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Financial Product Best Buys – September 2012

Retirement and Investment Solutions latest best buys for your savings.

 

  • Best instant access

ING 2.99%

Unlimited withdrawals. Minimum £1.00. Online or telephone.  Rate includes Bonus for 1st 12 months

 

  • Best 1 year fixed rate

Aldermore Bank 3.35%

Available online, by post or by telephone.  Minimum £1,000

 

  • Best 3 year fixed rate

Kent Reliance Building Society Issue 5 is 3.75%

Available online, in branch or by post.  Minimum £1,000

 

  • Best 5 year fixed rate

Julian Hodge Bank 4%

Available in branch or by post.  Minimum £1,000

 

  • Best 1 year fixed rate Cash ISA

Aldermore 3.3%

From £1,000. Apply online, phone, post. Transfers allowed

 

  • Best 3 year fixed rate Cash ISA
  • SAGA 3.7%

Minimum £1, post only.  Monthly interest available. Transfers in permitted

 

  • Best 5 year fixed rate Cash ISA

BM Savings 4.05%

Minimum £500. Transfers in permitted.  Monthly interest available. Online or telephone

 

  • Instant Access ISA     

Post Office 3.01%

£100 min. Transfers in permitted. Includes bonus for first 18 months. 2 free withdrawals each year. Branch or post

 

There may be better rates available but all these providers are regulated in the UK and are covered by the FSCS depositor protection scheme or equivalent European scheme.

 

Award-Winning Fund Managers

Brooks

Retirement and Investment Solutions preferred firm of Discretionary Fund Managers have just received two awards.


5 Star Rating:

Brooks Macdonald has achieved a 5 Star Rating from Defaqto for both their Bespoke Portfolio Service and Managed Portfolio Service. They are one of only 4 firms to have achieved the 5 Star Rating on both discretionary management categories. In Defaqto’s words, these ratings imply:

  • High commitment to the advisor market
  • Flexibility in products and services
  • High standards and quality in products and services
  • Leading propositions given the market place being reviewed


Best Discretionary Advisor:

Brooks Macdonald was named as the Best Discretionary Adviser at this year’s Investment Week Fund Manager of the Year Awards. The award recognises the depth of research the Brooks Macdonald investment team carries out and is voted for by all fund managers who themselves were short-listed for an award at the event.

Retirement and Investment Solutions Best Buys

To help you make more from your money, each month Retirement and Investment Solutions will provide you with best buys for your savings.

  • Best instant access

Coventry Telephone Saver

The Telephone Save from Coventry Building Society pays 3.25% AER on balances over £500. It includes a big 1.25% bonus for 12 months and you can make unlimited withdrawals.

  • Best 1 year fixed rate

Co-Op Bank

If you have £1,000 to save, the Co-Op Bank 1 year fixed rate bond pays 3.5% AER. However, no additional deposits or withdrawals can be made after opening. You can open and operate the account online, by telephone, in a branch or by post and interest can be paid annually or monthly.

 

  • Best 3 year fixed rate

Co-Op Bank

Co-Op Bank pays 4% AER on its fixed rate three year bond for balances over £1,000.  You can open and operate the account online, by telephone, in a branch or by post and interest can be paid  monthly or on maturity.

 

  • Best 5 year fixed rate

Yorkshire Bank/Clydesdale Bank

The Fixed Term Deposit account from Yorkshire Bank/Clydesdale Bank pays 4.25% AER for five years with a minimum deposit of £2,000.

 

  • Best 1 year fixed rate Cash ISA

Santander

The Fixed Rate ISA from Santander pays 3.5% AER for one year. You can save from £2,500 and transfer in money from previous years' ISAs. It can be operated by phone or in branches and can be viewed online. Interest will be paid annually.

 

  • Best 3 year fixed rate Cash ISA

Marks and Spencer  

The three year Fixed Rate Cash ISA from M & S pays 3.75% AER on balances over £500. It also accepts transfers from previous years' ISAs.

 

  • Best 5 year fixed rate Cash ISA

Halifax

The Fixed Rate ISA Saver from Halifax pays 4.15% AER for five years. You can only make one deposit which needs to be at least £500 and can also transfer in money from previous years' ISAs.

 

  • Best variable rate Cash ISA

Post Office

The Instant Access ISA from the Post Office pays 3.01% AER for deposits of £500 or more and it can accept transfers from previous years’ ISAs. The rate includes a bonus of 1.26% for 18 months and interest is paid annually. The account can be opened by phone or by post 

 


Your M&S Bank

Groceries, furniture, clothing and now banking! The retail giant announces its plans to shake up the high street banking sector.

Marks & Spencer have confirmed they will be moving into High Street banking, with their first branch opening in July within their flagship store in Marble Arch.  The new operation will see over 50 branches opening within high street stores in the next two years, with a predicted 500 new jobs created across the UK by 2013. This includes 400 customer-facing roles and around 100 roles at the company’s Chester based head office.

Branches will be open twice as long as traditional high street banks, reflecting M&S stores current opening hours, as well as enabling customers to bank while they shop from Monday to Sunday. Customers will benefit from 24 hour access to online banking, as well as UK-based call centres.

Each branch will feature private meeting areas, self-service banking points, as well as a bureau de change.  Marks & Spencer’s aim is to create a relaxed, contemporary banking environment for its customers.

With over 3 million customers already using M&S Money products, including credit cards, savings and loans, the retail giant is no stranger to the sector. It plans to make current accounts available from autumn 2012 and mortgages will be offered by the bank at a later date.

In addition to its strong retail heritage, M&S Bank has the support of HSBC. M&S Money made a profit of £100 million last year, which was split equally between the retailer and HSBC.

Chief executive Marc Bolland said: “M&S is one of the most trusted brands on the UK High Street and we’ve achieved this by continually listening and responding to the needs of our 21 million customers. This bank will be built on M&S values; putting the customer at the heart of the proposition and delivering the exceptional service that sets us apart.”

Supermarket chain Tesco is also preparing to launch its own current account but has been forced to delay it until next year.

So what’s next for High Street banking?

Your Cyprus Savings Are Safe

Last month, Cyprus became the fifth Eurozone country to officially ask for an international bailout in order to protect its financial sector from exposure to Greece debt. For weeks, Cyprus has been trying to manage its options between a bailout from Europe's EFSF fund or a joint loan from either Russia or China.

The Cypriot government finally came to a decision and decided to seek financial assistance from the European Union's bailout fund, as the country sought to reduce the risk to its financial sector from any spill over from the Greek debt crisis.

The Bank of Cyprus has offered savings accounts in Britain for 50 years, including several best-buy deals. However, unlike most foreign-owned banks it has not until recently sought British authorisation. This means that if it got into trouble, savers would have had to look to authorities in Nicosia to pay compensation, rather than to Britain’s Financial Services Compensation Scheme.

However, last week, the Bank of Cyprus’ UK-based savers received good news, when their UK protection came into effect. Their savings now come under the protection of the British Financial Services Compensation Scheme.  As a result, UK-based savers with the Bank of Cyprus are now guaranteed protection on deposits up to a maximum of £85,000 per person, by the FSCS. The Bank of Cyprus UK is now writing to customers informing them of the change.

UK savers with Santander, which includes the old savings brands of Abbey, Bradford & Bingley and Alliance & Leicester, are also safe to the same amount, as Santander UK is fully authorised in Britain, which means it enjoys the same compensation protection as other institutions.

Retirement and Investment Solution’s A-Z Guide to Financial Planning

Stone

Pilot Trusts


The Challenge

Many of us have death-in-service cover through our employer or death benefits through a pension scheme. You will probably have completed a nomination form to ensure the money goes to your spouse or partner.

The nomination form works perfectly to ensure that the proceeds of the payment pass directly to your spouse or partner, quickly, without any probate delays and typically free from any Inheritance Tax. However, have you thought about the tax implications of this in the longer term?

Once your spouse or partner receives the lump sum, the money is added to the value of their estate and as a result, may be liable to 40% Inheritance Tax on their death, significantly reducing the overall amount inherited by the next generation.


The Solution

Fortunately, there is a simple way to avoid this problem. Ask your pension scheme provider to pay your death benefits into a special type of trust, instead of directly to your spouse or partner. This is known as a Pilot Trust.

Established during your lifetime with a nominal sum, it then lies dormant until your pension death benefits are added.

Your spouse or partner can still benefit immediately from the lump sum in the trust, but because it is not treated as their own money when they die, no Inheritance Tax will be deducted.

Table1

Table 2

What should I do next?

Contact Retirement and Investment Solutions on 01489 878300 or email This email address is being protected from spambots. You need JavaScript enabled to view it. to explore if you and your family can benefit from a Pilot Trust.

 

 

 

PENSIONS AND DIVORCE – IMPORTANT INFORMATION

It has always been a widely held belief that pension funds are protected from creditors in the event of bankruptcy but a recent court decision has thrown this into doubt and which could have significant implications in divorce cases where pension funds are a part of the assets.

In a recent ruling in the High Court in the case of Raithatha v Williamson the bankrupt member Mr Williamson had an uncrystallised pension fund worth £1 million. He had not taken any benefits and relied upon the protection from the Welfare Reform and Pensions Act 1999 that excludes uncrystallised pension benefits from being part of the bankrupt’s estate. Of course if Mr Williamson had crystallised his pension fund and taken benefits the trustee in bankruptcy, Mr Raithattha, could  have applied for a general Income Payment Order that would have allowed the recovery of any income over and above that deemed necessary to provide the reasonable needs for Mr Williamson and his family. 

Mr Raithatha was advised to issue an application against Mr Williamson under the Income Payment Order rules on the basis that Mr Williamson could take the benefits from his pension fund but had chosen not to  (possibly to avoid some or all of the benefits being “lost” to his creditors!).

The Court concluded that there was no logical reason why there should be a distinction between a bankrupt who had taken pension benefits and one who could have taken benefits but had chosen (for whatever reason) not to do so.

The right to appeal has been given and we shall have to wait to see if the decision is challenged – however if it is not challenged or the decision is upheld this could have significant implications in divorce cases.   

Why?

In divorce cases it is not unusual for one or even both parties to be placed in a difficult financial position and subsequent bankruptcy could definitely be a concern.

If that person is aged 55 or over and has an uncrystallised pension fund (possibly as a consequence of the divorce settlement) then this decision makes it very likely that creditors could successfully apply for a general Income Payment Order against the benefits that could be provided by that pension fund.    

Earmarking has not been widely used as a means of using pension assets as a part of a divorce settlement due to the drawbacks (lack of control over timing and possible loss of benefits on death) but if there is any possibility of either party to the divorce being made bankrupt then perhaps this ruling makes earmarking a better proposition than pension splitting. 

Triviality Rule changes – “Stranded Pots”

Regulations have been laid earlier this year extending the facility enabling small

“stranded” pension pots to be commuted on the grounds of triviality to include personal

pensions. This extension takes effect from 6 April 2012 and means that if you have a small pension fund you can take the fund as a lump sum rather than use it to buy an annuity (fixed income for life).

In order to take advantage of this the scheme rules must allow it and the following

conditions must be met:

• member has attained age 60

• the funds in the personal pension arrangement must not exceed £2,000

• the payment extinguishes the member’s entitlement under the arrangement

• only 2 such commutations are possible in a member’s lifetime.

Please note that these payments take no account of the level of pension savings the

member has elsewhere and are in addition to any trivial commutation lump sum payments and

any commutation of small pots payable from occupational pension schemes.

10 Top Tips...

When we meet with clients there are a number of themes that crop up time and again – the same sort of questions and ideas. With this in mind we have prepared a list of what we feel are 10 top tips for those people facing retirement.  

Our 10 top tips to preparing for retirement:

    1. Work out how much income you will need in retirement – this is often overlooked but it is vitally important. A lot of what we do for our clients is financial planning but it is almost impossible to plan if you don’t know    what you are trying to achieve.  We have an excellent budget planner on our website and this will help you to do exactly that.  
    2. Get a State Pension forecast. Many people overlook the importance of what the state will provide. We have found that for many of our clients it is a useful top-up to their pension provision.
    3. Work out how much income you will get from your private and company pensions. It is very important to keep an eye on this. Make sure that you receive up to date valuations and projections for your personal and    company pension provisions. It is important that you review this regularly to ensure that it provides what you will expect.
    4. Look at the shortfall and devise a plan to meet this (see tip number 10!).  The most effective and straightforward way to achieve this is to seek out some professional advice.
    5. Ensure that your wills are up to date and reflect your wishes. This more for peace of mind than anything else and will ensure that the plans you have are carried out.
    6. Have a plan for your retirement – think about new hobbies or activities – have a strategy for how you are going to occupy this new chapter in your life.
    7. Keep on working – nowadays many people simply reduce the amount of work they do gradually or start something new that they have always wanted to do – it may be volunteer work
    8. Check out your options at retirement – how best to use your pension funds.
    9. Check your Tax – HMRC can get this wrong in the year up to and the year after retirement.
    10. Contact Retirement and Investment Solutions for a free retirement review!  At Retirement and Investment Solutions we offer a free retirement review. One of our overriding beliefs is that everybody should seek         independent impartial advice with regards to their retirement plans and how best to make the most of their retirement income.    

Equity release role in meeting long-term care costs.

Financial Conduct Authority head, Martin Wheatley, says equity release has a role in funding long-term care and argues that people may have moved on from the idea of leaving their home to their children. Speaking at an Age UK conference in London last week, Wheatley said equity release represents “one part of the solution” to the problems faced by an ageing society.

He said: “There is clearly a huge amount of capital built up in homes and we do not all need to leave large legacies to children who have already grown up and have a home themselves.“We may have moved beyond the age of leaving a home intact and debt-free to the next generation. The challenge now is how people can utilise the value that has been built up to pay for what is becoming an increasing problem of caring for an ever-longer old age.”

Association of British Insurers Director General, Otto Thoresen, said equity release is a big part of the solution to long-term care funding and could play a role as the industry looks to build on the care funding proposals outlined by Andrew Dilnot last July. He says: “We need to start thinking about how we can begin raising the profile of equity release in a positive way.” But Joseph Rowntree Foundation chief executive, Julia Unwin, warned equity release cannot cover the increasing levels of retiree debt. She said: “The Treasury has its eyes on equity release to pay for people’s old age, to pay for care, provide insurance and possibly pay off their children’s student loans. Let us remember that we cannot use equity that many times. The fact that a very high number of people are entering retirement with mortgages seems to be a wake-up call that people are leaving employment with quite a high level of debt. We should not overstate what that equity is there for.” 

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Contact us

Retirement and Investment Solutions
5 Lancer House, Hussar Court
Waterlooville
Hampshire, PO7 7SE

T: 01489 878300
F: 0870 0104883
E: advice@retirementis.co.uk