Things we don't like to talk about:101 - An extra helping for the Overweight

Eat more, Drink more and Smoke: My advice for those looking to maximise their pension....

If you’re Overweight, Smoke, have high blood pressure or other health issues, for once it’s a good thing, you might qualify for extra income from your pension in retirement potentially up to 40% more!

According to the Association of British Insurers 1 in every 2 people who retire could qualify for an enhanced annuity. Which means they could be losing out on extra income in their retirement by selecting a pension from their existing supplier when they retire.

The Technical Bit

WHAT IS AN ANNUITY?

Usually* when we retire we have to buy a product called an annuity, in simple terms this is where you give your pension savings to a company and they promise to pay you an income for the remainder of your life.

We don’t like to talk about it, but this income is based on statistics for life expectancy, and the healthier that you are the less money you’ll get. The one time in your life that someone will say “Smoking is good for you” is when you come to take your pension, the same is true of being overweight.

There are additional options that you can add such as an income for your spouse if you die, or if you want your income to increase with inflation each year. The starting income is based on the simple idea of a guaranteed level income for the rest of your life and each option you choose reduces the amount they will pay.  

OPEN MARKET OPTION – YOUR RIGHT TO SHOP AROUND

Clearly you can suppose that different companies might want to compete against each other to get your pension pot, by offering higher incomes. In 1978 the government introduced the right to shop around for your annuity, but unfortunately the statistics show that about 60% of people still don’t shop around, a process referred to as using “Open Market Option” By shopping around most people can typically get around 10 to 20% more income, which rises to around 40% more if they qualify for enhancement.

Open Market Option is very simple, all you need do is contact an Independent Financial Adviser, and they can check which options you want and find out who will give you the most income. An independent financial adviser can also see if you would qualify for enhanced annuities, statistically almost 70% of retirees would have qualified. That’s a huge amount of money lost each year, simply because of a lack of knowledge.

DALES Independent Financial Advisers, are independent financial advisers in Newark and Nottingham and can offer Independent retirement advice on taking your pension. Why not call DALES today to see how much more pension income you could get, through Open Market Option?

T: 0333 772 9607, T: 0115 832 0265 (Nottingham) or T:01636 87 00 69 (Newark). E: advice@pndales.co.uk.

*Until 6^th April 2011 everyone was forced to buy an annuity by the age of 75, now there is an alternative, but it involves risk and is not suitable for most people, for most people buying a “pension” when they retire is still going to be in effectively mandatory as the alternatives are unsuitable. Interestingly this is something that is in the news today, as the Pension minister Steve Webb speaking at the party conference, admitted that there are concerns that annuities may not be the right product for people in retirement and said the government needed to tackle the issue.

Philip Dales Dip PFS Certs CII (MP & ER)

Philip Dales is principal at DALES Independent Financial Advisers, based in Newark and Nottingham. He has been an adviser for over 16 years helping many clients with all aspects of financial planning, and retirement. For more information on this or any other aspect of financial advice contact t: 0333 772 9607.

Exclusive 5% Deposit Mortgage Deal (Including First Time Buyers)

Good News for the Property Market - the 95% LTV Mortgage Deal Rides Again!

Leeds Building Society has launched an exclusive 95% LTV (loan to value) product. The core product is a 3 year fixed rate with free valuation* for all purchase and remortgages and free legal service for remortgages, and is only available through mortgage brokers.

Key Highlights:

-          4.89% Fixed until 30/11/2016

-          £199 Booking fee (non refundable)

-          No Arrangement fee

-          Free Valuation (Purchase & Remortgage)

-          Free Legal Service – Remortgages only

-          Available to First time buyers, Home Movers and Remortgages

-         10% capital overpayments allowed each year

This comes as very welcome news to all First time buyers. Luckily there are no postcode restrictions on who can apply so for those looking to get on the property ladder in Newark, Nottingham or Lincoln can access this product though Dales Mortgage Advisers t: 01636 870069 or 0115 832 0265 e: advice@pndales.co.uk w: www.pndales.co.uk

All you need is 5% deposit, and where this differs from the complex Home Buy scheme, which also facilitates buying with 5% deposit, this is not restricted to New Homes, and clearly does not involve the equity loan of the HomeBuy scheme.

Available to Remortgage and Home Purchase customers, whilst its fabulous news for first time buyers the good news is not just restricted to them, this product is available for all types of mortgages, not just first timers. For remortgage clients there’s also the additional feature of a free legal service for the conveyancing.

Add this to the existing "Welcome' range of 0% interest rate mortgages for 3 to 6 months from Leeds Intermediaries, and you have a very strong range of products, that really lend a hand to people trying to get on the housing ladder. 

“Higher LTV products fulfil a need for those that can afford the repayments, but have found it difficult to save for a larger deposit during the economic downturn” – Phil Coombes Leeds Building Society.

This is just the sort of product that the market needs to help it get moving, first time buyers are the very start of the mortgage chain and more and more argue that they simply can not afford to get on the housing ladder, one of the main reasons for this is not lack of affordability, as often the rents they are paying are as high as their mortgage would be, the biggest single reason they can not get on the ladder is the deposit, this scheme offers them a real & affordable opportunity.

Philip Dales Dip PFS Certs CII (MP & ER)

Advising Director

For more information on this or any other mortgage product or to see whether this mortgage product may be suitable for your circumstances advice please contact e: advice@pndales.co.uk or call t:01636 870069. 

The mortgage highlighted here may not be suitable for your circumstances and as such the above is not advice, and should not be treated as such. Terms and conditions apply and more information can be obtained via advice@pndales.co.uk

PNDALES Ltd is Authorised and Regulated by the Financial Conduct Authority. A typical fee for mortgage advice is £300.

The Real Cost of Cash

Why do we use cash so much for our investments? I think the main reasons centre on the fact that it’s a safe investment.

But that’s not entirely the full picture….

Inflation is eating away at your savings or cash investments every single day, inflation can wipe out its value just because its sitting in a bank account.

Why: The Technical bit

The Consumer Prices Index (CPI) is 2.9% the very best Fixed rate Cash ISA is 2.75% (Virgin Money 2.75% for five years fixed). Even with the best Cash ISA you’re losing 0.15% each year. It gets worse if your money isn’t in ISA’s as you’ll pay tax on the interest. The best non ISA savings bond is 3.5% (Skipton 3.5% fixed 7 years) take off tax (20%) you’re down to 2.8%, then inflation and you are down to a loss of 0.1%.

All the above assumes you are using CPI index not the more well known RPI which is higher at 3.3%, use this and the figures look somewhat worse, add in that you could be a higher rate tax payer and the loss per year is quite startling.

From 2002 to 2012 the total rate of inflation has been 37.80%, between 1992 & 2002 its been 27.22% and between 1982 and 1992, 70.74%.

If you invested £50,000 in tax-free cash savings in 2002 and spent the interest (a common situation for older people who need to top up their pensions) in 2012 you would have a sum worth £34,011 in real terms. Interestingly the average interest rates over the same period (source-Association of Building Society’s) is 3.91% so taking into account inflation & interest you would have a miserable £650 extra in real terms, if you hadn’t spent the interest.

Therefore Are Cash Investments & Cash ISA’s. SAFE?

Not against inflation that’s for sure, this demonstrates that we should not use CASH for long-term investments. Short-term cash is ok; foregoing growth or income because we intend to spend the money. But, for longer-term, losing money each year against the costs of those items that you intend to buy seems a little foolhardy to me.

What about for those topping up pension income? There are two major problems facing people at present, inflation we have already discussed, ignore inflation the interest rates themselves are insufficient to maintain the income requirement for most and their lump sum is being eaten away in real and actual terms. The current rates of return on cash investments are simply insufficient.

Is there a solution?

Yes: The facts are longer term investments, such as fixed interests, bonds, gilts and equities and there are more such as property, art, fine wine, cars and antiques, which usually outperform cash. What’s the price of a better return? RISK. I have always felt that it is a simple truism of life: That the more risk one takes, the higher the potential for rewards, but like Newton’s 3^rd Law. With the higher potential for reward comes the higher potential for loss. So like many other things in life, Investment Risk is a balance. 

Look at these examples:

A house purchased at £50,000 in 2002 would have been valued at £85,000 in 2012 – above inflation growth and it appears a fairly low risk investment. Bricks and Mortar investments & Buy to lets are increasingly common, but there are more risks associated with property than many realise – we can offer buy to let advance and help in setting up your investment portfolio, letting you understand the risks. (Source Nationwide house price index)

A Medium/ cautious risk fund such as the Invesco Perpetual Monthly Income Plus - £50,000 invested in 2002 would now be worth around £120,990. This is the gross amount, but there are many straightforward ways to minimise the affect of tax on your investments, ISA’s for example are not limited to just over £5000 per year currently in equity ISA’s you can invest £12,520. Add this to a capital gains tax allowance each year and there is every chance that the impact of tax would be significantly less than a straightforward savings account. This fund mainly invests in Gilts, fixed interests and bonds with currently 20% invested in equities, the fund is available in a number of formats such as ISA’s and through many platforms. (Source – Morningstar Fund Data)

A Higher risk fund (keeping with the same brand) is the Invesco Perpetual High Income fund managed by the very highly regarded Neil Woodford. If you had invested £50,000 in this fund 10 years ago, this would now be worth - £168,475. With regard to tax and availability the same is true about this fund as above. (Source – Morningstar Fund Data)

I have not taken inflation into account with the above examples of the house, and the two funds for the simple reason that there is no need its fairly clear that the effects of inflation will have some impact, but all three examples out perform either the CPI or the RPI, and therefore you would have kept your money or increased it.

Conclusions - Moderation in all things.

Is cash “A bit rubbish really” well yes it is if your investing for the long term, don’t have any specific goals in mind or just need an income, but cash investments do have a role to play within any portfolio of investments. They give us a safety buffer, they are a safe place for money that’s going to be needed, but for anything else investments of a different type are necessary, investment advice is really worth seeking out to see how you can reduce the impact of inflation on your savings and investments.  

Philip Dales Dip PFS Certs CII (MP&ER)

Director

For more information or advice on Investments contact Philip Dales at DALES Independent Financial Advisers: advice@pndales.co.uk or go to our web site www.pndales.co.uk or call our West Bridgford office: 0115 832 0265 or Newark Office: 01636 870 069

Important information.

The investment returns and any income can fluctuate, and investors may not get back the full amount invested. Past performance is not a guide to future returns. Where Philip Dales has expressed views and opinions these may change and do not constitute a recommendation. For individually tailored advice please contact either our West Bridgford (Nottingham) office 0115 832 0265 or our Newark office on 01636 870 069

Sources: All CPI and RPI data – Office of National Statistics, Fund information – Morningstar, Savings & ISA rates– Moneyfacts. Historical Average Savings rates – Association of Building Societies. House price growth – Nationwide Building Society’s House price Index.

P N DALES LTD are regulated by the Financial Conduct Authority: 496107.

First Time Buyers & Stamp Duty Land Tax

More Innovation for First Time Buyers

Stamp Duty Paid Mortgages 

Would you like someone to pay your stamp duty, perhaps you've saved up just enough for that nice shiny new house, but now have to set aside even more than you'd bargained for, to pay the tax man. 

Currently the rate for Stamp Duty is 1% on Properties valued at £125,001 through to £250,000, it doesn't end there if the purchase price is higher the percentage increases, but for now lets assume that your buying between £125,001 and £250,000 as a first time buyer. 

So need a hand with your Stamp Duty, well Halifax's new products may just be for you!

On Tuesday the 30th April Halifax will launch an innovative product range, of Stamp Duty paid mortgages for First time Buyers. Halifax will pay 100% of the Stamp Duty Land Tax due on selected products for first time buyers that fall into the 1% bracket (Purchase price between £125,001 and £250,000). 

There is a choice of products available, across the core range, Affordable housing, Help to Buy/ First Buy, NewBuy and MI New Home products. 

In essence the Stamp Duty Land Tax will be paid via a cash back arrangement, where the cash back is equal to the stamp duty, this will be paid to the conveyancer on completion.

Halifax have a wide range of products to suit most client types, and generally their rates are well placed within the market, criteria is consistent with their main competitors, so this offers a real opportunity to first time buyers, particularly when you consider that this is available on their Affordable housing, Home Buy/ First Buy, New Buy and MI New Homes scheme and their core range.

Full details of the new products are not available until tomorrow, but in the mean time this looks like a very positive step forward for First time borrowers, maybe now is the time to start looking at buying your first house!

Philip Dales Dip PFS Certs CII (MP & ER)
Director

For more information or advice on First Time Buyer Mortgages, Standard Purchases & Remortgages and other types of mortgages contact Philip Dales at DALES Independent Financial Advisers: Advice@pndales.co.uk, or go to our web site www.pndales.co.uk. Nottingham office: 0115 832 0265 or Newark Office: 01636 87 00 69.

The information above is for information purposes only, it does not constitute advice, for advice suitable to your personal circumstances please contact us directly and we will be happy to help.

For mortgages, P N DALES Ltd do charge fees, a typical fee for mortgage advice and processing is £350. 

DALES Independent Financial Advisers, Nottingham (West Bridgford) & Newark. Authorised and regulated by the Financial Conduct Authority: 496107.