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Planning for the end of the 2019 tax year

With the help of a financial adviser and some simple financial planning ahead of the tax year-end (5th April 2019) you can make the most of the tax allowances available to you such as your ISA and pension Annual Allowance.

ISA allowance

You have a £20,000 ISA allowance each tax year. This is a ‘use it or lose it’ allowance as it cannot be carried forward if it is not fully utilised. This allowance will remain at the same level in the 2019/2020 tax year.

There are 4 types of ISA and you can put money into one of each kind of ISA each tax year:

  • Cash ISAs
  • Stocks and Shares ISAs
  • Innovative Finance ISAs
  • Lifetime ISAs

An ISA such as the Help to Buy ISA can be beneficial if you are saving to buy your first home. First time buyers get a 25% bonus from the Government on savings in a Help-to-buy ISA. The maximum bonus you can receive is £3,000 (if £12,000 has been saved). The deadline for opening a new Help to buy ISA is 30th November 2019.

With a Junior ISA,a UK child under 18 can currently save up to £4,260 in one tax year.

A financial adviser will be able to help you find the type of ISA most suitable for you and your investment goals.

Pension Annual Allowance

UK individuals can ‘normally’ contribute up to £40,000 gross, or up to their annual gross income, per tax year into a pension scheme. This allowance will remain at the same level in the 2019/2020 tax year.

Funds are tax efficient within a pension although the Lifetime Allowance (currently £1,030,000) limits the total amount you can accrue in a pension pot without an additional tax charge. 

You can take a look at our previous blog to find out if you are making enough pension contributions.

The Annual Allowance can be carried forward, subject to a few rules. If you have been a member of a pension scheme but have not fully utilised your Annual Allowance for the previous three tax years, you could be able to carry this forward to make a larger contribution in the current tax year.

Tapered Annual Allowance – this is when the Annual Allowance is reduced by £1 for every £2 of ‘adjusted income’ over £150,000. It can affect you if your income from all sources is over £110,000.

Inheritance Tax

The Inheritance Tax (IHT) nil rate band is currently frozen at £325,000 until 5th April 2021.

Inheritance tax planning can enable you to utilise the available exemptions including:

  • Annual Exemption – up to £3,000 can be given away each tax year and unused amounts can be carried forward and utilised in the next tax year.
  • Small Gifts Exemption – up to £250 can be gifted to as many people as you wish each tax year.
  • Gifts out of Income – you can gift regular disposable income if your income often exceeds your expenditure.
  • IHT efficient investments can benefit from business property relief and are then IHT exempt after being owned for two years. These investments can be high risk and financial advice should be sought.

Capital Gains Tax 

The annual exemption for the current tax year is £11,700. This is also an allowance that cannot be carried forward if it is not fully utilised. Unused losses are carried forward and can be offset against future gains.


2019/2020 tax year – changes to some of these allowances

Minimum/Living Wage

After 6th April 2019, the minimum wage for 18-20 year olds will increase from £5.90 to £6.15 per hour. For 21-24 year olds it will increase from £7.38 to £7.70 and for anyone aged 25+ it will increase from £7.83 to £8.21 per hour.

Personal Allowance

This will increase from £11,850 to £12,500 in the 2019/2020 tax year.

Lifetime allowance

This will increase from £1,030,000 to £1,055,000 in the 2019/2020 tax year.

CGT Annual Exemption

This will increase from £11,700 to £12,000 in the 2019/2020 tax year.

One of our independent financial advisers at Temple Wealth Management can advise you on how best to plan for the end of the tax year, as well as how to fully utilise your available allowances in the new tax year.

To discuss your end of tax year planning needs, contact one of our advisers on 01329 282882 or use our website contact form.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor. The Financial Conduct Authority does not regulate Tax Advice.

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Critical Illness Cover – what does it really do?

Critical Illness Cover is protection that’s designed to pay a lump sum if you’re diagnosed with one of a list of specified critical illnesses. 

Most Critical Illness Cover providers have a list of 40 plus conditions covered, but the big four are Heart Attack, Cancer, Stroke and Multiple Sclerosis (MS). Most companies offer children’s cover as an additional benefit and will pay an amount if any of your children are diagnosed with one of the listed conditions. Sadly, this is one of the biggest claim areas.

It doesn’t matter what happens after the diagnosis, it’s the diagnosis that triggers the claim on Critical Illness Cover (provided you survive more than 28 days after diagnosis). You don’t have to be terminally ill, off work for long periods of time, and you can make a complete recovery.

I’ve been a Financial Adviser for nearly 30 years and for much of this time I’ve been advising people to take out a range of protection insurance policies. For all of this time, I’ve been almost evangelical about the benefit of Critical Illness Cover.

Critical Illness Cover has been around for over 40 years. Most people now know somebody who has benefited from a Critical Illness Cover claim. If you don’t and you’re reading this – well – now you do. Whilst not unique, I’m unusual in that I not only advise on, and arrange critical illness policies for clients, I’ve also claimed on my own.

So what benefit does it really give?

You might just think it’s a lump of money – you can use it to reduce or pay off your mortgage and other debts, provide for additional health care and adapt your home if you need, but it also goes much deeper than that.

I was diagnosed with cancer in 2012. It goes without saying that it’s a pretty uncomfortable conversation that you have with your Consultant at this point. There’s shock, fear and even a bit of panic. The most difficult thing to deal with, in my view, is the uncertainty. Cancer, its treatment and subsequent hopeful recovery is a long road to travel and you ask yourself lots of questions. Will I make a recovery, will I be able to work, how will I react to treatment, if I do go into remission will it come back?

My NHS treatment was superb and with that, brilliant support from family and friends and a bit of luck I have made full recovery. The initial stages were very difficult with an endless round of hospital visits, surgery and chemotherapy which lasted around 6 months. Then you have regular checks and scans, hopefully to confirm that you are still clear. After 5 years, the big day when they tell you that you’re still clear and apart from for the occasional check every 5 years thereafter, they don’t want to see you again.

I made a claim on my Critical Illness Cover the day after I was diagnosed and within a month both policies had paid out.

I was doubly lucky in that I didn’t actually have to have too much time off work. I was able to work knowing that I didn’t have to if I wasn’t up to it. I knew that if I didn’t respond well to treatment that financially I was fairly secure. Believe me when I say that having that safety net is a massive comfort. I was able to concentrate on recovery without financial worries.

When you’re dealing with any critical illness you can count on superb care of the NHS. Hopefully you can rely on help from your family, friends and work colleagues, but in addition you need to be able to focus completely on the job at hand – recovery. To be able to do that you need to be free from financial worry. You need every possible advantage you can get. I know money isn’t everything, but it really does help. That’s the real point behind Critical Illness Cover and I truly believe that my policy helped me get to the stage I am at today.

About Critical Illness policies

Critical Illness Cover has evolved over the years and the modern policy offers flexibility with a much wider range of coverage. These include numerous additional benefits designed to aid recovery including, in some cases, specialist second opinions, access to complementary treatments and psychological support.

In 2017 (the latest full year statistics) 15,962 critical illness claims were paid in the UK with a total value of £1.16 billion paid. 92.2% of all claims made were paid by the insurers. (source: Association of British Insurers Claim Statistics 30/04/2018).

If you have existing policies, they are worth reviewing to make sure that the cover meets your current needs. If you don’t already have cover you can speak to an Independent Financial Adviser and see what’s available. It doesn’t need to break the bank.

If you’re ever in the unfortunate position that you need to claim on your Critical Illness Cover, you’ll think it’s the best money you’ve ever spent.

Critical Illness plans typically have no cash in value at any time and cover will cease at the end of term. If premiums stop, then cover will lapse. Plans may not cover all the definitions of a critical illness. The definitions vary between product providers and will be described within the Key Features and policy documentation if you proceed with the plan.

For more information on Critical Illness Cover, or any other protection needs, contact Simon Ereira at Temple Wealth Management on 01305 213150 or simon.ereira@templewealth.co.uk

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Are you making enough pension contributions?

Could you afford to live on an income of £155 per week in retirement? How about £8,060 per year?

You may be surprised to be told that these figures are one and the same. This is the Flat Rate State pension which a UK citizen with 30 years of National Insurance contributions will be eligible for from age 66 (as at January 2019).

The national living wage in the UK is currently £16,009 per annum. With this in mind, are you saving enough now to ensure that you can enjoy retirement without worrying about your finances?

How much are you contributing?

If you wish to receive a guaranteed income for life in retirement of the remaining £7,949 with no investment risk to your capital, you would need a pension pot of around £142,750* for a level income or a pension pot of £245,000* if you wish for your pension to increase in line with inflation.

In order to achieve these fund values in today’s terms (i.e. after the effects of inflation) this would mean making monthly pension contributions of at least £185.60 net or £317.60 net respectively from the age of 30 into a cost effect personal pension plan – assuming growth is 5% per annum, with an ongoing advice charge of 0.50% per annum paid monthly.

What can you do?

Of course, everyone’s situation is different. However, the Financial Times Adviser have calculated that clients who have an appointed financial adviser accumulate, on average, 21% more in their pensions than those who self-invest**. With this in mind, can you afford not to review your retirement planning? After all, a goal without a plan is just a wish, and you do not want to wish you did it on the day that you retire.

Contact one of our Independent Financial Advisers at Temple Wealth Management to find out how we can help you with your retirement planning and review your pension contribution levels.

You can contact us by calling our office on 01329 282882, send an email to Fareham@templewealth.co.uk or send us a message on our Facebook or Contact Us Page.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change in the future.

*Figures based on AssureWeb research completed on 08/02/2019 and are based on a single life, 5 year guaranteed annuity paid monthly in arrears for a healthy 66 year old, not taking into account advice charges.

**Source: https://www.ftadviser.com/your-industry/2017/07/13/financial-advice-leaves-people-40k- better-off/

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The importance of reviewing your personal finances, whatever your age

Setting goals for your personal finances is crucial to success and achieving your financial objectives.

What does it mean for your age group?

From your first job until your 30s, these are known as “the vulnerable years” as you are trying to build up your personal finances to secure your future, protecting your income and saving for the future.  You may have a specific financial objective such as buying your first car, saving a deposit for your first house or for even retirement.  This means being aware that, however small, the earlier you start the better the result.

Then you move to your 40s, when you may own your own home, have a family.  Your objectives will change towards protecting a higher level of income, whilst also protecting your family and lifestyle.  Retirement starts to be foremost in your planning in order to ensure financial security. It is important to consider making the most of your tax allowances for the future. 

In the years up until retirement, which could be any age from 55 upwards to around 70 you will begin to see the benefit of planning your personal finances from an early age.  You will be looking at making retirement work for you.  These are the years that you will start to think about your children and grandchildren and their financial security, maybe preparing the “bank of Mum and Dad”.  Health will start to play a part in your future financial planning.  An Independent Financial Adviser can help you assess if your personal finances are on track to achieve your goals.  

From your 70s and through retirement, your personal finances may mean that long term care becomes more of a consideration.   This can also include succession planning in terms of inheritance tax, Power of Attorney and ensuring your will is up to date.

There will be other areas of planning that will be unique to your situation and therefore the earlier you engage with planning your personal finances the better.  It does not matter if you think you have no money to consider these things; if you start planning early and engaging the easier it will be in the future.  An Independent Financial Adviser can help at any stage of planning.

Temple Wealth Management – Your Financial Partner for Life.

We believe that professional financial advice can add significant value to individuals at any stage of life whether this be ensuring you have a competitive mortgage rate; reviewing your protection needs in case the worst were to happen. 

Temple Wealth Management can help find the right solution to make your savings work better for you and guide you through retirement planning.

Contact TWM on 01329 282882 or fareham@templewealth.co.uk to find out how one of our advisers can help you

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How does the Help to Buy Scheme work?

In the five years since its inception, the Government has committed over £9.9 billion to Help to Buy. This is a scheme designed to help first-time buyers onto the housing ladder and home movers up a rung. Independent analysis shows that both the rate of take-up and the size of equity loans being given are growing.

So, how does Help to Buy work?

The Help to Buy scheme offers an equity loan where the government lends first-time buyers and existing homeowners money to buy a newly-built home.

Help to Buy Equity loans – how they work

  • You need at least 5% of the sale price of your new-build flat or house as a deposit.
  • The government lends you up to 20% of the sale price or up to 40% in Greater London
  • You apply to borrow the rest from a mortgage lender, on a repayment basis.

EXAMPLE 1 – Cost of home = £200,000

Your deposit (5%) £10,000
Equity loan (20%) £40,000
Mortgage (75%) £150,000
TOTAL (100%) £200,000

Who can’t apply for the scheme?

  • You can’t use the Help to Buy scheme to buy a second home or a property to rent out.
  • If you use Help to Buy, you can only take out a repayment mortgage.
  • You can’t buy a property for more than the set price limits.

When you sell your home, or the mortgage is paid off, you repay the equity loan plus a share of any increase in the value. It works like this:

EXAMPLE 2 – selling your home (value = £250,000)

Increase in value = 25%
Equity loan repayment = £50,000 (£40,000 + 25% profit)
Mortgage = £150,000 (less capital repayments)
Your share = £50,000 (excluding any moving costs)

The remaining equity figure after moving costs can be used as a deposit on your next home. The exact amount also depends on how much you’ve paid off your mortgage. You can also pay back part or all of the loan at any time. The minimum percentage you can pay back is 10% of the market value of your home. The amount payable will depend on the market value at the time.

What are the advantages of the Help to Buy Scheme?

  • If you want to move home but cannot quite afford the deposit, the Government’s Help to Buy scheme could make a big difference.
  • You get help buying a home enabling you to get on to the property ladder, boosting the housing market, and helping the wider economy
  • You need a smaller deposit to buy a home through Help to Buy which is set at a more manageable level of 5%. This is much lower than many other mortgage options meaning you could buy more quickly and own a brand new property
  • There are no loan fees due in the first five years although the amount owed can still increase during that time. The equity loan will rise and fall with the housing market, so if the house value increases in value, so will the amount owed.
  • For first time buyers in particular, these first five years can be some of the most financially strenuous, so a few years of breathing space may be viewed as an advantage.
  • Mortgage payments would still be made during this time (which will include interest charged by the mortgage lender), but no interest will be added to the Help to Buy loan.
  • There is the potential to access cheaper mortgage rates depending on individual circumstances. The fact you will need to borrow less overall may also mean being able to qualify for a mortgage in the first place. By needing to borrow a lesser Loan to Value, a more competitive rate of interest may be possible than if applying for a standard 95% mortgage.
  • You get a competitive Help to Buy loan rate (after five years). After not paying interest on the equity loan for five years, the initial rate of interest is 1.75% in the sixth year.

What are the drawbacks of the Help to Buy Scheme?

  • Although Help to Buy may give you the opportunity to purchase a new build home that you may not otherwise be able to afford, there are some limitations to carefully consider.
  • The Help to Buy loan will become more and more expensive. Although you will benefit from five years without interest, after this time the rate of interest applied to your loan will increase each year. While you will only pay 1.75% in your sixth year, each year your loan fee will increase by 1% plus any RPI increase.
  • The creeping annual cost of fees could put pressure on your monthly budget. Also, should RPI increase dramatically in any 12 month period, so would the additional rate of interest applied to your loan.
  • The amount you will ultimately need to repay on your Help to Buy equity loan is not fixed. Instead it will fluctuate with the market value of your property because it is percentage-based. This means that if your property has risen in value you may have to pay significantly more than you originally borrowed.
  • Currently the Help to Buy scheme is only available on new properties which may limit the choice of home. It is also only offered by some developers so the choice of property will be limited too.
  • It may feel like paying a premium for buying new, so unless you are really wanting a new property, other options should also be considered.
  • Not all providers offer Help to Buy mortgages, and those that do sometimes make them different from their standard mortgage packages. This is because a third party is involved with the purchase of your property, and they also have a claim to part of the sale value.
  • The potential danger of negative equity as some property experts claim that the Help to Buy scheme has started to inflate house prices. They are concerned that it is causing a housing bubble that will burst when the scheme ends, trapping a vast number of buyers in negative equity.
  • If you are buying a new home as an investment in the hope you will be able to move in the short to mid-term this could be an issue – if you are planning on living in the property for many years this will be less of a problem.
  • You do not know if the terms might change. While you can only plan your finances based on information you currently have available, a future government could review and change the terms of the scheme.

Your home maybe repossessed if you do not keep up repayment on your mortgage.

For more information on mortgages contact Martin Crump, one of our independent mortgage advisers at Temple Mortgages on 01305 213150

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Business protection – borrowing money to fund a business

Many business owners borrow money to provide the working capital needed to run a business. This money may be borrowed from the bank or from the director’s own capital that is lent to the business.

Business owners’ loans

Lending your own money to the business has a number of advantages with regards to tax and flexibility, however you might not be aware that in the event of an owner dying these loans are immediately repayable to their estate. This often means that the business may need to sell its assets or turn to the bank to replace that borrowing.

In the current economic climate, how easy would that be? The business could also face the possibility of expensive legal action with the deceased’s legal representatives. There are several ways to avoid this situation by effectively enabling you to become your own business banker.

It is worth reviewing your situation with a specialist business protection advisor. The intial consultation to ensure the business remains trading after the death of an owner or shareholder is usually free.

Bank loans

If you have a bank loan, you need to consider how you would service this loan if you lost a key business owner or manager through death or through serious or long term illness. In the current financial climate can you be sure your bank would assist in a recovery plan or would they, as in many cases, simply recall the overdraft and close the business down? It is easy to prepare for any eventuality.

Personal security

This is even more important if you have been asked to provide personal security (commonly known as a personal guarantee), in particular where the bank has taken a charge over your house. This could mean that in the event of your death your family could be reliant on your shareholders, partners or co-owners’ ability and desire to service the debt to keep a roof over their head.

In all of these situations we can advise on the most cost-effective means of protecting your family and your company.

In some cases, but not all, the existing business protection cover in place may be sufficient and fit for purpose. Following our free initial consultation we may be able to advise on an alternative that provides additional benefit for the same premium or similar cover for a lower premium. Where there is limited or no cover in place, we can create a cost effective cover strategy to protect both your family and your business.

For more information contact Tony Pizzi, our independent business protection adviser at Temple Wealth on 01329 282882

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The Secret of a Successful Mortgage

The secret to a successful mortgageThe need for convenience in modern day Britain is high with people becoming dependent on technology to speed up everyday tasks so that more tasks can be squeezed into each day. Banks and building societies are quick at adapting to market needs and provide services such as online banking and mobile apps.  If you are looking for a mortgage there are now a range of different ways you can apply, we look at how to ensure you get the best mortgage rate and service available.

The Time Vacuum of High Street Lenders

Obtaining a mortgage the classic way is a time-consuming process. Read more

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Is life insurance & wearable technology a match made in heaven?

 

Life Insurance TechnologyOne of the hottest topics being discussed in the protection industry is the possible move towards embracing wearable technology. One provider is already offering reduced gym memberships, as well as encouraging policy engagement through health and activity tracking. But could it change the industry and the relationship between providers and consumers?

The start of something special

These first moves towards integration may start more providers down the road of offering discounts and encouraging customers to engage with their policies. Read more

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Risk Profile And Your Capacity For Loss – Adventurous Or Cautious?

risk profile capacity loss

How you invest your money can have a dramatic effect on the return you receive.

We all know that investment stocks can go up as well as down but how do you know how much risk you should take with your money? Understanding your attitude to risk and completing a risk profile can relieve some of the worries of investing.

There is no right or wrong answer here; it is personal to you and your situation. This may change over time, as your family grows or you get closer to retirement. Therefore it is important to regularly assess your attitude to risk and ensure your money is invested wisely.
Read more

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Workplace Pension And Saving For Your Retirement

workplace pension

What is The Workplace Pension?

You may have started to see the TV adverts with the big fluffy monster, called The Workplace Pension. He wanders around and is ignored by those he meets. You may have even wondered what it was all about!

A workplace pension is a system of saving for your retirement. Under the Pensions Act 2008 every employer must create a pension scheme that both the employee and employer contribute to. Read more