Regardless of one’s politics, Joe Biden’s victory in the 2020 U.S. Presidential election marks an important event for investors’ portfolios – not only those residing in America, but also globally. In this article, our financial planning team here at WMM offers some thoughts on how the election result has impacted stock markets in the short term, as well as reflections on how investments may be affected in 2021 and beyond.
There is a perception that bonds are for “cautious” investors and that equities are for more “aggressive” investors, and that’s partly true. Yet 2020 has cast a spotlight on bonds in light of COVID-19 and other events in the economy (e.g. Governments around the world buying bonds). In this article, our financial planning team at WMM in Oxford wanted to share this round-up of the key developments and trends regarding bonds within the last 12 months. We hope you find this helpful and invite you to get in touch if you have any questions.
This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult us here at WMM (financial planning in Oxford).
Coronavirus has been a particularly stressful time for those looking to retire in the next 10-12 years. Many pensions have lost value since December 2019 as stock markets (which pensions tend to be heavily invested in) have taken a hit from the pandemic, lockdown and the resulting change in consumer behaviour and levels of concern.
Fortunately, equities have been steadily rising again across the developed world since the first quarter of 2020. The other good news is that there is still plenty of time to prepare for retirement for those who may be looking to finish work within 12 years. Below, our Oxford-based financial planning team here at WMM offers a handful of pension options for over-55s. Make sure you seek professional advice before acting on any of the below.
In 2020-21 the UK’s pension rules allow you to start taking money from a defined contribution pension once you reach age 55. You can withdraw up to 25% tax-free, for instance. However, just because you have this choice does not mean you should take it. You could leave the fund invested, allowing it to grow further so that you can enjoy a more comfortable lifestyle when you do eventually retire. However, it may be worth speaking to your financial planner about whether you could invest in lower-cost, better-performing funds to increase your real returns. It can also be wise to re-evaluate your contributions. Increasing them, for instance, could result in more money saved in retirement – allowing your pension(s) to stretch further.
In light of the pandemic, many people are attracted to an annuity. This is because it can provide a guaranteed, inflation-linked income throughout retirement. Some will be attracted to the financial stability and predictability this offers. Yet it’s important to consider that you may not get as much future monthly income from an annuity compared to income drawdown. In 2020, moreover, annuity companies have been affected by the pandemic. It may be wise, therefore, to consider ways to spread out your pension risk.
Of course, you may be tempted to empty your pension from the age of 55. Yet most financial planners would caution against this, since it’s likely to result in you not having enough money later in retirement. There are only specific circumstances in which this may be wise – e.g. if you have been diagnosed with an illness certain to result in death within the next 12 months.
Pensions come in different shapes, types and sizes. Some involve building a pension pot over time with your employer, for instance (i.e. a workplace defined contribution pension). Others, such as final salary pensions, grant you an income in retirement from your employer based on criteria such as your years of service and salary in employment. There are advantages and also disadvantages to each of these pensions, so it may make sense to transfer from the latter to the former in certain cases (e.g. if you want to leave your pension as an inheritance one day). Bear in mind, however, that this is a big decision that cannot be reversed once made. You can also only move from a final salary pension to a defined contribution scheme – not vice versa.
There are many other options available for over-55s who are thinking about retiring within the next 12 years or so. Above, we’ve outlined an overview of just some of the possible options. The important thing to remember is that your decision(s) regarding your pension is likely to have significant repercussions on when you retire, and what that retirement will look like. As such, it’s always worth considering professional advice to make sure you make the best decision.
Interested in finding out how we can optimise your financial plan and future income prospects? Get in touch today to arrange a free, no-commitment consultation with a member of our team here at WMM.
You can call us on 01869 331469
This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult us here at WMM (financial planning in Oxford).
Chancellor Rishi Sunak was expected to deliver a new Budget in the Autumn, yet this has now been officially called off. Many pundits were speculating a large tax raid – especially upon higher earners – in an attempt to start balancing the books in light of large coronavirus spending earlier in the year. It’s important to note the significance of this delay. Holding a budget in the autumn allows civil servants, accountants and the wider public time to implement large changes to the UK tax regime before the end of the financial year in April.
As such, a budget in the spring of 2020 could leave many people with insufficient time to make adjustments to their financial plan (to optimise their tax position). In light of this, our financial planning team here at WMM in Oxford wish to stress the importance of taking advantage of the existing rules to put your wealth and finances in the best position. Below, we offer some ideas on how to do that for you to discuss with your financial planner.
There are many misconceptions about inheritance tax (IHT) – which is understandable, since it’s such a complex area. One myth that’s important to bust straight away is the idea that IHT is only payable when you die. Bear in mind that transfers into a trust can also incur a 20% charge when above the available nil rate band. Moreover, be careful not to assume that shares on alternative investments (AIM shares) are exempt from IHT. Check these areas with your financial adviser.
Regarding gifts, the “7-year-rule” is currently still in place during the 2020-21 year. Some are suggesting that this rule could be axed in the coming months (which is possible). Yet it’s crucial to not simply make a gift now in an attempt to leverage the rule before it possibly changes. Bear in mind that taper relief applies on gifts applies at 20% after three years. Unless the gift exceeds your nil rate band (i.e. £325,000) it is unlikely that you will save any IHT.
Also, be careful with ISAs (individual savings accounts). Unlike pensions, these are not exempt from IHT. Assets outside of the UK can also be subject to IHT! Finally, make sure your executors are aware of some of the nuanced IHT rules which might catch you both out. For instance, your unused nil rate band is not automatically transferred to your spouse/civil partner. Rather, this must be claimed by your executors using the relevant forms. Also, remember that executors are personally liable to pay IHT. As such, it’s crucial to make sure they have access to the funds they need to do this in the future.
A number of measures introduced by the UK government earlier in 2020 are set to expire at some point soon. The Stamp Duty holiday, for example, is currently set to conclude in March 2021. Many landlords with Buy To Let properties are thinking about taking advantage of this window, but should remember that CGT has to be paid much earlier now on residential property sales.
Finally, investors with property investments should consider ways to optimise their tax position in the coming months. For instance, it might make sense to transfer ownership of a property to a spouse/civil partner so that rental income is charged at their lower, marginal rate of tax. Bear in mind that property transfers in 2020 can still be done between members of such couples without a tax charge. This is a decision with important implications, however, so seek advice first.
Interested in finding out how we can optimise your financial plan? Get in touch today to arrange a free, no-commitment consultation with a member of our team here at WMM.
You can call us on 01869 331469
A fierce battle has been going on in the Court of Appeals recently. Many women born in the 1950s have been fighting for compensation after seeing their state pension age gradually rise from 60 to 65 in the past ten years. The case has recently concluded with a ruling that the state pension rise does not discriminate against WASPI women (Women Against State Pension Inequality), and so the Court has upheld the law. Given this decision, what options might now be available for women in the 50s who are looking to develop their retirement plan?
If you’re new to investing then it can seem very complex and overwhelming. How exactly do you invest? What do you invest in and how can you protect your capital as it grows? In this article, our Oxford-based financial planning team here at WMM offers this short guide on investing for beginners. If you have any questions or wish to discuss starting your own portfolio, then please get in touch and we’d be happy to help you.
A review of capital gains tax (CGT) was ordered by the Chancellor in July 2020. Many believe that an increase could be on the horizon as the government seeks to plug the hole in the public finances – which has widening following the COVID-19 lockdown and generous policies such as the recent stamp duty holiday and VAT cut. In this article, our Oxford-based financial planning team here at WMM offer a brief recap on how CGT works in 2020-21, and what possibilities may be in store for the system in coming months.
It’s no secret that 2020 has been a volatile year for the UK stock market – and, consequently, many pension funds which are invested heavily in them. On January 17 2020, the FTSE 100 stood at 7,674 before falling sharply to around 4,993 by 23 March as the reality of the pandemic set into the markets.
This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult us here at WMM (financial planning in Oxford).
Since March 2020 many businesses across the UK have struggled with staffing, revenue and customer engagement. The COVID-19 pandemic has forced many organisations to completely change strategy – perhaps even moving from “growth mode” to “survival mode”. Given the high stakes involved (e.g. lost jobs, suppliers and closure) it’s crucial for business owners to ensure that their interests enjoy maximum protection in 2020 and going into 2021.
Here at WMM, our Oxford-based financial planning team offers this short guide on business protection in 2020 – hopefully providing some ideas and inspiration about how to take your own business protection to the next level.
One of the most important types of protection which all business types need to consider is Key Man Protection (or Key Person Protection). In simple terms, this is a policy which pays out a specific lump sum if a designated “key person” in your organisation dies. This could be the owner of the business or other crucial employee such as a senior sales person, chief technical officer or other vital staff member who you cannot afford to lose.
There are two main types of Key Person Protection to consider with your financial planner:
For limited companies with shareholders, the sudden unexpected loss of a key shareholder can cause big issues. Not only can there be emotional trauma after a close friend has suddenly left your presence, there can also be disputes over how to continue the company. If no appropriate shareholder protection is in place, after all, then the shares of the deceased automatically go to their estate. This typically puts their ownership into the hands of family members – who may have little/no experience or interest in taking over their management. In worst case situations, this can even lead to family members engaging in disruptive behaviour over how to take your business forwards. This is not something you want in the best of times – let alone in a pandemic.
It would be tempting for a financial adviser to simply recommend that a business owner just takes out both of the above types of protection. Yet it’s important to weigh up each option with an experienced professional. Sole traders, for instance, will not require the second type – since you do not have any shareholders!
Key Person Protection, however, is likely a much more serious consideration for all types of business. One study suggested that 52% of UK businesses would likely collapse within 12 months if they suddenly lost a key person in their organisation. With the increased financial constraints in 2020 brought about by COVID-19 and the subsequent lockdown, it is likely that the danger is now even more pronounced.
Finding the right kind of cover, however, is not always easy and the best deals are not always clear – especially since many providers have increased their premiums since March 2020. Here at WMM, our team can assist you in identifying a suitable set of candidate policies which may be most suitable for your business needs.
Are you a business owner in Oxford looking to increase your protection? Get in touch today to arrange a free, no-commitment consultation with a member of our team here at WMM.
You can call us on 01869 331469
Many people are aware that having a decent cash reserve is important during the best of times, let alone during periods of financial volatility. According to some research, about 25m people in the UK (i.e. nearly 50% of the population) live each month “paycheque to paycheque”, leaving them very vulnerable to a sudden outlay of money. An unexpected boiler replacement, for instance, could plunge a household to thousands of pounds of debt without a sufficient “cash cushion”.
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