Rickard Keen


Rickard Keen Financial Services – September 2015

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State pensions ‘will become less generous’


The state pension will become less generous in the coming years, with the retirement age bumped up and means-testing reintroduced, according to a survey of financial analysts.

A total of 96 per cent of the 200 experts quizzed said they expected changes to come which would see many pensioners left out of pocket.

Of those anticipating change, almost half said people will have to work later in life before they can claim, while four in 10 (39 per cent) believe the Government will have to means test pensions so wealthier retirees get a smaller payout.

A similar number (41 per cent) expect a move away from the current triple-lock guarantee, which means state pensions must increase annually by the higher of inflation, average earnings or a minimum of 2.5 per cent.

The survey was carried out by investment company Aegon UK - and retail managing director Duncan Jarrett warned that it could lead to uncertainty for people in their later years.

He said people are struggling to calculate how much they need to save for retirement, given a lack of clarity about what they can expect from the state pension scheme.

The new single-tier state pension set to come in next April will provide at least £151.25 a week to people entitled to a full pension, but Aegon says some 200,000 due to retire by 2017 will miss out on the full amount because their national insurance contributions are insufficient.

Aegon’s warning comes as many pension experts are growing concerned that people are being put off saving for their retirement because of the changes that successive governments are making to the pension system.

Keith French of Rickard Keen Financial Services said: “Given the volume of changes to the pension system over the last 25 years, it is difficult for the public to believe that changes being made now will still be in force 25 to 30 years from now.”

He added that it “could pose considerable risk to the Government’s aim of creating a savings culture”.

A spokesman for the Department for Work and Pensions said: “The new state pension reflects a bold move to a system that is fairer, simpler and easier to understand.

“Our pension reforms will give those ready to retire the security and independence to plan for the future.”

First-time buyers underestimate the costs of a property purchase by £6,000 on average


A recent study commissioned by Aviva – the British multinational insurance provider – has indicated that the average first-time buyer needs £6,481 more than they initially expect in order to buy a property.

Among the fees that buyers typically overlook are stamp duty, which remains a significant tax despite recent changes, as well as legal fees and other costs such as those for immediate repair work.

48 per cent of respondents stated that they had not even considered the legal costs involved when purchasing a property, at the saving stage, while savings to cover stamp duty were also short by approximately £1,000 on average.

The poll of 2,000 homeowners revealed that prospective first-time buyers managed to save £12,143 over a period of four years, but the average amount they actually required was £18,624.

Due to underestimating the costs involved, over half of buyers have to save for a further two years and eight months in order to get the required cash, especially once they consider paying for mortgage fees and valuations, furniture and relevant insurance.

Many first-time buyers have become more open to the idea of buying a property that requires substantial renovation, DIY or repair work, because the cost of buying one in a good state of repair has escalated beyond their financial reach.

According to the study, homeowners spend an average of £3,727 on carrying out maintenance work for a property they buy, which is £1,680 more than what most respondents expected.

Keith French of Rickard Keen Financial Services said: “In our experience, existing homeowners face similar issues. It is therefore important to seek advice to review costs, fees deposit levels, funds for improvements, etc, for selling and purchasing before taking the next step forward, so as to obtain a clearer outlook of funds required to complete the process.”

Banks must offer clearer savings deals under new rules


Banks and building societies will be named and shamed if they pay the lowest savings rates as the City watchdog looks to highlight firms that pay poor interest to longstanding customers.

From next year they will have to make it clear how much interest savers are paid on accounts and tell them if rates drop, such as when teaser rates end, under new rules being introduced by the Financial Conduct Authority (FCA).

Christopher Woolard, director of strategy and competition at the FCA, said: “In a good market, providers should be competing to offer the best possible deal. Consumers should expect the information they need to shop around to be clear and easy to understand.

“When they wish to move accounts, they should be able to do so with the minimum of fuss.”

In January, the FCA’s investigation concluded that millions of savers were getting a raw deal, particularly from the big High Street banks.

It found that those with older savings accounts tended to be left earning less interest than new customers. In many cases, their rate was lower than the Bank of England’s base rate.

The FCA has also vowed that switching savings accounts will become quicker and easier. Part of this will be achieved by working with the industry to deliver seven day switching for the vast majority of cash ISA transfers from January 2017.

It is also setting out a new rule that requires firms to provide a prompt and efficient service so that a customer can switch to a better account offered by the same firm.

The FCA has also said complex jargon needs to be simplified and easier information is needed in order to compare accounts.

The FCA is seeking feedback on the proposals and is expected to confirm finalised rules later this year. The majority will come into force in 2016.

Keith French of Rickard Keen Financial Services said: “This is long overdue.  There have been many occasions where we have carried out reviews for existing and new clients to find out they were unaware of the derisory rate applying to their account having been lured into investing by a ‘hard line’ rate.

“It is very sneaky of their provider to hope the client doesn’t notice.”

Workers ‘should save for their own sick pay’


Workers could be forced to save for their own benefits under radical new government proposals, the Government has revealed.

The idea was floated by Work and Pensions Secretary Iain Duncan Smith, who said he was “very keen” to look at the possibility of people using flexible financial products to build up savings, from which they can draw at times of need.

The system is used in Singapore, where people are forced to save a fixed proportion of their income to fund medical and retirement care.

Mr Duncan Smith said: “We need to encourage people to save from day one but they need to know that they can get some of the money out when their circumstances change.”

Downing Street stressed that the move - which would represent a significant shift towards a “social insurance” welfare system - was not Government policy, but made clear that Mr Cameron was not ruling it out.

Mr Duncan Smith said: “We need to support the kind of products that allow people through their lives to dip in and out when they need the money for sickness or care or unemployment.

“We need to encourage people to save from day one but they need to know that they can get some of the money out when their circumstances change. This is not government policy, but I am very keen to look at it, as a long-term way forward for the 21st century.”

In the last budget, the Chancellor George Osborne opened the door for new pension ISAs, which would mean workers paying into personal accounts for their retirement.

Emma Lewell-Buck, a Labour member of the Commons work and pensions committee, said it was “the latest signal that the Tories are determined to dismantle what is left of our country’s safety net”.

She added: “People don’t choose when to fall ill and the right to sick pay guarantees people financial security if they are unlucky enough to be too ill to work. Under the scheme the Tories are proposing, that security would disappear.”

Keith French of Rickard Keen Financial Services said: “It is always worth considering how to protect our income in the event of an accident or sickness. Private provision is a safeguard rather than relying on the employer or state. For the self-employed it is essential.”

10 of the strangest wills of all time


In the UK we are not very good at drawing up wills. In fact, fewer than half of UK adults have done so, leaving 26 million people with no formal instructions for what should happen to their possessions on their death.

Here are 10 strange bequests left in wills for anyone needing a little inspiration…

  • A daily rose. Legendary US comedian Jack Benny left an unusual but touching instruction in his will when he died in 1974. “Every day since Jack has gone the florist has delivered one long-stemmed red rose to my home,” his widow Mary Livingstone wrote in a magazine, shortly after his death. “I learned Jack actually had included a provision for the flowers in his will. One red rose to be delivered to me every day for the rest of my life.”
  • Anonymous donation “to clear the national debt”. A public-spirited donor made a half-million pound bequest to Britain back in 1928, which is now worth more than £350m. Unfortunately, the anonymous donor said it should only be passed on once it is enough to clear the entire national debt. The total national debt currently stands at £1.5tn.
  • A boozy weekend. We all like to think that our friends will raise a glass to us when we’ve gone, but Roger Brown made sure of it. The 67-year-old lost his life to prostate cancer in 2013, leaving behind a secret bequest of £3,500 to seven of his closest friends, with the proviso that they use it for a boozy weekend away to a European city.
  • The “second-best bed”. Poor Anne Hathaway, aka Mrs Shakespeare, has gone down in history as being snubbed by the Bard from beyond the grave. In his will, Shakespeare left her his “second-best bed” while the vast bulk of his estate went to his daughter Susanna.
  • $12m to a dog. In 2004, billionaire hotelier Leona Helmsley left instructions for her $4bn (£2.5bn) fortune to be spent caring for dogs, having apparently re-thought an earlier draft that left it to the poor.
  • Favourite holiday spot. When self-made millionaire financier Keith Owen, 69, was diagnosed with cancer and given just a few weeks to live, he decided to donate his entire £2.3m fortune to his favourite holiday spot, Sidmouth in Devon.
  • A new husband. German poet Heinrich “Henry” Heine left his estate to his wife, Matilda, in 1856 on the condition that she remarry, so that “there will be at least one man to regret my death”.
  • A legacy of bitterness. Michigan millionaire Wellington Burt used his will to put his enormous wealth out of reach of his family for almost a full century. When he died in 1919, his will was discovered to specify that his vast fortune would not be passed on until 21 years after the death of his last surviving grandchild. She died in 1989 and the 21-year countdown ended on November 2010. About 12 people discovered they were beneficiaries of the will, described as a “legacy of bitterness”, and they shared a fortune estimated to be worth $110m.
  • A wife for a gay son. When Frank Mandelbaum’s will was read in 2007, it was discovered that he had left behind a $180,000 trust fund for his grandchildren. There was one additional clause, though, which concerned his son Robert. Robert’s children would only inherit a share if Robert agreed to marry their mother within six months of their birth. One small problem: Robert is gay and is raising his son, Cooper, with his husband.
  • Seventy strangers from a phone directory. It is the stuff of daydreams and film scripts. When Portuguese aristocrat Luis Carlos de Noronha Cabral da Camara wrote up his will, he left his considerable fortune to 70 strangers randomly chosen out of a Lisbon phone directory.

Keith French of Rickard Keen Financial Services said: “Tempting as it may be to go out with a laugh, it’s probably better to err on the side of caution and to take your will seriously.

“If you absolutely insist on a joke, or an odd request, check to see whether this could invalidate the will and avoid doing it if it could. For more outlandish requests, it may be better to use the non-legally binding letter of wishes.

“Many modern laws would make these wills could easily be challenged and the jokes could backfire. The key point to take away from these 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.”

Why baby boomers need to be considering an exit strategy


The mass retirement of Baby Boomer entrepreneurs is triggering the largest transfer of wealth that the world has ever seen. Most have not engaged in any meaningful form of exit planning.

As a business owner, it is critical for you to understand the potential impact that the lack of an exit plan could have on the value and saleability of your business.

The fact is that about one million UK businesses are owned by the baby boomers. The majority of these businesses will have to be transferred over the next 10-15 years. The supply of businesses coming to market will therefore exceed demand and inevitably push overall business values down.

Keith French of Rickard Keen Financial Services said: “Most business owners have said they intend to sell their business on or before retirement in order to boost their retirement funds. Clearly the anticipated sale value is a determining factor in when this can happen.

“Getting the right strategy in place is the key to unlocking the maximum value from these sales.

“You have to consider who you are going to sell to. The very people that you are expecting to sell your business to (i.e. Generation X) have limited funds of their own.

“Also, be prepared to finance some of the purchase. Many small business transactions are considered bankable. As part of your strategy it is essential for you to think about how you can make the lending decision for a bank manager a no-brainer.

“Ideally, succession planning should start well in advance of the retirement or exit date. The importance of doing so is to ensure that you are able to negotiate the best exit at a time that suits you rather than being at the whim of the prevailing market prices when retirement is necessary rather than desired.”

© 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.

Rickard Keen Financial Services Ltd | Clearview House 599-601 London Road Hadleigh Essex SS7 2EB
Tel/Fax: 01702 428880 | E-mail: admin@rkfinancialservices.co.uk


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