Rickard Keen

 

Rickard Keen Financial Services – July 2015

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Mixed messages from the government on pensions freedom intervention

 

Ministers have given out mixed messages on when the government will intervene against providers failing to offer full pension flexibility.

Work and pensions secretary Iain Duncan Smith wrote in the Telegraph the government is ready to “name and shame” providers who are giving customers poor deals.

He also said the government has begun talks with regulators to ensure that people have the flexibility they deserve and will “not hesitate to take action”.

It follows news that some providers will not allow the over-55s to withdraw money from their pension pots as they wish, while other companies are charging hundreds of pounds for advice.

But Ros Altmann, the pensions minister, said the reforms - which started in April - must be given a chance to work. “If things aren’t working properly, we will take action,” she told BBC Radio 5 Live. “But let’s give these reforms a chance; let’s see how they work; the idea is right.”

Under the reforms, anyone over the age of 55 has the ability to withdraw as much money as they like from their pension savings, subject to income tax. But some companies are refusing to offer the full range of freedoms.

Friends Life, for example, has written to 1,300 customers, telling them they can either buy an annuity, or withdraw all their savings at once. But savers are not allowed take out smaller amounts - something which would enable pensions pots to be used like bank accounts.

It is not compulsory for providers to offer the full range of flexibilities.

Mr Duncan Smith wrote: “I have a message for those firms: it is your responsibility to sort this out and look after your customers. After all, it is their money that you hold, not yours.”

Keith French of Rickard Keen Financial Services said: “Has the rollout of pension freedoms been an almighty disaster? It depends on who you ask, with a gulf emerging between the two camps.

“In the red corner, the Government and the consumer press are keen to berate providers and the wider financial services industry for not allowing savers to access their pension pot in the way they want.

“In the blue corner are the Insurers and the Adviser community, much maligned for holding back the apparent tide of would-be retirees from a lifetime of instant wealth and happiness.  Perhaps this characterisation is crude but you got the idea.

“The tough talk against those standing in the way of pension freedoms has been stepped up in a big way.  The Government, keen to be standing on the side of consumers, has pulled no punches with its language.

“What is conveniently not being mentioned amongst all this rousing rhetoric is providers are not compelled to offer the pension freedoms, nor do they have to invest significant sums in order to deliver the Government’s vision of pensions freedom and choice for all.

“I agree that it is imperative for savers to be given the correct information when it comes to their options at retirement. This includes whether or not they need to take advice and the providers that are getting this wrong need to cascade the right information to their staff and fast.

“But what is not acceptable is for the value of advice to be sullied as part of all this.  Requirements to take advice have been put in place to protect consumers, not rip them off.  Advisers also act as a welcome voice of reason against the clarion calls to treat your pension like your bank account, with no thought to the tax bill you may incur.

“The overall point is that it is imperative to seek advice before taking action to obtain reassurance that you are making the right decision and not incurring an unnecessary tax liability or loss of flexibility by taking an irrevocable option.”


Leaving your pension to someone else – check your contracts

 

You’ve worked and saved throughout your life so that your pension will provide you with enough to live on in retirement.

Now, thanks to changes in the way that pensions are taxed, more of your fund can survive your death and provide an income or nest egg for your loved ones to enjoy, long after you are gone.

But people with older contracts could miss out on the benefits of new freedoms if they are not careful. Which is why at Rickard Keen Financial Services, we can help you to check your documents.

Since April, there is now enormous opportunity to leave some, or all, of your pot to your loved ones in a tax-efficient way. These funds pass on free of inheritance tax and the beneficiary has the option to draw benefits as income or take it as a lump sum, or leave it to pass down to another beneficiary on their demise.

This means personal pensions are now an Inheritance Tax mitigation tool. For those with Inheritance Tax issues, it is better for them to use up non pension assets before their demise. However, people need to check if their pension plan allows them to do this.

Keith French, of Rickard Keen Financial Services, said: “Older styles of pension schemes may not allow your beneficiaries to inherit your fund as a drawdown account. You may need to upgrade to a more modern pension that does.

“You also need to make sure you take your 25 per cent tax-free cash lump sum before you turn 75. If you don’t, it will be taxable.

“Finally, make sure you give up-to-date details of the nominated beneficiaries of your pension fund to your provider.”

You can nominate anyone to inherit your remaining pension fund as a drawdown account.

“It will come as a surprise to many that your will does not do this job,” Mr French added. “Pension providers should allow you to nominate your beneficiaries when you start paying into your pension, or at any subsequent time. It should be possible to change the beneficiary easily, and some allow you to do it online.

“It is possible to nominate more than one beneficiary, and decide in what proportion you want each person to benefit.”

For more information on pensions, please contact us.


Reviewing investments

 

Each year, check how your savings and investments are growing and decide if you need to make changes. Depending on your investments, you may need to review your savings more than once a year.

Why should you do this? Keith French of Rickard Keen Financial Services said: “People should regularly review their investments to see if they match their risk attitude and objectives. For example, the investments may be set up for growth, when in fact the client wants income.

“Also, more cost-effective and better rates come onto the market all the time – if you don’t review your savings and investments regularly you stand to lose out.

“A regular review will also help you save tax, check that you’re on track to meet your financial goals and even reach your objectives sooner.”

At Rickard Keen Financial Services, by matching your investments with your attitude to risk, you can be sure that the products and funds chosen are right for you.

We will aim to build a long-term relationship with you and can, if required, review your investment strategy on an ongoing basis, tailoring it to suit any changes in your circumstances.


Lessons to be learnt from celebrity wills

 

Some think that they are too young to need to bother, others simply don’t get around to it. That’s why two-thirds of adults in the UK have not yet made a will. However, as some celebrities have shown, unless we get to grips with our demise, and make plans for it, our loved ones could be left with a real headache.

There are two certainities in life: Death and taxes.

One high profile example of this was the murder of TV presenter Jill Dando in 1999. Amidst the shock of her death, it emerged that she had no will, and despite the fact she was due to get married later that year, her partner would not inherit any of her £1.18 million estate.

Instead it passed to her father. Given his age, this made no sense, however, when you die without a will, your family cannot divide your estate between them as they think you would have wanted.

In England and Wales, under the rules of intestacy, if you are married or in a civil partnership (and you have children), your spouse will inherit the first £250,000 of your estate. If you are just living together, your partner will get nothing.

After that, your spouse will receive half of the rest, and the other half is divided between your children (including legally adopted children): step children are not entitled to anything.

The tragic death of comedian Rik Mayall is another example. He died at the age of 56 before he had a chance to make a will.

This meant his wife received the first £250,000 from his estate, and a portion would automatically pass to his children. This may not have been exactly what he wanted, especially as it triggered a large inheritance tax bill on his £1.2 million estate.

Even royalty get these things wrong sometimes. During the trial of her former butler, Paul Burrell, in 2003, it emerged that Diana had written a letter of wishes requesting that her estate be divided differently than specified in her will. The letter requested that her 17 godchildren would get a portion of her estate too.

She had written the letter just after her will in 1993, before her divorce, when her personal belongings were relatively small because so much belonged to the royals. After her divorce, the value of her personal estate rocketed, but she never updated the letter.

When she died, her mother and sister decided that it was no longer appropriate to divide her estate this way, and they ignored the letter. Legally they had no responsibility to carry out requests in a letter of wishes.

Keith French of Rickard Keen Financial Services said: “The key point to take away from these celebrity cases is that it is absolutely vital to have a will – it’s the only way you can exercise control over who gets what, and how much. And from an inheritance tax point of view, bear in mind that surviving spouses can inherit tax-free, although if their estate is still over the threshold when they die, tax would still need to be paid.”


Mortgage lending rises slightly as experts predict a “gentle recovery”

 

Mortgage experts are predicting a “gentle recovery” in activity in the UK housing market as new figures show lending rose slightly.

Gross mortgage lending rose by 2 per cent in May compared with April to £16.2bn, according to the Council of Mortgage Lenders (CML).

This, and economic indicators, signalled a “limited” increase in activity in the coming months, it said.

Mortgage rates are currently at very low levels as lenders aim to entice buyers to enter the market.

Keith French from Rickard Keen Financial Services said: “Your home is a major financial commitment for many years, so when you are buying a property – whether it is your first or you are a few steps up the property ladder – it is vital that you find the best mortgage for you.

“We will take time to find out about what you are looking for, and make sure we understand your individual circumstances before we start searching for the right deal for you. Because we have access to products from dozens of lenders, we can choose from a wide range of mortgages to find the product that suits you best.”


Cash accounts leave most savers worse off – but we can help

 

Inflation has knocked £80 billion off cash saving accounts in Britain over the past five years – but we are here to help stop you being one of those to lose out.

Research by Henderson Global Investors found inflation increases have outstripped the interest rates offered on cash accounts, leaving most savers worse off.

Half the UK’s financial wealth, or £729 billion, is held in cash, with more than half of that in instant access accounts, which pay the lowest rates.

Although the cost of living has eased off in 2015, at certain points over the last five years savers have been unable to find a single savings account that paid a rate of interest that beat inflation. The result is that the average household has lost £3,000 in lost purchasing power from their savings.

Since 1990, cash has given a return of 69 per cent, but at Rickard Keen Financial Services, we can help you look for alternatives. In the same period property, for example, has increased 289 per cent and British stocks and shares by 700 per cent.

Keith French from Rickard Keen Financial Services said: “By nature we are risk adverse… so in recoiling from taking investment risks, we unwittingly suffer the corrosive effect of inflation.

“You can be near certain you will lose money over the longer term by putting your savings in cash accounts, as the cost of living, and expectations for living standards will quickly climb out of reach of the paltry returns on cash deposits.

“It’s costing us billions of pounds every year. The ravages that inflation has inflicted over the last five years are easing for the time being, but it is hard to dispute the evidence that cash consistently lets us down.”

© Rickard Keen Financial Services.
Rickard Keen Financial Services Ltd. is an appointed representative of French & Associates Ltd. which is authorised and regulated by the Financial Conduct Authority.

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