Chancellor’s Summer Statement

Chancellor’s Summer Statement

The main points of the Chancellor’s Summer Statement are summarised in this article.

The Chancellor’s focus was on the government’s ‘Plan for Jobs’, with the objectives of supporting, creating and protecting jobs. The main initiatives announced were:

  • The ‘kick-start scheme’ to encourage employers (not Northern Ireland) to create new six month work placements for 16-24 year olds on Universal Credit and deemed to be at risk of long-term unemployment. The government will provide funding for each job at the level of 100% of the relevant National Minimum Wage for 25 hours a week plus the associated employer National Insurance contributions and employer minimum automatic enrolment contributions.
  • A Job Retention Bonus consisting of a one-off payment of £1,000 for employers that have used the Coronavirus Job Retention Scheme (CJRS) for each furloughed employee who remains continuously employed until 31 January 2021. To be eligible, employees will need to earn at least £520 per month (above the Lower Earnings Limit) on average for November, December and January. Employers will be able to claim the bonus from February 2021. More information will be available by 31 July and full guidance will be published in the Autumn.
  • Employers will receive a payment of £1,000 for each 16-24 year old trainee to whom they provide work experience. The government intends to improve provision and expand eligibility for traineeships to those with Level 3 qualifications and below, ensuring more young people will have access to training.
  • Investment in infrastructure projects.
  • Incentives to create ‘green’ jobs.
  • Green Homes Grant is to be introduced to provide at least £2 for every £1 spent up to £5,000 per household to homeowners and landlords making their properties more energy efficient. For those on the lowest incomes, the scheme will fully fund energy efficiency measures of up to £10,000 per household.
  • An immediate temporary Stamp Duty Land Tax (SDLT) holiday in England and Northern Ireland until 31 March 2021 by raising the threshold above which the main rate of SDLT is payable from £125,000 to £500,000. For second homes, the 3% additional rate will continue to apply. The new rate table is shown below (and the previous position can be seen here):
Slice of Residential Property Value SDLT Rate %
Up to £500,000   0
£500,001 - £925,000   5
£925,001 - £1,500,000 10
Over £1,500,000 12

The devolved administrations in Scotland and Wales set their own rates of tax on Land and Buildings Transaction Tax (LBTT) and Land Transaction Tax (LTT) respectively. At the time of writing, neither country had announced their plans.

  • A temporary cut in VAT for the hospitality sector from 15 July to January 2021. A 5% rate of VAT will apply to supplies of food and non-alcoholic drinks from UK restaurants, pubs, etc and accommodation and admission to attractions across the UK. Further guidance will be published by HMRC shortly.
  • Half-price discounts on meals at participating restaurants on Mondays to Wednesdays in August, of up to £10 per head.

The Chancellor confirmed that there will be a Budget and Spending Review in the Autumn.

Investment Diversification is Key

Investment Diversification is Key

When you examine investment performance over the long term, there is no obvious pattern.   Take Emerging Market funds some years returns are top, some years they are bottom.

The white box represents a simple diversified portfolio where money is allocated equally across all 12 sectors.  The white box is much less volatile than other individual asset classes: this reduced volatility is often referred to as the "only free lunch in investing".  My clients usually respond back with “don’t put all your eggs in one basket”.

An expert financial adviser, working with a risk profiling tool, can create the optimum mix of assets to meet the long-term needs and risk capacity of each client.  Seeking to maximise the return for the level of risk for the client's portfolio.

If you would like an assessment of your own portfolio for diversification and risk.  Get in touch, our initial consultation is always at our expense.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

WE MAKE THE COMPLEX SIMPLE

COVID-19 Government Support For Business

Government Support for Businesses During the COVID-19 Pandemic

On 17th March the Chancellor, Rishi Sunak, announced a dramatic set of temporary measures designed to support people and businesses through the COVID-19 pandemic. As greater restrictions on personal movement are brought in, they aim to help those most effected by it through the forthcoming months. How successful they are only time will tell but there is no doubting the seriousness of the problem given the long-term fiscal implications of this response.

This is a brief summary of the measures for employers and small to medium sized business owners as we understand them today. Understandably, very little has emerged on implementation yet. Please feel free share this with anyone else you feel it would benefit.

Statutory Sick Pay

For businesses with fewer than 250 employees the cost of providing 14 days of Statutory Sick Pay per employee would be funded by the Government in full. This will also apply to those who are in self isolation. The three day waiting period for statutory sick pay will also be removed, but legislation will be needed to implement this so we await more information on this.

Job Retention Scheme

For all employees who remain on the payroll but would otherwise be laid off, the Government will pay 80% of their basic salary up to a cap of £2,500 per month. Employers will have the ability to top-up the salary to 100% of salary if they choose.

All businesses are eligible for this scheme but in order to access it they need to:

  • Designate affected employees as ‘furloughed workers’ (which just means they are being retained but would normally be laid off) and notify those employees of this change. Changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation, so you should obtain employee law advice where necessary.
  • Submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal. HMRC will provide more information soon on exactly what they need.

Businesses can apply from Monday 23rd March. It will be in place for three months and then reviewed every month. The money will be available from the end of April but will take affect from 1st March. HMRC are now working to set up a system for reimbursement as existing systems are not set up to facilitate payments to employers and will publish further guidance here once available.

Coronavirus Business Interruption Loan Scheme (CBILS)

The Government intends to support businesses who have short-term cash flow needs and need  money before the end of April when the Job Retention Scheme kicks in through business loans which will be interest free for 12-months, rather than the six months previously announced. The scheme provides the lender with a Government-backed guarantee against the outstanding facility balance.

It will be administered through the British Business Bank and is due to launch in the week commencing 23 March. It will be available through high street banks and 40 other accredited finance providers

The limit of funding has increased from the £1.2 million announced on the 11 March to £5 million for companies with a turnover of less than £45 million.

Finance terms are from three-months up to ten years for term loans and asset finance and up to three-years for revolving facilities and invoice finance.

To be eligible the Scheme, the business must:

  • Be UK-based, with turnover of no more than £45 million per annum.
  • Operate within an eligible industrial sector (a small number of industrial sectors are not eligible for support or subject to limitations – see link).
  • Be able to confirm that they have not received de minimis State aid beyond €200,000 equivalent over the current and previous two fiscal years.
  • Be unable to meet a lender’s normal lending requirements for a fully commercial loan or other facility but would be considered viable in the longer-term.

You can find out more here.

COVID Corporate Financing Facility (CCFF) and Bank Lending

Whilst not directly applicable to small to medium sized business, this fund aims to provide essential liquidity amongst banks and in turn allow them to lend to the small and medium sized businesses who depend on them. This adds to the previous week’s launch by the Bank of England of a new Term Funding Scheme (TFSME) with additional incentives for lending to SMEs. This will, over the next 12 months, offer four-year funding to banks of at least 5% of participants’ stock of real economy lending at interest rates at, or very close to, Bank Rate.  Additional funding will be available for banks that increase lending, especially to small and medium-sized businesses.

The CCFF is being made available through the Bank of England for the next 12 months who will purchase 1 year corporate bonds subject to an assessment of their credit rating prior to the pandemic.

The Government has pledged that it will make £330 billion (equivalent to 15% of GDP) of guaranteed funding available to any business that needs it. The Chancellor has also stated that, if demand is greater than the £330 billion of funding, he will provide additional funds.

With this in place, all of the UK’s main clearing banks are now creating funds which they will make available to small businesses under their own schemes. For example, Lloyds now has a £2bn fund and NatWest has earmarked £5bn. If you anticipate financial difficulties, you should begin discussions with your bank as early as possible.

Many businesses with banking covenants will be in danger of breaching them as the pandemic drags on. The breaches could be on performance covenants or an inability to provide financial information due to loss of staff. Banks will be expecting this so early communication is advisable and, where possible, covenant waivers should be sought. For businesses with serious cash constraints, it is also recommended that the subject of payment holidays is discussed.

Cash Grants and Business Rates

Businesses which pay minimal or no business rates and are eligible for small business rate relief (SBBR) or rural rate relief will be eligible for a one-off grant of up to £10,000 from April 2020 onwards. These grants will be provided by Local Authorities and it is understood that small businesses will be contacted by their Local Authority shortly (rather than having to proactively approach their Local Authority) with information on exactly how to access these grants.

A further grant of £10,000 to £25,000 is being made available to businesses operating from smaller premises in the retail, hospitality and leisure sectors, which have a rateable value of £15,000 to £51,000 and business rates for businesses in these sectors will be suspended for the 2020/2021 tax year.  This is designed to assist the payment of rent in particular.

If any business which qualifies for this relief does not receive a letter from their local council, they should contact them directly to claim it. You can check your business’ rateable value here.

Self-Employed and Universal Credit

The self-employed will not have to make a tax payment on account in July and the payment will be deferred until January 2021. The minimum income floor for Universal Credit has been removed and it has been increased by £1,000 per year, ensuring the self-employed will get this Universal Credit at the statutory sick pay level. He also announced a further £1bn to cover 30% of house rental costs for the self-employed.

Mortgage Holidays

Whilst much of the attention will be on personal home mortgages, three-month payment holidays are available for business mortgages also. Talk to your lender.

Deferred VAT payments

Business VAT payments for the next quarter (until 30 June 2020) will be deferred until the end of the year.

Deferral of IR35

HMRC have confirmed that the proposed changes to IR35, which were due to take place with effect from 6 April 2020, have now been pushed back to 2021.

Extension to Filings with Companies House

Companies House and the Financial Reporting Council have confirmed that all companies with imminent filing deadlines – predominantly 30 June 2019 year-ends which are due for filing by 31 March 2020 – will be granted a two-month extension.

If your annual accounts are not yet finalised and may not get completed by the filing deadline, you must still contact Companies House, but they are automatically accepting Coronavirus as a reason and providing a two-month extension. In extreme circumstances they can grant a further one-month extension.

You will need to provide them with your company number, an e-mail address  and state that you are extending due to Coronavirus via this link, but make sure you apply for the extension before the deadline or it will be rejected.

If you have passed the filing deadline and are receiving notices concerning the overdue accounts, you must contact Companies House to explain the circumstances behind the delay. If Coronavirus is a factor, let them know this by emailing enquiries@companieshouse.gov.uk.

Time to Pay HMRC

HMRC has set up a dedicated helpline at 0800 0159 559 to help businesses and self-employed individuals in financial distress and with outstanding tax liabilities so they can receive support with their tax affairs.

It may be possible to agree a ‘Time to Pay’ arrangement with deferrals being agreed on a case by case basis.  This arrangement will see the usual 3.5% annual interest on deferred tax being waived.

Late Filing of VAT and PAYE Returns

If your business is unable to file a VAT or PAYE return due to staff absence, you should contact HMRC before the due date to explain the situation and mitigate any surcharges that may be levied.


Arrange a free no obligation consultation with an experienced and local Independent Financial Adviser today.

Coronavirus & Investment Update for Clients

An Investment Update for Clients

It’s difficult writing about financial and economic matters when health is quite rightly at the top of everyone’s agenda. We aren’t qualified to tell you how long this epidemic will last, but we can give you some information about investing which might give you some peace of mind now and ideas for the future.

How long will this market downturn last?

The circumstances behind this market downturn are unique. We’ve seen people go back to the 1918 Spanish Flu pandemic for comparisons. So any attempt to predict when we will reach the bottom of the market and how long it will last is really guesswork at this stage. However, history can give us some comfort, if we take previous crashes as a series of unique events.

inv1

The table above shows almost 100 years of market conditions. A bear market, where market prices fall more than 20%, is not uncommon. This can be expected as part of the normal functioning of equity markets, and your own financial plan is built to expect them. We don’t know how long this one will last but we do know that in each unique circumstance since 1926, human ingenuity has responded to changing market conditions within an average timescale of 1 year 8 months.

As you can see from the alternative way of viewing the same data in the illustration below, bull markets have always rewarded patience by more than compensating for downturns over the long term.

inv2

Diversification

This might be small comfort for those of you watching a FTSE index drop dramatically on the news right now but remember, your own portfolio is not a replica of the FTSE100, although it will have some of those businesses in it. The FTSE100 should paint a far worse picture than the reality for your own portfolio.

Your money is invested in a globally diverse portfolio of investments, and not just in equity markets. So whilst the UK is coming to the forefront of the pandemic, your own money is invested elsewhere. Diversification not only helps buffer you a little against downturns, it will also increase your chances of capturing a recovery early as things improve at different times in other countries around the world.

We can’t predict the future but we can rely on mathematics

It sounds glib but so many people buy at the top of the market and sell at the bottom. Panic selling investments is as common as panic buying in supermarkets, however irrational both may be.

We don’t know when the equity markets will hit rock bottom and start their recovery. If we did, we would invest all of our spare cash precisely then. Some investors will be comfortable investing spare cash to top up pensions and ISA allowances right now. Some may be more cautious and want to drip money in each month. The benefit of dripping money every month is that whilst you will never benefit from investing at the best possible time, you are also ensuring that you are not investing at the worst time. You effectively buy at the average price. This is known as ‘pound cost averaging’. It’s a good defensive strategy although over the longer term, as the general market trajectory is upwards, its not always the optimal one.

There is no right or wrong way to invest money as it depends on individual circumstances. You might have a small amount of money left to invest into your pension or ISA before the tax year end which necessitates a lump sum. You might want to establish some long-term behaviours and pound cost averaging is a good way to start saving on a monthly basis. This is where our advice will differ from client to client.

Equally for anyone drawing an income from their portfolio, pound cost averaging works in reverse. Withdrawing income from an equity portfolio during a significant market downturn such as this one, has a damaging impact on the recovery rate of your investment portfolio. Again this is simply a case of using maths and not predicting market changes. In a market downturn, creating income by selling investments in equal and regular intervals means selling funds when prices are low and fewer when they are high, exactly the opposite of what you want.

Sticking with it

This is a core aspect of our approach to managing not just your money but your behaviour towards it. Many people who do not have an adviser will act impulsively at this time and lose the long-term benefits of their hard-earned investments. Even with all the right investment decisions made previously, one impulsive or impatient decision can undo it all.

It might seem counter intuitive to do little or nothing with your investment portfolio at this time, but we will advise you of everything that you need to do at the right time.

Our service to you will continue almost as usual over the forthcoming months, and we will be in contact with you as planned, albeit certain work may take a little longer and we will begin to use online meetings or telephone to conduct review discussions rather than face-to-face, for obvious reasons.

For reasons outlined above, you need not be concerned that we aren’t recommending wholesale changes to your portfolio. You should also feel free to contact us at any time if you are concerned or have questions about your investments or broader financial affairs, we are available and ready to help.

Can your money work harder in 2020?

Can your money work harder in 2020

Now could be the perfect time to consider whether your savings, investments and pensions are working as hard for you as they could with three resolutions for the New Year.

  1. Pay Less tax

Less tax means higher returns for you.  You could pay less tax with a carefully constructed financial plan and by making the most of your tax allowances.

  1. Seek better returns with investment choices tailored to you

Much has happened in 2019 and your investments may look different from a year ago. You could now be taking too much risk, or holding poor-performing investments.  Independent Investment Advice can help you make sure your investments are positioned to seek the best returns for your financial goals.

  1. Make it easier for yourself

With a bit of help you can make your investments easier to look after and reduce your paperwork.  This New Year could be an excellent time to bring all your pensions, ISA’s and investments together. Saving you time, effort and paperwork.  We recommend you seek independent financial advice before moving any type of pension plan or investment product.

The New Year is always a good time to seek advice to improve potential returns and to pay less tax.  We can help you do this.

Contact us today on 01384 671947 for advice.

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The value of investments can fall as well as rise, and you may not get back as much as you put in. Please note tax rules may change.and benefits depend on individual circumstances.

 

Pension Freedoms 4 years on

Pension Freedoms 4 years on

The Government’s announcement of Pension Freedoms in 2014 came into play from the start of the 2015/16 tax year, promising “freedom and choice in pensions”. It has now been four years since the new rulings took effect, yet many people approaching retirement age are still none the wiser as to the key features.

Let’s remind ourselves of the key elements, with a focus on what it means for your finances.

The Pension Freedoms Plan

The introduction of the new plans in 2015 allows people aged 55 and over to take out their private pensions as a single lump sum, removing the previous limit of 25%, although anything over the initial 25% will be hit by tax which could put you into a higher tax rate bracket..

Individuals essentially have a number of options at their disposal:

  1. Leave funds in the pension, as is the default position until you wish to start taking payments.
  1. Withdraw the full sum of money from the private pension, although not recommended in nearly all cases. (25% tax-free; 75% taxed).
  1. Withdraw lump sums equalling a percentage of the overall funds, leaving the leftovers in the pension fund.
  1. Take the tax-free 25% and then buy an annuity to gain a monthly income for the rest of your life.
  1. Take the tax-free 25% and then buy a drawdown product, giving you a monthly income and the flexibility to keep withdrawing lump sums if required.
  1. A combination of an annuity to secure guaranteed income alongside the flexibility of withdrawals

A recent market study by our regulator, The Financial Conduct Authority estimated that 100,000 people use the fifth option without seeking advice and is costing consumers up to £25m in missed pension income each year. Moreover, pension freedoms can lead to the unnecessary tax being paid and being caught up with other rules, such as the Money Purchase Annual Allowance which can limit your contributions to £4k a year, rather than the annual allowance currently £40k.

As such, it is highly advised that you speak to an expert before making any decisions on how to utilise your pension.

New Rulings From 2019

While the increased flexibility has provided additional options, the teething problems of missed pension income have been further exacerbated by the fact that many have focused on the short-term by taking lump sums, essentially putting their long-term financial stability in jeopardy.

As a result, the Financial Conduct Authority (FCA) is to usher in some amendments in November 2019. These planned changes are designed to make things a lot clearer for individuals.

Firstly, consumers will receive “wake up packs” every five years (starting at age 50) until their pension has been entirely cashed. This will include a summary, risk warning, and basic guidance. Secondly, pension firms will have to look into enhanced annuities to see whether clients are eligible. This must be supported by a market-leading quote based on their individual circumstances.

Further ideas are being trialed with a view to making them available in 2020. This includes a requirement for pension firms to provide clear information regarding payments and fees, as well as insight into potential investment pathways.

It is important to note that a pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.

The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation which are subject to change in the future.

Given the pending changes, now is the perfect time to seek further advice from a financial adviser. The health of your future finances may depend on it.

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The Pro’s and Con’s of buying an Annuity

The Pro’s and Con’s of buying an Annuity

Protecting your financial health with the right retirement plan is a responsibility that nobody can afford to ignore. The decisions revolving around your pension are undoubtedly among the most important of all, and an annuity is one of the options that you’ve probably heard about.

Before rushing into a decision one way or another, it’s imperative that you understand the potential benefits and drawbacks – not least because it is often not possible to undo your decision. Here’s all you need to know.

 Annuities At A Glance

In essence, an annuity is an agreement in which you trade your pension (or at least a part of it) for a guaranteed income that will last throughout retirement until the day you die, regardless of what age that happens.

Annuities are a form of insurance, then, and are used by many people throughout their retirement years.

 Annuities: The Pros & Cons

Like most financial products, there are a number of pros and cons to consider before taking out an annuity agreement. Let’s take a look at both below.

The Pros

First and foremost, the annuity arrangement means that your income is guaranteed for life. This means that you’ll have money entering your pocket even if you live for 20 or 30 years after the annuity payments start. This in itself is extremely reassuring.

Annuity agreements offer flexible options, including the choice between flat payments and increasing payments. The latter option gives you the best chance of staying ahead of inflation and increased living costs, resulting in the same level of buying power at all times, albeit starting at a lower initial income.

It is also possible to pay a lump sum and start taking monthly payments right away, or defer the payments until a later date (such as after you retire). Some of the agreements also allow you to defer payments to a loved one should you pass – albeit only or a set amount of time.

If you have health problems, you could receive a higher level of income. This is because of the provider will look at life expectancy

The Cons

Annuities can be quite complex and difficult to understand. Nobody should take a financial product that they do not understand.

Annuities do not allow you to change the payment terms, even if your situation changes, which can tie you into financially suffocating agreements.

Annuity providers offer different rates of payments, so it is important to shop around. Depending on investment performance and longevity, an Annuity may not offer the best deal when it comes to the total income it pays out. When you (or your spouse if joint income is selected) dies the annuity dies with you.

Is An Annuity Agreement Right For You?

As with most financial products, there is no single right or wrong answer. As long as you consider what’s most important to you, finding the right option shouldn’t be too difficult. But if you do still require some help, our experts are only a call away.

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How to Create the Perfect Retirement Plan

How To Create The Perfect Retirement Plan

Retirement, for many, is a chance to continue doing the things they love most, from following their favourite football team across Europe to getting away from the British weather for a winter in the sun. However, waiting until you’re 67 to step away from the working world entirely can feel like a long time away. It’s for this reason why many are looking into retiring early, on a plan which ensures they don’t have to give up any aspect of their current lifestyle.

Unfortunately, retiring on your own terms is expensive, especially if you want to enjoy the comforts and luxuries you’ve had since you first started to earn a wage. What’s more, your retirement is going to last a significant number of years, so preparing in advance for these years is crucial. How do you create the perfect retirement plan, however?

How Much Do You Have?

The average employee who has been working for several years will have a pension pot building up. All employers must provide workers with a workplace pension scheme, which employees are then automatically enrolled in. You are automatically enrolled if you meet the following criteria:

  • Aged between 22 and the state pension age – in 2019, the state pension age for both men and women is 66. However, it is going to increase further to 67 by 2026.
  • Earn at least £10,000
  • Classed as a ‘worker’
  • Work within the UK

How much you have within this pension pot will depend on a variety of factors, including what type of scheme you’re enrolled in, how much both you and your employer pay in, and the tax relief the government has added to your workplace pension.

The current minimum contribution limits are 5% for you as the employee and 3% for the employer.  That is a maximum of 8%.  Tax relief is also available in most situations reducing which makes up part of your 5% contribution thus reducing the amount you actually pay.

To work out how much pension you have to play with in retirement, you first need to discover how much is in your savings already. Once a year, your pension provider should send you a statement. However, you can also choose to check the amount online, should your provider allow you to track it via their website.

You can also check your State Pension online, using the gov.uk website. You can then accurately see how much you have for your pension.

How Much Do You Need?

Once you’re aware of how much pension you have, you need to work out how much you need.

How much do you predict your winter away in the sun will cost? How much, on average, is a season ticket for your favourite football team?

Also add into this amount the monthly outgoings you will still have: mortgage repayments, utility bills, and other lifestyle factors.

How To Achieve The Money You Need

Savings are the best way to build your pension pot up, but you need to be saving in the right places. Therefore, it’s highly crucial you find the best pension scheme for you and your savings. Of course, if you have the opportunity to pay more into your pension, it’s recommended you do so, as this is one key way to increase your amount.

Alternatively, you can choose to switch your pension from the government-backed workplace scheme to a private scheme. A private scheme may offer you higher interest on the money you pay, therefore, enabling you to withdraw a higher amount when you choose to.

Why A Pension Is The Best Plan

A pension plan is the best solution for ensuring you have the funds available to enjoy your lifestyle for the rest of your life. While employers now have a commitment to providing a workplace pension, if you’re not automatically enrolled, it’s imperative that you do so as soon as possible. There are several reasons why a pension is a wise move, including:

  • A pension is tax efficient. What this means is for every £1 an employee pays into a pension scheme, the tax man will you give 25p. When you’re ready to withdraw your pension, 25% is tax-free. If you accrue £100,000 in your pension pot, £25,000 is tax-free.
  • Today’s pensions are highly flexible. Long gone are the days where you had to buy a monthly annuity pension from an insurance company. Now you can draw as little or as much as you’d like out of your pension after the age of 55.
  • Your pension can be passed onto your loved ones in the wake of your passing. You can even leave it as a lump sum, so you know your family is looked after when you’ve gone.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected the interest rates at the time you take your benefits. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.

Contact us to start your retirement plan.

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The Benefits of Saving Regularly

The Benefits Of Saving Regularly

There are often two types of investors. There are investors who already had money in their pocket, and now wish help to invest it somewhere. Alternatively, there are investors who didn’t have any money beforehand, but now they do, they want to build up their pot of money.

While both investors are aware of the benefits of saving, not many understand the benefits of saving regularly. What’s more, many investors don’t fully appreciate the benefits of committing to saving regularly.

The Benefits

Committed Savings:

By committing to saving regularly, perhaps a set amount every pay check, you are much more likely to build up your money, rather than spending it. Unfortunately, some saving accounts are easy to access, meaning the temptation to dip into them should you wish to can be tricky to avoid.

Stock Market:

As you’re not investing your money into the market at a single point, it removes the risk of getting the timing just right. However, using the stock market for your regular savings applies to those wishing to save for the medium and long term.

The ups and downs of the stock market are one reason why investors are afraid of it. However, the approach is known as ‘pound cost averaging’ is one to consider. Pound cost averaging is the approach of investing small amounts very regularly.

As the name suggests, it is the cost you spend buying stocks which average out over time. It helps an investor instill good behavior because you’re establishing a routine. This routine enables investors to consider the stock market as an ongoing activity, rather than one which relies solely on gain or is affected by a temporary loss.

How to Save:

For those wishing to save for the long term, choosing to save regularly is highly effective. You first need to assess why you’re saving. Often, savers decide to put money aside for their children, which may start from the moment their child is born until they leave for university at 18.

Tax Efficient:

Whatever your saving goals are, there is a variety of ways to achieve it. One such way is an ISA. An ISA is an Individual Savings Account, which offers tax-free interest payments. It means, by choosing this, you could get more for your money. However, there are limits, known as an ‘ISA allowance.’ This currently stands at £20,000 per annum

If you’re saving for a medium (5-10 years) or long-term goal (10+ years), choosing stocks and shares ISA could prove more beneficial.   A stocks and shares ISA is very different from a typical cash ISA.  Rather than merely paying money in, you’re investing in assets that have greater potential for growth compared to a cash isa account. Although cash ISAs are relatively secure, investing in stocks and shares does have varying degrees of risk associated with them.

Conclusion

Saving regularly can be the difference between affording the lifestyle you want, and not. A great example is the retiree who bought a Mercedes 2-seater sports car after leaving the world of work behind for the last time. How did he manage to do this? Simply by committing to saving a regular amount each month into a stock market investment unit trust. It took 20 years to achieve this goal, but by ensuring he didn’t miss a single payment, he could treat himself in cash to the car of his dreams. This is what long-term saving is about: enabling you to afford the luxuries you want after you’ve worked so hard all your life.

TKV Financial Management can advise you on the best saving plan for your situation. Contact us to arrange a meeting.

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