We are delighted to welcome Steve Carson back to Firth & Scott Financial Services Ltd after an absence of seven years.
Steve has over 20 years experience in the Financial Services industry as an Independent Financial Adviser and brings to our team of IFA's expertise in pensions and investments.
He is able to provide all-round and comprehensive advice on all aspects of financial planning and provides his clients with a professional service to meet their individual needs and requirements.
Welcome back Steve!
Certificate in Financial Planning & Member of the Personal Finance Society (Cert PFS)
Email: stevecarson@firthandscott.co.uk
Mobile: 07736 069581
With effect from 1 January 2013 all Independent Financial Advisers have to agree their remuneration with clients. We very much welcome this move by the FSA.
There will be a huge focus on costs going forward and to ensure we are in a position to offer our clients an extremely competitive priced investment solution we have joined Succession Advisory Group taking their total number of partner firms to 40 in January 2012. These 40 partner firms have a total funds under management in excess of £6bn - this will give us tremendous buying power.
As well as buying power our investment solution offers a research and investment facility supported by investment research experts Raynor, Spencer Mills who constantly review the performance of these funds and the volatility. Taking this work away from us will allow us to concentrate on what we feel we are good at, i.e. financial planning for our clients. As one firm of a small number of Chartered Financial Planners this development allows us to concentrate on our strengths.
I would however wish to point out that Firth & Scott Financial Services Ltd are a totally independent company, directly regulated with the FSA, and these additional services are being brought in to enhance our client proposition.
Junior ISA's were first announced in George Osbourne's 2011 Budget and they have now become available from 1 November 2011.
Initially the maximum amount that could be invested in a Junior ISA was to be £3,000 but this has now risen to £3,600.
The Junior ISA is available for any child under the age of 18 years who does not have a Child Trust Fund Account, for example they were born before 1 September 2002 or after 2 January 2011.
The account allows contributions of up to £3,600 p.a. which will also be the revised limit of contributions for the Child Trust Fund. These contributions would normally be paid for by a relative such as a parent or grandparent.
Monies can be invested in either Cash funds or Stocks & Shares (as per either a normal Cash or Investment ISA).
The account provides tax freedom on capital gains and investment income although the tax credits on dividends received by an Investment ISA cannot be recovered.
As previously mentioned the limit for the Child Trust Fund has increased to £3,600 p.a. but the Government have not yet confirmed whether they will allow a Child Trust Fund to be converted into a Junior ISA.
Certainly it would appear that the Junior ISA has a role to play in investment and tax planning and provides an opportunity for parents and grandparents who are maximising the levels of contributions they are paying into their own personal ISA's (which is £10,680 p.a.) to utilise the allowances for their children to build tax efficient funds for private and university education.
As with the Child Trust fund there is always the consideration that the investment becomes the child's own property at age 18 years, when the parent loses control. Monies invested in the parents' name for the child's benefit have the advantage that the parent can decide when is the appropriate time to pass the monies onto the child, either directly or by paying for university fees etc.
Businesses can obtain up to £50,000 of NI savings if they are a new business or, in certain cases where careful planning is carried out where there is either diversification or expansion of an existing business.
The rules allow for a saving in the Employer’s National Insurance of up to £5,000 per employee for up to 10 employees.
Whilst the scheme is designed for new businesses, the business does not have to be entirely new. For example, if over 6 months has elapsed since the owners last ran a similar business, then the saving is still available.
Careful planning is needed where a business is looking to expand or diversify into say, a new market. With careful planning in advance, the saving could be taken advantage of by, for example, forming a new company for the new activity. However, if the existing company simply expanded their activities within the same company, then they would not qualify for the saving.
The Dilnot Commission (chaired by the Economist Andrew Dilnot) issued on 4th July it's recommendations on funding of care and support. If the Government is prepared to implement the proposed reforms then this will have a fundamental implication on long-term funding for the elderly.
The Government have committed to publishing a White Paper next year but undoubtedly there will be fierce arguments about the proposed funding arrangements in the months ahead. The commission was set up by the Government to investigate how to achieve an affordable and sustainable funding system for long-term care.
Under the current system most individuals have to pay something towards the cost of long-term care. Anyone with assets worth £23,250 or more is expected to pay for their care needs and in most cases the value of the property will be included.
The new system suggested by Dilnot is to limit the maximum amount people would have to pay for care to between £25,000 and £50,000 with Dilnot recommending that only those with assets worth more than £100,000 should pay for the full cost of care.
The Commission favoured £35,000 and the effect of these new proposed measures would be to ensure that no one loses more than 30% of their assets.
The State will however take over responsibility of paying for care once the threshold is reached. Individuals still have to contribute something towards their general living costs, e.g. food and accommodation of up to £10,000 per year.
The Commission has also recommended that there should be a framework in place nationally to ensure that local authorities are consistent in the way they assess the individual's needs.
I think the best way of actually looking at what might happen if the new system is implemented is just to take a case study from the Dilnot report.
Case Study
Alice lives alone in her own house worth £180,000. She had dimentia and needed to go into a residential care home when she was aged 85 for 5 years.
Current System
Under the current system her daughter would have to arrange for Alice's house to be sold to be able to use the money to pay for her care. She had to pay all her care and living costs in full until she died spending £165,000 from her pensionable income and housing wealth.
Recommended Dilnot Model
Under the recommended Dilnot model Alice would initially need to contribute in full to her care and living costs. After two years she would have contributed £35,000 towards her care and reach the cap (if this was set at the £35,000). From then on the State would pay the costs of her £18,500 p.a. (assuming overall care home costs of £28,500) and she would pay for just her general living costs (£10,000) out of her pensionable income. She would retain approximately 80% of her wealth.
Conclusion
It will be really interesting to see how the Government reacts to the Dilnot solution and whether they consider as a country we can afford the proposals. If the commission's recommended cap of £35,000 was introduced this would cost an estimated £1.7 billion. Dilnot comments: "The reforms are actually relatively low cost at .14% of Gross Domestic Product" and has suggested a number of ways of raising the monies which are still being looked at.
The Government will consider the commission's recommendations, including its proposed timetable for reform, which would see implementation of the changes in 2013. The Government is committed to publishing a White Paper in the Spring of 2012.
Funding for long-term care is mentioned by our clients more than any other subject in respect of their financial planning requirements. Even if these proposals are implemented in their recommended form there is a definite need for all of us to plan for our old age and therefore please do not hesitate in contacting us here at Firth & Scott if you would like the opportunity of discussing the matter further.
From September 2012 universities and colleges in England and Wales (Scotland and Northern Ireland are currently still under review) can charge up to £9,000 per year for their full-time under-graduate courses. Living costs on top of this could be as much as £5,500 per year meaning that the average student starting a course in the 2012 academic year could need up to £14,500 for their first year.
However, of course, inflation is going to have an effect on these costs and even a modest 2.5% p.a. inflation level would mean that a student starting a university course at age 18 in 2012 could need in the first year £17,743.28, in the second year £18,186.87 and finally in the third year £18,641.54 making a grand total of £55,571.69.
So what can be done about this?
Let's look at an actual situation .....
A client of ours in their mid 30's has a daughter who is 4 years old and she is just about to start school.
Our clients are concerned about the rising costs of further education and want to make some provision. They have agreed that they can afford to save comfortably £250 p.m.
The investment vehicle that we would recommend to our clients would be a Unit Trust as they were already using their allowances for an Investment ISA.
If the investment grew at 4.5% p.a. when the daughter started a 3-year university course in 2025 then the funding could look something like the following:-
|
Year of Study |
1st (2025/26) |
2nd (2026/27) |
3rd (2027/28) |
|
How much is needed? |
£20,074.90 |
£20,576.77 |
£21,091.19 |
|
How much is saved (at beginning of year)? |
£58,171.43 |
£39,971.00 |
£20,431.09 |
|
How much is drawn to cover fees/living expenses (over the year) |
£20,074.90 |
£20,576.77 |
£20,571.53 |
|
Shortfall still to be funded |
£0.00 |
£0.00 |
£519.66 |
I must emphasise that these figures are for illustration purposes only and are not guaranteed and the growth and inflation level are only assumptions.
However, hopefully you can see that it is possible to fund for university education if a decision is made early enough and a realistic commitment is made towards the costs needed.
The second scenario which we have recently been asked to look at is where grandparents wanted to make provision for university education for grandchildren. Initially the grandparents had a lump sum of £20,000 which they could put aside and were prepared to fund on a monthly basis £500 out of pensionable income, which they did not need, to build up again a further fund to help towards their grandchild's university education.
In this scenario the grandchild in question was hopefully going to university in 2020 and assuming a 5.5% net return this time and a 2.5% inflation increase from the chart below you can see in fact all university fees were covered and in fact there was an additional £9,339.43 left at the end of the three-year period.
|
Year of Study |
1st (2020/21) |
2nd (2021/22 |
3rd (2022/23) |
|
How much is needed? |
£17,743.28 |
£18,186.87 |
£18,641.54 |
|
How much is saved (at beginning of year)? |
£59,205.32 |
£43,915.71 |
£27,321.53 |
|
How much is drawn to cover fees/living expenses (over the year) |
£17,743.28 |
£18,186.87 |
£18,641.54 |
|
Shortfall still to be funded |
£0.00 |
£0.00 |
£0.00 |
In this particular example offshore funds were used (explaining the higher growth rate assumption), written under a discretionary trust to provide tax efficiency as well as help against IHT potential liability.
Conclusion
Therefore, if you have children or grandchildren where you are hoping that they will go to university, now might be the right time to consider setting up some form of provision to help them. If you would like to discuss a specific situation then please don't hesitate in contacting us here at Firth & Scott Financial Services Ltd.
Over the last three years we have been asking new and existing clients what they think about the service they receive from Firth & Scott Financial Services Ltd. We are delighted to announce that 2010 actually saw an improvement on the overall the figures for the previous two years (as shown in the graph below) with 100% of clients surveyed still happy with the service they received.
A big thank you to all our clients who participated in the survey for taking the time to complete the questionnaire. Your views and comments are very much appreciated and valued.
Protected Rights benefits result from you having been contracted out of the State Second Pension (S2P), which was formerly known as the State Earnings Related Pension Scheme (SERPS).
From 6 April 2012 you will no longer be able to contract out of the State Second Pension by means of a Rebate Personal Pension contract (Protected Rights) and the last payment made into these contracts by the State will be in respect of the tax year 2011/2012.
However, there are also changes to the way that the benefits can be taken from a Protected Rights contract. After 2012 the benefits within this contract can be taken in exactly the same ways as any other personal pension policy. Previously the annuity rates being taken were based on unisex annuity rates (the same for both men and women) and in the event of your death these benefits must be used to provide a spouse or a civil partner with an income. If you are not married or do not have a civil partner then the benefits would be paid outside of the estate so long as a nomination has been made.
After April 2012 Protected Rights pension funds can be taken and paid out on retirement or death in exactly the same way as a conventional personal pension policy.
The Scottish Widows Group have for a number of years now been offering mortgages and deposit accounts through their subsidiary Scottish Widows Bank. The bank's range of deposit accounts are competitive and for the individual they offer an E-Cash ISA and a Direct Transfer account.
The Direct Transfer account is particularly competitive, currently paying a rate of 2.8%, with the facility for no-notice withdrawals and no restriction on the number of withdrawals made during the account year.
The account links into the account holder's current account (whoever that might be with) and monies are transferred from and to the current account using the BACS system, which normally takes between 3 to 4 working days. The account does include a bonus for the first 12 months included in the 2.8%, with the rate falling to 1.91% after 12 months, which is still competitive when compared to similar accounts available from other organisations.
Should this particular account be of interest to you this can be arranged by ourselves with a very simple application form.
Despite the reduction in lending over the last few years for many people the importance of seeking out professional mortgage advice has thankfully not diminished. In fact statistics from the Council of Mortgage Lenders show that when looking to move house or re-mortgage financial advisers still play a leading role in the eyes of the majority of consumers.
Here at Firth & Scott advice is offered on all forms of mortgages, from residential properties to Buy to Let and Commercial. Mortgage advice can be very complex and your adviser will guide you through the process, explaining the various stages and the legal implications of buying a property.
Contact us here at Firth & Scott to take advantage of a free appraisal and review of your mortgage situation.
