Even if interest rates rise throughout 2011, it is unlikely that they will rise high enough for savers to achieve a positive return, in real terms, any time soon. On the basis of Consumer Prices Index inflation at 4% a year, a basic rate taxpayer needs to earn 5% before tax, if the impact of inflation at this level is not to erode the purchasing power of their non-ISA cash savings. Matching the Retail Prices Index figure, which is usually higher, makes achieving real growth even more difficult. This situation may encourage investors to adopt higher risk strategies, to secure a better return.
Is risk a bad thing?
Risk is an integral part of investment; generally, the greater the risk, the higher the potential reward. However, the value of investments really can go down as well as up — if you accept greater risk in return for the prospect of larger profits, you could lose part or all of your money. On the other hand, leaving your cash on deposit can simply mean that its value withers over the years, in any event.
Unacceptable risk
What is unacceptable, in terms of risk, is leaving yourself open to potential losses that you are not aware of. This can happen with some forms of derivative-backed investments that look as if they are guaranteed; but the protection evaporates under certain circumstances, such as default by the guarantor.
Acceptable risk
‘Nothing ventured, nothing gained’, they say. You cannot afford to go through life in cotton wool, but must accept some degree of risk if you are to achieve any growth. To do this successfully you must understand what risks you are exposed to with various types of investment, and consider an asset allocation strategy that gives you the best chances of success. Asset allocation strategies involve ensuring that you do not have all your eggs in one basket. Of course, if you knew in advance which horse would win the Grand National, you could put all your money on it to win. But in reality, the future is a closed book. If we cannot put all our money on a ‘sure winner’, spreading our investments avoids putting everything on a ‘loser’. Selecting different shares to invest in, for example, means that you have a greater chance that, if one sector performs less strongly, another might shine. Not everyone will require the same strategy, but looking at separate business sectors, company sizes and geographical locations could be a good start. For those with larger sums to invest, it may also be worth considering inclusion of a wider range of assets such as commodities and property. These, however, have different risk profiles compared with more traditional assets such as shares and most collective investments, so individual advice is essential. It is important always to seek independent financial advice before making any decision regarding your finances. The value of investments is not guaranteed; you may get back less than you put in.
For independent, excellent advice from one of our IFA's visit the website. Our services including pensions, retirement, corporate, taxation and SIPP advice are offered around Berkshire - inclusive of Ascot, Wokingham, Camberley, Bracknell and Sandhurst.
Thursday, 28 April 2011
Wednesday, 20 April 2011
A budget for making things...
The aim of this most recent Budget was to help the UK recover its position as a manufacturing country. To achieve this, we need to make it easier for businesses to start up and thrive, as well as to reduce the proportion of GDP represented by the state. According to the Budget Statement, GDP growth forecasts have been cut from 2.1% to 1.7% due to weaker than expected 4Q10, higher inflation and increased commodity costs. However, the future looks stronger with the economy set to grow by 2.5% next year, rising to 2.9% in 2014. Additionally, borrowing for the year is forecast at £146bn, falling to £29bn by 2015/16 and CPI inflation is likely to remain between 4% and 5% for 2011, before reducing to 2.5% next year and to 2% in two years’ time.
Personal taxation
The personal allowance – already set to rise by £1,000 to £7,475 – will be increased for 2012/13 by a further £630 to £8,105, for under-65s. The government will consult on merging the tax and National Insurance systems, in order to simplify their operation for businesses. This will not affect pensions or other forms of income. The 50% income tax rate is not seen as permanent, but future tax indexation will be in line with the CPI rather than the (generally) higher RPI. This means that thresholds will not keep pace with the higher measure of inflation in future. This also applies to ISA limits from April 2012. The tax relief available on Enterprise Investment Schemes increases from 20% to 30% and the capital gains tax entrepreneurs’ lifetime relief is doubled to £10 million. The fuel duty escalator announced in 2009 Budget is abolished and replaced by a ‘fair fuel stabiliser’, paid for by a levy on oil companies. The main fuel duty rate was cut by 1p per litre from Budget day.
Business taxation
The main rate of corporation tax is cut by 2% rather than the 1% previously announced, producing a rate of 26% from April 2011. It will be cut by a further 1% each year, until it reaches 23%, making it lower than in France and the US. The tax system is being simplified with the removal of more than 100 pages of code. To help small businesses in particular, £350 million worth of specific regulations are being removed and 21 new Enterprise Zones are being created, offering businesses up to 100% discount on rates, new super-fast broadband and the potential to use enhanced capital allowances in zones where there is a strong focus on manufacturing. The small business rate relief holiday has also been extended by one year from 1 October 2011. Overall, it is to be hoped that, while there is little short-term joy for families, there is real potential for an economic recovery that can make us all better off over the longer term.
Exert taken from the Financial Planning Partners Ltd eNewsletter. More news to be released in future blogs - for independent, excellent advice from one of our IFA's visit the website. Our services are offered around Berkshire - including Ascot, Wokingham, Camberley, Bracknell and Sandhurst.
Personal taxation
The personal allowance – already set to rise by £1,000 to £7,475 – will be increased for 2012/13 by a further £630 to £8,105, for under-65s. The government will consult on merging the tax and National Insurance systems, in order to simplify their operation for businesses. This will not affect pensions or other forms of income. The 50% income tax rate is not seen as permanent, but future tax indexation will be in line with the CPI rather than the (generally) higher RPI. This means that thresholds will not keep pace with the higher measure of inflation in future. This also applies to ISA limits from April 2012. The tax relief available on Enterprise Investment Schemes increases from 20% to 30% and the capital gains tax entrepreneurs’ lifetime relief is doubled to £10 million. The fuel duty escalator announced in 2009 Budget is abolished and replaced by a ‘fair fuel stabiliser’, paid for by a levy on oil companies. The main fuel duty rate was cut by 1p per litre from Budget day.
Business taxation
The main rate of corporation tax is cut by 2% rather than the 1% previously announced, producing a rate of 26% from April 2011. It will be cut by a further 1% each year, until it reaches 23%, making it lower than in France and the US. The tax system is being simplified with the removal of more than 100 pages of code. To help small businesses in particular, £350 million worth of specific regulations are being removed and 21 new Enterprise Zones are being created, offering businesses up to 100% discount on rates, new super-fast broadband and the potential to use enhanced capital allowances in zones where there is a strong focus on manufacturing. The small business rate relief holiday has also been extended by one year from 1 October 2011. Overall, it is to be hoped that, while there is little short-term joy for families, there is real potential for an economic recovery that can make us all better off over the longer term.
Exert taken from the Financial Planning Partners Ltd eNewsletter. More news to be released in future blogs - for independent, excellent advice from one of our IFA's visit the website. Our services are offered around Berkshire - including Ascot, Wokingham, Camberley, Bracknell and Sandhurst.
Friday, 15 April 2011
Pensions, SIPP's and Retirement
Money Marketing released an interesting article about options outlined by the government aimed at linking the state pension to life expectancy. An exert is below:
"A Department for Work and Pensions green paper unveiled last Monday confirmed plans to introduce a link between the state pension age and longevity.
The paper, A State Pension for the 21st Century, presents two proposals for calculating future increases in the pension age.
The first would involve introducing a formula linked to life expectancy which would mean that increases in life expectancy would automatically adjust the state pension age to reflect rev- isions in projected longevity.
The alternative would be a review at regular, predetermined intervals which would be informed by an independent report to allow life expectancy projections and socio-economic factors to be taken into account."
With people living longer, what do you think about these proposals to help the pensions crisis? Influential opinions contained in the article at - read the complete pensions article.
For pensions advice, including retirement planning and SIPPS, visit the Financial Planning Partners Ltd
Sunday, 10 April 2011
Wecome to our FPP team!
Budget summary for financial advisors: http://www.moneymarketing.co.uk/politics/budget-2011-financial-planning-opportunities/1028829.article. The article details taxation changes - none too surprising but relevant to the general public. Interesting comments for savers and those paying into SIPP's or other pensions also in the article.
Visit http://www.fpp-ifa.co.uk/ for advice on all aspects of your financial wellbeing.
Monday, 4 April 2011
SIPP Advice from your Independent Financial Adviser (IFA).
For specialist advice including SIPP's and retirement planning, speak to one of our Independent Financial Advisers (IFA's) by going to the Financial Planning Partners Ltd website. We serve Crowthorne, Berkshire in addition to Wokingham, Bracknell, Sandhurst, Camberley, Ascot and Reading.
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