Annuities – are you being ripped off?

With annuities in the news following George Osborne’s budget announcement that the Conservative party propose to remove restrictions on selling annuities, it is also being reported by the Telegraph that savers will be informed if they’re being ripped off.  They expect that pension regulators are going to announce that pension companies will be compelled to admit to customers if the annual income offered was significantly less than other deals on the market.

It’s par for the course for financial advisers such as CDG to put together detailed comparisons for clients showing the benefits and downsides of different decisions, and now it is being suggested that companies will be forced to do the same. Research has indicated that savers could be missing out on a lot of money in their old age compared to better value plans.

The Telegraph writes that the FCA have found evidence that a great many people have missed out as a result of the annuity they bought. The ultimate goal is that people shop around for a better deal and the regulator hope that giving consumers more information on the proposed performance of their annuity will achieve this.

What this highlights for us is the dangers of shopping around for financial products without professional financial advice. There are a great many websites and guides to help consumers find the best deal but this isn’t helped without transparency from providers. We welcome this move to help people get a better deal on their annuities.

That fact remains that people will always be better advised to seek financial advice from an IFA such as ourselves. You will be able to get a bespoke financial review including information about how your pension fund is performing and what annuity would work best for you – if an annuity is even the right decision at all. The first meeting with a CDG financial adviser is no obligation and entirely at our expense.

If you want to find out how CDG can help you, give us a call on 0115 977 1155 or drop me an email at richard@cdgfs.co.uk

Budget 2015

As George Osborne held the iconic red briefcase aloft before the doors of Number 10 Downing Street, the last budget of this current government was upon us. There were some big changes proposed which may affect your money and savings, and now that the dust has settled a little we’ve been kind enough to summarise them for you. Remember though, this is a pre-election budget. These will only apply if the Conservatives are still in government in 3 months’ time!

Annuities

One of the biggest headlines is the proposed removal of restrictions on buying and selling your annuities. Should the Conservatives find themselves still in government come May, savers will be allowed to sell their annuity for a lump sum, freeing up funds if they need them for a big purchase or investment. The current situation is that anyone who wished to sell their annuity would be unable to do so without incurring a 55% tax penalty. George Osborne’s proposed change to the tax rules would allow pensioners to sell their annuity while paying their usual rate of income tax.

It’s worth noting that this change is still very much at the consultation stage, and nobody is quite sure the specifics of how it will work yet – indeed, many in the industry are suspicious that it will be achievable at all. Whatever happens, savers will be well advised to seek out professional advice on the matter.

Savings Tax

In happy news for savers, one of the policies to emerge from the red briefcase was the inclusion of a tax-free allowance for any interest earned on savings. This allowance would be £1000 for basic rate taxpayers (those who earn up to £42,700 a year) and £500 for higher rate taxpayers (£42,701 to £150,000). What this amounts to, according to the government, is 95% of taxpayers being taken out of savings tax entirely, as most will earn considerably less than the £1000 allowance in interest every year.

Help to Buy ISA

Mr Osborne’s response to “Generation Rent”, the Help to Buy ISA is intended to help first time buyers get their foot on the bottom rung of the property ladder. The proposition is that for every £200 that people save towards the purchase of their first home, the government will contribute £50. This goes up to a maximum bonus of £3000. This will be achieved by the opening of an ISA into which these savings will be placed, in addition to the government’s 25% (£50) boost.

New ISA freedoms

This isn’t the only ISA news in the budget. The budget would allow for savers to take money out of their ISAs and then put it back in without losing the tax free entitlement (up to the limit of £15,240). This means that people would avoid a tax hit as long as the money they take out and put in to their ISA doesn’t exceed a £15,240 net.

Lifetime Allowance

It wasn’t all entirely rosy for savers, however. The lifetime allowance for pensions would be dropped down to £1 million after a Tory victory, meaning that after savers have accumulated a total pension of £1 million they will pay tax at a rate of up to 55%.

So, what does this mean for you? Does this mean you’ll have to rethink your retirement plans, or has it opened up a new opportunity for the future? Give CDG a call for a free, no obligation review or a chat about the reforms in more detail, on 0115 977 1155, or drop me an email on richard@cdgfs.co.uk.

Guest Blog: Workplaces need to help you stop smoking

Something a little different this week as we’re hosting one of what we hope will be a number of guest blogs. This week’s piece comes from Penny Strutton, a Career and Employee Performance Coach and all round nice person. This was hosted with her permission and can also be found on the Nottingham Post. Enjoy! 

Firms need to help staff to give up smoking.

Ex-smoker Penny Strutton, a performance and careers coach, looks at smoking in the workplace.

It is 10 years ago in September that my husband dragged me kicking and screaming (well, chain-smoking, actually) to a mass hypnotherapy session to kick the habit.

Begrudgingly handing over my refundable £80 I asked specifically when I would be able to get it back, convinced I was just about to waste two hours of my life.

I walked out of that strange, dark setting and, believe it or not, have never touched a cigarette again – not one. After being a 30-a-day girl, I never thought it would be possible.

Although last Monday was No Smoking Day, don’t worry, I’m not going to lecture those that still partake of the habit – I know too well how hard it is to quit when you believe you’re hooked for life.

Being pretty much a chain smoker, my work day was driven from one cigarette to another. Dipping in and out of the office was the norm and although I thought I was productive, it wasn’t until after I stopped smoking how much I time I realised I had been spending outside the building instead of inside working.

Ten years on after the restrictions of smoking in public places was introduced, greater attention is being placed on the damages smoking causes to the smoker and those around them. At work, smokers and non-smokers alike benefit from having an effective company policy in place.

A good policy should set out clearly how much time is allowed for breaks in work (whether they be used for a smoking break or a healthy break from the work station), where smoking should take place (hopefully avoiding the entrance of the building), how the policy will be enforced (to ensure all expectations are effectively managed), and – most importantly, in my opinion – provide support and information on the effects of smoking and access to anti-smoking programmes.

With statistics demonstrating a decrease in daily smoking consumption in companies that operate a total smoke-free zone, employers need to accept the responsibility they have in maintaining a healthy environment for their staff and encouraging not only a smoke-free workplace, but a smoke-free life where possible.

If you’re a small business owner and want to get the ‘smoke-free’ ball rolling, the following steps can get you started:

Consult with your employees: you need them on board, so get them involved! You may want to call a team meeting or send out a questionnaire. Either way, gaining an understanding for what your employees would deem acceptable is important when drafting your policy.

Send out a draft: once you’ve pulled together a draft, send it out to your employees for comment.

Finalise it: demonstrate how you’ve taken on board comments or why you have chosen to exclude them. Everyone needs to feel like they’ve been heard!

Send a letter: once you’ve finalised it, send out a copy of the policy with a letter to each employee notifying them of when it will come into effect.

Review it regularly: make sure your staff are happy with how it is being implemented and enforced and make appropriate changes.

If you need support in pulling your first smoking policy together, please do get in touch at penny@psbebetter.co.uk.

Conquering Kilimanjaro

On February 26^th 2013 a young girl named Jessica Gauntley passed away after a 10 month battle with brain cancer. She was 16 years old.

In her memory, her parents John and Karen set up the Jessica Hope Foundation to fight against brain cancer in children and teenagers in her memory – 6% of all UK cancers are brain cancers but it receives less than 2% of national funding, and treatments haven’t changed for decades.

In the years that have followed, a great many people have raised money for the Jessica Hope Foundation, with events including performing choirs and an amazing wheelchair completion of the Three Peaks Challenge. This is an issue close to my heart and I wanted to do something to help, so with a group of 6 others, I found myself spending the tail end of December in Tanzania, halfway up a mountain.

At 5885 metres, Mount Kilimanjaro is the highest free standing mountain in the world, and we had to climb it. I’d been training for weeks leading up to it, eating well and cutting out alcohol, but nothing prepared me for how difficult it was going to be.

We arrived in Tanzania – via a short stop-off in Amsterdam – and after unpacking everything we spent a night in a row of huts, the last time we’d see a proper bed for quite some time! We were introduced to the guides who’d be taking us and a lot of our equipment up the mountain. There were 36 of us in total, many people raising money for different causes, and we were split into three groups of 12. Each 12 person group had a team of 49 porters who took the water, sorted out the toilet, helped with the tents – pretty much everything we were going to need. It seemed like the porters with all our gear could go forever at times without getting tired, singing and laughing all the way.

As we climbed, we saw the landscape change. At the very ground level, Tanzania is tropical rainforest. As the Land Rovers took us further up, the jungle turned to rocky scrubland, and it was here that we started our climb, at 2500 feet. We could see the peak looming over us even from that first camp, and it was a pretty intimidating sight. Hard to believe we’d be on top of it a week later!

As we progressed up the mountain, the plants were gradually left behind and the mists started creeping in – it certainly felt a lot more like home. Soon the landscape was scattered grey rocks and dirt, and we had to make little practice climbs up the route we’d take on the following day to make sure everyone was comfortable with where we were going.

The higher we got, the more amazing the views started to be. I could see Africa stretching out for miles and miles into the distance when the clouds cleared – Kenya on one side, and Tanzania on the other. It’s a view that will last long in my memory.

The early parts of the ascent were no picnic but the final climb to the summit was unbelievably difficult. The weather took a turn and soon we were doing the hardest part of the climb with snow falling around us. The wind was whistling around us, noses were cold and legs were aching, but eventually we made it to the top of Africa. What a feeling!

Unfortunately, as good as it felt, there was still more work to do. Climbing up might have been difficult but getting back down was downright treacherous in slippery conditions, with everybody desperately craving a hot bath and a lie down. Slowly, surely and carefully though, we did it, every step closer to the bottom bringing us closer to a well-deserved rest.

Without a doubt, it was one of the hardest things I’ve ever done, but also one of the most rewarding – and for a good cause too. In the end, we raised just over £2000 for the Jessica Hope Foundation, and if you want to make a donation then please follow the link here, there’s still time. It was gruelling and painful, but we did it – we conquered Kilimanjaro.

David Pavier

Labour’s plans for pensions

As will probably not have escaped your attention, the UK is heading towards a general election, and all the major parties are rolling up their sleeves and preparing for the fight. In the coming months we can expect to see a great deal of policies mooted and promises made, and last week Labour released a big one.

Should Ed Miliband’s party surge into a majority come May, they have announced that they will cut student fees by £3000, bringing them down to £6000. Maintenance loans will also receive a boost. How will this be paid for, you ask? According to reports on Friday, the money will be coming out of pensions. Specifically, the “additional rate” taxpayers’ 45% relief.

What this involves is reducing tax relief for very high earners- specifically those who earn more than £150,000 – so they therefore only qualify for 20% tax relief. The cut will result in those whose salaries are between £150,000 and £180,000 per annum gradually lose tax relief on their pension contributions – and the more they earn, the more they will lose.

Every year, there is a limit on what you can invest in a pension, and there will be some tax relief on this amount – as long as you’ve paid enough income tax. Presently, the maximum is £40,000, although it was £50,000 in previous years. In addition to the allowance from the current year, you can also carry forward allowance from the previous years which you didn’t use – so if you only invested £20,000 in your pension last year then the additional £30,000 carries through to this year making your limit £70,000.

Ed Miliband and the Labour Party have also proposed further reducing this allowance, as well as how much people can save over the course of their lifetime – the limit at the moment is £1.25 million). After these limits, there will be no tax relief at all.

Obviously it remains to be seen whether Mr Miliband and his party get the majority that they need, but should Prime Minister Miliband be sitting in Number 11 come May, we can expect a whole new set of shake-ups to pensions to follow on from the current chancellor’s reforms – detailed here in one of CDG’s older posts.

If something isn’t making sense or you’d like to discuss anything else to do with your pension and retirement, do give us a call on 0115 977 1155 or drop me an email on richard@cdgfs.co.uk

The Countdown to Pension Reform

As spring gradually arrives and the tax year runs to a close, we are approaching one of the biggest upheavals to pensions in recent years. As of April the 6th, the Chancellor George Osborne’s pension reforms will come into action and change the way that many of us approach our retirement.

Since that announcement the financial world has been abuzz with the upsides – as well as the downsides – and almost 6 months on we have a much better grasp on the bigger picture and how it will affect peoples’ retirements. First of all though, what has changed?

The idea behind the reforms is to introduce a flexibility in the way we take out money, to give greater freedom to retirees in the way they spend and withdraw their pension pot. Mr Osborne hopes for this to be achieved in part by allowing savers to access the whole of their pension pot when they retire, with the first 25% being tax free.

Pensioners will also be able to place their money into a “flexi-access drawdown” from which they should be able to withdraw any amount they like over a period of their choice – although as we’ll discuss later, it might not be as simple as that.

So, what have we learned in the months that have passed since this announcement? Well, first of all, we now know that you have to be very careful about avoiding fines when withdrawing your pension. Pensioners will be legally obliged to alert all of their pension providers that they have accessed their flexible pension within 31 days, lest they receive a nasty fine of up to £3000.

There was also the somewhat worrying news, reported here in the Telegraph, that only 5 percent of surveyed providers say that they will allow savers genuinely unlimited access and freedom, and there is no legal obligation on them. Pensioners who wish to make a withdrawal from their fund must first see if it’s an option provided by their provider.

Everyone will be watching very closely to see how the overhaul affects people and if you’re in any doubt about how things will affect you and your plans for your retirement, don’t hesitate to give CDG a call on 0115 977 1155 or email me at richard@cdgfs.co.uk

Of Penguins and Pensions

Alfie Date is Australia’s oldest man, at 109 years old, and at the start of the 1930s his sister-in-law taught him how to knit. Some 70 years, two world wars and 20 World Cups later and he spends his time doing the mostly unlikely of activities – he knits sweaters for injured penguins. It sounds silly, but oil spills can disrupt a penguin’s natural functions, so they need help staying dry – and this is where Alfie’s jumpers come in.

One thing’s for sure, when he was younger Alfie never envisaged spending his silver years making tiny jumpers, but life sometimes throws up unexpected situations. Another thing Alfie might not have expected is to still be going strong at the grand old age of 109 – and he isn’t the only one.

Recent research has suggested that we are not very good at estimating how long we’re going to live.  Medical technology advances but we look to our experience of those older than us and in past generations. We’re living longer and longer, which might seem like a nice thing for some – but it has serious implications for the way we approach pensions and the way that we plan our retirement.

The research by Platforum showed that men expect to live 15 years after retirement, and women 19, which combined with mortality data suggests that men and women may live six and four years longer respectively than they expected. That’s a lot of extra time in which to stretch out a pension pot!

What this does mean is that IFAs like ourselves have to put a little bit of thought into the way that we advise people who are planning for their retirement. Non-smokers in good health have a chance of living longer, as do those whose parents lived for a long time.

It has already been shown – and detailed on our exclusive CDG blog post here – that many people underestimate the money they’ll need to live the lifestyle they hope for in retirement, and on top of this there is now the danger that they’ll underestimate both the money needed and how long they will live. It’s a tricky situation and no mistake, and the answer should always be to seek professional advice and have a retirement specialist take you through your future in great detail. For a free, no obligation retirement review with CDG, give us a call on 0115 977 1155 or drop me an email at richard@cdgfs.co.uk. We’ll be happy to help.

The Taxman

“Let me tell you how it will be

There’s one for you nineteen for me

Cos I’m the taxman, yeah, I’m the taxman.”

• From “Taxman” written by George Harrison in 1966.

Thankfully for many, the days of 95p coming from every high earner’s pound have passed – although that hasn’t stopped artists such as Adele complaining about how much of their wedge disappears in taxes. Nobody likes seeing their hard earned pounds and pennies taken as tax, even if the tax burden is lower than in the Swinging Sixties.

Despite this, however, you may be surprised to hear that UK taxpayers are set to pay a staggering £4.9 billion more in tax in 2015 than they’re obliged to, according to this report from the financial services directory Unbiased – that’s an average of £165 per taxpayer! This isn’t a matter of complicated overseas Jimmy Carr schemes either, just people failing to make best use of the allowances and tax breaks allowed to them.

There are four main areas identified in this report as the sources of wastage. These are:

1. Individual Savings Accounts (ISAs)
2. Tax relief on pension contributions
3. Capital gains tax
4. Inheritance tax

Not everyone has the time to submerge themselves in the hazy and ever shifting world of tax regulations and finance, and that’s understandable, but tax efficiency can run from extremely simple solutions at one end to extremely complicated ones at another. £165 is nothing to be sniffed at either- that’s the price of a nice new cappuccino machine or weekend away in Europe!

And, of course, the important thing to remember is that with professional financial advice you don’t need to bookmark the HMRC website and start swotting up on allowances and thresholds at all – we do it all for you, and we even enjoy it.

Tax planning is an important part of our financial lives but often we don’t pay a great deal of attention to it, and there’s no reason not to when it can save us so much money! To find out a little more about tax planning or to ask us any other questions, give CDG a call on (0115) 977 1155 or drop me an email at richard@cdgfs.co.uk.

The Growth of Equity Release

As a financial adviser, one of the things you pick up with age and wisdom is the ability to spot market trends and position yourself to take advantage of them. No tea-leaves or astrology for us: just hard earned experience and financial know-how. One trend in recent years which has become impossible to miss has been the growth of the equity release market.

Figures released by the Equity Release Council showed lending in excess of £1bn during the first 9 months of 2014, a record high, and more and more people are looking towards it as a solution to their problems or a source of funding to achieve the retirement they want.

Now, it’s all well and good to know that the market is growing but to truly understand what drives a trend and see them coming from a distance, you have to dig into the reasons that it’s happening. We know more people are using equity release products, but why is this happening? As we see it, there are two main reasons.

1. Inadequate Pension Provision

This is a big one! As we live longer we find that our pensions have to stretch further and further into our retirement. Changes in public sector pensions and a rising cost of living means that pennies are being pinched rather more than people hoped. Many people also find that they’ve been stuck in poorly performing pensions and they don’t realise until it’s too late. As a result, many are responding to this by releasing equity from their house.

In the same vein, those who are well off in retirement but need extra funds for a holiday, gift or housing project (and they’ve already checked behind the sofa) might look to equity release for the assistance that their pension isn’t quite managing to provide. There are many uses for equity release and by no means are they all to do with overcoming problems such as paying off mortgages or debts.

2. Rising House Prices

A second factor is the rising house prices, as people seek to cash in on a much increased value on their property, which allows them to take the same percentage of their property value for a significantly higher amount of money. The average equity release plan grew from £48,994 to £56,917 from 2011 to 2013 with no change in the percentage of the property given up – if used responsibly, this extra cash could be of significant benefit to many people.

Equity release is a big step and professional advice should always be sought before making any decisions. If you are in difficulties with money and debt then other options should be looked at first. To talk through these with us and learn more about equity release then do give us a call on (0115) 977 1155 or email our equity release specialist Lee Tabreham on leet@cdgfs.co.uk.

Mortgage Adviser Job Description

Job Description

• Whole of Market mortgage broker based at one of Nottingham’s leading IFA firms.
• The role will involve working alongside the existing senior mortgage adviser.
• This is a self-employed role offering attractive splits on fees and commission.
• Warm leads will be provided (at no cost) from existing connections coupled with an expectation to self-generate leads a well.
• The successful candidate will work alongside and be assisted by our Business Development Director.
• Free professional indemnity cover
• Full administration and IT support at no extra cost.

Job Duties

•  Conduct regular client meetings.
• Maintain compliant and accurate client records.
• Attend networking events.
• Develop 3rd party referral connections, e.g. solicitors and accountants. (Guidance, training and on-going support will be given by the Business Development Director).

Requirements

Essential

• Full CeMap

Desirable

• Existing clients and prospects
• Existing third party introducers

Summary

This is an outstanding opportunity for an experienced Mortgage Broker. The position has come about due to the high number of leads and opportunities being created by the existing team. The role would suit advisers within an estate agency or bank as well as brokers within a practice who are looking to become self-employed. The company has a strong team ethic and ambitious expansion plans. The existing team is friendly, professional and ethical with decades of experience in the industry.

For more information on how to apply for this position, please contact Richard Jephson at richard@cdgfs.co.uk or call (0115) 977 1155.