How do you get higher investment returns and grow your wealth? This is usually the motivation behind wanting to become a better investor. Yet people have different understandings about what investing is, and how to do it successfully. Here at WMM, our team in Oxford offers their thoughts on what defines investing – and how to invest effectively.
You have your monthly spending and bills. Birthday and Christmas gifts. One-off, unexpected costs (e.g. a broken boiler). Pension contributions. Holidays. Rare, big purchases like a new car. Savings and investments. The list goes on. Money management is difficult, to say the least. Yet doing it well is certainly possible. Here at WMM, in light of the financial hardships many people have experienced with COVID-19, we wanted to offer this 2021 guide below.
There are many types of UK pension – with final salary pensions often referred to as “gold plated” ones. Also sometimes called defined benefit pensions, final salary pensions pay you a lifetime, guaranteed income in retirement – similar to a state pension.
Cash in the bank feels great – especially after a year like 2020, which has shown the importance of having a strong emergency buffer. However, is your cash really working for you? Inflation (i.e. the “cost of living”) stood at around 0.7% in 2020, yet interest rates on easy-access UK savings accounts are currently barely breaking even with this. Therefore, those with large cash savings are likely missing out higher returns offered elsewhere – and may even lose money in real terms later this year if inflation rises, as it might indeed do. As such, what are some other options?
Did you know that there’s a limit to how much you save into a pension? In 2020-21, this “lifetime allowance” is set at £1.0731 million – with 55% tax levied on any withdrawals which exceed this amount (or 25% when taken as income). Unfortunately, many people in the UK are unaware of this limit throughout their careers, only to face difficult and costly decisions as retirement nears and the realisation dawns. Here at WMM, our aim is to help people avoid these kinds of errors and enjoy their hard-earned wealth once their careers wind down. Below, you’ll find some ideas about how to avoid breaching the lifetime allowance – as the rules currently stand.
The UK’s four-year wrangling with the EU for a Brexit “trade deal” has finally ended. At 11pm on the 31st of December 2020, the “transition period” – during which the EU’s rules for trade, travel and business temporarily still applied to the UK – ended. From the 1st of January 2021 the relationship between the UK and EU will be governed primarily by the formal Brexit deal that has been agreed.
Many people think that a will’s main purpose is to ensure that your possessions go to the right people upon your death. This is partly right, but a will also holds immense power to help reduce a future inheritance tax (IHT) bill if you plan it carefully. In 2019-20, the UK government collected £5.13bn in IHT receipts – much of which was needlessly paid. How, then, can you ensure that you keep as much as your hard-earned wealth as possible within the family?
To help deal with the financial pressures brought on by the pandemic in 2020, many companies across sectors have cut their dividends – choosing instead to hold more profits as cash reserves to weather harsher global economic conditions. This, of course, has had a big impact on income investors – i.e. those who draw a significant monthly income from dividends and/or other income generating assets (e.g. bonds). In this article, we explore what impact this has already created on income investors and what the outlook might be as we enter 2021.
Many people in the UK have a tendency to deal with isolated areas of their financial plan, in a reactive way. For instance, suppose a couple in their mid-30s suddenly has their first child. At this point, they may quickly realise that they need a life insurance policy (e.g. to pay off the mortgage). Yet this reactive approach may not come at the best timing. In 2020, for instance, the COVID-19 pandemic has led many insurers to restrict their products and even raise prices.
NS&I Premium Bonds are an interesting alternative to saving into a regular savings account. Yet they have come into the public spotlight in December 2020 due to a recently-announced cut in the rate they offer, from 1.4% to 1%. As a result, many people are now questioning whether they are still worthwhile or if your cash savings are better off in a Cash ISA or similar account at your local high street bank. Below, our financial planning team here at WMM offers some thoughts on this important subject for you to factor into your own case.
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