Comprehensive Spending Review that all State Pension benefits from 2020 will only be available from age 66, rather than 65.

This is the same if you have not been working during the course of the marriage, as you will see.

Let’s look at the issues.

1. Basic State Pension…..and possible additions?

You may not know that there are usually two types of state pension that may be accrued, namely the Basic State Pension and the State Earnings Related Pension) (SERPS) or Second State Pension) (S2P) as it is now called.

This may be particularly relevant if the divorce happens close to the end of a working life, as many over 50’s are finding.

Most people are entitled to some form of state pension at any age from 60 for women and from 65 for men. This age is rising to age 66 from 2016 for men. The minimum age for the state pension is equalising for all to age 65, and then this is likely to increase further to 67 or 68 in future years.

Have you ever found out what your benefit is worth? The benefits available can be checked by completing a BR19 State Pension Forecast form, which will tell you what you are entitled to, both now and in the future.

Your spouse should also be entitled to individual pension benefits.

On divorce, there is the potential to transfer some of the State Pension Benefits to your ex-spouse dependent on your circumstances and this may be required as part of a divorce settlement.

To find out the transfer value of any benefit you can request this information from The Pension Service in Newcastle using an original BR20 form, one for each party. They don’t like photocopies and the valuation is valid for twelve months.

2. Forms and independent advice

Both are easy to check and the BR19 Pension Forecast Form and the BR20 Form are available on The Pension Service website, www.thepensionservice.gov.uk.

Whether or not you are divorcing, it’s always worth checking your State Pension to make sure you are maximising the pension benefit that could be available to you.

For married couples, I would usually recommend that both parties check to ensure that the household will benefit from this income.

Your Independent Financial Adviser (IFA) can also look at this information for you to see if there are any shortfalls in the value and if this can be added to with extra contributions.

This information should be explained in the detail. It’s just a question if it offers good value and this is where advice is vital.

3. Tax on the income

You knew that income tax will come up somewhere.

Currently the income from the State Pension is paid gross to the recipient, but is taxable. This may mean that any other earned or pension income you receive above the State Pension has a greater tax charge to take account of the State Pension already in payment.

4. Contribution records and State Pension Benefits after divorce

I hope that your financial negotiations have gone as well as you planned. Remember, you pay to argue.

When the divorce is finalised and completed, you can re-check the State Pension benefits available to you, to see whether they have changed.

As a point of interest, you may see an increase in your benefits if your spouse’s National Insurance contribution record was higher than yours as they may use this record as a substitute.

Again, you can use a BR19 form for this, updated with the concluded changes, such as the fact that your marital status is now ‘divorced’ and the date of the divorce. The detail comes back in around a month’s time, however the time taken can vary.

5. Further details

Divorce can be a difficult and emotive time, but with some focus and quality advice, I hope that you reach your objectives. Thsi article should not be seen or used as individual advice.

To expand on all things divorce and the fundamentals, I have been able to outline the full process in my new book, Addicted to Wedding Cake, The Journey of Divorce.

Further details of this are available at our websites, www.addictedtoweddingcake.co.uk or www.churchouse.com.

Keith Churchouse is Director of Churchouse Financial Planning, a firm of Chartered Financial Planners in Guildford, Surrey. Keith is a Chartered Financial Planner and Certified Financial Planner (CFP) professional. Churchouse Financial Planning Limited is Authorised and Regulated by the Financial Services Authority.

Probably not such an Equitable Life ‘Henry’!/ Compensation finally looms

It is nearly 10 years since the demise of what was declared the ‘oldest mutual organisation in the world’, first formed in 1762. And in a variation to many of the ‘Henry’ clients portrayed in the television adverts, it turned out not to be such an Equitable Life after all. Sadly, it is estimated that some 50,000 policyholders have died waiting for any form of compensation to be paid since 2000(Source/Report: Daily Mail, July 2010).

Finally, this week, it is reported that the details of a £1.5 billion compensation package will be announced and finalised by the Coalition Government after nearly a decade of delays, enquiries, arguments and disagreements, including investigations by the Parliamentary Ombudsman. This is way short of the £6.0 billion package that many felt was required. Although this announcement will be a momentous occasion in itself, I am not sure it will make the top headlines it deserves because it will come in the Comprehensive Spending Review that will have many other (mainly negative) headlines of its own. Wednesday the 20^th October 2010 will be a day of history whatever happens.

And what now for the policyholders? Bearing in mind that the with-profits fund at the end of 2000 had an estimated value of around £26 billion (source: Wikipedia), you might see that the proposed £1.5 billion in the big picture may not spread very far, although admittedly something is better than nothing! I understand that they may start to provide compensation to those who have or are suffering ‘hardship’ and this might, as an example, include those that took out a with profits annuity which has seen the income first projected fall away over the years. Others who have not suffered any ‘hardship’ but seen their investment bond, pension (executive pensions/ Section 32/retirement annuity) or income drawdown go down in value may find themselves lower down the pecking order of compensation payments. I have no doubt that the devil will be in the detail on this one, but I believe that the principal of priority list is correct.

We are likely to know after Wednesday. I am only sad that it has taken so long to get this far.

Whatever the outcome of the Equitable Life compensation scheme and its subsequent effects, it is always worth seeking independent financial advice (IFA) to ensure that you are getting the best from your financial planning.

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, Chartered Financial Planner

Director of Churchouse Financial Planning Limited

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.