AMOUNT OF PENSION From April 2017, a new single weekly flat rate of £144 (in today’s money) for all pensioners (the actual figure will rise to take account of inflation) will replace the current system. The  tiers of the graduated, basic state and the state second pension will be merged into one, and the means testing complexity of Pensions Credit will be abolished. The single tier will increase in line with the average growth in earnings. 

QUALIFICATION To qualify for the full amount, individual will require 35 qualifying years of national insurance contributions/credits (increased from the current level of 30 years). After 35 years, no further benefits will accrue. Importantly, nobody will be entitled to a penny until they’ve amassed at least 7 to 10 qualifying years.  And those accruing fewer than 35 years but above the minimum number of qualifying years will receive a pro-rated amount.  The focus will be on individual qualification – being able to inherit or receive rights from a spouse or civil partner will cease. Deferral of the single-tier pension will be permitted in return for an increased weekly rate, but the ability to take the deferred payment as a lump sum will stop.  There’ll be a sharp cut-off point - the new pension won’t be available to those 11 million people who have already reached their state pension age by April 2017.  The proposals also confirm that the state pension age will be increased from 66 by 2020, then to 67 between April 2026 and April 2028. Due to increasing longevity, the age will be reviewed every 5 years.

CONTRACTING OUT Scrapping the state second pension signals an end to defined benefit (DB) contracting out. The downside is that 7 million members (figures issued in the White Paper) of DB schemes (most of these are in the public sector) will face a hike of 1.4% in their National Insurance (NI) contributions. Furthermore, employers sponsoring such schemes will pay an extra 3.4% NI, and this cost increase is likely to accelerate the closure of DB schemes.

TRANSITIONAL MEASURES Due to the inherent complexity of the current state system, transitional measures will address the issues of state pension benefits accrued prior to the implementation of the single tier pension.

WHO WILL BENEFIT? Knitting together the diverse components that make up state pension provision won’t be straightforward – there’ll undoubtedly be winners and losers. Those who will particularly benefit will be women who have taken time off to care for children; low earners; and the self employed who currently are entitled to only a full basic state pension (currently £107.45 a week). The new system will be detrimental to those older employees with long-term membership of SERPS/State Second Pension.

IN SUMMARY Despite these new proposals having some flaws, these changes should be embraced positively as individuals will understand their state pension entitlement and will be in a far better position to prepare for their retirement and plug any shortfalls with private pension provision.  At a time when auto-enrolment is being rolled out across the workforce, and individuals are being encouraged to make additional provision for their retirement, abolishing means testing creates far more of an incentive to save.

Great opportunities in financial services for our many clients in London NW1 and the wider community of London and and the South East

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One of the main early adopters of the discreditted goverment sponsored pension scheme for auto enrolment, NEST, has pulled out and taken their business to an insurance company. Who can blame them? NEST is not as inexpensive as some would have employers believe and it is certainly highly inflexible - there is also no advice available direct!

We recommend all employers take independant financial advice before making what could otherwise be a very costly mistake!

Despite this the unexpected deal reached by the Eurozone on 29 June 2012 was welcomed by investors and resulted in gilt yields rising 11 basis points to 2.29%. This leaves providers of annuities with an opportunity to increase annuity rates during July, in some cases by up to 2%, should gilt yields remain at current levels or increase further.Annuity rates continued to fall in June with reductions of 1.0% to 4.0% and with the 15-year gilt yields reaching their lowest ever level of 2.06%.

Despite this the unexpected deal reached by the Eurozone on 29 June 2012 was welcomed by investors and resulted in gilt yields rising 11 basis points to 2.29%. This leaves providers of annuities with an opportunity to increase annuity rates during July, in some cases by up to 2%, should gilt yields remain at current levels or increase further.

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Whether any of us likes to admit it or not the UK spent more than it earned for far too long. The mountain of debt that this has created must be significantly reduced otherwise our economy will end up as a basket case - like Greece or Ireland - and we will all be far worse off!

That means the government has to spend less borrowed money or raise taxes. But contrary to popular opinion further taxes on the perceived rich will result in very little extra money for the treasury and may drive higher earners out of the country - as we have seen in the past. No one wants to pay more tax in any event...

With little to play with the Chancellor today proposed a broadly neutral budget offering some tax breaks and reliefs for business coupled with an extension of personal allowances and a lifting of the higher rate tax threshold. Axing the rise in fuel duty leading to a 1p per litre cut from tonight instead was also welcome.

Those who have lost or who will lose their jobs as a result of spending cuts will see this budget as doing nothing for them and they would be right. But sadly, cuts in public sector spending and hence cuts in public sector jobs amount to a price that has to be paid if the economy in the UK, and all our futures, are to be secured.

It is planned that a lower taxed, less "red taped" private sector will create jobs in the medium and longer term - and we can but hope. But an extension of small business relief will certainly help this small business fund further employment opportunities later this year.

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From 01/01/2013 in order to trade as independent, financial advice firms will have to meet far higher professional standards than those required today. This means there will be fewer such firms in the future. Facts & Figures already meets most of these standards and is working hard to put the last pieces of the jigsaw into place as the regulator's thinking evolves. We do know that in order to trade as independent firms will have to offer:

By definition then other advisers won't and from January 2013 their advice will be labelled "restricted". Some restricted advice firms will say they are specialists in a particular area. But if I have my car serviced I clearly don't take it to an engine specialist, because I also want someone to look at the brakes!

Facts & Figures is committed to retaining its hard won independent status and continuing to meet the ever higher requirements for trading as chartered financial planners, the "gold standard" for financial advisers.

Restricted advisers may say meeting all these requirements will cost us a fortune and make us expensive. They are certainly right about the costs but, because we have heavily invested in our systems and administrative support, advice from Facts and Figures is surprisingly affordable.

Why not give us a call and find out more?

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TCF Investment noted that there are over 17 million people in the UK who have collectively saved £158 billion into cash Isas (source: HMRC), now earning very low levels of interest. Many of these investors will be trying to protect against inflation with inappropriate asset class mixes – cash will be eroded by inflation over the long run.

So, for example, if someone without advice on National Average Earnings of £25,500 saved 3 per cent of their salary a year for 40 years in a tax inefficient way with low returning assets (2 per cent pa net, with salary inflation at 2.5% pa) the final value might be £74,444 – and provide an income in retirement of £4,615 a year.

If, after good advice, they saved the same amount but with 20 per cent tax efficiency on their savings and into an asset mix that delivered real returns of 3.5 per cent pa year, the final value would be £220,120 – which (with an improved annuity rate) could provide an income in retirement of £18,050 a year. That is nearly four times as much.

In this example, the value of advice could be a whopping £268,686- ie – an extra income of £13,434 for 20 years or ten times the starting salary of the saver.

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An announcement from George Osborn at Tory party conference today has signalled that the qualifying period for the right to claim unfair dismissal will be extended from one to two years on 6 April 2012.

“We are ending the one way bet against small businesses” said George Osborne in Manchester and “We respect the right of those who spent their whole lives building up a business, not to see that achievement destroyed by a vexatious appeal to an Employment Tribunal.  So we are now going to make it much less risky for businesses to hire people.”

It has also been announced that from April 2013 there will be a fee payable for bringing an Employment Tribunal complaint.  The fee will be refunded if the claim succeeds.  Consultation will be undertaken later this year concerning the level of the fee and the means by which it will be paid. The hope is that the changes will reduce the number of Employment Tribunal claims by 2,000 per year.

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For us as independent financial advisers and chartered financial planners we are committed to maintaining the independent status our clients tell us they prefer.

But this is not the first time this area has been "fiddled with" by bureaucrats. Regulatory polarisation was introduced in 1988 and advisers became either tied or independent. Consumers clearly preferred independent financial advice as the business results of the IFA sector and the failure of the banks to capitalise on their captive markets have consistantly demonstrated ever since.

Recently Simon was asked to submit comments on regulatary costs to a parliamentary sub committee reviewing the cost of regulation. This is the report that was sent. For consumers it is probably a boring and slightly techncial read BUT just remember the multi million pound bill for regulation paid by the financial services industry is being funded by you!

Did the regulator catch the banks or Equitable; Arch Cru or Keydata before they happened? That would be a no!

Financial Services became regulated in 1988; since then the UK has lost c 400,000 life and pensions financial services jobs; including the destruction of many major financial services businesses such as The Prudential who used to have c 1,000 agents on the road and Sun Life of Canada who had another 1,000 - a company I personally worked-for for 12 years.   SLOC still makes money in N. America and the far East but it cannot make money in the UK because the regulatory costs are so high.

The question for those who establish the regulatory framework is: “is this a price worth paying for a well regulated UK system?” It might be if regulation had actually worked; but in the words of one of the early RDR discussion papers “20 years of regulation have not brought about the desired results”.    

We now have RDR but we have already made the UK so regulated that few can afford to do business here. It also means that there are 400,000 less people involved in providing financial advice and helping people save money and protect their families. Clearly some were poor and effective regulation was required; but we have not had it and the attrition rate has been excessive.  

Only recently Barclays pulled the plug on its FS arm because it could not make any money out of it - due primarily to regulatory costs. While on one level few will shed tears over  a bank in trouble, their captive client base should have given them an unassailable position but they could not make any money, so the UK loses yet more distribution.   It is worth underlining that those who do not buy life and health insurance from the private sector will ultimately claim on the state at taxpayer expense.

Current RDR demands higher qualifications this is no doubt a good thing but there are financial advisers with unblemished 20 plus years careers who are being forced to go back to school and take complex exams. The absence of any grandfathering has put a huge and unnecessary cost on industry practitioners. In addition the FSA now requires advisers to be issued with a statement of professional standing annually. Another huge paper chase for what value? Those authorised to issue such certificates will doubtless make money.  

The exact cost of qualification is hard to quantify (I had mine 10 years ago) but 2 or 3 months of exam study at say £150 per hour £6,000 plus the cost of the exams and study material, say £1,500 plus any courses another £500.   The cost of annual accreditation is as yet unknown as the requirements of those issuing the certificates are as yet unknown - but another couple of hours to collate the support data undoubtedly required so say £400 plus the certificate cost itself…  

The FSA has delayed the doubling of its capital adequacy requirements which means that firms have another couple of years to double the amount of dead money they are required to keep on their balance sheets. But there is an express cost to this one £10,000 in addition to the £10,000 we are already required to keep on deposit. The FSA claim that this proves that firms have enough money to meet their obligations. But it is a circular argument. If a firm uses the money to meet its obligations it is in breach. So it just becomes dead money. No other profession in the country has this ludicrous requirement.  

Caveat emptor has disappeared in financial services. If a client loses money their first thought is how can I get it back and the FSA has spawned a huge compensation culture where honest financial advisers are regularly having claims upheld against them on very tenuous grounds. Advisers also have open ended liability with no long stop… The excess on a claim is usually £5000, but the cost of annual PI premiums is far higher than it should be due to the open ended nature of the liability.  

In 1988 FS was straight forward – adviser were either tied agents or independent. The law of agency was clear: tied agents worked for their employers, typically banks or life companies, while independents worked on behalf of their clients. At the last rule rewrite c 2002 - multi-tied advisers were introduced, they were neither one thing nor the other, although most multi-tied agents have consistently masqueraded themselves as independent - something the regulator has not done anything about, perhaps until now.   Now they want advisers to be independent or “restricted” so we are back to where we started but there remains, even at this late stage, considerable confusion in the profession about what is actually required of an independent firm.

We now have a only year to decide how we are to trade, but we still do not know the rules. Of course for nearly 20 years we have proudly proclaimed ourselves as independent – it is the one thing most customers seem to want. But I am still not certain of the specific requirements and they have changed several times in the last 24 months.  

I have personally attended 3 and a half days of training on this one issue alone in the last 2 months. I charge £200 per hour so the cost to my firm is 3.5 times 8 times 200 which equals £5,600. It might all be worthwhile if I now knew the exact answer - but I don’t. I attended one 3rd party course with other advisers who had also been to FSA RDR road shows where it became clear that different FSA teams were putting out conflicting information on this vital issue.  

The FSA has determined that consumers should know the precise cost of every aspect of any financial transaction in cash terms. Like much of the what the FSA comes up with it sounds great in theory. But when people buy a car they do not know who much the engine or the seats cost individually - they just know that the car costs say £15,000. The FSA wants costs broken down to the nth degree.  The cost of the paperwork to present this information is onerous in the extreme. The amount of paperwork the public is expected to read is excessive (often over 50 sides of A4 paper for a single transaction) and when there is a complaint the common client answer is: “I signed what I was asked to sign - but I did not understand it.” In these circumstances FOS often deems the adviser liable.  

Instead of an adviser being able to suggest invest your money with XYZ and the total cost will be x% per annum. The FSA wants advisers to break down the cost of advice, the cost of the platform, the cost of individual funds, dealing charges & stamp duty costs then add back the value of any rebate. In theory this is not a problem, but because the same funds are sold through many different outlets the fund management houses risk having to create whole rafts of different versions of the same fund with a different underlying charge (and therefore different performance) instead of having one fund and offering different rebates.  

This is a subtle point but the cost ramifications are potentially exorbitant. So much so that when the FSA finally realised the scale of the problem it postponed making its rules in this vital area until after RDR implementation. So now as  a firm we are not sure to best structure ourselves for the best. It is actually a farce. The cost to the fund management industry of these changes is incalculable but will run into many millions. There is also a huge cost to our firm alone which will run into thousands.  

The FSA has determined that commission on investment business is bad because they say advisers are churning (rewriting) existing client plans to generate more income. The FSA commissioned research in this area which proved the contrary; but the FSA pressed ahead with a commission ban anyway. Instead of limiting the maximum commission that could be paid (which was deemed anti-competitive) we now have a move to what is being termed “adviser charging”. Laughably this can be a percentage of the sum invested and can be taken from the product so in many minds it is still commission. BUT there are two huge unintended consequences of this route:   

There will be no commission on regular savings plans; so if someone comes into my office for advice on his £250 per month personal pension I have to charge him £500 up front to cover my costs. But it is generally accepted that most will not pay. Perhaps the FSA hopes people will deal online without advice (but where, as I understand it, commission can be paid). Consider the “success” of workplace stakeholder pensions - over 90% have zero contributions. Conversely individual  stakeholder plans have a capped charge of 1.5% per annum and commission could be paid to advisers, while the no advice, and supposedly cheap NEST plan has a 1.8% contribution charge and a 0.3% AMC - which equates to a 1.5% per annum AMC. In other words commission based advice is available under present rules - effectively free. It’s not, because zero commission stakeholders are available with a sub 1% AMC. But the question then becomes is advice and the motivation to invest worth 0.5% per annum - surely it is?

In addition one bi product of adviser charging is that those clients with investment bonds in receipt of on-going advice will have to fund that advice from their 5% annual withdrawal allowance rather than from the product so those who qualify for age allowance are now being disadvantaged.  

Every advice firm in the UK is having to rejig its business model to comply with adviser charging. Commission is being banned to solve a problem that does not exist at a huge cost to every advice firm - we have spent literally weeks on this – at least £30,000 worth of time. But the future of our business (and every other advice firm in the UK) is at stake.  

At manufacturer level every product provider in the UK is having to rewrite their software yet again at the behest of this latest regulatory whim. Let us not forget this is not the first “play” they have had with adviser remuneration: first they introduced mandatory c 8 page illustrations; then they mandated hard disclosure of commission and now this; and each change requires yet more hugely costly IT work from every product provider in the UK.  

C 4 years ago when RDR was first floated and the FSA’s interest in abolishing commission on investment business became known they were warned that EU rules (now crystallised as MIFID 2) might have a serious impact here. Nevertheless they were determined to proceed. We are about to enter RDR and only a month or so ago the MIFID rules, which are potentially binding on the UK were published and they are totally at odds with what the FSA is trying to achieve. So this area is again a mass of confusion. All at huge cost.

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Going to university can cost more than £10,000 a year when you take into account tuition fees, accommodation, food, transport and socialising.

When considering university education you should ask yourself three questions.

1. What will it cost to send a child to university for a year?

2. Can I afford it?

3. Before committing a great deal of hard earned cash, make sure your child is both suited and prepared to do the work to justify the investment. In theory a university educated student should command a higher salary in the job market; but in reality a 2/2 in an arts-based subject does not generally impress employers.

In terms of funding the trick is to start early; the longer you have to save the less you need to put aside each month. As to where you put it, for terms of over five years I would recommend stocks and shares ISAs; put the money on a wrap platform and spread it between a number of fund managers and markets. Seek independent financial advice for the selection.

If you have a lump sum then ISAs for each partner first and perhaps a unit trust portfolio with the rest. Some will favour child trust funds or children's ISAs but I am not a fan of giving children control of material sums at a young age. If they have control of the money they may prefer the beach in Bali to a three year slog at uni.

If the money is under the child's control the child has the choice; if it is somewhere else; the parent has control. You may agree to fund Bali but at least you get a choice. If ISA allowances have been used up a series of maximum investment plans maturing in sequential years as required might be an option for a higher rate taxpayer.

Avoid friendly societies they tend to be too expensive even with their bit of tax relief.

If you have left it too late and you have some equity in your house a further advance may help. Flexible mortgages with a drawdown facility can be helpful.

Last but by no means least student loans are an attractive way of funding late planners cheaply. Take the student loan and the parents can help pay it off later if they want to.

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There is a 2 tier state pension in the UK comprising the basic old age pension and State Second Tier Pension S2P (formerly SERPS). Both are notionally funded from the national insurance (NI) paid by employers and employees.

For several years it has been possible to contract out of  S2P (stop earning S2P entitlement) by simply asking the government to pay an NI rebate into your personal pension each year instead.

Contracting out means giving up S2P accrual for the current year in favour of receiving a rebate into a personal pension in the current tax year instead. This is then invested in a personal pension to buy  benefits at retirement.

Whether contracting out  remains or ever was a good idea is a complicated argument based on individual circumstances. We would be happy to advise on request. Contact Us

When contracting out via personal pensions was first introduced in 1988 there were complex rules about providing for a widow(er)'s pension - even if you weren't married. No no tax free cash could be taken from the pot either - unlike "normal" personal pensions. However tax free cash is now available and from next year the frankly daft requirement to always provide for a widow(er) is removed - but you can if you want or need to!

From 2012 the government has decided it can no longer afford to pay the rebates to contract people out of S2P and it is cancelling them – hence many who are currently contracted out are receving letters from their pension providers confirming this fact.

In future when national insurance is paid individuals will accrue S2P again with benefits to be  paid in retirement; rather than have a rebate paid into personal pension now.

The government is saving money today but ramping up a big pension bill for the future. Sadly, as we have recently seen in Greece, governments do not think they get re-elected for solving tomorrow’s problems now!

In short if you are the recipient of one of these letters you had probably best Contact Us

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Simon Webster 02/11/2011

UK mortgages usually run for 25 or sometimes 30 years; while typical fixed rate mortgages run just between 2 and 5 or occasionally for 10 years before reverting to variable rate. In the US full term fixed rate loans are very common. But in the UK they are non-existent. Recently Housing Minster Grant Shapps MP called for that to change. He was immediately pilloried in the Guardian under the headline “Astonishingly Bad Advice”. A bold opinion and one based exclusively on recent history. It is always easy to be wise with hindsight, but the real question is whether taking a long term fixed rate mortgage now is really such a bad idea?

Over the last 30 years I have seen mortgage famines, deregulation, special offers to attract new business, interest rates of 15% and now some tracker rates of under 1%. The one thing I have learnt it is that it is hard to predict what will happen next year - never mind what will happen over the next 25 adn beyond.

The advantage of a long term fixed rate loan is that borrowers know exactly what their payments will be for the duration of the fixed rate.

Clearly the 2 things to avoid are fixing your mortgage only to see variable rate slip below the level you have fixed (as happened to many in the noughties) or taking a variable option only to see that variable rate rise above the fix rate that you could have had. If a borrower fixes at 5% and variable rates go to 10% they save a fortune but if, as many people did in the noughties, borrowers fix at 5% and variable rates move to 2%, they could now be paying considerably over the odds.

As a borrower the first thing to remember is that they are your repayments. So you must ask yourself what you think is going to happen to long term interest rates. If you don’t know you should discuss the options with your adviser. But there are no guarantees. You have to make a judgement on what you consider to be the balance of probabilities. But in the end it has to be your decision.

If you are taking out a new mortgage today and you have the choice between a variable rate and a more expensive long term fixed rate there are 5 things to bear in mind:

If one accepts that historical mid-market interest rates for mortgages are in the region of 6 or 7%, for much of the noughties you could safely say a 5 year fix was a 50:50 bet, so we recommended a lot of variable rates. But if I was taking a new loan today (and subject to pricing and availability) I would be giving long term fixes some serious consideration – interest rates cannot fall off the floor.

Given the fact that there aren't many long term fixes around; the only question left unanswered is whether the lenders will take any notice of Grant Shapps.

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Simon Webster
Facts & Figures: Chartered Financial Planners
01233 722922

Halifax was the first of a couple of lenders to increase their variable mortgage interest rate recently. A fix is starting to look increasingly attractive. Talk to us about your options.

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Sadly there is no magic pill. The patient, the British economy, has been seriously ill for some time and a period of convalescence is required; as with so many things, the solution to our problems probably lies somewhere between the two political poles.

My wish list for budget 2012:

POST budget comment 4 out of 6 wasn't bad!

The eagle eyed will note that all this comes at a cost to the exchequer. But I would argue not at a large cost - and perversely number 2 should actually boost revenue - ask the Adam Smith Institute. As tax receipts are way higher than predicted they will fund all of the above which together will really help stimulate the economy.

By tomorrow afternoon we will know the answers.

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In truth it is higher rate relief that is under threat. Encouraging people to save for their retirements comes at a price and the chancellor needs to balance the books. Will higher rate relief go this year? in truth we do not know. But this year it just might.

So get your contribution in early this year - just to be on the safe side...

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I hear today that tanker drivers are striking for financial gain and better conditions. Thjey earn £45,000 per annum for driving well maintained vehicles, hardly that onerous.

The average wage in Ashford, Kent - where our head office is based - is c £20,000 per annum and in London perhaps £25,000. Yet these guys are earning twice the national average and they want to strike! Hardly fair on the rest of us trying to a make a living - especially those living in rural areas.

No wonder so many jobs end up abroad where people appreciate what they have.

Let's hope it does not happen...

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The Personal Accounts Delivery Authority (PADA) has revealed the pension saving scheme is to be rebranded the National Employment Savings Trust (NEST). The working title “personal accounts” will be replaced by NEST as the consumer-facing brand for the pension saving scheme targeting low to moderate earners. PADA says the cost of the rebranding excercise, including the research undertaken to come up with the name is £363,000.

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NEST will be run by the NEST Corporation, a not-for-profit trustee corporation, and will have its own website. The scheme will launch in low volumes in 2011. Acting PADA chair Jeannie Drake says: “The reforms to UK workplace pensions, including NEST, represent a consensus settlement reached across industry, political parties and interest groups. We all have one goal in mind - to make saving for retirement become the norm and to put an end to poverty in old age.”

Minister of state for pension reform Angela Eagle says: “This Government’s radical reforms to the pensions system will ensure millions of workers on low and moderate incomes are able to save for their retirement in a workplace pension with a new guaranteed minimum contribution from their employer. Nest will play a key role in this and help transform attitudes to saving.”

Facts & Figures Managing director Simon Webster was scathing about the changes. "Personal Accounts were a poorly thought out idea when they started. When will these stupid politicians learn?

Name changes make no difference. Ten years ago stakeholder was going to be the answer to low levels of UK retirement funding. It was going to work, we were told, because it was cheap. Now they have produced something else cheap but no advice is available, and there has been total mismanagement, confusion and delay - so it too will fail. Meanwhierl the retirement aspirations of millions could be irreperably damaged.

In any event don’t wait for your employer or the Government to take the initiative, start saving for retirement today.”

Independent pensions consultant Ros Altman, a former adviser to the Government on pensions policy, warns changing the name of Personal Accounts will not make them work any better and she is equally unimpressed. She says,

"NESTs are only continuing bcause they offer short term benefits to powerful vested interest groups with no regard for workers. Politicians will claim credit for getting more people to save in a pension. Employers will cut costs by cutting pension contributions back to the 3% minimum. The Treasury will save money on future means-tested benefits and financial companies will earn fees on managing the money each year. Indeed by ploughing ahead with this project, regardless of the risks to the lower and middle earners they are aimed at, the Government is continuing to ignore the dangers of forcing workers into a pension arrangement that may not be suitable for them," she says.

Future means-testing, investment and annuity risks, levelling down, and cut-backs in existing pension coverage as a result of NESTs are "serious threats to future pension outcomes which both the Government and the pensions industry are choosing to ignore", she says. She gives the example of a worker earning £20,000 a year putting £50 a month into their NEST under the assumption this guarantees their future security is taken care of. "The amount workers will be required to put into their pensions will not deliver much of an investment return. These people could discover, but not for many years, that their NEST merely replaced the means-tested state benefits they would otherwise have received."

She says "Unless the scheme is abandoned immediately, Britain will end up paying for its failures for generations to come. If we do not abandon this project soon, we will waste even more money on a pension savings scheme not fit for purpose. If the Government is not honest about the risks then future taxpayers may end up funding compensation claims from workers who will explain how the Government misled them about the value and security of their pension savings."

Contact Us for further advice on Personal Accounts/ Nest.

Later this year the law will change to ban the enforced retirement of workers on grounds of age. This means that a 65 year old, who remains competent to work beyond age 65, can do so. Those who wish to resign at 65 may continue to do so...  

Employers will have to deal with all the issues surrounding having an older workforce. In addition they will need to design their employee benefits packages for those aged beyond 65. The good news here is that employers may phase out medical, life and sickness cover for the over 65’s as the government was concerned that the additional pro rata cost of insuring those who are older would cause employers to curtail schemes for everyone.  

Employees working beyond 65 should continue to accrue retirement benefits so employer sponsored access to independent financial advice is worthy of consideration.   Contracts of employment will need to be amended as will pension related documentation referring to a default retirement age of 65...

Contact Us for further information...

Employee Benefits

If you're not making the most of your whole tax free allowance you're missing out. We explain how to get started with Investment ISAs if you've never dabbled before.

Sometimes referred to as a ‘Stocks and Shares ISA’, an Investment ISA allows you to use your tax free allowance in stocks and shares as opposed to straight-forward cash. Investing stocks and shares under an ‘ISA wrapper’ has the added benefit of protecting you from paying Capital Gains tax on your profits.

How much can I invest? The annual tax-free allowance for Investment ISAs is £10,200 less any amount invested in a Cash ISA (this can be up to £5,200). This increased from £7,200 total, £3,600 cash in October 2009 for savers over 50 and 6th April 2010 for all other savers.

How do I invest? Unlike Cash ISAs, which are simply tax free savings accounts, you will usually require the services of an ISA manager, a stockbroker or the stockbroking division of one of the big high street banks when youinvest in an Investment ISA. You can only open one Investment ISA with one ISA manager per tax year. However, you are allowed to hold different Investment ISAs with different ISA Managers from different tax years. It's important to remember that there is an element of risk whenever you are dealing with stocks and shares and there is no guarantee of returns as with a Cash ISA.

What different types of Investment ISAs are there? Investment ISAs can be broadly categorised into two different varieties: The most popular type of Investment ISA, involves making what’s known as a ‘collective investment’. This is where your money is pooled with others and used to invest in a selection of different shares and sectors that are typically picked on your behalf by an experienced fund manager. As such this kind of Investment ISA tends to be a better choice for first-time or less experienced investors. One of the main benefits of spreading your money between a number of different companies and sectors is that you are mitigating the risk to your capital should one of your investments perform poorly. The alternative is a Self-select ISA where you choose exactly where your money is invested yourself. Your investment is then managed by an execution only stockbroker who simply acts on your instructions as opposed to offering advice.  Alternatively you can manage your shares yourself via a fund supermarket. This type of ISA tends to be better for more experienced investors who have invested in stocks and shares before.

What type of investments can you make? There are a huge number of different types of investments you can make under your ‘ISA wrapper’ as long as they meet the criteria of the ISA regulations e.g. only investing in the shares of a company listed on a ‘recognised stock exchange’ like New York or London. It is your ISA manager’s responsibility to ensure that all investments meet the requirements of the ISA regulations, so any fund offered by an ISA manager should automatically be ISA qualifying. Some typical examples of the different kinds of investments you can make are: Gilts & bonds.  Individual shares & corporate bonds issued by companies listed on recognised stock exchange.  Unit trusts, investment trusts and open ended investment companies.  Exchange traded funds.

Can you make withdrawals? It is possible to sell shares within your Investment ISA and withdraw your money at any time. However, you will need to bear in mind that you won’t be able to reinvest this amount again tax-free during the same tax year. Any profit you make from your Investment ISA is treated in the same way - meaning that you can’t re-invest it during the same tax year.

Can you switch an investment ISA? If you are not happy with the way your fund is performing, then it is possible to switch your Investment ISA to a different fund or ISA Manager. However, be careful not to simply withdraw your money and close the account yourself. This will simply result in you losing your entire tax-free allowance as you are only allowed to invest with a single ISA Manager each tax year. Instead you should arrange the transfer with your new ISA manager who will carry out the move on your behalf. It is possible that you may have to pay a charge for transferring your Investment ISA so always check the details carefully before you act.

Are there any charges? The charges applied to Investment ISAs vary from provider to provider which is why it's really important to familiarise yourself with the fees levied before you apply.  Examples of the kind of charges usually associated with Investment ISAs are: one-off set-up fees, transaction fees, transfer in & transfer out fees and annual charges. You should also be aware that you will be charged Stamp Duty of 0.5% on any shares or funds that you purchase over £1,000.

Are they better than Cash ISAs? Historically, Investment ISAs have offered a better return over the long-term than their cash equivalents. However, this must be weighed up carefully against the greater level of risk that your investment is exposed too, as well as considering carefully what it is you require from your savings and investments. An Investment ISA could also be a better proposition for those in a higher tax bracket as they would otherwise have to pay tax on any share dividends. Even if you currently find yourself in a lower tax bracket, an Investment ISA might be worth considering if you suspect that you may be up for a pay-rise in the near future. The fact that you can move money from a Cash to an Investment ISA (but not the other way round) can be exploited to prevent you placing all your eggs in one basket. If you are new to investing in stocks and shares then - rather than exposing yourself to a higher risk from the start with an Investment ISA - you could first choose to build up a healthy cash base with a Cash ISA and then invest your profits in an Investment ISA at a later date. Alternatively, you also have the option of simply running both concurrently. You should also remember that whereas you can only invest a maximum of £5,100 in a Cash ISA, you can invest your entire allowance in an Investment ISA (or any combination that doesn’t exceed either your cash or total tax-free allowance).

What are the risks? Unfortunately, wherever there is the potential for greater returns on an investment, there also tends to be a greater element of risk. This is the case with Investment ISAs as, by their nature, the value of stocks and shares can go down as well as up. Exactly how much risk you are exposed to will depend upon the risk profile of your investment, how much money you choose to invest and how much of a risk you are personally prepared to take. To take out an Investment ISA, you should be looking to invest in the long, rather than short-term (say around 5 years). Most ISA Managers would advise that the longer you can leave your money in an Investment ISA the better, as this allows the various peaks and troughs of the stock market to even out and offer a more consistent return. To lessen the risk, it could be a wise move to spread your investments between a number of different fund companies, funds or sectors - rather than putting everything into a single company’s shares. If you are new to the world of stocks and shares or even if there is anything you are unsure of with regards to Investment ISAs, it is always worth seeking the advice of an independent financial advisor.

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As the name suggests, principal private residence relief is available for a property that is lived in as a main home. There are implications on the availability of this relief if the property is let out at some point during the period of ownership. Most people are aware of the exemption from capital gains tax that applies on the sale of one’s home.

The exemption, known as only or main residence or principal private residence relief, applies where a person sells a `dwelling house’ which is, or which has been at any time during the period of residence his or her only or main residence. The relief extends to land enjoyed as a garden with the dwelling house, provided that this does not exceed the permitted area.

As far as main residence relief is concerned, the basic rule is that exemption applies in respect of that portion of the gain that relates to a period of ownership during which the property was the owner’s only or main residence. If the property is not the only or main residence throughout the period of ownership, the gain is time apportioned and the gain attributable to periods where the property was not the only or main residence is taxable. If the property is let at some point during the period of ownership, there will be periods where the only or main residence condition is not met. However, some relief may still be available.

Provided that the owner has no other property qualifying for relief, certain periods of absence are ignored in computing the gain.

These include: 

• period(s) of absence not totalling more than 3 years;

• any period of absence of any length during which the owner is employed overseas;

• any period or periods of absence not totalling more than four years during which the owner is required to live in job-related accommodation.  The owner must actually live in the property as his or her main residence after each period of absence for the absence to be ignored, unless this is not possible as a result of the owner’s employment. 

The last 36 months of ownership are always treated as a period of occupation if the property has been a main residence at some point, regardless of whether the owner is actually living in the property at that time.   Letting Relief Where a gain is made on a property that has been the owner’s only or main residence at some point and which has also been let as residential accommodation, additional relief is available. This is known as letting relief.

The additional relief is the lesser of: 

• £40,000 per owner (so for a couple, the limit is £80,000)

• the amount of the main residence exemption otherwise due; and

•  the amount of the gain otherwise chargeable to tax 

Eddie purchased a house on 1 January 2002. He sold it on 31 December 2009. He lived in it as his main residence from 1 January 2002 to 30 June 2004, when he brought a new house which became his main residence. The property was let from 1 July 2004 to 30 September 2009. It was empty from 1 October 2009 to 31 December 2009.  He makes a gain on sale of £200,000.  Total period of ownership = 96 months Period of ownership qualifying for main residence relief = 66 months (01/01/2002 to 30/06/2005 (30 months) plus last 36 months).                                                                                       £

Total Gain                                                                   200,000

Less main residence relief (66/96 x £200,000)               (137,500)

Gain before letting relief                                                 62,500

Letting relief:                                                               (40,000)

Lower of:

• £40,000                    

• £137,500; and

• £62,500                                                              

Chargeable gain                                                           22,500

If Eddie had not made further gains in 2009/10, the gain of £22,500 is further reduced by his annual exemption of £10,100 leaving taxable gains of £12,400 on which tax (at 18%) of £2232 would be payable.   

The fact that a person’s home has been let during the period of ownership does not mean all main residence relief is lost. Depending on the period of letting, it may be possible to sell the property tax-free.

Many people believe that the State will look after them if a long-term illness or injury prevents them from working. But this has now become far more uncertain following the Government comprehensive spending review. The Coalition plans to:

The new Employment and Support Allowance (ESA) was introduced on 27th October 2008 as a replacement for state Incapacity Benefit. The new allowance will take immediate effect for new state benefit claimants, while existing claimants of Incapacity Benefit will be gradually transferred across to the new allowance by 2012.

Claiming the New Allowance - Click to expand Claimants who apply for the new allowance will have to undergo an assessment which takes place during the first 13 weeks of a claim. During this period, they’ll receive a weekly benefit of £65.45 (or £51.85 if they are under the age of 25). The assessment is firmly focused on a claimant’s capability to work and not the extent of their disability. If the client fails the assessment, any benefits they receive while being assessed will come to an end, when they may have to apply for other benefits such as Income Support. The assessment not only helps to establish whether the claimant is entitled to receive benefit payments from the state, but will also help determine how much they will receive depending on which of two categories they are placed in.

How much will the claimant receive after the assessment? - Click to expand If there’s a reasonable chance the claimant will work again, they’ll receive a basic allowance of £65.45 per week and a further allowance, called the Work Related Activity Component of £25.95 per week. However, this further payment is conditional on them attending regular back-to-work interviews. If the claimant is severely incapacitated and it’s clear that they will never work again, they’ll qualify for a slightly more generous second level of benefit. In addition to the Basic Allowance of £65.45 per week, they’ll also receive the Support Component of £31.40 per week. Plus, depending on their circumstances and eligibility for other benefits such as Disability Living Allowance, they could also qualify for an Enhanced Disability Premium of £13.65 per week.

Care homes for the elderly can cost between £30,000 and £50,000 pa – equivalent to sending three children to private school!  Even a couple of hours care at home per day could cost around £7,500 pa.  With local authorities needing to make cuts pensioners will need to rely on their capital, much of which is often tied up in their home.  

If you have a relative who needs care you should ensure that a needs assessment is made, along with a financial assessment (whether or not any financial assistance is ultimately given).  In England those with less than £23,000 in capital may qualify for some financial assistance. If a partner, spouse or qualifying dependent lives with you in your home this may be excluded from the calculations.  

Attendance allowance of £47.80 at the lower rate, or £71.40 for the higher rate may be available.  Registered nursing care contributions may also be paid by the NHS of £108.70.  

It may be the next generation, often in their 40s or 50s who have to shoulder the burden of care costs, so it is never too early to start planning for care costs. 

For impartial independent financial advice contact Pam Webster of Facts & Figures Financial Planning on  01233 722922, email pw@fffp.co.uk or Contact Us

See also Long Term Care

Marginal tax rates can now be very high. Ask most people what is the marginal tax rate for a high earner and they will probably say 50%. But taking account of the reduction of the personal allowance it can now be 75% for a narrow income range. Add employee’s NI and that comes to 76%, with another 12.8% employer’s NI on top. 88.8% tax is rather more than 50%. It is therefore no wonder that many London business owners are looking again at more tax-efficient methods of extracting cash from their businesses.

One way, of course, is to close the business down and take the cash. For the owners of many small and medium sized businesses this could mean a marginal tax rate of only 10% thanks to the now significantly increased entrepreneurs relief. If your client is considering this option, make sure he or she is aware of all the rules relating to this relief and does not do anything to reduce or even eliminate it entirely. I have heard of some business people repeating this exercise several times in succession with “phoenix” operations, although I would suggest this is likely to attract the rather careful attention of HMRC. Shifting income from one spouse to the other can be another popular tax planning move. Provided one is careful this can be very effective, particularly since HMRC lost the Jones v Garnett case on appeal to the House of Lords. The principles established in Young v Pearce still apply, however, so make sure your client does not, for example, try to set up a structure where he owns all the ordinary shares and his wife owns a class of shares with only a right to dividends.

Dividend waiver can still work, whether the purpose is to transfer income between spouses or simply to reward one shareholder to the exclusion of others. As with most tax-planning measures, there are pitfalls of which your clients must be aware. Buck v HMRC clearly established that a dividend waiver could constitute an element of bounty, in which case it would not obtain the desired tax result. This would be the case where it could be shown that as a result of the waiver one or more shareholders was able to receive a higher dividend, as was the situation in Buck. A client going down this route must make sure the dividend declaration and waiver follow all the proper procedures, including ensuring the full dividend without a waiver would have been legal and payable. Dividend versus bonus is still an important consideration. Despite all the changes in both personal and corporate taxation a dividend is still usually more tax efficient than a bonus payment.

As long as the individual is a director and has no written or implied employment contract, it should be possible to pay most or all of the required earnings as dividends rather than salary or bonus without falling foul of the Minimum Wage regulations. Beware, though, of the very recent decision in HMRC v PA Holdings Ltd. This case has established that HMRC can treat a payment as both earnings and a distribution in certain circumstances, and then levy National Insurance even though in tax law it is recognised as a dividend. This particular case was rather special, with very clear tax avoidance mechanisms which the Revenue were anxious to counter, but it has established a rather dangerous precedent. Most commentators believe it should not impact on normal use of a dividend v bonus strategy, and if for some reason your client’s tax inspector disagrees you should quote to him NIM02115 in his own manual, which states: “Dividends are derived from a shareholding and not employment. They cannot therefore be classed as earnings and do not attract NICs.”

Finally, a client may wish to consider using the loan write-off route. A loan is made to a director, and is then written off just before nine months after the company year end (this timing avoids the Section 455 charge which would otherwise apply). At the point the loan is written off it is treated for tax purposes as if it were a dividend. But it has the advantage that as it is not a dividend the company does not have to worry about whether there are distributable profits, nor address the complications of dividend waivers if there are other shareholders who will not receive a similar benefit. It also has the cash flow advantage that it is not treated as income in the client’s hands until the date it is written off, rather than the date it was received. This could buy up to two additional years before the tax on this payment falls due. And it may also be possible for the company to claim corporation tax relief as well, which would certainly not be the case with a dividend payment. Such corporation tax relief is by no means certain, as the company will need to show this expenditure was for the purpose of the trade, but a good accountant may well get the Revenue to accept that it was part of the director’s remuneration package, in which case the deduction will apply, making this an extremely tax-efficient method of payment. I

Please remember that tax planning is filled with traps for the unwary and you should always ensure you take proper advice before attempting to institute such strategies.

Research from Axa published last year (2009) found almost 25 million Britons are suffering from financial anxiety, and 1.4 million taking time off as a result. Many of them a re based in London. The research concluded that money worries continue to be the biggest cause of stress and depression in the UK with stress-related illness costing £3.7 billion a year in lost productivity and healthcare costs.

There can be no doubt that the UK consumer faces a complex range of financial issues from high levels of personal debt to lack of planning for retirement.  We know that the national annual savings gap now exceeds £27bn with 13million people at work having little, if any retirement provision. But while we know issues like this exist, there’s no agreement on what the solutions should be. 

The Government has been asked to take the lead in creating a more financially capable public by offering a set of incentives to both individuals and companies. Until they do why not ask us to council your staff on matters financial.  We believe that allowing individuals to engage with money matters in a working environment will lead to improved productivity, reduced sickness absence, greater employee engagement and enhanced loyalty to the employer.

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Anyone who has read any of my occasional articles on this subject will know that I am not a fan. What we must all remember is that child trust funds are merely a mechanism for returning tax to the taxpayer - surely simpler to just not collect the tax in the first place.  

Under gormless Gordon’s wasteful scheme people were needed to do the sums for collecting the tax and still more people needed for calculating how much to give back and to whom. All extra government salaries and pensions so kids could receive the odd £250!  

George Osborne has hit upon the right answer: save all the bureaucracy and axe them altogether. It is hardly as if anyone was going to make much money out of these things and the cost of running them was ridiculous in relation to any benefit...

In April 2006 SSAS Trustees were given 5 years to adopt “Post A-Day Rules”. All SSASs must adopt these new Rules by 6 April 2011 or potentially face tax charges and other consequences.

The deadline fast approaches - urgent action is required.

SSAS SIPP Borrowing

Pension Property Purchase Advice

Small Self Administered Scheme Advice

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SIFA membership eligibility is based on professional status, which in the case of financial advisers means qualifying to be classified as independent in the terms of  the FSA’s Retail Distribution Review, high level professional qualifications and a fee based client proposition.

The Legal Services Act of 2007 ushers in a new era of professional advice in which the dividing lines between the legal, accounting and financial planning disciplines will be broken down and reconfigured business entities will emerge which are focused on identified client needs.

SIFA’s objective is to support and assist interaction between solicitors, accountants and financial advisers in whatever form this may take. Facts & Figures joined SIFA to assist them in promoting that goal.

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If you are older and think you have left pension planning too late the answer may surprise you. Due to generous tax breaks from the government it is still worthwhile using a pension to increase your retirement income - even if you retire the day after you move your money - as the following example shows:

£10,000 in a building society at say 5% = £500 per annum**

For a basic rate taxpayer £10,000 in a pension becomes £12,500 due to tax relief.

At 65 take an annuity income for life @ 6.6%* (on the £12,500) = £825** - that’s 65% more income.

For a higher rate taxpayer £10,000 becomes £16,667 due to tax relief.

At 65 take an annuity income for life @ 6.6%* (on the £16,667) = £1,100.02** that’s 110% more income!

Now of course if the money is in the building society you can still access your capital - but then you’d lose your income - so a balanced approach is probably wise…

*Single life, level, 10 year guarantee

** Income is potentially taxable in both cases

NB you can get a 6.6% annuity today - more if you are ill or a smoke – you’d be hard pressed to get 5% on deposit rates! Contact Us for fully qualified independent financial advice everyone can follow...in Wye near Ashford and Canterbury in Kent.

Bank of England base rate is at a historic low of 0.5%. Those with base rate tracker mortgages are delighted; those trapped on fixed rates are not so lucky. (Those with savings are in dispare.)

Why is it then that lenders continue to offer 5-7% mortgage rates and charge huge arrangement fees and restrict their lending to a maximum of 85% loan to value in most cases - effectively keeping 1st time buyers out of the market?

The banks have got themselves into a hell of a mess. They are being slated by everyone, me included, for excessive risk taking. The government has had to sure them up financially and they are all trying to find a way to trade in the future. The government lent them money at 5% to 6% and while the housing market continued to see falling prices; lending on property could realistically be described as higher risk. So to minimise lending risks against failing values they lend a lower percentage of current value. To cover their funding costs they need to lend at 5% plus or they lose money on each loan. To build their reserves up they need to get profit into their current accounts - they do this by charging fees, which generate instant profit.

It does not feel right to us as consumers, but it is right for the long term future of the banks, which is arguably good for all our long term futures.

But now the housing market has started to stabalise property is not so risky. So banks MUST increase their lending...

Her Majesty's Revenue and Customs (HMRC) has clarified the rules affecting existing SSAS & SIPP borrowing. Where a SSAS or SIPP has existing borrowing in place from before 6 April 2006, and this exceeds the current maximum limit of 50% of the scheme net assets, any re-structuring of the loan leads to an unauthorised charge being levied on the scheme.

In current market conditions this could lead to financial hardship for a scheme where investment income is falling yet interest on the loan remains at a high level. HMRC have recognised this point and will now accept that such borrowing can be restructured, including a change in the interest rate and/or a change in the term of the loan, without generating an unauthorised charge. This is providing there is no increase in the amount borrowed and that there is no change in the borrower.

At this stage, transferring such loans to a new scheme (which would result in a change in the borrower) would appear to still trigger an unauthorised charge. This is the subject of ongoing discussion with HMRC and we will inform you  here of any changes in this position once clarified.

In current market conditions tenants of SSAS and SIPP properties may be experiencing difficulty in paying their contractual rent. To avoid triggering unauthorised charges the scheme should be enforcing the terms of the lease in a commercial manner.

The practical problem faced by schemes is in assessing what would be regarded as "commercial", particularly if the tenant is connected with the scheme. Recognising that it is better to have a lower rental income than no tenant at all, HMRC has confirmed that the terms of a lease can be reviewed, leading to potentially lower rents, provided that the scheme can demonstrate that the revision is on commercial terms. To demonstrate commerciality where connected tenants are involved the scheme must:

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This recession has made us all increasingly risk averse; loss of income through redundancy or sickness is now an all too real threat. In exchange for a modest premium, payment protection insurance (PPI) makes it one less thing to worry about. But note if you are already under threat of redundancy a new plan may not cover you. So always take independent financial advice.

Recent headlines concerning the mis-selling of PPI do not alter the fact that for the right client PPI is a fantastic product.

Payment protection insurance/ mortgage payment protection insurance will provide a monthly amount to cover mortgage or other loan repayments in the event of accident, sickness or unemployment (ASU). It is available at a cost of around £2.77 per month for ASU or unemployment only at around £2.18. per £100 per monmnth of cover.

To cover a mortgage repayment of £500 per month would cost 5 x 2.77 = £13.85 per month. Unlike its now discredited single premium equivalent monthly plans can be stopped at any time without penalty.In these uncertain times ASU now looks like very good value and we would encourage anyone with a loan outstanding to consider it.

Typically you have to be sick or unemployed for at least one month before you receive payment which usually will last for no more than one year for unemployment or up to 2 for sickness. You’re eligible if you: are in permanent full-time continuous employment or self-employment (minimum 16 hours per week) have been in employment for at least six months, are aged 18 - 60 years (in many cases, cover can be continued to the age of 65) are working in an acceptable occupation, are living in the mortgaged house, and living and working in the UK, Channel Islands or Isle of Man, are not aware of impending unemployment, have been in good health for at least 12 months or 6 months (depending which policy you choose) prior to the start of the policy.

Be aware unemployment cover will not pay out for self employed people unless you can prove insolvency and will not pay out for employees on taking voluntary redundancy or resignation.

If you fall ill many employers will only pay you a full salary for a short time, and some only pay the statutory amount (around £68 for up to 28 weeks). State Incapacity Benefit (paid if you can’t get statutory sick pay, or yours has ended) can be less or not much more (around £58 to £77). The average length of accident/sickness claims, and unemployment claims, is more than six months. (Source: CML website May 2005, for the year 2004)

If you become unemployed Job seekers' allowance is only around £34-£56, and you may not be eligible if you have some savings. The state will may well not help you, but insurance probably will.

So talk to Facts & Figures: chartered financial planners today Contact Us

The following was published as an aritcle "IFA View" by Money Marketing in September 2009...

In 1989 there were c 300,000 financial advisers active in the UK, and while admittedly a goodly proportion were hairdressers within the previous few months, the savings ratio as a percentage of GDP was still pushing 10%. By the way conventional wisdom has it that it needs to be over 12%...

After 20 years of regulation by the hugely expensive FSA and its  predessessors the numbers are dramatically different. There are now only c 30,000 financial advisers left and the savings ratio is down to less than 3%. There have been other contributory factors to this decline; but of the FSA's many failures the fall in savings ratio is probably the most damaging.

The latest RDR is set to introduce 4 key principles; not one of which will address this:

But here's the thing. As a network member our PI insurance premium was over 7% of turnover. When we went direct (3 advisers) it went down immediately to less than three - where it has remained for the last 4 years. I queried this with my broker. The answer was small, director-owned IFA businesses are seen as less of a risk by the risk professionals than large institutions; because as the business is the directors' livelihood more care is taken and they have fewer complaints and therefore less claims.

The FSA's response is to consider pricing smaller IFA's out of business. Given their track record this is hardly surprising. But paraphrasing Ian Hislop if this is logical, I'm a banana.

It is suggested that another 5 - 10,000 advisers will leave the profession by 2012 - what hope for the savings ratio then?

Some in the consumer lobby are trying to advance the proposition that the only independent advice is fee based. This is probably untrue but from 1.1.2013 all advisers will operate on a fee only basis - but only an elite few will remain independent.

Always ask your adviser, "are you independent or restricted?" if they say restricted - RUN!!!!

What few seem to acknowledge is that you cannot legislate for integrity. People either have it or they don't. In my 30 years experience most IFAs do - as do most accountants and lawyers (who are already exclusively fee based.) But still the PI claims in other professions for negligence & fraud dwarf those of the IFA community.

The real difference is that it is the IFA's role to be an agent of the client and to be on the client's side. The role of the tied or multitied agent or now restricted adviser is to represent their bank or insurer - that is the difference.

At Facts & Figures we care about our clients and we always put their interests first.

In advance there really is no right answer to the fix or not to fix question. Some say that from their perspective 100% certainty trumps all other options -but at what price? A £100,000 loan fixed for 10 years at 6% costs £500 per month. A 3% variable rate costs £250. For many a £250 per month insurance policy is simply too expensive...

For those just starting out, the single most important issue is cost now. While that short term attitude is at the route of some of our current problems, for young professionals a cheap deal to get on the ladder now when they believe their income will be significantly higher in 5 years could well be the right answer for them.

In MSE chatrooms I noticed one or two getting "sniffy" about "gambling" on interest rates linked to house purchase. But everything in life is a gamble, when you buy a used car, a used house or something new on the internet or even when you make a proposal of marriage you have no way of knowing in advance whether you have "bought" at the right price or whether you will be "supported" after your purchase etc etc.

Like it or not even crossing the road is a gamble. The trick is to try and make sure the odds are stacked in your favour.

The  average private employer pays sick pay for a month or less- hen nothing. In the public sector it is more likely 6 months full pay, 6 months half pay and then nothing. But what happens then? State benefits are derisory. So we lose our health we lose our income; all we get is some paltry amount from the state. Is this what any of us want?

Permanent health insurance pays out a regular income if someone is unable to work through sickness or accident until recovery, plan expiry or prior death. We have just been able to provide £17,500 per annum cover for a mid 30's smoker, at a cost of just £30 per month payable after he has been sick for just one month! This is incredible value and if you worry about loss of health this might be just the thing for you

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