Differing generations – Are you a stereotypical saver?

There are many differing statistics around attitudes to saving and investing, suggesting as we mature our focus and mind set will shift.

According to statistics*, Millennials (age 21-34) focus on working in a fulfilling career and making money, whilst as we move into Generation X (age 35-49) we focus more on health, keeping fit and family time.

Across generations, a common theme is the feeling that they are not saving enough. Only one third of Generation Z (age 15-20) and Millennials feel they are saving enough for their financial future, but about half are not confident in their saving strategies. Half of Generation X respondents, and about four in ten Baby Boomers (age 50-72) and the Silent Generation (age 73 upwards) respondents are saving some money, but are not confident in their financial futures.

Whatever your age or personal situation, it is vital to consider your saving strategy as early as possible, and reassess regularly on an ongoing basis. Any savings plan needs to be specific to personal circumstances and objectives, and needs linking to all aspects of your personal finances.

At Clarke Nicklin Financial Planning, we will always assess each clients’ circumstances in detail to arrive at a savings strategy that meets personal objectives. For every client, we will review and revise this with you on an ongoing basis as circumstances and objectives evolve due to your personal and family circumstances changing.
If you wish to discuss this further with one of our advisors please do not hesitate to call Kath Arnold on 0161 495 4700 or email kathrynarnold@cnfp.co.uk.

Important information

The value of investments and income from them may go down. you may not get back the original amount invested. Past performance is not a reliable indicator of future performance.

*The Neilsen generational lifestyle survey 2015 an online survey of 30,000 consumers in 60 countries. Neilsen is a leading global information & measurement company.

 

A little today, a lot tomorrow – Managing investing risk during turbulent markets

A common mistake some investors make is not diversifying their portfolio enough. To make sure investments are spread across different asset classes, it could contain a blend of equities, bonds, cash and property to benefit from their changing investment cycles.

Market timing

One of the biggest dilemmas some investors face is market timing. Jumping in and out of markets on a regular basis not only requires constant monitoring of daily events but also requires expertise to act on such events.

Many investors invest in lump sums, whether it’s a few thousand hurriedly put into an Individual Savings Account (ISA) before the end of the tax year or an annual bonus or similar payment. Another approach, however, is to invest smaller amounts regularly.

Volatile times

This can be achieved by drip-feeding lump sums into the market as opposed to investing it all in one go. In fact, during volatile times, this strategy allows one to benefit from what is known as ‘pound-cost averaging’. So how does it work?

The concept involves investing on a regular basis, and most funds whether they are Open-ended Investments Companies (OEICs) or investment trusts are available through regular savings plans (such as ISA schemes) allowing you to invest on a monthly basis.

‘Pound-cost averaging’

• It’s a good habit to get into that helps you develop discipline as a saver
• It can help you stay focused on your long-term goals, as instead of seeing the value of your portfolio change dramatically, it ideally grows steadily over time
• You reduce your chances of making a mistake trying to time the markets (i.e. investing all your money when prices are high and then seeing prices fall in the ensuing volatility). Instead, you invest the same amount of money monthly – when prices are low, you will acquire more units for your money, and when prices are high you will receive fewer. Over time, this can reduce risk and provide more stable returns.

Meeting your aims

This can also be a good way to invest when you’re just starting out, and you may be less likely to have a large lump sum at your disposal. But whatever your circumstances, goals or financial aspirations, you can be confident that we have the know-how to help you meet your aims. That applies today, tomorrow and for the years ahead, which is ideal when you’re thinking about building up wealth through regular, continued investments.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

Who will be opening a new ISA in 2017?

5 million over-50s looking to make their money work harder

Savers have had it extremely tough over many years now, and yet many still feel uncertain about making the switch to investing. This is largely because people don’t know quite where to start, and they are wary of the risk. However, people need to make their money work harder for them – not just to give them a higher level of income, but also simply to stop their money losing value in real terms.

Investing should be a long-term plan

Ultimately, holding cash which earns less interest than the rate of inflation means that people are losing spending power. And the compounded effect of this over a number of months or years could be much bigger than they realise. If people have a good cushion of cash savings – say, enough to cover 6-12 months’ worth of living expenses – then it may make sense to try investing with some of their additional cash savings. Investing should be a long-term plan, we suggest 3–5 years as a minimum to help even out the rises and falls in the market.

Savers continue to be punished by ultra-low interest rates

Many people look to their savings to boost their income as they move towards retirement or retire completely, but even though savers continue to be punished by ultra-low interest rates, the over-50s continue to believe that cash is king when it comes to their Individual Savings Account (ISA) allowance, according to new research by Saga.

Taking advantage of a tax-efficient account

When asked about their ISA plans, a quarter say they plan to open a new ISA in 2017. Amongst those who plan to take advantage of a tax-efficient account, a third say they will look at a Stocks & Shares ISA, but almost half say they will be opting for a Cash ISA. One in five say they will be looking to open both a Cash and a Stocks & Shares ISA.

Choosing between cash and investing

There are big differences between the sexes when it comes to choosing between cash and investing, with women strongly favouring cash over shares ISAs (58% vs 27%). There is a more balanced view amongst men, with 41% wanting cash and 38% shares ISAs.

Taking out a Stocks & Shares ISA

Regionally, there are also big differences in opinion: more than twice as many Londoners are willing to take out a Stocks & Shares ISA (39%) than those in the North East (24%), While those in the north east (61%), Yorkshire and the West Midlands (53%) are the most likely to opt for cash ISAs.

Reason behind the decision to invest

Just 2% of over-50s say they will be looking to open a Stocks & Shares ISA for the first time. For more than three quarters of these people, low interest rates are the reason behind their decision, while one in ten say they have inherited some money which they would like to invest.

Want to look at the options available to you?

When it comes to making important financial decisions, obtaining professional advice is essential. If you would like to look at the options available, please contact us.

Source data:

Populus interviewed 9,128 people aged 50 over, online between 13th and 19th December2016. Populus is a member of the British Polling Council and abides by its rules.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

Cash ISA at new low – but keep saving!

The average rate of a Cash ISA has fallen to a record low of 0.82% according to Moneyfacts, ten years ago the rate averaged at 5.06%.

‘Don’t let that put you off investing though’ comments Scott Herbert, Partner & IFA, Clarke Nicklin Financial Planning.

‘It’s vital for savers to consider their options. It highlights the need to research and source the best rates possible and to continually keep a track of how your investment is performing.

‘ISAs are a great way of putting cash aside. You don’t pay tax on interest or on income or capital gains from your investments; also the ISA limit for 2016/17 is increasing to £20,000 up from the existing £15,240.

‘There are other options available for you to consider though’, he adds. ‘Whilst ISAs are an integral part of financial planning its worth looking at alternatives such as Smoothed Investment returns, cash and having an equity portfolio.

‘Whichever investment route you are suited to will ultimately depend on your attitude to risk, higher risk means higher return but for the more cautious there is less chance of losing it.’

Scott has a mass of experience and deals with many high net worth individuals. If you wish to discuss any investment strategies then please contact katha@cnfp.co.uk or call 0161 495 4700 for a free no obligation appointment.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

 

Don’t miss the ISA deadline

Take control over where your money is invested tax-efficiently

Each tax year, we are each given an annual Individual Savings Account (ISA) allowance. The deadline to add to the tax-efficient accounts is at midnight on Tuesday 5 April 2017. It is a ‘use it or lose it’ allowance, meaning that if you don’t use all or part of it in one tax year, and you cannot take that allowance over to the next year.

The ISA limit for 2016/17 is £15,240, increasing to £20,000 in 2017/18.

Withdrawals to increase your income

Income from an ISA doesn’t affect your personal allowance or age-related allowance, and there’s no Capital Gains Tax (CGT) payable on any growth you may achieve. This means you could use withdrawals to increase your income when necessary.

Withdrawals from an ISA are tax-efficient

ISAs can give you control over your retirement income, as you can take as much money out as you like, whenever you want. Savings in an ISA and withdrawals from an ISA are tax-free. If you are a pension saver, you can generally also take out as much money as you like, whenever you want from age 55. Currently up to 25% of the pension pot can be withdrawn tax-efficient with additional withdrawals taxed at the applicable marginal rate of Income Tax.

Types of ISAs and allowances

Cash ISA – Anyone over the age of 16 can put their cash savings into a Cash ISA. Accounts can be either instant access, have notice periods or have fixed terms.

Stocks & Shares ISA – Anyone over the age of 18 can put individual shares or managed funds into a Stocks & Shares ISA.

Innovative Finance ISA – This ISA is for investments in peer-to-peer lending platforms. You must be over the age of 18 to invest.

Help to Buy ISA – To help first-time buyers over the age of 18 get on the property ladder.  You can start with a lump sum deposit of up to £1,200. You can then save up to £200 a month.

For every £200 you save, the Government will add 25% up to a maximum bonus of £3,000. It’s available per buyer, not household, so if you are saving with a partner, the bonus potential is up to £6,000 towards your house deposit.

Junior ISA – Cash or investments can be wrapped in this ISA on behalf of children under the age of 18. The Junior ISA has an annual allowance of £4,080. You must be a UK resident or crown employee to invest in any type of ISA.

Sheltering your money from tax

ISAs are becoming an integral part of financial planning. However, it is important to remember that an ISA is just a way of sheltering your money from tax. It’s not an investment in its own right although they offer a unique range of benefits.

It’s worth considering other investments strategies too, such as:-

Smoothed Investment returns

Cash – Safe liquid, FSOS protection

Equity portfolio

Expert professional investment advice

Choosing how you invest will depend on the level of risk you are comfortable taking with your money, as well as factors such as how soon you will need to access your money. If you require individual expert professional advice to beat the ISA deadline on 5 April, please contact us to review the most appropriate options for your particular situation.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

 

‘Mid-life savings crisis’ – start looking at realistic options

Retirement planning is simply about how you look at your future. However, more than a million Britons are facing a ‘mid-life savings crisis’ as they near the age of 40 with no retirement savings, according to research from Zurich. A third of British adults aged 35 to 39 say they have no money saved into a pension, despite approaching the mid-point of their working lives.

Among ‘millennials’ (born between 1980 and 1999), the picture is equally bleak with almost two in five adults aged 25 to 34 not saving into a pension.

The findings highlight how financial pressures could be forcing some to start saving later, while others are struggling to save at all. Rising rents and house prices, combined with years of low wage growth, have made it harder than ever for people to save.

Wiping off tens of thousands of pounds

Delaying saving for a few years can wipe tens of thousands of pounds off the future value of your pot. The earlier you start investing into a pension, the more your savings will benefit from the compounded benefit of growth on growth.

It is important to maximise employer contributions and take advantage of pension tax relief. The good news is that your employer and the Government can help to boost your savings.

If you save into a workplace scheme, it is likely that your employer will pay into your pot – with many matching your contribution.

Under auto enrolment, all employers are obliged to pay into a workplace pension for their employees. If you decide to opt out of the scheme, you will miss out on employer contributions and tax relief, which is free money by any other name.

Regardless of whether or not you have started to save, these four tips can help get your pension on track:

• Take advantage of tax relief

Any money you pay into your pension receives a rebate from the Government at the same rate as you pay Income Tax – 20%, 40% or 45%. This means it costs a basic rate taxpayer 80p to put £1 into their pension, a higher rate taxpayer 60p and a top rate taxpayer 55p.

• Maximise employer contributions

Make the most of your workplace pension scheme. Some employers will match your pension contribution, which can turbo-charge your savings. For example, if you increase your current contribution by 3%, your employer may pay in an extra 3% too.

• Taking risk can work to your benefit in the long term

It’s not too late. Even if you’re starting to save from 40, it’s likely you’ll have another 25 years before retirement.

To build up a healthy investment plan firstly consider your attitude to risk. The higher levels of return have a higher risk factor due to the more volatile sectors and regions that are targeted   whereas the more cautious have a lower return.

• Plan ahead

Know how much you need to invest each month to achieve your ideal retirement, and don’t forget to factor in inflation. Everyone’s different. And it’s likely the things you spend your money on now will change when you stop working.

Source data: Total sample size was 1,018 adults aged 18 to 39. Fieldwork was undertaken from 10–13 June 2016. The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18 to 39).

A PENSION IS A LONG-TERM INVESTMENT. THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

YOUR PENSION INCOME COULD ALSO BE AFFECTED BY INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS. THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION, WHICH ARE SUBJECT TO CHANGE IN THE FUTURE.

LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION MAY BE SUBJECT TO CHANGE, AND THEIR VALUE DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF THE INVESTOR.

Capturing the upside – Forecasting future variations in volatile investment returns

To invest successfully, you have to navigate complex market forces, so it’s important to take a more rounded approach. Investors have much to think about when choosing and understanding investments; in particular, market volatility and the impact it can have on your investment.

Choosing the right investments

Understanding volatility is vital to the overall process of choosing the right investments. Volatility is how sharply and how frequently a fund or share price moves up or down over a certain period of time.

It can be triggered by any number of factors. The UK stock market, for example, can fluctuate because of various factors both home and away: the Eurozone debt crisis, the slowdown in the US and problems as far flung as China can all have a turbulent effect on markets. Periods of losses/downturns can be followed by upswings (also known as ‘rallies’) and vice versa. But this is the very nature of the stock market.

Standard deviation

The most common measure of volatility is standard deviation. This measures how much the value of an investment moves away or deviates from its average value over a set period of time, i.e. how much it rises and falls. The more volatility, the higher the standard deviation.

Forecast volatility attempts to use standard deviation to forecast future variation in returns. The higher a forecast volatility figure, the more an investment could move both up and down over time.

Loss or gain

Generally, investors are happier with lower volatility, even if this means making less money over time. Investors worry most about volatility when markets are falling. When this happens, remember that any loss or gain is only realised when you sell your holdings. Investing for the long term means short-term volatility is not necessarily a reason to panic and make drastic changes.

It can actually work to your advantage if you invest a monthly amount. When prices go up, the value of your investment rises; when they go down, your payment buys more. This is often referred to as ‘pound cost averaging’. However, this cannot be guaranteed.

Smooth out any bumpy rides

Spreading risk through diversification is often said to be the first rule of investment. Diversification across a range of markets and asset classes will enable your savings to go to work in different markets and, crucially, reduce exposure to one individual area, as one asset class may go up while another goes down.

Strategies of long-term investing and regular saving will help smooth out any bumpy rides. Matching your attitude to risk with your investments is crucial to getting the right portfolio for your needs.

Give your money greater potential to grow

 Investing gives your money greater potential to grow in value than if you put it in a savings account or cash ISA, and the longer it’s invested the more opportunity it has to grow in value. Your investment choices can make a significant difference to the value of your long-term savings, so it’s important to obtain professional financial advice to find a solution that’s right for you.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

 

Navigating your investment options –

Few of us have the time or inclination to understand the vast number of different investment products available and consider what the best options are to suit our objectives.

Managing our ever-changing financial affair

It can be difficult to find the time to keep up to speed with everything, including managing our ever-changing financial affairs, especially as investment products are unlikely to remain the same throughout our lifetime.

Professional financial advice can help you design a custom investment portfolio to suit your individual situation. It should take into account your financial goals, as well as your need, willingness and ability to tolerate risk. It should also generally be designed to minimise your tax burden, if possible, and is prudent given your circumstances.

What’s your attitude to risk?

Investing, is as much about managing the potential downside as it is about targeting potential gains.

Generally, higher returns come with higher risk, and professional financial advice can help you think about your attitude to risk before making any recommendations. It’s also important to make sure your portfolio has the right balance for your risk profile by diversifying across asset classes, regions, providers and products as applicable.

To invest successfully, think about your long-term financial future. You are at the centre of your financial plan: your goals (both short term and long term), your situation, and your financial strengths and challenges.

As time passes and your lifestyle changes, it is important to keep a regular check on your investments. It is likely that the balance of the investments in your portfolio will need to evolve, not only in line with changing market conditions, but also with factors such as your investment goals, your personal circumstances and perhaps most notably your age.

Important considerations when building an investment portfolio:

Balance

Typically, investments with the potential for a higher return also carry a higher risk due to the more volatile sectors and regions that are targeted. Part of the process we consider is the risk or return trade-off, and we can help you to gauge your attitude to risk.

From this, we can ensure that your portfolio has the right balance of risk by diversifying across asset classes, regions, providers and products as appropriate.

Continual reviews

Over time, both markets and your lifestyle can change dramatically. Therefore it’s important to keep your investments under continual review to get the most out of them. Anything in your life, such as your age or personal situation, could affect the requirements you have for your investments.

Confidence

With markets constantly on the move and unforeseen events sometimes having significant impacts the need for ongoing adjustments to your investments can be extremely important.

Let an advisor take this important responsibility off your hands to help you to feel more confident that your holdings are suitably invested for your individual requirements.

Looking to invest for income or growth?

Creating and maintaining the right investment strategy plays a vital role in securing your financial future. Whether you are looking to invest for income or growth, we can provide the quality advice, comprehensive investment solutions and ongoing service to help you achieve your financial goals.

To discover how we can help you build a long-term strategy for your investments, please contact Kath on 0161 495 4700 katha@cnfp.co.uk – we look forward to hearing from you.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

Prepare for the big life events as soon as possible

None of us know exactly what life’s got in store for us, but we know that there are a handful of major events that we’re likely to encounter at some stage. Some of the great milestones of life, such as buying a property, getting married, starting a family, funding university education, buying a holiday home or planning for retirement.

It’s essential to start thinking about preparing as soon as you can. Often this means saving for major expenses that may not yet be in sight but are awaiting us just over the horizon.

Readily accessible savings

Before you start investing for the medium to long term, initially it’s important to keep three to six months’ worth of living expenses in a readily accessible cash savings account – don’t invest that money! Don’t invest any money that you may need to access in a hurry in the event of a short-term emergency.

By investing in stocks and shares, you’ll gain access to potential returns that saving in cash alone cannot offer. Of course, there is an inherent risk that some or all investments may not keep pace with cash or may even go down in value, but real risk should be seen as the permanent – not temporary – loss of capital.

Temporary market sentiment

While investors must accept the short-term fluctuations of markets, those investing for the long-term are usually in a position to ignore day-to-day gyrations in asset values. Over the long run, asset prices follow their fundamental values – either up or down – rather than being affected by temporary market sentiment.

Timing the right moment to enter the market is notoriously difficult. While you may have a lump sum that you’d like to invest, implementing a regime of regular investment might be a lower-risk approach, even though you might forgo the opportunity to invest your money at the bottom of the market when an asset is at its cheapest.

Timing the market

Investing regularly reduces the danger of making a one-off investment at the top of a market cycle before asset values fall. At some points, you may have to pay more than if you had made a lump sum investment, but at others you could pay less – unless of course the price of the asset rises (or falls) each and every month onward. By keeping to a regime of regular investment, the emphasis shifts away from timing the market to time in the market.

Pound-cost averaging

You also benefit from ‘pound-cost averaging’ by investing the same amount each month, perhaps through Direct Debit. When the price of an asset is high, you will buy less of it, and when the price is low you will buy more.

The effect of ‘pound-cost averaging’ means that, on average, the price paid is lower than the average asset price over the period. There is no guarantee that pound-cost averaging will result in better returns than lump sum investing, but it can help smooth the ups and downs of market volatility.

Generating extra returns

The earlier you commit, the longer your money can work in the market. Reinvested gains can themselves generate extra returns, creating the effect of compounding, which, in a growing market, is larger the longer money is invested.

It follows that the nearer to the time when you plan to realize your investments, the less time your money will have remaining to achieve compounded returns. It is worth bearing this in mind when regularly reviewing your investments, which themselves should be updated to take account of any changes in your circumstances or priorities.

Percentage of your salary

Much as your pension contributions, when a percentage of your salary, will automatically rise in line with any salary increases, it could be worth applying the same principle to the amount you regularly invest.

Failing to increase your regular investment contributions means that, over time, their real value – and the quantity of assets they will buy – will normally fall. To improve the chance of your investments growing over time to meet your future financial goals, make sure you review your monthly contributions regularly so they don’t fall behind both inflation and your means.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.