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Retirement Planning

Britain’s population is ageing. More and more pensioners are relying on a smaller workforce to fund State pensions. It is therefore vital to make extra provisions for retirement. Click here to find out about contracting out.

Pensions are tax efficient with the Government providing tax breaks at 20% for basic tax rate payers and 40% for those paying higher rate tax. It is not often that the Inland Revenue actually gives us money, so it makes sense to take advantage of a pension.

What type of pension should I choose?

Many employers are obliged by law to offer a pension scheme to employees. If your company is to contribute, it is usually sensible to take advantage of such a scheme. If you are self-employed, a stakeholder pension could be the way forward. Stakeholder pensions were introduced in April 2001 with the intention of encouraging those with lower incomes to plan for retirement. These pensions aim to be straightforward, low cost and flexible.

For the more adventurous, a Self Invested Personal Pension (SIPP) allows you to manage your own investments.

You can contribute to as many pensions as you like as long as you don’t exceed the maximum levels for contributions set by the Inland Revenue.

How much should I contribute?

In theory, the more you contribute, the greater your retirement income. It is therefore advisable to invest as much as you can afford. The recommended amount is at least 10% of income, and it is important to ensure that your contributions increase in line with your salary.

The rules introduced in April 2006 permit UK residents to contribute up to 100% of their pensionable income into pension contracts. There are now Government guidelines, introduced in April 2009, which limit the amount of salary you can earn in order to take advantage of this rule. This starts at £100,000 and ends at £150,000

The pensions market is vast and there are numerous products to choose from, each with different charges, fund performance and legislation. It is important to ensure that your contributions are adequate to provide you with the income that you would like to receive in retirement. A discussion with your IFA can help you to reach a decision about the policy that would be best for you.

Life, Health and Critical illness

Over a hundred companies offer protection plans. There are numerous different products, costs and charges to consider, as well as the small print on policies and, in some cases, investment performance.

Protection plans pay out a lump sum or income on death or illness, in return for regular premiums or a one-off payment. There are various types of cover to consider:

Term Assurance

This offers cover for a fixed number of years, whilst the children are growing up for example. It is very important to establish exactly how much cover will be required in the event of death.

Whole of Life

A Whole of Life plan safeguards the financial security of your family for a longer period.

Regular Savings Policies

Commonly known as endowment policies, this sort of plan pays out an assured sum on death, or a tax-free lump sum if you are alive after the final premium has been paid.

Critical Illness

A Critical Illness plan pays an agreed sum either on death, or should the person named on the policy be diagnosed with a condition specified in the plan’s terms.

When choosing a life assurance company, it is important to shop around. If your policy is to have an investment aspect, you need to study the performance ratings of several companies.

When thinking about life cover, you need to consider the following:

Can I alter the amount of cover should my circumstances change?
Is an endowment policy still a good idea?
Does my plan allow for inflation?
Can I surrender my policy at any time?
Can I insure myself against redundancy?

A discussion with your IFA will help you to answer these questions and can advise you as to the best course of action to take to ensure that you and your family are protected should the unexpected happen.

Savings and Investments

Saving, whether for retirement, a ‘rainy day’ or big life changes, is becoming increasingly important in today’s society. With a reduction in State support for retirement, an increase in the cost of raising children, a sharp rise in university fees and an increase in consumer borrowing, the need to invest for the future is essential.

The housing boom, longer life expectancy, uncertainty in employment, and many employers cutting back on pension provision for staff are all factors that have taken many by surprise and call for an increase in the amount that we save.

So how do you know how much you need to be saving each month? It is best to consider your goals and work backwards. This is why it is so important for us to understand what motivates our clients.

There are literally thousands of savings products available from hundreds of providers. Some of these are listed below:

• Bank accounts
• Savings Accounts
• Cash ISAs
• National Savings and Insurance
• Bonds
• Gilts
• Unit Trusts
• Investment Trusts
• O.E.I.C.s
• Stocks and Shares ISAs
• Individual shares
• Pensions

Your IFA can discuss these with you and help you to make sense of the options available.

When considering the type of savings product that would be best for you, you need to give some thought to the following:

• The level of risk you are willing to take
• The level of income that you require, if any
• When you will need to access your savings
• The rate of tax that you pay

Once you have established the above, we will be able to offer advice that will help you to plan for a happy, financially secure future.

Residential Mortgages

Did you know that there are over a thousand mortgage deals on the market from over a hundred different lenders? Deals are constantly changing and trying to keep abreast of what is on offer is not easy. We have access to all available deals and can trawl through the market to locate the product that is best for you.

Paying off your mortgage

Repayment

You pay the lender a monthly sum which is partly made up of interest and partly the original debt. At the end of the mortgage term, the loan will be paid off.

Interest Only

Monthly payments are comprised only of the interest accrued on your debt. At the end of the term, you owe the lender the same amount that you did at outset. A separate investment plan is needed to build sufficient funds to clear the debt.

Interest Rates

Variable Rate

The interest that you pay changes in line with the bank base rate.

Discounted Rate

You take advantage of a discount for a specified period, after which the rate is variable.

Cashback

The rate is variable with a lump sum (usually a percentage of the loan) payable when the mortgage completes.

Fixed Rate

The interest rate is determined for a set period at outset. This is often lower than the standard variable rate.

Capped Rate

The lender determines a maximum rate for a period of years. If the lender’s rate falls below the capped rate, mortgage payments will be lower. Some lenders also impose a collar or floor, below which the rate can’t fall.

There are advantages and disadvantages of each type of mortgage, and they do not all suit everybody. A discussion with your IFA will help you to understand the options available and find a deal that’s right for you.

Wealth Management

Wealth management is not just for the wealthy. It is concerned with the achievement of life goals through proper management of your finances.

We all have goals, whether they involve buying a house, saving for your child’s education or planning for retirement. Formulating a financial plan will help you to achieve these goals.

Each financial decision that you make will have an effect on other areas of your finances. For instance, you may choose to buy an investment product that will help you to pay off your mortgage more quickly, but this may mean that you have to delay your retirement. Most people go through life making these decisions in a fairly disordered fashion. A coherent plan is essential if you are to manage your finances successfully.

Establish clear goals

It is important to differentiate between a goal and a pipe dream. Your goals must be measurable and specific and you should be able to prioritise so that you know what is of most importance to you.

Discover where you are now financially

Once you have established your goals, you will need to have an idea of the resources available to help you meet them. Look at your income and expenditure over the course of a year. This will help you to see exactly where your money has been spent.

Decide whether you are on target to achieve your goals

This aspect of your planning may reveal a need to take action. In thinking about your future financial position, bear in mind variable factors. For instance, when your mortgage is redeemed your outgoings will be reduced, and as you get older car and home insurance premiums may decrease.

Whilst it is possible to work through the above on your own, your IFA has experience in dealing with wealth management and may be able to suggest strategies that you may not otherwise have thought of. The calculations involved in establishing your financial status and projecting what your position will be in the future can be complicated. A professional will be able to work through this with you and help you to put measures in place that ensure that you can meet your objectives.

Corporate Services

At Willow, we pride ourselves on our ability to differentiate between the service required for an individual client and that appropriate to corporate accounts.

We employ specialist corporate consultants who have considerable expertise in all areas of financial advice for businesses. From personal planning for the Directors to Company pension schemes, we are able to provide the full range of solutions for any problem a business may encounter.

Our main areas of advice:

• Directors & Partners Pension arrangements
• Small self-administered schemes
• Self-invested pensions
• Employee pension plans
• Executive Drawdown and Retirement options
• Group Income Protection policies
• Keyman – Life, Critical Illness and Permanent Health Insurance
• Shareholder/Partnership protection
• Corporate Investment Management

Specialist services include:

• Residential & Commercial Mortgages
• Commercial Lending
• Wealth Management
• Medical Insurances
• Equity Release
• Long Term Care Advice

Why should you use Willow?

We have been working with clients since 1992 and have considerable experience in assisting businesses across the Midlands. Willow is totally independent and is able to review all product providers in order to recommend the most appropriate solution each time.

We are regulated by the Financial Services Authority and have both Investors in People and ISO accreditation showing our commitment to high standards. In total, we now have over 7,000 clients.

If you would like to know more or want to arrange an initial no-obligation meeting to discuss your particular situation, please contact us on 0116 258 1640 or e-mail enquiries@willowfm.co.uk.

Inheritance Tax Planning

Introduction

Unfortunately even after we die we are not freed from the clutches of the taxman. During the 2009/2010 tax year, everything that you leave over £325,000 per person is subject to inheritance tax (IHT) at 40%. Nobody wants their beneficiaries to receive a hefty tax bill, particularly when there are measures that can be taken to reduce or even eradicate it.

What happens to your Estate when you die?

On death the assets of the estate are effectively ‘seized' by the Inland Revenue and are only passed to the beneficiaries once the tax liability has been paid.

To avoid interest being charged on the tax payable, the total liability usually has to be paid within six months of death.

What constitutes your Estate?

When the Inland Revenue calculates the inheritance tax liability on your estate, they take into account the following:

• Investments and savings
• Your home and car
• Your furniture and personal effects
• The proceeds of your life assurance, unless it is written under trust

With the rise in house prices over the last few years, it is not just the very wealthy whose assets are worth over £325,000. It is therefore important to look at ways of ensuring that your IHT liability is as low as possible.

Long Term Care

Very few of us will have given any consideration to what would happen should we be unable to look after ourselves in later life.

Nursing homes and round-the-clock care can be very expensive and with the current pressure on local spending, it is no longer sensible to rely on the State’s social service to cover the cost.

If your assets are over £20,000, you will be assessed as being able to pay for your own care. This amount takes into account your income, pension, savings and the value of your property. If you are deemed able to afford care, you may have to sell your home, and plans to leave an inheritance for your loved ones may have to be scrapped.

Why should I take out a long term care policy?

Taking out a long term care policy will ensure that you and your family can remain financially secure during this difficult time. Your IFA will have access to information relating to the plans available.

Whilst value for money is an important consideration, it is also worth thinking about the level of support and guidance available from the product provider. Some will locate an appropriate care provider for you and may be able to advise on nursing homes, whilst others will only offer a basic information service.

When considering the sort of cover that you require, you should give some thought to the following:

• What life expectancy will the cover be based on?
• • Is there a plan that covers care in my own home?
At what stage will I be entitled to make a claim?
• What range of services are available?

Your IFA can discuss this with you and will be able to help you ensure that you are able to cope financially should you require long term care.