More than one million workers to see final salary pension schemes close

With the recession forcing companies to find ways of reducing costs Final Salary Schemes are being closed , abandoned or changed.

The slide of interest rates to historically low levels has seen more than 8 million pensioners’ monthly income fall by nearly 25% over the last 12 months, according to figures from SHIP (Safe Home Income Plans), the equity release trade body.

SHIP’s figures show that, in April 2008, the average pensioner received £158 per month from their savings. This was in addition to their pension and accounted for 28.62% of their total income.

FTSE Companies Defecit Soars- Only 3 left that offer new recuits Finalr Sal

Terminal bonuses are being cancelled.

Do not rely on your pension provider for a good deal

Don't bank on the insurance company or Pension Provider to tell you what you need to know when it come to retiring.  So says the Times in the article today on Open market Options.  Nor it appears ca

British pensioners face poverty, the same level as that found in Lithuania

The number of pensioners living in poverty in Britain is among the highest in Europe with the over-65s in poorer countries, including Romania and Poland faring better, official figures have shown.

Almost a third of British pensioners face poverty, the same level as that found in Lithuania, according to European Union statistics. Pensioner poverty in Britain is more than a third higher than the European average.

Read the full report in the Telegraph using the link below.

The Dramatic rise in the number of over 65s forces changes in retirement lo

Seaside towns no longer retirement destination of choice for wealthyaccording to a report in the Teelgraph. Comfortably off pensioners are retiring to the Cotswolds, and parts of Hampshire and Kent, have become the destination of choice instead of the traditional seaside resorts.
 
The change has been driven by an increase in the number of people reaching retirement age, along with rising levels of wealth, according to the analysis of demographic data.

Day Cooper Adams leaves hundreds facing losses

It was only a matter of time before one these compensation firms went under owing money to clients.

Apart from the fact that using them gives little advantage to the claimant it means that the claimant who has a legitimate claim ends up not being fully compensated die to their fees.
This firm took fees up front and apparently FOS paid compensation to this firm which was never passed on.

This where FOS and FSA have dropped the ball.
NO IFA can can handle client money without some very strict regulations and protections in place.

Power of Financial Planning

 

So, what is Financial Planning, who is it for, and why do we think that it is important?

The funny thing is that the finance part of it is not the most crucial element. The most important element is the planning side. And plans are pretty useful things. All great achievements have plans behind them - all great businesses have their business plans, all great explorers have their expeditions mapped out, all successful generals have their stratagems and a great financial future is no exception. Of course, you can have a great financial future without putting in place a plan, but we feel that putting in place the plan increases the likelihood of securing that great future.

What we at Capital seek to do when we first meet with you is to help to elucidate those things that matter most to you in your life, the goals that you have, when you want to achieve them and how much they cost. This is the discovery stage of our process.

We then create your own bespoke plan. Our expertise on the finance side of things then comes into play in the review of your existing situation, the creation of the plan and its subsequent implementation. All your investments, pensions, insurances, mortgages and tax planning will now begin to work in harmony and will be aligned with your goals. This is the planning and implementation stage of our process.

Just as businesses continually review their business plans to ensure that targets are met and that its performance is up to scratch, so you and your Financial Planner should continue to monitor the plan over the years to make sure that all is on track to meet your goals and make appropriate adjustments as circumstances or goals change. This is the monitoring stage of our process and we hope that our relationship with anyone we work with will evolve into a fruitful long term partnership.

In terms of who Financial Planning is for - we feel that everyone can benefit from Financial Planning - not just the rich, and that there is no time like the present to begin your Financial Planning - the sooner the better. You can build a Financial Plan on your own or work with a Financial Planner to help you. The important step is to begin to focus on what it is that matters to you in life and incorporate those desires into a plan. If you don't create a plan, you run the risk of drifting through life and not seeing your most important goals realised.

We think that the benefits of good Financial Planning may include the following:

• Giving you the freedom not to worry about financial matters
• Giving you a better quality of life by allowing you to concentrate on the things that are important to you
• Increasing or preserving your wealth and reducing your tax
• Permitting you to have a much clearer view of your future
• Creating a greater level of interest and knowledge in financial matters
• Educating and empowering you to feel in control of your life

And what have we been able to do for our clients? Well, take one of our clients, a partner at a City law firm, as an example. When he came to us, we helped him and his wife to formulate their goals, which included:

• Early retirement
• Maintaining their existing standard of living throughout their lifetime
• Ability to provide for their children's education and to help them onto the property ladder
• Not being a financial burden on their family in the future
• A review of their existing financial arrangements

We were able to:

• Provide peace of mind that retirement could be taken at age 55, with a higher standard of living than currently enjoyed
• Increase the budgeted amount to be provided to the children for help on the property ladder
• Reduce tax bills
• Create more tax efficient income in retirement
• Give peace of mind that they would not be a burden on their family in the future

So ask yourself this question: have you in the last few years reviewed your existing situation and thought of your plans for the future, plus how best to achieve these? If not then perhaps it is time to start investing in "you" by taking time out to create your own Financial Plan.

Alan Smith
Director
Capital Asset Management
27 Great Queen Street
London
WC2B 5BB

Tel - 0207 831 9108
Fax - 0207 242 7169

email: alan@camfinancial.co.uk
web: www.camfinancial.co.uk

Self-invested pensions in the Credit crunch

With the country in recession directors and business people tend not to be thinking of pension provision – apart from when they have the nasty surprise of looking at their latest statement. There may however be ways in which their pensions could assist their businesses.

The Small Self-administered Scheme (SSAS) has been a favorite pension and tax-planning tool for advisers with corporate clients particularly small to medium sized firms.

 

The original remit of such schemes was to attract shareholding directors into making pension contributions rather than just investing in their own business by allowing a degree of self-investment and it has been very successful. Since their introduction in 1989 Self Invested Personal Pensions [SIPPs] have also become very popular.

Pension simplification in April 2006 was supposed to remove the distinction between SIPPs and SSAS however the reality is slightly different. True the existing differences in contributions and benefits are removed but some differences remain on investments and constitution. For the Inland Revenue (HMRC) there is still a distinction between company-sponsored schemes, which for ease we will continue to call SSAS and provider sponsored which we will call SIPPs.

Loanbacks from the fund to the sponsoring employer albeit now secured can be made by a SSAS. A SIPP has no sponsoring employer and therefore cannot make any loanbacks to any connected business without being hit with a minimum 55% tax charge.

So how could a pension loan work?

A company director needs finance for his business - he could try a bank or his pension fund. He can transfer his existing funds into a SSAS set up for him by a specialist trustee company like us. The scheme can then lend to his company up to 50% of the fund for up to 5 years, although this must be secured by a first charge on assets of either the company or its directors. A suitable interest rate of at least 1% over base rate is charged and at least annual repayments of capital and interest made.

The result - the business can get an important loan, the director a good return on the money in his pension fund - there is obviously a risk in concentrating pension assets into the company but many directors feel more confident of this type of investment than they do in Insurance companies etc.

Although a SIPP cannot lend to a company connected to the scheme it is worth remembering both a SIPP and a SSAS can lend to 3rd parties. So a pension fund can be used for business angel type investing.

For share purchase a company-sponsored scheme e.g. SSAS is limited to buying 5% of the shares in its sponsoring employer. For a SIPP as there is technically no sponsoring employer the fund could invest 100% in the directors own company shares. There are however some very complex rules that block purchasing shares in your own business except in a few cases but again 3rd party investments are fine for those willing to take a high risk but investing in unquoted businesses.

As long as it is done commercially there is no problem with pension plans buying assets from their members or their members companies. The allowed assets are usually commercial property and quoted shares or other investments.

For example a company that owns its commercial premises but is struggling for cash could sell all or part of the building to its director’s pension scheme(s).

Or a sole trader might sell some shares they own personally to their own SIPP thus releasing cash from their pension scheme.

Also remember that if you are over 50 (rising to age 55 in April 2010) it is usually possible for you to access your pension fund and take benefits and after April 2006 you can take the tax-free lump sum and not draw income. Although it is usually best to defer drawing benefits until you really need to taking all or part of the lump sum to clear some expensive debt, for example may be a worthwhile option.

Finally remember that pension plans need to be invested carefully – some of these ideas can help both the business and the pension but equally could cause a large loss. For those that do not want to get involved in these more esoteric areas (even some SIPP providers are not flexible enough to do some of them – one of the reasons why we have our own in-house SIPP and SSAS) you should still review your pension provision in these unstable times. Review your arrangements to get a reasonably charged plan and a good mix of investments.

Ian Smith BA (Hons), APMI, FPFS, IMC, CFP.
Director & Chartered Financial Planner
Central Wealth Management Limited
Unit 36 East Moons House
Oxleasow Road
Redditch
B98 0RE
 
Also at 29 Harley Street
London W1G 9QR
Tel 0845 0066 204
Fax 0845 0066 254
www.centralinvest.co.uk www.centraltax.co.uk
ian@centralinvest.co.uk
 
Central Wealth Management Limited is an appointed representative of Central Financial Planning Limited which is authorised and regulated by the Financial Services Authority.