Category Archives: Financial Planning

No More Excuses – Overcoming the Barriers to Financial Planning

It’s all too easy to make excuses in life – whether in relation to exercise, diet or any other aspect of our lives, many of us put things off until tomorrow rather than being disciplined and seizing the moment. The same applies to making financial plans despite the fact that the act of engaging a financial planner, getting your existing portfolio in order and setting out plans for the future, can bring great peace of mind.

Here, we look at 5 of the reasons people avoid taking the step of addressing their financial plans.

Lack of experience 

Our experience throughout life influences what we do – and do not – feel comfortable addressing or tackling. The basis of this is that it is easier to avoid things we perhaps don’t fully understand rather than delving into the unknown.

Rather than letting your lack of experience of dealing with investment propositions such as pensions or getting involved with share portfolios stop you from investing, it is often much more beneficial to contact a financial planner. You probably wouldn’t attempt to tackle an electrical or plumbing task on your own, so why would you do the same with something as important as your financial planning? We all have our own areas of expertise, and putting your hands up and seeking the help of a professional often works out to be the most cost-effective solution.

Choice overload

Once you have taken the decision to commit to long-term financial planning, you may quickly find that you are overwhelmed with the options available to you. Not only do you have to decide how much money to allocate to different forms of savings/investments, you then need to decide which iterations of these to use and the financial institutions that can provide them.

Try not to become bamboozled – if you keep your goals and objectives in mind, you should be able to narrow which choices are most suitable. This is also where consulting a financial adviser can really help – they will be able to help you set out the course of action most suitable for your own circumstances and then help to set everything up on your behalf.

FOFO (Fear of Finding Out)

Standing up and looking at the reality of your situation isn’t always easy to do and consequently, it can be common for people to avoid doing so. As with most things in life, turning a blind eye to your finances will only make things worse in the long run – especially if you are nearing retirement as you will be left with relatively little time to make a significant difference. There are several free-to-use calculator tools available online that give a good idea of the level of savings you will need in retirement.

Finding out where you stand might not be an enjoyable experience, but having knowledge puts you in a position of power, which can only leave you better placed in the long run.

No two sets of financial circumstances are the same so you will only be able to identify the best plan for yourself and your family going forward if you have a firm grip on what you already have in place.

Thinking you don’t have enough

The financial advice industry can seem like another world and people are often under the impression that only the highest earners need to consult a financial planner. Whilst some financial planners work on the basis of a minimum level of investable funds, this shouldn’t act as a barrier to entry – it’s simply the case of finding the right adviser for you. Once monies held in pensions, ISAs, savings and any investments are added up, individuals often have more ‘investable assets’ than they might have thought. It is also worth bearing in mind that financial advisers will often work with families or couples; looking at the combined family wealth rather than what each individual has to their name.

The need for instant gratification

It’s human instinct to have a strong desire for immediate rewards and this has only become more magnified as a result of our dealings in an increasingly digitised world. Unfortunately, financial planning often acts conversely to this psychological preference as it involves a commitment to long-term savings that mean you may not be able to access your money for several years.

Rather than let this put you off altogether, look at what you can afford to set aside and develop a set of shorter term financial goals. These goals could be monthly – for example, setting up a direct debit into an ISA every month, or annual – aiming to make an additional pension contribution of a set amount during the financial year. This isn’t an easy thing to do and may involve making sacrifices elsewhere, but once you start to see the funds accumulating, you will get a sense of gratification and your future self will almost certainly thank you!

If the time has come to ditch the excuses and make a meaningful mark on your financial plans, we’d love to talk to you. Regardless of what stage you are at or whether you already have an existing financial planner, we can help to point you in the right direction. To speak to one of our advisers, please contact us.


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New Year’s Resolutions for Your Finances

New Year is a time for goal setting and objective making, as well as those notorious new year’s resolutions! Just as we make plans for other areas of our lives, so too should we consider what improvements we can make to our financial outlook.

Here are some areas you may wish to consider looking at with a view to improving your long-term financial outlook.

Review your spending

One of the reasons people fail to plan is they don’t feel they have enough to work with.

It may seem obvious but a good place to start when making financial changes is to look at your expenditure and identify areas where savings can be made. As well as looking to save on large areas of expenditure, such mortgage deals or household bills, there are also small changes we can make on a daily basis.  For example, the cost of a daily coffee on the way into work (around £2.50 per day, equating to £50 per month), buying lunch every day (around £5, equating to £100 per month) or the cost of a weekly takeaway (around £20, or £80 per month) very quickly add up. Through these changes alone, you could be looking at an annual saving of £2760 per year.  This is not an insignificant sum and certainly provides a good starting point to work from.

Have a plan

The world of pensions and investments can seem complex to those that don’t have experience with the industry – and this can, unfortunately, act as a barrier to entry. It is likely that you will only be able to take your financial affairs so far on your own and even if you once had a plan put in place for you, it is important to review this to ensure it is still suitable for your needs and circumstances. Seeking the advice of a financial adviser often gives people an enormous sense of relief; providing peace of mind that their investments and pensions are being managed and overseen by someone who deals with similar matters day in day out.

Review your pension provisions and contributions

Reviewing your existing pension provisions on a periodic basis is always a worthwhile exercise as it helps ensure they remain competitive and suited to your needs. It’s amazing how often we come across clients that have pensions from previous employers they have simply forgotten about!  However, advice should be taken before any changes are made because contracts may have some features that would be very difficult to replace, such as guaranteed annuity rates, guaranteed growth rates and enhanced tax free cash entitlements to name but a few. These benefits would be lost if you moved your pension to another provider so care must be taken to ensure you know exactly what you have.

Make sensible choices

If you have been tied to heavy expenditure over a sustained period of time –such as a programme of home improvements or funding nursery or school fees – experiencing a reduction in these outgoings can leave you in the mindset of wanting to ‘splash out’. Similarly, if you have a windfall such as a bonus or receive an inheritance, it can be tempting to increase expenditure on short-term extravagances, such as a fancy holiday or a series of treats for the family. Whilst this is human nature, it is important to remember these are also the key opportunities to make a real difference to your long-term planning. By channelling additional funds into your pension rather than flitting them away you will not only benefit from building a larger pension pot, but also the immediate benefit of tax relief.

Maximise allowances

Every individual has a set of allowances they are able to utilise in any tax year. If you are in a position to, you should maximise these allowances each year. For example, the current ISA allowance is £20,000 per year and on the whole, the annual pension allowance for individuals is £40,000 per year.

Review your investments

Let’s face it, most people do not have the time, nor the inclination, to review and analyse their investment portfolios. Yet clearly, this is an area that can deliver great potential returns – or indeed losses – where large sums are invested. There is usually a trigger that first prompts someone to contact us with a view to becoming their financial adviser and sadly, this is sometimes because they have suffered the pain of making a poor investment decision. Although financial advice is difficult to quantify, the likelihood is that having a professional keeping a constant eye on the performance of your investments will ultimately leave you less exposed to losses – therefore leaving you better places to be able to make measurable gains.

Be accountable to yourself

Even if you have a brilliant financial adviser giving you the best advice for your personal circumstances, the only person who can actually make a difference to your long-term financial outlook is you. Take the dawning of the New Year as an opportunity to set goals – write them down and hold yourself accountable to them.

Getting to grips with your financial affairs at the start of a New Year not only ensures you are in a better position in the short term, you could also find that you are better placed to make money from your investments in the longer term.

No single action will solve all your financial plans, but rather putting together a few elements in a plan will combine to have a greater overall effect. Financial changes that lead to even the smallest percentage improvement can build up more quickly than you might think.


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Charitable Giving – the Benefits of Giving Back

I have the pleasure in working with a number of clients who choose to make charitable donations on a regular basis or have made significant gifts to charity following receipt of a lump sum payment.

In making charitable donations to support causes or organisations that you feel passionately about, many of the tax benefits associated with making gifts to charity can be forgotten.

The following provides a gentle reminder of some of these.

Charitable transfers or use of charitable trusts via a Will

It is possible to reduce your inheritance tax liability by leaving money or assets to charity in a Will.

The relief works by subtracting the value of the donation from the value of the estate before inheritance tax is calculated on the balance – so no inheritance tax is payable on the amount gifted.

This might also reduce the inheritance tax rate payable on the taxable estate by 4% from 40% to 36% if the value of the donation represents more than 10% of the net estate value.

Donations via the Will can be made directly to a charity or the Will could direct the legacy into a Charitable Trust.

The way the 10% discount is applied can be complex, so professional help when writing your Will is important.

If a Charitable Trust is used, then a letter of wishes will need to accompany your Will. This will help inform the trustees of your wishes regarding who, and what sort of charitable causes, should be supported.

For those that want to retain control over their wealth during their lifetime this may well be an attractive option. However, donors have the opportunity to improve their charitable objectives by making gifts using Gift Aid.


Gift Aid

Gift Aid was set up by the UK government in 1990 to allow charities and community amateur sports clubs (CASC) to reclaim tax already paid on monetary donations they receive. It allows charities to claim an extra 25% for every £1 donated.

Donors also benefit because the value of the donation immediately comes out of your estate for inheritance tax purposes, and the value of the gift helps to reduce your liability to income tax. For those who have higher or additional rate tax liabilities, the difference between the tax you’ve paid on the donation and the amount the charity received can be claimed back via self assessment.

For example, if an individual donated £100 to their chosen charity under Gift Aid, the charity would receive £125 in total. A higher rate tax payer could reclaim additional tax relief of 20% on the gross donation (£25) and an additional rate tax payer could claim 25% (£31.25) via self assessment.

Gift Aid donations work in a similar way to personal pension contributions in that they effectively extend the basic and higher rate tax bands. This means less income is subject to higher or additional rates of tax. For some, Gift Aid contributions might be able to help regain personal allowance or child benefit.

However, there are a couple of points donors should be aware of when gifting under this scheme. Your donations from the current and previous year combined must not be more than 4 times what was paid in tax in the previous year.

Another stipulation is that you must have been charged with Income Tax and/or Capital Gains Tax for the year of donation which is at least equal to the tax treated as deducted from your donation. If more than one Gift Aid donation has been made in the tax year they must be added together. If you have not paid sufficient tax to cover the Income Tax deducted from your Gift Aid donations then you will owe the amount of the difference in tax to HMRC.

Payroll Giving schemes, offered by employers or pension providers, work slightly differently in that any donations you make through the scheme will be taken before income tax is calculated. Employed individuals will still pay National Insurance on the amount donated.


Charitable trust set up in lifetime

A Charitable Trust is a structure which can be set up by an individual or small group of people who want to distribute some of their assets or income to charitable causes. Usually those individuals who create the trust act as its trustees, alongside other members of family or friends.

It is possible for trustees to grant money with conditions, or to support specific projects which are more closely aligned to their charitable interests. For this reason, Charitable Trusts provide a vehicle for donors who wish to have greater control and involvement over who benefits and how money is gifted on an ongoing basis.

The Charitable Trust can continue after its founder’s death. It is possible to gift a legacy to the Charitable Trust in your Will, which will also be tax-free. The trustees will continue to distribute funds according to the guidelines set out in the Charitable Trust’s constitution. This way you can make sure that your chosen causes continue to benefit.

Individuals can make donations into the trust and are able to claim Gift Aid (as described above).

The trust will also be able to take advantage of many tax benefits. It will not pay tax on its income or gains if these are used for charitable purposes, nor will it pay corporation tax, inheritance tax, or business rates (a cap of 20% applies to any non-domestic property which is used for charitable purposes) if it eventually runs its own office.

The Charitable Trust will only pay VAT if it starts to supply a significant amount of products or services that are subject to VAT. This is unlikely if activities are limited to making grants or donations to other charities.

In England and Wales, supervision comes from the Charity Commission. The trust needs to be registered and is required to publish an annual report and accounts. Whilst this should not generally be a significant administrative burden, the initial set up and ongoing costs should be weighed against the benefits described above.


The Financial Conduct Authority does not regulate Will-Writing, Tax, Trusts and Estate Planning.

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Is it Time to Take a Drawdown Reality Check?

Reaching retirement is a huge milestone for anyone. If you’ve been able to build up a significant retirement pot in a pension, have other savings such as ISAs or investments, or maybe a combination of all three, you may feel like you’re set for the rest of your life and can live your retirement in the lifestyle to which you’ve become accustomed.

However, every now and again, it may be that you need to take a ‘reality check’.


Life expectancy has increased dramatically over the last 100 years. In 2016, there were 1.5 million people over age 85, a figure that is set to increase to 3.4 million by 2040. The next 20 or so years will also see a significant shift in the number of people reaching age 100. In 2016, there were 14,450 individuals over 100 but it is forecast that nearly one in five people currently living in the UK will reach their 100th birthday.

All of these figures mean that if you retire at 60, you may feasibly have another 30 or 40 years to live – a fact that is changing the landscape of retirement planning. Where a pension may previously have had to support an individual for 15 or 20 years, retirement pots now need to last longer and deliver more than they ever have – and all of this against a backdrop of inflation at an above-target rate.



You may think that your plans for retirement are fairly modest but when it comes to it, many clients can quickly and easily become carried away. Whether it’s helping family onto the property ladder, funding school fees for grandchildren or enjoying your new-found freedom by taking numerous holidays per year, if the percentage you are drawing from your pension pot is higher than the interest you are earning on it, you don’t have to be a rocket scientist to figure out that your funds will begin to deplete. And quickly.

This is notwithstanding the cost of unplanned expenses – such as care home fees – which can rapidly diminish savings even further.



So what is a sensible withdrawal level to aim for to decrease the pressure on your portfolio and improve its long-term sustainability? For a long time, a figure of 4% pa has been considered ‘the magic number’. This is partly derived from the target level of return expected on pensions and investments during retirement as clients often de-risk their portfolios when they no longer have the ability to earn and top up their pension. In moving their portfolios into a more cautious position, the effect is to reduce the potential rate of return they might be able to expect. Many say ‘the magic number’ should be adjusted down now to a more realistic 2.5% pa, factoring in charges, advice fees and projected growth rates.

Arriving at a target level of withdrawal of course depends on the size of your pension pot and whether other monies are available. For a moderately sized pension of £500,000, 4% equates to £20,000 gross (i.e. before tax) a year – a figure perhaps way below the amount you may have been used to receiving when you were working.

Therefore, without making adjustments to expenditure or lifestyle, it may be tempting to up withdrawals. But even adding one or two percent to your annual withdrawal rate can knock years off the length of time your pension may last.

In the past few months, we’ve seen a number of clients drawing from their capital at rates closer to 10% or 12%, clearly therefore putting strain on the sustainability of their portfolios.

Although we may want to treat ourselves in retirement or help our children – and rightly so after spending years working – there is ultimately a fine line between enjoying retirement and risking running out of money.

So how can the conundrum be solved? As with many matters we deal with, it comes down to having a sensible plan and sticking to it – something that requires a level of discipline.

This is where we come in as financial advisers. It’s our job to ensure that clients make informed decisions regarding their money and that they are fully aware of the impact that withdrawals may have on their overall portfolios. We have a number of tools at our disposal to help us forecast the longevity of a portfolio, putting the figures into perspective for clients. We would much rather be able to use these tools as a way of helping clients to plan their retirement effectively rather than needing to prepare projections that give a short, sharp shock on how little time a pension may have left after years of heavy withdrawals!

Part of the solution is about changing mindset. Reaching retirement and being able to access your pension pot shouldn’t be seen as a windfall. Even those with retirement pots in the upper realms of the Lifetime Allowance need to be realistic about their withdrawals and take advice on their options during both the accumulation and decumulation phases to ensure they make the most out of their own personal circumstances.

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Selling a Business – The Case for Financial Planning

So often business owners prepare and plan well to build and sell their business but do so without any real thought or regard to what that means for them or their family. The time pressure of their day to day work, along with the immediacy of the deal can often take precedence over personal financial planning. However, failure to think about their personal affairs early enough can often leave key questions inadequately considered.

How do you know what an acceptable sale price is without fully considering your expenditure requirements once you retire? You may think that the capital you hope to achieve from the business sale will be sufficient to fund you into your retirement, but without having built up funds in pensions or other environments, your funds may dwindle sooner than you think.

Example – Mr Smith

The assumption that indiscriminate expenditure and generosity will always be supported by a large capital sum is a dangerous one to make. The chart below assumes a client sells their business for £8m at age 50, after payment of capital gains tax, an immediate gift of £2m, expenditure on property totalling £1m invests the proceeds to deliver 4.00% per annum net of tax and charges to support regular expenditure of £150,000 per annum and annual / one off expenditure of £50,000 per year.

At age 75 this person would be reliant on releasing equity from property to fund income and maintain living standards.

Cash Flow Planning

Cash flow planning can help identify how much money you and your family will need to meet all your personal financial goals. This can help to drive your target sales price and inform negotiations.

Establishing a target sales price can help establish when you can realistically stop working or exit your business and that may provide valuable input into business decisions and planning.

The process of planning not only supports the decision making process, it helps dispel any apprehension surrounding the sale of the business. After having complete control over the attainment of your financial wellbeing the idea of being completely reliant a lump sum of cash is understandably daunting. Having insight and a plan for the future can provide reassurance to you and your close family.

Commit to Planning Early

The thought of having less control and no time to think or plan logically about what ‘retirement’ really means is often the reason people fail to plan early enough. Working with an adviser over a long period of time provides a benefit that is cumulative.

The following points are considerations you should consider with your adviser at least annually to help build wealth up personally.

1. Plan to reduce your effective tax rates. This can be done before and after sale. Consider holding wealth in your spouse’s name to help utilise their allowances and spread your wealth across a range of investments which allow you to capitalise on range of tax allowances. Combining the use of all your allowances together, reduces effective tax rates before and after sale because it reduces the cost to build your investment portfolio and more of your investments will be held in tax efficient environments at the point of sale so income can be supported with less tax to pay.

2. Maximise ISA allowances. The allowance is £20,000 per annum which gives you the ability to build up significant amounts of wealth over a period of time in a tax free environment which can be used to support a tax free income stream (among other things).

3. Make pension contributions. In most circumstances employer pension contributions sit as an expense in the profit and loss account and therefore attract corporation tax relief (currently 19%). Funds can be drawn on very tax efficiently with the use of your tax free cash entitlement and the funds held in a defined contribution scheme sit outside of your estate for inheritance tax purposes.

4. Review your investments at least annually. Consideration should be given to the market in general, the rate of return needed to meet your objectives and the level of risk you are prepared to take to achieve that. This exercise helps make sure you remain on track.

Taking the above action will help to ensure that you are in the best possible position when you enter negotiations. After all, being in a strong personal position gives you the flexibility to negotiate harder, wait for the right buyer and be less reliant on the date of sale and ultimate sale price, all factors that may prove difficult to control.

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