With a number of individuals strapped for cash, when these letters drop through their door it appears to be a short term answer to a current dilemma, but is it in your interests to move?

The Pensions Regulator said earlier this year that this could end up with the member having a far lower income in retirement, by as much as 25% over 20 yrs or more.There was no requirement also, to go to an IFA, normally advice subsidised or paid in full by employer when offered an Enhanced Transfer Value-ETV.

  Pies are different and so they fallout the realm of the FSA.

 However, care should be taken and IFAs could help around this important issue, but the concern is that employers do not need to provide for the advice around this matter.

The Pensions Regulator stated the following guidance on transfers:

● Transfers are not in most members’ interests, and they should therefore approach any exercise cautiously and actively. Some may benefit from transferring but these cases are likely to be in a minority and, very possibly, a small minority.

● Cash incentives distort decision making.

● Fully independent financial advice should be made accessible to all members and promoted in the strongest possible terms.

● No pressure should be placed on members to accept the offer.

The Junior ISA is a tax-efficient way to save and invest for a child’s future.

Like any other Individual Savings Account, you can invest in a Stocks and Shares Junior ISA, a Cash Junior ISA or a combination of the two. The key difference is that a Junior ISA is exclusively for under 18’s.

Why invest in a Junior ISA?

As the child gets older, they will face some major expenses: university fees, student loan repayments or  a deposit on a home and of course marriage.   

By starting to invest for them now, in a tax-efficient Junior ISA, those big bills could be a lot easier to handle. Especially as any investment returns are free from any individual liability to income tax and capital gains tax for both you and your child.

Who can Pay in?

 Parents and grandparents , must open the account, but also  relatives and friends can all save for the child in a single savings plan, and what is important- no tax is payable by any contributor to a Jisa. So , any interest over £100 in any year is not charged to the donor, as is the case for ordinary bank and building society accounts

Can I set up a different Junior ISA each year?

No.   Junior ISA rules only allow a parent/grandparent to open  only  one cash Jisa and one stocks and shares Jisa. Regulations prevent clients from opening a different Junior Isa with separate providers for each tax year,

Some Key Points about Junior ISAs

·        Junior ISAs share the same tax benefits as a normal adult ISA, but they’re

exclusively available to people under the age of 18. They’re a great way

to invest for a child, for the medium to long term, as they protect their

money from income tax and capital gains tax.

·        In total, you can put aside up to £3,600a year on behalf of a child and this money can be invested in Stocks and Shares, Cash or a combination of the two.

·        ISA investments are a tax-efficient way to save and invest for a child’s future – making it remain one of the taxman’s most valuable concessions to investors.

Our role will be to help the business owner with putting in place the right scheme , contribution structure, who should join, provide details of costings, and help set it all up with the Pension Regulator.

·        Employers begin automatic enrolment gradually over 4 year period starting with largest first

 ·        1st October 2012Large employers begin automatic

Enrolment, 50,000 employees+

·        For employers with 1,250 or more employees it is September 2013

·        And for employers with  250 or more employees it is February 2014

·        1st October 2016 Remaining employers begin automatic enrolment

And so, it is a gradual process moving towards October 2016, depending on the number of employees  involved.

 Contribution Levels will vary over time.

 October 2012 to October 2016

 Contribution levels will be- 1% employer and 1% Employee

October 2016 to October 2017

Contribution levels will be- 2% employer and 3% Employee

October 2017 Onwards

Contribution levels will be- 3% employer and 5% Employee

Which employees to enrol?

‘Eligible Jobholders’, as they will now be called, fall into categories.

·        All over the age of 22- State Pension Age, earning £7,475 +,

These should be auto-enrolled.

·        And  , ‘non eligible jobholders’  ;

1.   Aged 16-21 or SPA to aged 74 who earn £5,035

2.   Aged 22-SPA and earn £5,035 to £7,474

These can elect to opt in.

·        Workers without  Qualifying earnings, known as ‘entitled workers’, they will be aged 16-75 earning under £5,035.

Waiting Periods

There is also a short lead in period and certain information will need to be given to the jobholder about the arrangement;

·        Waiting period of up to 3-months, but jobholder can opt-on

·        Information provided to jobholder with one week

·        Contribution test based on period between enrolment and

day before staging date anniversary

 Definition of Basic Pay

“Basic earnings” means earnings that represent regular wage or

salary payable to a worker under the worker’s contract”.

DWP has indicated that it will follow the definition of basic pay in

the Annual Survey of Hours and Earnings (ASHE).

ASHE basic pay includes basic pay, geographical allowance and

Statutory payments only

We have all been affected by the economic downturn and so making the right choice is paramount when it comes to utilising all your assets for retirement be it pensions plans, cash, investments or releasing capital form your home.

For individuals who simply don’t want the income but want to access the tax free cash or PCLS (pension commencement lump sum to be correct) there are a number of options.

Unsecured Pension- USP (income drawdown) is the first choice for many, as it appears similar to what they had before. In that they were invested for growth in funds of a life company and with USP they can hold the same funds and their fund can fluctuate as before. It offers the immediate access to income as and when required.

Flexible Annuity- this can pay an income for the plan term say 10 years,  plus a guaranteed maturity value, if you live until the maturity date.

And it  allows you to choose income and lump sum benefits to be paid if you die before the maturity date.

Example; £100,000 fund for a male aged 60 could secure a pension of £5,700 a year and in ten years time have a guaranteed fund value of £81,400. By that time he may qualify for enhanced annuity as his health may have deteriorated.

The flexible annuity in this example pays £276 a year less than a guaranteed or convential annuity, but allows more control now rather than lock in to low annuity rates.

Enhanced and Smoker Annuity – recently, we managed to secure an enhanced annuity for two smokers, husband and wife in their early sixties. This was a 24% increase on what there previous provider was offering.

For those with medical conditions , not only cancer, diabetes or heart disease but even raised blood pressure, high cholesterol, being overweight, can secure you a better pension even if it is only slightly.

Equity Release- with no mortgage on your house and  moving house is not your priority, then rather than being asset rich and income poor, taking out an equity release mortgage on your house is a good way of staying put and boosting your capital reserves and standard of living.

You don’t make any mortgage payments instead the interest accumulates on your loan each year. The amount you can borrow depends on your age and house value.

So with your pension plans, your house, using these assets along with your other investments and cash reserves can, if advice is taken provide a decent income for the future.

Now there appears to be few places to   go for shelter as both stocks/shares and  some fixed interest investments may default, that is pay the coupon or return the capital.

The basics of investing outside cash are as follows;

Timescale-if you need access to the money within three years, my advice stay in cash or if invested already consider a move to cash.

For three years to six years then fixed interest securities are recommended like gilts and bonds.

Longer than this timescale you should consider a small percentage in stocks and shares, the ratio increases as your  length of investment and dependency on this part of your investments lowers.

Asset Class-Broadly there are four main asset classes, cash, fixed interest ,property and equities. Commodities are also a consideration.

Best way to spread risk is to have some in each of the above thereby not suffering too much should one go down.

Some funds that were used in the past for ISA/PEP investing have too strict an investment objective to manoeuvre round today’s climate.

Absolute return funds are more adaptable as they don’t follow a bench mark instead aim for say , growth but can hold any asset that it seems fit to achieve this objective.

Solution-  a bit like keeping your gas and electricity costs down is to regularly review your needs and demands on your own assets, ISAs, pensions, rainy day money etc and regularly review what you think they should do for you.

If a fund has fallen by 20% and you thought it could only fall 10% then you need to review and seek advice.

The price of houses has to fall before the market can pick up.

This is my belief and there is evidence out that shows that well over half of those of thinking of taking a flat or house on, will rent it and believe they will never own a property.

This is the complete opposite of opinion 10 years ago when individuals with little or no deposit and even an less than good credit record could somehow obtain 95% borrowing or more at the drop of a hat.

In my business there was not one client that we did not secure funding for during the boom years. Even those who wanted the maximum they could borrow paid only a slightly higher rate of interest.

In a recent survey only 5% of people are saving to buy a house, what a turn around. There are advantages in renting in that you can move more easily and with little or no fees. But the demand for quality rental property is on the increase which will push up rents and eventually bring the market back while not in favour of buying just more on a level playing field.

Large deposits and fear of being turned down are the two high hurdles to jump. Potential buyers possibly not disciplined enough to save for tomorrow living for today.

When rents start to jump and the requirement for large deposits start to fall then and it  seems a while away will we see the demand for mortgages increase and in turn property values pick up.

However,this is the lower of the inflation indices and this NSI product is linked to the higher RPI rate, currently 5.20%.

What Does it Do? Well you give NSI anything from £100 to £15,000 for  five years and you will get your money back plus the movement in the RPI plus 0.5%.

So it looks like you will receive  5.20% being the rate of RPI plus 0.5% for this month totalling 5.70% and its tax free. This means for a basic rate taxpayer you get the equivalent of 7.125% and for a 40% taxpayer it is the equivalent to over 9.5%.

With rates this good you can understand why NSI have had to deploy more staff to cope and as its government backed its 100% secure.

So with capital security, attractive rate and beats most if not all savings accounts out there it’s a good deal around.

Downside is that you have to tie your money up for 5 years and you don’t know what RPI will be over the period, but its better than cash at the moment.

The simplification had introduced an Annual Allowance and a Lifetime Allowance doing away with  carry forward, carry back and a number of rules and dates for funding purposes as well, thank goodness.

Anyway, they have brought back carry forward on 6 April 2011 and done away with the hideously complicated anti-forestalling rules on pension tax relief. They will not be missed, and with their demise comes an opportunity for some of you to make a substantial tax-efficient pension contribution.

A new restriction introduced will be based on a reduced annual allowance, initially £50,000.

Limiting tax relief to a person’s income, it will now be limited according to the amount of money they contribute to their pension. This is much easier to determine and has the additional benefits of using the existing system of allowances.

  if you contributes up to £50,000 you will benefit from full tax relief. If you contribute more you will attract a tax charge which is designed to cancel out any tax relief paid on the excess contribution, called the annual allowance tax charge.

 The £50,000 limit is gross and includes tax relief at the applicable rate. Also, personal contributions and   employer contributions   count towards the annual allowance, but personal contributions are also subject to the individual allowance. This restricts the tax relief available to 100% of earnings.

Hope you are still awake at this point,  if you have any questions please do ask for fuller detail as this is a summary of a complex matter.

Pre paid cards are relatively new on the market, cash or travellers cheques.

All depends on what you are trying to do.

There are euro or other currency prepaid cards as well as pre paid cards for everyday use when at home.

Pre Paid cards-Sterling

I saved £5 a flight per person when I booked with one of the budget airlines using a pre paid card, I booked flights for five people travelling (10 flights )  to Italy  and so saved £50, convert that into euros then potentially into beer, it was a good start!

Some cards are better to use when abroad as you can have them in euro or dollar.

Getting a currency card is safer than cash and more convenient than travellers cheques with no application and commission fees inside the Euro Zone this is a great companion for your trips away.

If you need to take a lot of money then the security of cheques is possibly better as they will get new cheques to you quickly should you lose them.

At home most of us use cards or cash rather than cheques,  but when we go abroad our usual cards can be costly to use when away, costing 3.50 euros each time  we go to an ATM or use in a shop.

Tip-Think about what your habits are when on holiday regarding money and be organised in advance.

I also  looked at the how much I would get in euros from £1,000  from the high Street, post office, M&S and airports,  also  online, etc.

It ranges from 1070 euros to 1125 that’s an extra 55  euros or 5% more  and yes more beer, but probably   shoes for my better half. So overall I was £100 better off by following these simple steps.

Jargon-Its hard to see through the terminology and the sales pitch of ..’ we don’t charge a fee’ which should also include ..’ we just give you a poor rate’.  I went to the counter of a large department store  last week, I calculated that if I bought £1,000 worth of  euros then immediately sold them back to them at the next till I would be £125 worse off. In effect there is a 6.25% charge every time you change your money, makes you think.

Tip- Finally try not to    buy your currency   at the airport this would be  the dearest way of changing money.

We normally hear of banks not passing on the benefits quickly enough to borrowers when rates fall.

Well we seem to be in the unique situation where interest rates stay the same yet savers earn more interest. But the rates struggle to beat the increase in the CPI Consumer Price Index.

With the Consumer Price Index (CPI) at 4pc, a basic-rate tax payer at 20pc needs to find a savings account paying 5%, those who pay tax at higher rates need  tax payers  over 6.67pc in order to cancel out the effects of tax and inflation. With  a tax-free Isa account, you  need to earn  only 4pc to beat inflation.

On The ISA front you need to tie your money up for 3-5 yrs. If you do then you can secure 4% with Northern Rock, The Leeds Building Society and The Halifax to name a few.

You must remember that inflation is on the up as are interest rates  and so you will gain today but potentially lose out by this time next year. However if you don’t keep searching for the best rate then you will be in an account earning less than 1%.