Category Archives: Advice

The benefits of financial planning

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Do you think about where your money is going or do you spend what you have with little direction?

Whatever your goals – whether it’s to guarantee long-term security or you’re looking to maintain a particular lifestyle – having a financial plan in place will certainly help.

Financial Planning is a vital process and something we advise all of our clients to do. Being financially independent will give you greater control over what you do and when. Here are our top tips to help you with this.

1) Start as soon as you can. Your investments or savings will have longer to benefit from compound interest.

2) Starting earlier will also enable you to take more ‘investment risks’ to generate better returns – therefore costing you less money overall.

3) At the moment, the value of any cash you hold is being reduced by inflation.

4) Over a long period of time, you can also afford periods of poor returns or below average earnings – which is more difficult to absorb over a shorter timescale.

5) You’re much more likely to be able to cover the impact of unexpected problems such as unemployment or long term illness this way.

6) The same is true of other costs and charges – such as the cost of care home fees in later life.

7) It may also enable you to build up surplus assets to enjoy beyond those you need which may allow you to stop working earlier.

8) Planning ahead pays – you may not receive the inheritance you are planning on.

9) There’s also no guarantee you will be able to release the capital you need from your home later in life when you downsize to meet your costs.

10) Annuity rates are also falling. Your current pension planning may not provide the income in retirement you expect.

Besides all of the above reasons, having a financial plan in place also gives you targets and goals to aim which, otherwise, you might notachieve. Reeves Independent works with clients to help them plan ahead and achieve these targets. If you need any help, please get in touch on 0871 271 1280.

 

Trusts explained: the role of trusts in estate planning

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When it comes to estate planning, most people understand the need for a will even if they put off writing one (over 50 per cent of the population in fact). Unfortunately, this is less true about another important estate planning tool: trusts.

While most people have heard of ‘trusts’, the role they play in the estate planning process is less understood. Trusts can seem complex but here we explain their role, how they work, what type of trusts there are and the benefits they offer as part of your estate planning.

What is a trust?

In simple terms, a trust is a legal arrangement that enables property within the trust (money, assets, investments, property for example) to be held in ‘trust’ for the benefit of another person or group of people (beneficiaries) until a specific time.

The person who sets up the trust is known as a ‘settlor’ and he or she chooses people to run the trust for its beneficiaries. Those people in charge of the trust are its ‘trustees.

Why set-up a trust?

You have a choice whether to pass on your assets directly to your beneficiaries (absolutely) through your will or use your will to create a trust or trusts which hold property on their behalf.

When assets are given absolutely they enter the beneficiary’s estate and are immediately at risk from future claimants, creditors and taxation. When you set up a trust this is not the case.

What are the benefits of setting up a trust?

There are multiple benefits of setting up a trust, as we have hinted, the main one being you are able to protect your property and control very clearly how and when your assets are passed onto your loved ones such as your spouse, children, and future generations

The ‘property’ of the trust remains within the trust rather than the estate of any one individual so trusts can be used strategically to:

1) Mitigate the impact of taxes (primarily inheritance tax) and other costs such as possible care fees or even bankruptcy   2) Ensure that you have greater control on the inheritance of your assets so that they go to the people you want. For instance, have you considered what happens if your spouse remarries? How would this affect your own children if he/she later changed their will in favour of the new spouse and any subsequent children?

Or for those who already have children from a previous marriage how do you ensure that they would get their fair share? There may also be a business you have worked to build up. Surely you would want to protect this for your family too? Using trusts allows you to do this and protect your estate from future claims that prevent it going to who you want it to.

3) Writing trusts also keeps your estate out of probate. Trusts are exempt from probate – unlike a will – which undoubtedly saves time and money and make things easier in the long run.

What types of trusts are there?

There are several different types of trusts and various mechanisms for passing on the property of these trusts to beneficiaries. Some of the main options are:

Bare trust: this is the simplest form of trust. Although the trust is held in the name of a trustee, the beneficiaries have an absolute right to the property of the trust and the trustee has no discretion over what the beneficiary gets.

Interest in possession: this exists when a beneficiary has a ‘current’ legal right to income from the trust. Often they will have no right over the capital of the trust. Usually the trust capital will pass to a different beneficiary in future.

Discretionary or accumulation: A discretionary trust is where the trustees have discretion about how the income from the trust is used. They may be required to use the income to benefit particular beneficiaries but will have to decide how much is paid, how often and what conditions are attached. In an accumulation trust, the trustees have the option to accumulate income in the trust – adding to the trust’s capital. The accumulated income becomes part of the trust. They will often do this until the beneficiary becomes entitled to the assets or the income produced from the assets. How important is the role of the trustees? It’s very important. Trustees are the legal owners of the trust property. They are legally bound to look after the property of the trust in a particular way and for a particular purpose. Trustees administer the trust and in certain circumstances make decisions about how the property in the trust is to be used. The trust can continue even though the trustees might change, but there must normally be at least one trustee. We will advise you on how you go about appointing your trustees. How is a trust set-up?

A wide range of trusts exist and they are created by deed or used in conjunction with a will to protect and control the inheritance of assets and assist bloodline planning.

However, trusts can choose to distribute property at anytime – as soon as a trust is written, at death or at a distant time in future after the death of the first beneficiaries.

 

Is it time for a Spring clean?

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Done any financial planning recently? Thought about the state of your personal finances and investments? If it’s something you’ve put off for a while, why not use the start of a new financial year as a reason to review your plans?

Making an investment or taking out a policy is only the first step. It’s important to review your investments and finances regularly to check that they meet your needs. Here are a few tips on what to think about to put everything in order.

Life insurance:

At the moment, the life insurance market is very competitive so it can be worthwhile to review your cover – particularly if it’s a while since it was taken out or your circumstances have changed.

When you review your cover, it’s an opportunity not just to see if you can save money, but also to make sure you have the right amount of cover and also the right type. Different types of cover can be taken out including term and whole of life cover. We are currently reviewing life insurance policies for clients as part of our One Life campaign. In some cases, this also involves consolidating several policies that have been taken out over time.

Investments:

Investments (pensions, bonds, shares, funds, cash etc) are usually made for the long-term but that doesn’t mean they shouldn’t be reviewed regularly.

Even if your investments were balanced at the time they were made, it’s likely that over time, due to the performance of the markets, some will have done better than others.

It’s always worth speaking to a financial advisor about this to make sure you have a balanced plan, with your investments in the right areas and, crucially, with the right level of risk for you.

ISAs:

One particular type of investment worth looking at is an ISA. Not again you might say if you were inundated with reminders at the end of last month to use your annual allowance before the end of the last financial year.

However, for those that didn’t do it (and even those that did), we’re now in a new financial year. ISAs are still one of the best and most tax efficient ways of making the most of your savings and the new annual allowance has increased this year to £11,520, of which £5,760 can be put in a cash ISA. So, if you’re reviewing your finances, and have money to invest, it makes sense to take advantage of ISAs. Make sure you shop around for the best rates or seek advice from us on where to put your money.

Other finances You can also help to spring clean your personal finances by keeping an eye on other ‘everyday’ matters such as utility bills, where it can pay to shop around for the best deals. Similarly, it also pays to review things such as dormant direct debits or standing orders and unused contracts – all of which could save you money.

For more advice on financial planning and any of the issues discussed here, please contact Reeves Independent on 0871 271 1280 to speak to one of our advisors.

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What you need to know about life insurance

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Is it worth it? Who should buy it? What cover should I get? Just a few of the many questions that pop-up when we’re talking to clients about life insurance cover.

For many people, it’s something they’d prefer not to think about too much or, even if they do, perhaps see it as a waste of money and something they will never need. As part of our One Life campaign, we look at some of the key issues and potential benefits.

What is life insurance?

Life insurance is designed to provide a vital service – to help your dependents cope financially should you die. Even if you prefer not to think about this prospect, it can be very reassuring to know this cover is in place should the worst happen.

Who should buy?

Taking out life insurance is more to do with the stage of life you’re at and your personal circumstances than it is to do with your age.

A key question to ask is ‘what would happen to the people around me if I died?’ If the answer is that the financial impact would be minimal, you probably don’t need a policy. But if paying the bills, the mortgage, bringing up the kids and picking up the shopping would be more of a struggle; this is a cheap way to solve that.

Many people choose to take out a policy when they start a family, or when they buy their first property and want to make sure they would not leave significant debts behind for their loved ones to deal with.

For some people it can be an unnecessary cost – for example a young person, renting a property with no dependents. Someone in this situation might be more concerned with what would happen to them if they were ill and couldn’t work through ill health. Income protection might be more relevant in this case.

The key thing is to continually review your life insurance cover as your circumstances change as you may need more or less cover. For example, if your children are older and have left home and paid off the mortgage you may well need less cover than previously.

What type of life insurance is available?

There are two basic types of life insurance – term and whole-of-life cover – but many variations within these categories.

Term policies are the simplest and most straightforward. Often taken out at the same time as a mortgage, they pay out a lump sum if you die within a specified period, although you get nothing if you are still alive at the end of the term.

There are several types of term assurance including level term. This means that your dependents would get the same pay-out whenever you died after taking out the policy. Other common types are decreasing term assurance, where the pay-out decreases by a set amount each year down to zero by the end of the policy, and increasing term assurance. Conversely, this increases the amount paid out each year – often to counter inflation.

In contrast, whole-of-life, as the name suggests, will guarantee a pay-out whenever you die. However, because you are certain to die while holding the policy, premiums are considerably higher. There are different types of whole-of-life policy, some offer a set pay-out from the start, while others are linked to investments.

What are the costs?

Existing health conditions and whether you smoke or not will make a difference to the premiums you will pay. Age is another key factor. On a 15-year, level term policy with £100,000 payable on the death of the policyholder, monthly premiums for a non-smoker would cost about £6.00 at 28 years old. This would rise to £9 at 40 years.

If you take out a term assurance policy set to end at the age of 60, a 28-year-old with a 32-year term would pay around £7 a month (or a total cost over the term of £2,741.76). A 38-year-old would pay £9.53 a month and a 48-year-old would pay £16.17 a month or £2,328.48 over the 12-year term – a similar total amount but for 10 years’ less cover.

For a FREE no obligation chat about your current situation or your requirements then call 0191 281 9862 or e-mail info@reevesifa.com NOW!

Life insurance – is it time to rebroke?

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If you have a life insurance policy, it can be prudent to review your cover regularly. Our life insurance audit is designed to help you rebroke your existing cover to reduce premiums and pick out the best terms.

It’s always prudent to review your life insurance on a regular basis and the start of a New Year is a good time to check the health of your cover.

For a start, premiums and conditions change all the time – costs have generally dropped and terms have improved over the past decade, dropping as much as 50% due to increasing competition and higher life expectancy.

Continuing to pay a higher premium than you need may not seem a significant cost on a month-to-month basis but over the life of a policy soon mounts up. And that’s not to mention the fact that the amount you pay should vary over the course of a policy!

Through our audit we are able to advise clients on the best options and rebroke exisiting cover with the intention of:

• reducing your premiums

• improving your cover and terms

• reducing your number of policies

For example, a professional couple with three children were able to reduce their monthly premiums (£166 per month) by 10% and cut their number of policies from four to two at the same time as enhancing the cover provided through our simple audit.

Nigel Reeves, explains: “The message is very much that it pays to shop around when it comes to your life insurance cover. We can often save you money, make life easier for you and improve your terms simply be rebroking your existing deal.”

Those looking for new policies – particularly women – are also likely to be affected by new European gender legislation. Introduced last year it prevents insurers taking into account a customer’s gender when calculating premiums. Initially this has caused volatility in the market with some insurers increasing their premiums and others cutting theirs to attract new customers. This is likely to continue for some time while the market readjusts to the new directive, underlining once again why it’s important to shop-around.

If you need help with your life insurance, take advantage of our bespoke audit service and speak to us today.

For a FREE no obligation chat about your current situation or your requirements then call 0191 281 9862 or e-mail info@reevesifa.com NOW!

Case Study! Salary Sacrifice – “Same take home pay, higher pension contributions.”

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Client profile

Gordon is 45 years old with a highly paid job earning him around £150k pa. He has no mortgage and low personal outgoings.

Our analysis

Gordon asked us to find ways to increase his retirement fund at the same time as reducing his personal tax liability.

Our team looked into a salary sacrifice solution that would maintain his current level of income and standard of living and increase his Self Invested Personal Pension (SIPP) each year.

The solution

We calculated that Gordon’s £150k salary resulted in a net take home pay of £86k per annum.

Utilising efficient tax planning, we calculated that an £8k drop in salary to £142k would still keep his take home pay at £86k. It would however, increase his SIPP contributions from £15k to £16.3k.

By sacrificing part of his salary Gordon was able to maintain his level of income and contribute more into his pension plan.

The Outcome

With regular reviews of Gordon’s pension fund from the Reeves Independent Portfolio Management Service we are confident that he will hit his financial goal and be able to retire at his desired age.

Salary Sacrifice has many advantages. Perhaps the most obvious are that because you are earning less, you pay less National Insurance Contribution and in some cases, Income Tax.

You may also receive a boost to your retirement savings because your employer may add a percentage of their NIC saving to your pension contribution.

Source – The Pensions Advisory Service

If you would like to speak to someone about Salary Sacrifice please contact us NOW for initial chat on 0191 281 9862 or e-mail your enquiry to info@reevesifa.com

Case Study – Planning for Retirement!

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Client Profile

Judy is in her late 50’s (it would be impolite to say how old she is!) and approaching retirement from her busy career. She wants to make sure that her pensions and investments will be adequate to fund her retirement. She also needs a detailed analysis of her options of how and where to take her income.

Our Analysis

Judy came to us 10 years ago with little retirement funding or plans despite being in a highly paid job. We advised her that what she needed was a retirement planner to help her to to focus on when she wanted to retire and how much she needed financially to lead the lifestyle she wanted in her twilight days.

The Solution

Using our financial expertise and the needs of our client, we came up with some realistic actions to ensure that Judy was on target for her retirement options.

In Judy’s case, the best solution was the funding of pensions, ISA’s and cash.

Things in life rarely go to plan all of the time so we regularly reviewed Judy’s case to ensure the plan was on target.

The Outcome

Judy is now happily retired with more than adequate funds and a healthy spread of investments held within various tax wrappers.

We are pleased that she is going to have a secure income in retirement and also the financial flexibility to cater for events such as ill health, transfer of estate or other unforeseen circumstances.

If you would like to speak to someone about the Reeves Independent Retirement Planning Review Service please contact us NOW for initial chat on 0191 281 9862 or e-mail your enquiry to info@reevesifa.com

Case Study – Reeves Portfolio Review Service!

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Client Profile

Ben is aged 51 and leads a busy life as a company director. He has £170k in pensions and ISA’s all held within one pot. His employer also funds him £50k per annum.

Our Analysis

We discovered that Ben had invested in a more cautious portfolio than he would normally have done previously due to the current, uncertain economic climate. This is understandable, however, Ben has previously invested in more volatile funds and sectors showing his less risk adverse side.

The Solution

In Ben’s case, we found that compared to the FTSE 100 , his portfolio had fallen short of the performance expected mainly due to the size of the cash holdings. ( 45%.)The Reeves Portfolio Review Service takes away the worry and risk associated with some investments. Our team of experts looked at Ben’s portfolio and made key decisions that both protected his investment and helped it to grow.

However, we also found that the invested money had actually outperformed the FTSE 100 with Euro Funds showing at 12% / 10.1% and Financial Funds 12% / 18% .

Ben was delighted that his investments were being so closly monitored, protecting his income and his investments.

The advantages of this service include:

  • You have much more control of your pension/investments
  • An expert ifrom our team is actively managing and looking after your investments and pension funds.
  • By constantly reviewing your financial options, you have a higher chance of achieving higher investment returns.
  • Our experts have an in depth knowledge of the markets and will inform you proactively when and where to invest
  • Helps you focus towards your retirement plan by giving you regular updates
  • Reassurance that someone is keeping an eye on your hard earned money

If you would like to speak to someone about the Reeves Independent Portfolio Review Service please contact us NOW for initial chat on 0191 281 9862 or e-mail your enquiry to info@reevesifa.com

Salary Sacrifice Q & A’s

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Why would I give up part of my salary?

Recently, we’ve done a number of salary sacrifice cases and here are some of the more common questions we’ve answered for our clients

What type of pension plan can salary exchange be used with?

It can be used with any type of UK registered pension plan – i.e. individual or group personal pension/stakeholder or occupational money purchase/final salary schemes. The main point to remember is that your employer must be willing and able to make payments to the scheme after the exchange is made.

Can the self-employed use a salary exchange arrangement?

As there’s no employer to make a pension payment on their behalf, the self-employed cannot set up a salary exchange arrangement.

How can salary exchange be set up with a pension plan?

The employee exchanges an amount of salary that they would have otherwise paid to their pension plan. The employer then pays the amount exchanged to the pension plan as an employer payment. For example:

  • Employee earns £20,000 gross yearly
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  • Employee currently pays 5% of salary to a pension plan – that’s £1,000 yearly
  • Employee exchanges £1,000 of gross salary
  • Employer pays this £1,000 (plus any employer payments) to the pension plan.

Can pension payments be increased just by using salary exchange?

Yes. Depending on how the NIC and tax savings generated are used, there are several options available. Our calculator can deal with the following four options:

None of the tax and NIC savings generated are used:

  • Employer saves as they pay less NICs on a reduced salary.
  • If it’s the current employee pension payment that’s being exchanged their take home pay increases as they are paying less tax and NICs, albeit on a reduced gross salary
  • Pension payments remain the same

Employee take home pay remains the same:

  • Employer saves as they pay less NICs on a reduced salary.
- If it’s the current employee pension payment that’s being exchanged, they can exchange slightly more so that their take home pay remains the same.
- The pension payment increases by the extra amount the employee exchanges.

The employer reinvests their NIC savings into the pension plan:

  • Employer reinvests their NIC saving into the pension plan.
- If it’s the current employee pension payment that’s being exchanged their take home pay increases as they are paying less tax and NICs, albeit on a reduced gross salary.
- The pension payment increases by the amount of the NICs savings that the employer makes.

Employee take home pay remains the same and the employer reinvests their NIC savings into the pension plan:

  • Employer reinvests their NIC saving into the pension plan.
- If it’s the current employee pension payment that’s being exchanged, they can exchange slightly more so that their take home pay remains the same.
  • The pension payment increases by the extra amount the employee exchanges plus the amount of the NICs savings that the employer makes.

Higher rate and additional rate taxpayers can claim additional tax relief. Does this affect the salary exchange calculation?

This depends on whether the exchange is being set up in a personal pension/stakeholder pension plan or an occupational pension scheme:

Personal pension/stakeholder pension (relief at source)

In the vast majority of these plans, pension payments are deducted from net pay – i.e. after tax has been deducted. These pension payments are then grossed up by the pension provider at basic rate only. The amount that can be claimed back depends on the individual’s tax position and their total taxable earnings.

Occupational pension scheme (net pay arrangement)

In these schemes, payments are normally deducted from gross pay i.e. – before tax – this has the effect of giving full tax relief on any pension payments paid. Our calculator will show this where the individual is a higher rate or additional rate tax payer by showing the payment before the exchange as being deducted from gross pay.

Will HMRC restrict or remove salary exchange arrangements in the future?

There’s no straight answer to this as it will depend on Government attitudes going forward.

HMRC have published guidance together with questions and answers on salary exchange so it seems likely that at least in the short term, salary exchange will continue to be available.

How can any employer NIC savings generated through salary exchange be used?

The NIC savings the employer makes can be used in many ways. For example, they can be used to provide other employee benefits, increase pension payments, shore up deficits in a defined benefit schemes or the employer may simply keep the savings. Remember however that the actual amount of salary that the employee exchanges MUST be used to provide a non-cash benefit to the employee, such as childcare vouchers, or pension plan payments.

Anything else you need answering? Interested in talking to one of our financial advisors about the possibility of introducing Salary Sacrifice for yourself, key employees or even your whole workforce.

Please contact us on 0191 281 9862 or e-mail info@reevesifa.com for a FREE initial chat!

The rules are changing – the quality of our advice isn’t!

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From January 1st 2013, the way that you pay for financial services is changing. Instead of costs being hidden behind commissions, you’ll have to pay your Independent Financial Advisor direct for receiving the best advice and benefit of their experience.

At Reeves Independent Wealth Management, we do appreciate however that there is another option; shopping direct online.

Before you consider this, we’d like to gently remind you why sometimes some things are best left in the hands of experts and not call centre telesales clerks or automated systems. For example, would you really want to trust in a doctor’s online diagnosis or make decisions about your children’s future school via an online presentation?

Some things are great online; others are best left upfront and personal. Your financial future is one of them!

Why seek our advice?

As a valued client, we know you and what your financial circumstances and aspirations are. Our team has years of experience in not only dealing with the financial market but also analysing trends & statistics to make sure that the best possible advice is given to help you decide on your investments. Of course once you invest with us, we provide you with regular reviews & pro-active phone calls to ensure that your investment is protected.

The financial world can be a legislative nightmare with regular changes to rules and regulations. Our team make it their business to keep themselves up to date on factors that may affect your valuable investment. Whether it’s an opportunity or a threat, we will keep you personally informed – something that a website can’t always do.

Reeves Independent Wealth Management can:

  • Establish the degree of investment risk you’re willing to take
  • Tell you about the main asset classes such as cash, equities, bonds and property
  • Work out how to make the most of tax efficient investments
  • Tell you about specialist types of investments, such as ethical funds
  • Align you investments with a bespoke retirement plan
  • Integrate Inheritance tax issues/death & ill health planning into your investment plans

How we’ve performed for you

Over the past year, our clients have predominantly invested in cash and bonds. Through good, financial management, a significant percentage of our client’s assets have avoided being exposed to volatile equity markets, keeping their capital safe. Similarly, Corporate Bonds have been used for client’s wanting an even lower risk and have achieved similar growth to equity markets (7.7% last 6 months) compared to 6.1% from the FTSE 100 Index.

For our clients wanting equity investment, we advised those prepared to take higher risks to support Europe & financial equities through various collective funds. Over the last six months the European sector has outperformed the FTSE 100 Index, whilst the financial sector has lagged behind.

In summary, clients following our advice have seen their overall exposure kept to an absolute minimum whilst keeping away volatile markets, which have led to slightly lower returns than the FTSE 100 Index. Returns have mainly been dampened by cash holdings while clients who have just invested (no cash holdings) have generally outperformed the FTSE 100 with significantly lower risk.

Remember if you decide to take financial services advice online, you would not be receiving advice from us and you may find that there is an important issue concerning the investment or the product that you have overlooked.

You would also receive less protection in the event of a failure of your investment. For example, you would be unlikely to be successful in a complaint against us for ‘mis-selling’.

How we can help you further:

Whether you are considering investing in individual companies, a collective investment scheme such as a Unit Trust, Open Ended Investment Company (OEIC) Investment Trust or making the most of tax efficient investments using an Individual Savings Account (ISA), it always pays to seek investment advice from an IFA.

There are always questions to answer when it comes to your finances and our Priority Client Financial Health-Check will help you to make the best possible decisions on matters such as:

  • Will your current retirement provision provide you with the income you need in retirement?
  • Are your savings aligned to your current and future objectives?
  • Is your portfolio maximising the tax efficient opportunities available?
  • Has your portfolio been reviewed and aligned to your risk profile?

 Investments

Sometimes, money can arrive from unexpected sources, a lump sum inheritance or even a lottery win but mostly, your investment comes from earning it through sheer hard work.

At Reeves Independent Wealth Management we will question you extensively about your goals and ambitions so that we can give you the most appropriate solution from the whole of the market to help you achieve them. We guarantee that we will also tell you all of the risks associated with the options available and work with you to create an investment package as individual as you are.

We also want to make sure that the funds you have saved will go into an investment that will grow in value. We are able to assess the performance of individual portfolios using software analysis tools giving you peace of mind and the knowledge that our team of experts have the right experience and resources to guide you in the best way possible.

Reassurance, expertise and peace of mind are worth their weight in gold when it comes to financial decisions.

For a FREE no obligation chat about your current situation or your requirements then call 0191 281 9862 or e-mail info@reevesifa.com NOW!