Creating a balance in life is important and core to this is knowing how to achieve your financial goals. With every financial corner you turn it’s important to ‘run through the numbers’, which will help you make the right financial decisions.

Cashflow planning is vital if financial goals are to be achieved. It’s important to be specific; for example, it’s not enough to say “I want to have enough to retire comfortably”, you need to think realistically about how much you will need. The more specific you are, the easier it will be to come up with a Plan to achieve your goal.

As we all know reaching financial goals won’t simply happen on its own and requires careful planning. The good news is that with our cashflow modelling tool, identifying what you need to do to achieve your financial goals can be less stressful than you might imagine.

Our lifetime cashflow modelling is aimed at individuals who wish to:

•  Become and remain financially well organised.

•  Determine lifetime goals.

•  Create a lifetime cashflow plan

•  Control tax liabilities

Our Lifetime Cashflow Plan will enable you to:

•  Produce a clear and detailed summary of your financial arrangements.

•  Define your family’s version of the ‘good life’ and begin working towards it.

•  Work towards achieving and maintaining financial independence.

•  Ensure adequate provision is made for the financial consequences of the death or disablement of yourself or your partner.

•  Plan to minimise your tax liabilities.

•  Produce an analysis of your personal expenditure planning assumptions, balancing your cash inflows and your desired cash outflows.

•  Estimate future cashflow on realistic assumptions.

•  Develop an investment strategy for your capital and surplus income in accordance with risk/reward, flexibility and accessibility with which you are comfortable.

•  Become aware of the tax issues that are likely to arise on the death of yourself and your partner.

Cashflow Modelling is just one of the financial planning tools we use. To find out further information, contact us and we will be happy to help.

According to figures published in April 2013, men will need 29% more savings to reap the retirement income that they could have gained in 2009.

In 2009, a 65 year old man with a £472,000 pension pot at retirement would have been able to secure an annual income of £20,000. This year however, the same person would have to have a pot of £611,200.

The cost of securing an income has grown more slowly for women, who would have had to have a pot of £534,000 in 2009 in order to secure a £20,000 yearly income.

The figures represent a dramatic fall in annuity rates in the last four years. If people’s expectations and financial plans are set by their historical experiences, without recognition of economic changes, then they are going to find shortfalls in their anticipated retirement funding.

In addition, it is suggested that too many people have sacrificed long-term retirement provision, choosing instead or by necessity, to provide higher income for themselves today.

Inflation proofing or organising pension pot savings has fallen by the wayside, contributing to the growing problem of inadequate retirement income provision and the realisation for many that they will need to work much longer to retirement than they had anticipated.

In the present economic climate and with increasing life expectancy, it is totally unrealistic for us to expect any government to step in and save more for our futures, beyond the provision of any low level safety net. The only way people can fix the problem is for them to save more money through adequate pension pot building.

Please contact us if you would like to review your own provision.

If you made a profit but have not told HM Revenue & Customs (HMRC), you might not have paid the right amount of tax. To take advantage of the best possible terms, you must voluntarily disclose your income or gains and pay what you owe by 6 September 2013. This deadline is less than six months away.

After 6 September, HMRC will use the information it holds to target those who should have made a disclosure under this campaign and failed to do so.

This campaign is for you if you’ve sold, or disposed of, second or additional residential properties either in the UK or abroad. These could include a holiday home or a property that you rented out. You may also be able to use this campaign where you have sold your main home. This would normally qualify for Private Residence Relief (PRR) but in some circumstances this relief is restricted.

Where the entitlement to PRR is restricted, Capital Gains Tax may be due if you are liable to UK taxes. If your circumstances meant that Capital Gains Tax was due on the sale of your main home, you may be able to use this campaign. Even if you didn’t originally purchase the property you may still be liable to pay tax on the gain if you acquired the property another way. For example, you may have inherited it or it may have been a gift.

The HMRC Property Sales Campaign is not for you if:

• you buy and sell property as a business. These sales are subject to Income Tax rather than Capital Gains Tax.

• you need to disclose a gain made by a trust, company or partnership.

If you take part in this campaign and tell HMRC about any gain that you haven’t previously disclosed:

• you can assess the correct level of penalty to reflect why you have not paid the right amount of tax in the past

• if your circumstances warrant it, you may be able to pay what you owe by instalments.

If you are eligible to take part in the campaign you must also tell HMRC about any other income or gains that you haven’t previously disclosed. This could include:

• income from property or land rental (less the expenses relating to that income)

• earned income not taxed before you receive it, for example, profits from another business

• investment income not taxed before you receive it, for example, interest

• taxed income where additional tax is payable

• capital gains on the sale of other assets or properties.

This is a chance to get things right and know exactly how much it will cost to sort out your tax for earlier years. If in doubt – check it out, now!

In a recent Which? investigation, some of the UK’s biggest banks were identified as failing to give the right advice when it comes to transferring and managing their Cash ISAs.

In the investigation, Which? placed 180 calls to 15 leading banks and building societies to assess the quality of advice given to people who want to transfer their Cash ISA savings. The same three questions were asked in each conversation with a Bank Advisor:

 •  How do I transfer my cash ISA?

 •  Are there any rules about how much I can transfer?

 •  Can I transfer to a stocks and shares ISA?

In just 16 of the 180 calls Which? enquirers made, the bank advisors gave correct answers to all the three questions asked.

Big name banks failed to give correct answers to the three ‘simple’ (Which?) Cash Isa questions in more than 50% of the calls that were made. In the percentage of Bank Advisors who answered the three questions correctly, the top three were at National Savings & Investments (NS&I) – 72%; Santander – 71% and the Co-operative Bank – 66%.

The bottom scoring three banks were Royal Bank of Scotland (RBS) – 44%; Yorkshire Bank – 35% and HSBC – 33%. HSBC scored particularly badly when asked if there were any rules about how much you can transfer.

RBS, which finished third from bottom in the Which investigation, told one of the researchers who asked about transferring a Cash ISA, that all he needed to do was ‘just withdraw your funds, close the account down and transfer it over to somebody.’

Five steps to a successful Cash ISA transfer

How many of us have a Cash ISA that has passed beyond its initial first year bonus rate and we haven’t done anything about moving our money to a better ISA? Many Cash ISAs currently yielding between 2-3% interest p.a. only have that rate because of an introductory bonus, designed to draw in the investor. Cash ISA rates dropping to 0.5% or lower after 12 months, are not unusual.

At the present low rates of interest, we can be forgiven for not bothering to look to transfer funds to a better rate ISA. However, the change process is relatively simple, particularly if you have to hand information on ISA products and a form to fill in from your provider, prompting you to take action. Many of us don’t move providers – we’re too loyal! But even if you are staying with your provider, a few minutes work can earn you a few extra pounds in interest.

The five checks and steps to take for a successful Cash ISA transfer are:

1) Check whether or not your new provider will allow you to transfer older ISAs to it, because not all do.

2) Beware of penalties: your existing provider can’t prevent you from transferring but, if you have a fixed-rate or notice ISA, you might incur charges.

3) Contact your new provider and request a Cash ISA Transfer Authority form. Never close your account and transfer the money yourself, as you will lose the tax benefits.

4) On your Cash ISA Transfer Authority form you will be asked to specify the amount you’d like to transfer. If you’re transferring an ISA from the current tax year, you must move the full amount. But if you’ve built up savings from previous years, it’s up to you how much you move.

5) It shouldn’t take longer than 15 working days for a provider to complete the transfer, so complain to your provider if you experience any delays.

Transferring to a Stocks and Shares ISA

It is possible to transfer your Cash ISA to a Stocks and Shares ISA, but you should remember that you cannot then reverse your decision; transfers are not allowed from Stock and Shares ISAs to Cash ISAs.   

If you are interested in finding out whether such a course of action could be appropriate for you please get in touch with us.

The new pensions legislation will affect all employers in the UK. The Pension Reform Act is designed to help more people to save for their retirement. Businesses must automatically enrol some 10 to 12 million employees into a qualifying scheme. This will have a huge impact on businesses administratively, which means they need to take action sooner rather than later to prepare for the changes.

We invited employers, Finance Directors, Head of Human Resources, Solicitors and Accountants to attend this event.

Attendees learnt:

• What Pension Compulsion will mean for them and their clients
• Why they need to start planning now to prepare for the changes
• Whether their existing Pension Scheme is suitable or if they must choose another
• The implications of ignoring this piece of legislation

Please contact us if you would like more information.

So vital putting practice missed everyone teed off up the 1^st fairway, opening drives consistent (and short), everyone showing relief that the opening holes have no water and that no one hit the houses on the right.

With both a Team and Individual competition, each hole marked the opportunity for a team discussion and pressure on each putt; well not really – the day was even tempered (mostly) and friendly (always) and a good time was had.

The only dampener was a huge black cloud that appeared late in the afternoon but almost entirely failed to deposit any rain, although it did reduce the temperature and create a flurry of coats.  Fortunately by the time everyone approached the fearsome 18^th (the hole is on an island) the sun was out and the wind was calm.

After a relaxing interlude official scorer Mark announced Martin Hill as the individual winner, and the winning Team of Chris, Martin Hill, Paul Ketcher and Peter White.

Overall a fun afternoon was spent; good company, acceptable weather and an opportunity for a great game of golf. Our thanks go out to all attendees for making it an enjoyable day.

Congratulations to the Winners:

1^st Place Individual – Martin Hill (Tollers)

Team Winners – Chris Bowmer, Martin Hill, Peter White & Paul Ketcher

Nearest the Pins – Mark White and Simon Gill (Keens Shay Keens)

Essentially funds that generate a “rebate” of fund charges which are repaid to the Nucleus Cash account on the platform are to become taxable from 6^th April 2013.  Our understanding is that clients who are in receipt of such rebates will need to declare them on their self-assessment tax returns.

The Background

Historically many fund managers operated a charging structure where a proportion of their manager’s annual management charge was paid to the adviser in the form of fund-based commission.

With the advent of 3^rd party administrative platforms (including fund supermarkets and wraps) many fund managers also rebated a proportion of their charge to the platform provider. Some platforms retained this rebate; others (including Nucleus) paid the rebate into the client’s cash account.

It is proposed that these rebates are to be banned.  As a result of this change fund managers are beginning to issue new share classes which have a lower annual management charge and do not pay fund based commission or make rebates to platforms.  We call these “clean” shares.  We have already revised our model portfolios to include only “clean” shares and have been recommending that clients switch their existing holdings and redirect any future contributions to the new model portfolios. In some cases the net saving is only a few basis points, but as the saying goes “a penny saved is a penny earned”.

What we propose

The timescale between the announcement and the date that the change took effect gave us very little time to take any action.  Unless we have already contacted you we are not proposing any immediate action because:

• The rebates are small and any tax liability is likely to be insignificant
• Changing the funds to ones with no rebate is possible, and will ultimately be implemented, however to act now would create a much larger Capital Gains Tax liability than any income tax liability impact resulting from the rebates
• Nucleus is working on a solution which they hope will allow changes at a platform level which should not then generate a Capital Gains Tax liability

If you are affected we will either review your investments and agree appropriate action at our next meeting or write to you earlier if Nucleus is able to provide a platform level solution.

In the meantime please feel free to contact us if you have any questions or queries.

Image courtesy of Meyer Cha... Flickr

Below are a few tips to assist you in performing your duties:

1. Obtain a copy of the Trust deed. This document sets out the objectives of the Trust and provides the mandate for the Trustees, including their investment powers.
2. Find out whether the Settlor of the Trust has executed a letter of wishes, which would be read in conjunction with the Trust deed and provide non-binding guidance as to the Settlor’s intentions. It is often considered desirable to have a letter of wishes where beneficiaries could have conflicting claims on the Trust.
3. Diarise important dates such as the dates when interest in the Trust will vest, the 10-year anniversaries of Discretionary Trusts and dates for agreed distributions of Trust funds.
4. Check to ensure that all of the Trust assets are in the names of the Trustees or under their control.
5. Ensure that investment advisers are properly briefed as to the objectives of the Trust and any letter of wishes, and that in the case of discretionary investment managers, a policy statement is agreed which accurately reflects the risk profile of the beneficiaries and the need to balance their interests.
6. Hold regular meetings between Trustees, investment managers and, where appropriate, beneficiaries. Ensure that the meetings are minuted so as to provide an audit trail to demonstrate compliance with the requirements of the Trustee Act. If there is a power to accumulate funds, it is wise to record whether or not this power is being exercised.
7. Keep accounts that can be considered by the Trustees and supplied to beneficiaries, so as to demonstrate transparency and reduce the risk of possible criticism by a disgruntled beneficiary.
8. Keep records of beneficiaries and their addresses up-to-date, so as to avoid the cost of having to locate missing beneficiaries at a later date.
9. If any beneficiary could be vulnerable, for example on account of youth or age or infirmity, ensure that no one is exercising inappropriate influence. It may be necessary to request receipts, to prove how monies distributed from the Trust have been spent.
10. Check from time to time that beneficiaries to whom payments are being made are not subject to bankruptcy orders.
11. Be mindful of the requirement of Section 4(2) of the Trustee Act to review Trust investments regularly. The seminal case of Nestle v NatWest Bank provides a salutary warning of the consequences of neglect.
12. If the Trust has made a loan to a beneficiary which is subject to interest, make sure that the interest rate being charged is competitive and that other beneficiaries are not being unfairly prejudiced.
13. Ensure that full use is made of the Trustees’ annual Capital Gains Tax exemption, but check first that the settlor has not created more than one trust, because the value of the exemption will be divided between all relevant Trusts.
14. Report investment losses to HM Revenue and Customs to ensure that these can be set against capital gains.
15. If the Trust has a ‘tax pool’ of tax paid by the Trustees in earlier years on income, which was received but not distributed to the beneficiaries, consider whether this might be used to distribute income to beneficiaries who either are not subject to income tax or pay income tax at the lower rate. This will allow some, or all, of the tax previously paid to be reclaimed.
16. If the settlor could stand to benefit from the Trust, liaise with the settlor or their accountant to find out if they have received a tax reclaim which is now due back to the Trust because the Trustees have paid tax at the higher rate, which is applicable to trusts.
17. Be aware of the tax implications of distributions of capital made by the Trustees from the Trust funds or assignments of interests under the Trust. If a Trust is being wound up it might not be appropriate to pay monies if the would-be recipient is:
    - Receiving means-tested benefits
    - Involved in divorce proceedings
    - Being assessed for nursing home fees
    - Subject to an increased liability to inheritance tax
18. Where the Trust assets include property, make sure that this is properly insured and that the insurance company has noted the Trustees’ interests. Also, ensure that the property is being properly maintained; and make sure that any life tenant is complying with any requirement to meet the costs of repair and insurance.
19. Finally, Trustees need to be aware of the responsibilities which Trusteeship entails, and the risk of personal liability if these are neglected or paperwork is ignored. Those who do not feel able to take on these commitments might be invited to step down.

We offer a Trust Review Service to our Trustee clients to ensure compliance with the act. For more information about this service or to find out how we can help you create a clear strategy for dealing with the implications of the Trustee Act, please contact a member of our team.

We share his belief that the investor’s behaviour rather than investment behaviour will have the greatest impact on their wealth.  We cannot control what markets do, but we can control what we do.  In our experience, the combination of a robust investment process implemented in a disciplined manner is the best way to accumulate and protect your wealth.

Neil chose this particular article because he has cousins living in Melbourne with children at University (or about to go) one of whom took great delight in ‘facebooking’ him this morning to tell him how much they are enjoying the autumn heat wave.

We hope they have the good sense to start building their own espresso portfolios in due course.  They make great coffee in Melbourne, so it will be a bit of a challenge.

Image courtesy of Meyer Felix, Flickr

The Espresso Portfolio

When you haven’t got much capital of your own, the road to financial security can seem long, hard and complex. But the truth is that wealth building is relatively simple. All it takes is time and the price of a cup of coffee.

A son of a friend just graduated from university. Still in his early 20s and with student loans to pay off, Josh has hardly any savings or capacity to save much at all.

So Josh and I met for coffee and a chat. He had acquired a taste for espresso while studying and working nights waiting tables (the coffee kept him awake).

“How much do you spend on espresso each week?” I asked him. After thinking for a moment, he replied that he averaged about two cups a day, each costing $3. That equates to about $40 a week or $160 a month.

“Well, what if you sacrificed the coffee and put the cash into a savings scheme instead?” I suggested.

Josh looked doubtful. Kicking caffeine wouldn’t be easy. Besides, he couldn’t imagine that loose change spent on coffee would make much difference to his long-term financial position.

I dealt with the first problem by suggesting he make instant coffee at home and bring it into work each day in a flask. The second problem – that it wouldn’t be effective – I dealt with by telling him about the miracle of compounding.

With an initial balance of $100, a monthly contribution of $160 and a yield of 5%, his coffee money would gradually accumulate to a pool of a quarter of a million dollars by the time he retires. And this is without saving another cent.

Assuming Josh’s salary was to rise on his graduation, he might bump up that monthly contribution to $500. In this case, his savings pool would grow to three quarters of a million by the time he reaches retirement. And this is a conservative estimate.

The Espresso Portfolio

This sounds too easy, he said. That’s because it is easy, I replied. The interest he earns on his saving is paid into his account and included in the next calculation. So essentially, he was earning interest on his interest.

The key is firstly that he is starting early. Secondly, he is saving a small amount consistently, month after month. Thirdly, he will be exercising patience. The rest of it is just the effect of time and compounding.

(Obviously, this young man’s earnings will be subject to tax. But the purpose of this exercise is to show that a small sacrifice, made regularly, will yield significant results over time.)

Josh now refers to his savings plan as his ‘espresso portfolio’. The initial pain of kicking his expensive caffeine habit was made up for by the slow roast of a savings scheme that promised him a comfortable retirement.

Even for those of us much older than Josh, there are lessons here. We tend to underestimate the effect of gradual saving and patience in building wealth, just as we tend to over-rate gimmicks promoted in the media.

We can’t control the ups and downs of markets or the daily noise of the media. We can control our own behaviour. With slow and steady saving, and a trusted adviser to keep us disciplined, there is no reason we can’t succeed.

The Small Print

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. This article is provided for informational purposes and it is not to be construed as an offer, solicitation, recommendation or endorsement of any particular security, products, or services.

To find out how we can help you to start your very own ’espresso portfolio’, contact a member of the fortitude team.

Stuart opened the seminar with a summary of the Solicitor’s Regulatory Authorities (SRA) position on referrals and the practical implications for legal practices. Abbie Tanner, of A Business Innovation then discussed why the “beauty parade” is broken and suggested ideas for the attendees to consider. Our Director, Neil Bailey closed with an insight into how we can help solicitors meet the new due diligence requirements along with an introduction to our investment policy.

We are thrilled with the feedback we received. 100% of attendees rating all of the speakers as very good/excellent. Attendees were also interested in attending future events, and indicated topics they would like to hear– so watch this space.

So you don’t feel like you missed out, below are slides presented on the day.

Neil Bailey and Stuart Bushell video from the Fortitude Financial Planning Seminar on 5th March.

To find out more about future seminars or to receive a copy of our Due Diligence pack please get in touch with a member of our team.