Smart Money January February 2012 Singles

Smart Money January February 2012 Singles

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  JANUARY/FEBRUARY 2012 Property-focused investment Autumn companies Statement Regaining favour with The state of the economy investors as demand for and the government’s income continues future plans UR YOES FIT T GEANC 12 FINFOR 20d taix s -en g t p ear Y nnin pla Would you Happy need to get back to work quickly if you ISA Year Don’t miss out on using your were off sick? Over half of UK workers are unable to survive tax-efficient allowance financially for more than three months
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  Welcome Investment Editorial W ith further tax increases likely on the horizon, there really is no time like the present to take a step back and look at how you could reduce your taxes and improve your financial planning strategy The hunt for before the end of the current 2011/12 tax year on 5 April. On page 04 of this latest issue of our personal finance magazine income continues apace we have provided an overview of the key areas you may wish to consider to get your finances fit for 2012 and achieve a more secure future for you and your family. An Individual Savings Account (ISA) is 33 per cent of investment companies a tax-efficient wrapper. Within an ISA you pay no capital gains tax and no further tax yielding more than FTSE 100 average yield on the income, making it one of the most tax-efficient savings vehicles available. If While the hunt for income continues apace, recent figures released by you are planning to open or transfer an the Association of Investment Companies (AIC) demonstrate that 33 per existing ISA, you have until 5 April, but cent of conventional investment companies are yielding more than the don’t leave it until this date. If you miss FTSE 100 average annual yield of 3.2 per cent. Of these, 66 per cent are the deadline, you’ll lose your £10,680 trading at a discount to net asset value. allowance for the 2011/12 tax year forever. Read the full article on page 12. Annabel Brodie-Smith, Communications average discount), Global High Income Inheritance Tax (IHT) in the UK may be one Director of AIC, said: ‘The investment (5.4 per cent average yield, -2 per cent of life’s unpleasant facts but IHT planning company sector has long recognised average discount), Sector Specialist: and professional advice could help you pay the importance of dividends and it’s Infrastructure (5.3 per cent average yield, less tax on your estate. With the current encouraging to see such a significant 1 per cent average premium), UK Growth thresholds set to remain at £325,000 for proportion of the sector yielding more & Income (4.5 per cent average yield, individuals and £650,000 for married couples than the FTSE 100 annual average. 0.3 per cent average premium), Global and registered civil partnerships until 2014, ‘Investment trusts have the ability to Growth & Income (4.5 per cent average on page 07 we consider the importance of sustain their dividends by building up yield, 0.8 per cent average premium) and reviewing your potential liability and finding their revenue reserve in good years, hedge funds (4.2 per cent average yield, out what you could do to reduce or even which allows them to pay dividends in -7.4 average discount). n eliminate this burden. n difficult years. They do this by retaining up to 15 per cent of the income they Dividend and discount data to 31 October Content of the articles featured in this publication receive each year and transferring this 2011. Source: AIC using Morningstar.  is for your general information and use only and is not intended to address your particular to their revenue reserve. Known as AIC Members only. Excludes VCTs and requirements. They should not be relied upon in ‘smoothing’ dividends, this is one of the split capital investment companies, their entirety and shall not be deemed to be, or defining characteristics of the sector. leaving 246 companies. FTSE 100 average constitute, advice. Although endeavours have been made to provide accurate and timely information, ‘Income-seeking investors should not annual yield over last 12 months to there can be no guarantee that such information is get carried away by yield alone. Investors 31 October 2011. Source: Datastream. accurate as of the date it is received or that it will need to consider their risk profile when The value of these investments and the continue to be accurate in the future. No individual or company should act upon such information making an investment decision and if income from them can go down as well without receiving appropriate professional advice investors are in any doubt they should as up and you may not get back your after a thorough examination of their particular consult their financial adviser.’ original investment. Past performance is situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect not an indication of future performance. of any articles. Thresholds, percentage rates and Highest yielding sectors Tax benefits may vary as a result of tax legislation may change in subsequent Finance The Property Direct UK sector has the statutory change and their value will Acts. Levels and bases of and reliefs from taxation are subject to change and their value depends on highest average dividend yield of 7 per cent depend on individual circumstances. the individual circumstances of the investor. The and is on an average discount of Thresholds, percentage rates and tax value of your investments can go down as well as -4.2 per cent, followed by UK High Income legislation may change in subsequent up and you may get back less than you invested. (6.6 per cent average yield, -0.6 per cent Finance Acts. 02
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  IN THIS ISSUE 06 In this issue 02 The hunt for income continues apace 33 per cent of investment companies yielding more than 08 Property-focused investment companies Regaining favour with investors as demand for income continues 10 11 FTSE 100 average yield 10 Would you need to get 04 Get your finances fit for 2012 Year-end tax planning tips back to work quickly if you were off sick? Over half of UK workers are unable to survive financially for more than 05 Working for financial need, rather three months than enjoyment More people will have to work later 11 How will you achieve your investment goals? in life to maintain an adequate Gaining prudent exposure to stock standard of living. exchange investment without putting all your eggs in one basket 06 12 Autumn Statement The state of the economy and the government’s future plans 12 Happy ISA Year Don’t miss out on using your ss iscu cial 07 Identifying the most appropriate solution for you tax-efficient allowance To d inan g r f in you lannments p ire u tain What should you do to reduce, req to ober or even eliminate, an Inheritance or furth tion, Tax burden? rma e infopleast us tac con want to make more of your money IN 2012? For more information please tick the appropriate box or boxes below, include your personal details and return this information directly to us. n Arranging a financial wealth check Name n Building an investment portfolio Address n Generating a bigger retirement income n Off-shore investments n Tax-efficient investments n Family protection in the event of premature death n Protection against the loss of regular income n Providing a capital sum if I’m diagnosed with serious illness Postcode n Provision for long-term health care Tel. (home) n School fees/further education funding n Protecting my estate from inheritance tax Tel. (work) n Capital gains tax planning Mobile n Corporation tax/income tax planning Email n Director and employee benefit schemes n Other (please specify) You voluntarily choose to provide your personal details. Personal information will be treated as confidential by us and held in accordance with the Data Protection Act. You agree that such personal information may be used to provide you with details and products or services in writing or by telephone or email. 03
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  Wealth protection £10,680 The maximum Get your finances amount you can invest in an Individual Savings Account this fit for 2012 tax year £10,600 An individual’s current annual capital gains tax-free allowance (2011/12) Year-end tax planning tips With further tax increases likely on the horizon, there really is no time like the present to take a step back and look at how you could reduce your taxes and improve your financial planning strategy. The end of the current 2011/12 tax year Top up your pension paying IHT – known as your ‘annual is 5 April. We have provided an overview contributions exemption’ – or £6,000 this year if you of the key areas you may wish to consider The annual allowance for the tax year haven’t used last year’s allowance. that could help you achieve a more secure 2011/12 is £50,000, inclusive of your You also have a ‘small gifts exemption’, future for you and your family. own contribution and any other amounts which means that you can make small paid into an approved pension scheme. gifts of £250 each year free of IHT. There Make use of Contributions paid by you to a personal is no restriction on the number of small personal allowances pension plan or a stakeholder pension gifts but they must each be to separate Every person in the UK is allowed to earn scheme are made net of 20 per cent basic individuals. You cannot use your annual a certain amount of money each year rate tax. This means that for every £100 exemption and your small gifts exemption without paying income tax, known as you want to save, you pay only £80. Tax together to give someone £3,250. a personal allowance. This tax year, the relief of £20, topping your contribution up personal allowance is £7,475, with higher to £100, is then added by HM Revenue & Reduce your capital allowances available to those aged 65-74 Customs (HMRC). gains tax (CGT) liability (£9,940) and age 75 and over (£10,090). If you are a 40 per cent higher rate tax If you have made a taxable gain from If you become 65 or 75 during the year to payer, you may be able to claim additional the sale of property, shares, investments, 5 April 2012, you are entitled to the full tax relief. If you are a 50 per cent additional businesses or any form of capital gain, allowance for that age group. If you earn rate tax payer, you may also be able to claim make sure you don’t make unnecessary income above £100,000 you start to lose additional tax relief at your highest rate. CGT payments. CGT is a tax charge that the personal allowance (at a rate of £1 for Depending on how much you earn over arises from the disposal of assets, such as each £2 you earn above this limit). the higher rate tax band, and your level of shares or buy-to-let properties, charged at If you are married and one partner is contribution, any additional rate tax relief not working, if appropriate, it could be would range between a further 1 per cent beneficial to transfer savings accounts to up to a maximum of 30 per cent. them, so that you pay less income tax as a couple. If you don’t make use of your Plan for Inheritance Tax (IHT) personal allowance in any tax year, you Effective IHT planning could save your family cannot carry it forward to the next year. hundreds of thousands of pounds. If you haven’t done anything about a potential Use your Individual Savings IHT bill, now is the time to take action. Account (ISA) allowance Currently, IHT is charged at 40 per cent on ISAs allow you to save tax-efficient money. anything you leave over £325,000 when Within an ISA you pay no capital gains tax you die (£650,000 for married couples or and no further tax on the income. You don’t registered civil partnerships). With rising even need to declare ISAs on your tax return. property prices in recent years, this has This tax year, you can invest up to £10,680 in resulted in more people being subject to IHT. a Stocks and Shares ISA or, alternatively, you Start by writing a will, making it clear to can invest up to £5,340 in a Cash ISA and whom you want to leave your money and the balance in a Stocks and Shares ISA. Any possessions when you die. You may then allowance not used by the 5 April deadline want to try and minimise any potential will be lost forever. The value of tax savings IHT bill by giving regular small gifts away. depends on your circumstances and tax rules Currently, you can give away a lump sum can change over time. of up to £3,000 in each tax year without 04
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  Retirement 18 per centfor lower and 28 per cent for higher rate tax payers. Every individual has an annual CGT-free Working for financial allowance, which currently stands at £10,600 for the 2011/12 tax year. need rather than enjoyment The limit applies to each individual, so if you are More people will have to work later in life married or in a registered civil partnership you each have an annual exemption and should ensure that each of you to maintain an adequate standard of living. maximises your CGT-free gains. There are different ways to reduce CGT bills, for Some 6.1m of today’s over-50s expect to work past the current example, equalisation or joint ownership of investments state retirement age, according to data from LV=’s Working Late will transfer income to the lower-taxed one. This can be Index. The report reveals that, on average, those planning to done CGT-free for married couples and registered civil work past state retirement age will work for an extra six years, partnerships. By transferring an asset into joint names, which could see them retiring at age 71 for men and 66 for you could both make use of your tax-free allowance women based on today’s retirement age. so that up to £21,200 of any gain can be tax-free in the current tax year. But the transfer to your spouse or Affordability, the fact that as a nation we are partner must be a genuine outright gift, so this might the key reason living longer has had a significant not be a suitable strategy for everyone. One in five over-50s said they impact on our retirement It may also be appropriate for some unmarried couples expect to work for at least a aspirations and the amount to equalise non-CGT assets such as bank accounts, decade past the current state of money we need to live a which could mean that it becomes possible to equalise retirement age. Affordability is the comfortable retirement. or transfer assets on whichever gains are less than their key reason stated by 51 per cent ‘Our findings have shown a shift to annual CGT exemption. Even if an asset is only put into of over-50s who plan to work continuing to work for financial need joint ownership the day before it produces income – for beyond the state retirement age, rather than enjoyment and we’re example, through interest or a dividend – that income while a further 11 per cent want likely to see this increase further.’ will still be split equally between both owners. to delay taking out their pension If you immediately sell employee shares that in the hope its value would Working later in life you get through a Save-As-You-Earn share option increase over time. Ray Chinn continued: ‘In recent years scheme, company share option scheme or enterprise we have seen many people cutting management incentive scheme, you may have a CGT bill. Continuing to work for back on the amount they are saving Consider selling in several tranches, so that each year’s financial need towards retirement. As a result many gain is within your annual tax-free allowance. n The data from last year’s Working will have no choice but to work Late Index showed that 43 per cent later in life to maintain an adequate of those planning to work beyond standard of living in old age. state retirement age said they ‘We urge those nearing would do so because they enjoyed retirement not to give up on the job they do. In 2011 this had saving at such a crucial time and to fallen to 37 per cent, which LV= consider all the options available claimed represented a shift to to them.’ continuing to work for financial need rather than enjoyment. Whatever your stage Moreover, these trends are likely of life, it is important to continue as the state retirement that your retirement age increases to age 65 for women There are various allowances and planning is on track to in 2018 and to age 66 for both reliefs available that can help ensure you meet your minimise tax liabilities arising on men and women in 2020. needs, now and in the earnings, profits of trade or gains future. To find out when you sell chargeable assets, Taking more about how we but understanding what they are professional advice can help you plan to and which ones you are entitled to Ray Chinn, Head of Pensions at can be a daunting task. Whatever enjoy your retirement LV=, said: ‘The trend of people your tax planning needs, we will years, please contact us retiring well into their 60s, endeavour to find a tax saving for more information. or even their 70s, has been scheme to suit your circumstances. increasing slowly over the last All statistics are from LV=’s data Please contact us to discuss your few years. taken from a survey of 1,522 specific situation and requirements. ‘The rising cost of living, low British adults, all aged over 50. interest rates on savings and 25 November 2011. 05
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  Autumn Statement £107.45 The amount the state pension will rise Autumn to - an increase £400m of £5.30 The amount allocated to Statement a new scheme to jump- start stalled construction projects in England The state of the economy and the government’s future plans On 29 November 2011, the Chancellor of the Exchequer, George Osborne, announced the Autumn Statement, which provided an update on the government’s plans for the economy based on the latest forecasts from the Office for Budget Responsibility. These are the key announcements from his speech. Pay, taxes and allowances per cent discount and the money going Battersea, which will create 25,000 jobs. Public sector pay awards will be frozen to build new homes to stimulate the Mr Osborne confirmed that rail fare at 1 per cent at the end of the two-year construction industry. increases would be limited to the Retail pay freeze. A £400m scheme will jump-start stalled Price Index (RPI) plus 1 per cent, rather Most working age and disability benefits will construction projects in England. than RPI plus 3 per cent. be uprated by the September inflation figure The government will underwrite of 5.2 per cent and the child element in the mortgages for 100,000 young families Families, education and child tax credit will be increased in line with trying to get on the property ladder. employment and skills inflation, rising by £135 a year in 2012/13. But Families in the south-west of England the £110 above-inflation increase that was Transport and will have their water bills cut by £50. planned for 2012/13 will not go ahead. infrastructure A further £380m will be invested by The state pension age is set to rise from The government is publishing a 2014/15 to extend the government’s 66 to 67 from 2026. Mr Osborne said National Infrastructure Plan, identifying offer of 15 hours of free education that it will save £59bn and will not affect over 500 projects for the next decade. and care a week for disadvantaged anyone within 14 years of receiving their Budget savings will enable the two-year-olds, covering an extra state pension today. government to put £5bn into these 130,000 children. The state pension will rise by £5.30 to projects along with a further £5bn it is The government will provide an £107.45, in a move which Mr Osborne said committing over the next spending period. additional £1.2bn for capital investment was the largest ever cash rise. Pensioners It has also struck an agreement with two in schools in England, including an extra receiving pension credit will also benefit from groups of British pension funds to unlock £600m to fund 100 additional Free Schools an increase worth £5.35. an additional £20bn of private investment. by the end of this Parliament. January’s planned 3p rise in fuel duty Infrastructure measures to be funded A £1bn youth contract will fund was cancelled and August’s increase will be by a new £30bn include electrifying measures including wage incentives for limited to 2p. the TransPennine Leeds-to-Manchester 160,000 young people to make it easier rail route, building a new railway link for private sector employers to take Housing between Oxford, Milton Keynes and them on and at least 40,000 incentive The Right to Buy scheme for council Bedford, and extending the Northern payments for small businesses to take on house tenants is back, offering a 50 Line of the London underground to young apprentices. 06
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  Wealth preservation Identifying themost appropriate solution for you What should you do to reduce, or even eliminate, an Inheritance Tax burden? Inheritance Tax (IHT) in the UK may be one of life’s unpleasant facts but IHT planning and professional advice could help you pay less tax on your estate. With the current thresholds set to remain at £325,000 for individuals and £650,000 for married couples and registered civil partnerships until 2014, now is the time to consider reviewing your potential liability and finding out what you could do to reduce, or even eliminate, this burden. Everything you have of value Writing a will n Gifts of up to £250 to any number IHT is usually payable on everything you One of the most important things you of other people – but not those who have of value when you die, including: your can do to help reduce the amount of IHT received all or part of the £3,000. home, jewellery, savings and investments, you may have to pay is write a will. If you n ny amount from income that is given A works of art, cars and any other properties die without a will, your estate is ‘divided- on a regular basis provided it doesn’t or land, even if they are overseas. up’ according to a pre-set formula and reduce your standard of living. These When you die, your assets become you have no say over who gets what or are known as gifts made as ‘normal known as your estate. Any part of your how much tax is payable. expenditure out of income’. estate that is left to your spouse or n If your child is getting married you can registered civil partner will be exempt Gifting it away gift them £5,000, if a grandchild or from IHT. The exception is if your The taxman allows you to make a number more distant relative is getting married spouse or registered civil partner is of small gifts each year without creating £2,500, and a friend or anyone else you domiciled outside the UK. Then the an IHT liability. Remember, each person has know £1,000. maximum you can give them before their own allowance, so the amount can IHT may need to be paid is £55,000. be doubled if each spouse or partner uses By taking steps now and getting Unmarried partners, no matter how their allowance. sound professional financial long-standing, have no automatic rights You can also make larger gifts but these advice, you could reduce or even eliminate this potential under the IHT rules. are known as Potentially Exempt Transfers future burden for your loved IHT is usually payable on death but there (PETs) and you could have to pay IHT on ones at what would already be are certain circumstances, if you put assets their value if you die within seven years a difficult time – while in some into certain types of trusts, for example, of making them. Any other gifts made cases retaining full control of when IHT becomes payable earlier. during your lifetime that do not qualify as your estate. To find out more, a PET will immediately be chargeable to please contact us to see how we Taper relief IHT. These are called Chargeable Lifetime could help you identify the most appropriate solution for you. Taper relief applies where tax, or Transfers (CLT) and an example is a gift additional tax, becomes payable on your into a Discretionary trust. death in respect of gifts made during The tax treatment of any investments your lifetime. The relief works on a The taxman lets you give the following depends on your individual circumstances sliding scale up to seven years and is as exempt transfers: and may be subject to change in the future. calculated on the number of years before Past performance is not an indication of your death in which a transfer is made. n Up to £3,000 each year as either one or future performance. Tax benefits may The relief is given against the amount a number of gifts. If you don’t use it all vary as a result of statutory change and of tax you’d have to pay rather than the up one year you can carry the remainder their value will depend on individual value of the gift itself. The value of the over to the next tax year. A tax year runs circumstances. Thresholds, percentage gift is set when it’s given, not at the time from the 6 April one year to 5 April in rates and tax legislation may change in of death. the next year. subsequent Finance Acts. 07
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  Investment Property-focused investment companies Regaining favourwith investors as demand for income continues The property market has experienced some significant highs and lows since 2008 but is now steadily regaining favour among investors as property-focused investment companies are proving a source of much sought-after income. The Association of Investment Companies (AIC) has surveyed property managers for their views on the outlook for the sector. 7.3% Average annual income yield from property- focused investment companies We are able to offer you access to a broad range of income-producing products. To discuss your requirements, please contact us for more information. 08
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  Investment Positive returns next year or so but the gap between London robust locations with reasonably financially The increasing attraction of property for and the regions may narrow, particularly for secure firms as tenants are likely to investors can be seen in the discount City offices, given the turmoil in the financial continue to produce a compelling positive movement from 32 per cent at the end and debt markets. Nor should prime property sustainable income yield that compares of September 2008 to 6.5 per cent at the in regional markets be written off.’ favourably with the depressed yield on a end of September 2011 for the Property range of other “defensive” type assets.’ - Direct UK sector. Income is a strong pull Outlook for property for this sector, according to the Investment Although the long-term outlook for Economic backdrop Property Databank (IPD), with yields property is positive, investors must be Richard Kirby commented: ‘This year averaging 7.3 per cent, but returns have prepared to weather any storms that may is expected to be more difficult given been positive too, up 23 per cent over the result from recent volatility. Jason Baggaley the economic backdrop and the last three years to the end of September cautioned: ‘Some weakness in pricing is downside risk implicit in the Eurozone 2011 compared to the average investment anticipated over the next few months as crisis. There are positive elements. Low company increase of 18 per cent. more stock is brought to market and it is interest and borrowing rates coupled Jason Baggaley, Manager, Standard Life likely that the softer prices are accentuated with a second round of quantitative Investments Property Income, commented: for secondary assets in poorer locations easing may offer support. The UK ‘Despite heightened volatility and with greater investor demand continuing may be seen as a safe haven from the unprecedented uncertainty resulting from the for relatively low-risk assets. Despite some troubles of the Eurozone. ongoing Eurozone problems, UK Commercial softening in the prices for poorer- quality ‘Looking to the longer term, years of Real Estate continues to be one of the few stock, reasonable positive total returns low development have led to areas of asset classes to provide reasonable positive are expected over the next few years for tight supply where a turnaround could returns over the year to date.’ investors as yields compensate for any be quick once demand recovers. For modest capital declines.’ now, though, the focus needs to be on Attributable to income the protection of the income stream and Richard Kirby, Manager, FC Commercial A reliable source of income securing its longevity. There are differences Property Trust, noted: ‘The property market Higher personal taxation and reduced within the market and this will involve has proved remarkably resilient in the face pension contributions, as well as an all-time selecting and managing property at the of slow domestic economic growth, fiscal low interest rate, have contributed to the asset specific level.’ austerity, a stalling of economic recovery growing importance of income to private overseas and the Eurozone crisis. There investors. Managers recognise the need to A well-diversified portfolio have been two years of sustained growth protect income streams and emphasise the Property is regaining its place as a mainstay following a severe downturn. The initial importance of careful asset allocation in a of a well-diversified portfolio. The closed- sharp bounce-back has been replaced by poor macro-economic environment. ended structure of investment companies is a year when performance has been largely Jason Baggaley said: ‘In the current particularly suitable for this type of illiquid driven by income. In September 2011, the environment, with a relatively weak asset and the majority of the sector has annual total return was economic backdrop, ensuring the quality bounced back following the property bubble 8.7 per cent, of which 6.9 per cent was and sustainability of income is a key of 2008/9. Property is once more in demand attributable to income, according to the IPD investment decision-making criterion. for its ability to provide investors with Monthly Index.’ Investors remain risk averse because of attractive levels of income. n the economic volatility and are shunning A more affluent population poorer-quality secondary and tertiary All performance figures are mid-market In the UK property market, London stock at present. share price with net income reinvested and continues to outperform other regions a 3.5 per cent deduction for charges, stamp although this difference could become Stock-picking opportunities duty and market spread to end September less marked. Richard Kirby maintained: ‘However, these conditions may provide 2011. Source: AIC using Morningstar. The ‘London has out-performed the regions, ideal stock-picking opportunities for savvy value of these investments and the income helped by a stronger local economy, a investors where good value assets can be from them can go down as well as up more affluent population, tight new identified in relatively resilient areas and and you may not get back your original supply, its role as an international as can be repositioned further up the quality investment. Past performance is not an well as a national centre and its relative spectrum. We expect asset management indication of future performance. Tax resilience to public sector cutbacks. initiatives and locational choices to be the benefits may vary as a result of statutory ‘Overseas investors have been attracted defining characteristics contributing to change and their value will depend on to this market, with London seen as a large, income returns into this year. individual circumstances. Thresholds, mature, transparent and liquid market. This ‘Currently, for multi-asset investors, real percentage rates and tax legislation may out-performance is expected to persist for the estate assets that are located in relatively change in subsequent Finance Acts. 09
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  Protection £67.50 Weekly Employment 44% and Support Allowance The percentage of people who fear going back to work could cause a relapse of their condition Would you need to get back to work quickly if you were off sick? Over half of UK workers are unable to survive financially for more than three months New research from Aviva reveals that over half of UK workers (52 per cent) would be unable to survive financially for more than three months if they were off work with an illness. Around a third (30 per cent) say they would survive for less than a month. Less than one in ten (9 per cent) say they would remain solvent for a year or more. Unsurprisingly, nearly seven in ten workers other people. However, in reality you never most suitable sum assured, premium, terms (65 per cent) cite financial concerns as the know what’s around the corner and few and payment provisions – is essential. n main reason to get back to work quickly people have the savings available to support if they are off sick. Regaining a sense of themselves and their families for very long. Employment and Support Allowance can If you became seriously ill purpose (28 per cent), getting well (21 per or were injured and had to cent) and providing for their families (16 come to as little as £67.50 a week – even give up work, you would per cent) are also high priorities. less than Statutory Sick Pay – which in many want to be sure that your cases would hardly cover a family’s food family could continue to Afraid of returning shopping, let alone their mortgage and be supported financially. We take the time to understand to the workplace other necessary expenses.’ your unique needs and While the motivation to return to work circumstances so that we is apparent, the research reveals that Protecting your can provide you with the many workers are afraid of returning to family’s lifestyle most suitable protection the workplace after a long-term illness. A Making sure you have the right protection solutions, in the most cost- effective way. To find out significant number of people (44 per cent) can protect your family’s lifestyle if your more, please contact us. fear that going back to work could cause a income suddenly changes due to death relapse of their condition and a quarter (24 or illness. But with so many different per cent) worry that they won’t be able to insurance policies available, it can be All statistics are from a nationwide work to full capacity. difficult to know which ones will best survey of 1,000 British adult employees Commenting on the research, Aviva, protect your family from financial hardship. and 500 employers, carried out for Aviva UK Health says: ‘It’s understandable that That’s why obtaining the right by market researchers OnePoll. The opinion over 80 per cent of people think long-term professional advice and knowing which poll was hosted online between 18 and 21 sickness is something that happens to products to recommend – including the October 2011. 10
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  Investment How will youachieve your investment goals? Gaining prudent exposure to stock exchange investment without putting all your eggs in one basket Investment trusts are a way of gaining prudent exposure to stock exchange investment but without putting all your eggs in one basket. They are often categorised into country and regional funds and sub-divided further into funds that invest only in certain industry sectors. Investment objectives Shares of other companies Investment trust shares are traded on With their long-term approach, usually low The difference between investment trusts the stock market just like those of any charges and wide choice of investment and normal ‘trading’ companies is that other company and so their prices can objectives, investment trusts and investment trusts invest their money in the change on a minute-by-minute basis, investment companies could be used to: shares of other companies, rather than in according to how many shares investors grow your wealth; repay a mortgage; physical assets such as factories or mobile are buying and selling. build a retirement fund and provide phone networks. Since they are like a income in retirement; invest for children company, they are also able to borrow Trading at a discount and grandchildren to pay for school fees, money to invest. However, only a few take Investment trusts calculate their ‘net university or a better start in adult life. advantage of this to any significant extent. asset value per share’ at regular intervals. Investment trusts are often referred to Their share prices tend to trade at a Long track record as ‘closed-ended funds’. Like ordinary discount to their net asset value. There Investment trusts and investment companies, they have a set number of are a variety of reasons for this. One companies have a long track record shares in existence (although they do reason is that you could buy the same of helping people to achieve their occasionally issue more or buy some back). portfolio of shares yourself directly in the investment goals, whether it is for market, without suffering the ongoing income, capital growth or both. They Net asset value management charge. allow investors to pool their money The value of all types of investment These discounts make investment together and spread the risk. fund is made by reference to their net trusts slightly more risky, since the The easiest way to understand investment asset value (NAV) per share or unit. This value of your investment is affected trusts is to think of them as a company, net asset value per share is basically by the amount that the ‘discount to because that is exactly what they are. Just like the total value of the trust’s portfolio NAV’ changes during the period of your any other company, they issue shares to raise of investments divided by the total investment, as well as the performance money from shareholders and then invest number of its own shares or units. of the assets they hold. n that money. Investment trusts and investment companies can be a particularly effective way to invest for appropriate investors. If you would like to find out more, please contact us. 11
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  Wealth creation Happy ISAYear 2012 Don’t miss out on using your tax-efficient allowance An Individual Savings Account (ISA) is a tax-efficient wrapper. Within an ISA you pay no capital gains tax and no further tax on the income, making it one of the most tax-efficient savings vehicles available. If you are planning to open or transfer an efficient Cash ISA but to save in a Can I transfer my existing ISA, you have until 5 April, but Stocks and Shares ISA you need to be existing ISA money? don’t leave it until this date. If you miss at least 18. You can transfer the money saved in a Cash the deadline, you’ll lose your £10,680 ISA to a Stocks and Shares ISA, even if it allowance for the 2011/12 tax year forever. How much can I invest? was saved in previous tax years, without HM Revenue Customs says your ISA As of April 2011, the ISA limit affecting your annual ISA allowance. application must have been received by your increased for everyone by £480 to ISA provider and it must also have been £10,680 per tax year. Of this, the To ensure that there are no processed to qualify. maximum amount you can put into delays in processing your ISA a Cash ISA is £5,340, and then the application, please contact us sooner rather than later. What types of ISAs are there? remainder can be invested into a Again, do not leave this There are two main types of ISAs: Cash Stocks and Shares ISA. until the last minute. If you ISAs and Stocks and Shares ISAs. Alternatively, you may choose to allocate the do and your ISA application Cash ISAs work in the same way as entire £10,680 into a Stocks and Shares ISA. is not processed on time, it normal savings accounts. You choose will be classed as part of next year’s ISA allowance if you want a fixed rate account, an When should I invest? and you will have lost the easy access (or instant access) account As long as you have not exceeded remainder of your tax- or a regular savings account. The only the current £10,680 ISA limit you can efficient allowance forever. difference is that you don’t pay income invest in an ISA at any point during the tax on the interest you earn. tax year and, depending on the ISA The value of these investments and the With a Stocks and Shares ISA you can provider, you can allocate lump sums or income from them can go down as well as invest in individual stocks and shares or monthly contributions that fit around up and you may not get back your original investment funds. Any profit you make is not your lifestyle. investment. Past performance is not an subject to capital gains tax. However, you indication of future performance. Tax pay 10 per cent tax on dividend earnings. Will ISAs always benefits may vary as a result of statutory be tax-efficient? change and their value will depend on Who can save in an ISA? The government has promised to keep ISAs individual circumstances. Thresholds, Anyone who is 16 or over and a UK indefinitely. However, the tax treatment of percentage rates and tax legislation may resident can save money in a tax- ISAs may change in the future. change in subsequent Finance Acts. Published by Goldmine Media Limited, Prudence Place, Luton, Bedfordshire, LU2 9PE Articles are copyright protected by Goldmine Media Limited 2012. Unauthorised duplication or distribution is strictly forbidden.