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w h at t y p e of investor are you? Everyone is playing a guessing game about the right time to start investing again.

ISAs the Season to be Jolly! Junior ISAs 1 0 way s t o c u t y o u r I n h e r i ta n c e Ta x b i l l In March 2011, Her Majesty’s Revenue and Customs (HMRC) collected from the people £2.7bn in inheritance tax (IHT). This is set to increase further in 2012, but with some careful IHT planning you need not be caught in this trap.



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ISA allowances are changing from th 6 April 2012. Are you ready? From the 6th April 2012, the annual ISA investment allowance has been raised to £11,280! And remember, up to £5,640 of that allowance can be saved into a cash ISA with the remainder being able to be invested into a stocks and shares ISA with either the same or a different provider. :LWKVRPHIDQWDVWLFUDWHVDYDLODEOH,6$¡VDUHDJUHDWZD\RI VDYLQJDQGEHLQJWD[HIÀFLHQWDWWKHVDPH time.


In this issue, amongst other things, we look at how to get the best from this year’s ISA season, protecting your hard earned assets and reducing your mortgage. 'XULQJWKHVHGLIÀFXOWHFRQRPLFWLPHVRQH of the tools available to the Bank of England to stimulate the economy is interest rates. Lower interest rates mean that it is cheaper to borrow money and people have more to spend, hopefully stimulating the HFRQRP\DQGUHGXFLQJWKHULVNRI GHà Dtion. Not good news if you’re an incomeseeker, but certainly better for those with a mortgage and looking to reduce their costs or term. Not always a subject that’s liked to be discussed, but very important non-the-less.

Welcome to financialSense eMagazine – your personal financial management guide. ŠTrigoldCrystal Media

No part of this magazine may be produced without the prior permission of the publishers. Whilst every care has been taken to ensure accuracy of editorial content, no responsibility can be taken for any errors and omissions. Content of the articles featured within this document are designed for your general information and use only and does QRWFRQVWLWXWHĂ€QDQFLDODGYLFHXQGHUWKH)LQDQFLDO6HUYLFHV and Markets Act 2000. If such advice is required, you should always seek appropriate professional advice. Whilst every effort has been made to provide accurate and timely information, no guarantee can be made that such information is accurate as of the date it is received or that it will continue to be accurate in the future. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts. Levels and bases of and reliefs from taxation are subject to change and their value depends on the individual circumstances of the investor. The value of your investments can go down as well as up and you may get back less than you invested. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

In order to protect family and loved ones, it is essential to have provisions in place after you’re gone.

obtaining professional advice and having a valid Will in place to ensure that your legacy does not involve just leaving a large IHT bill for your loved ones. And as mentioned, also inside this issue, we remind you not to miss the fastapproaching Individual Savings Account (ISA) deadline – you only have until 5 April to use this tax year’s allowance or you’ll lose it forever! As ever, we hope you enjoy reading the PDJD]LQHDQGLI \RXÀQGDQ\RI WKHDUWLcles of interest and wish to discuss them personally, please don’t hesitate to contact us directly. YOUR NAME, YOUR JOB TITLE, YOUR COMPANY NAME EMAIL YOUR NAME AT YOU@YOURCOMPANY.CO.UK OR VISIT YOUR WEBSITE AT WWW.YOURCOMPANY.CO.UK

The easiest way to prevent unnecessary tax payments, such as Inheritance Tax (IHT), is to organise your tax affairs by

Want to make more of your money? For more information please tick the appropriate box or boxes below, include your personal details and return this information directly to us. Arranging a mortgage/re-mortgage

Protection in the event of premature death


Protection against the loss of regular income

Generating a retirement income

Provision for long-term health care


School fees/further education funding

Provision for myself and/or family if I’m

Protecting my estate from inheritance tax

diagnosed with serious illness

Other (please specify)

Name: Address: Postcode: Tel. (home): Tel. (work): Mobile: Email: <RXYROXQWDULO\FKRRVHWRSURYLGH\RXUSHUVRQDOGHWDLOV3HUVRQDOLQIRUPDWLRQZLOOEHWUHDWHGDVFRQĂ&#x20AC;GHQWLDO by us and held in accordance with the Data Protection Act. You agree that such personal information may be used to provide you with details and products or services in writing or by telephone or email.








In any event, re-evaluate your portfolio regularly and also seek professional advice when reviewing your investment strategyâ&#x20AC;?

Everyone is playing a guessing game about the right time to start investing again. There are as many theories as there are pundits.

With the recent ups and downs in the stock market, a key question to ask yourself is: what is your appetite for risk? Consider using the sleep test: if you canâ&#x20AC;&#x2122;t get to sleep worrying about how your share based investments are doing, then you probably have too much exposure to them. The bigger the risk, the more potential there is for reaping rewards and for courting disaster. But no matter which type of investor you are, you can take certain actions to reduce the risk. Firstly, aim to have at least six monthsâ&#x20AC;&#x2122; worth of living expenses in an accessible savings account. Secondly, in turbulent times like these you should drip-feed your money in by saving regularly, so you donâ&#x20AC;&#x2122;t have to worry about timing the market. Over the longer term, the ups and downs will be levelled out by regular investing. Finally, spread your savings across the difIHUHQWDVVHWW\SHVVKDUHVSURSHUW\Ă&#x20AC;[HGLQWHUHVWDQGFDVKDQGKRSHWKDW if one falls the others will remain robust. However, all these asset classes have fallen in value in recent years, so there is no guarantee of future performance.

W h at t y p e o f i n v est o r a r e yo u ? Firstly, aim to have at least six monthsâ&#x20AC;&#x2122; worth of living expenses in an accessible savings account. 4


Cautious Even cautious investors face some risk. Itâ&#x20AC;&#x2122;s envisaged that this type of investor could have between 20% and 30% in equities, with an equal amount in Ă&#x20AC;[HGLQWHUHVWSURYLGHGE\FRUSRUDWHERQGVDQGJLOWVDQGWKHEDODQFHDVD cash reserve. A cautious portfolio is low risk, not no risk. Only cash is as FORVHWRQRULVNDV\RXZLOOĂ&#x20AC;QGDQGHYHQWKHQPXFKFDQGHSHQGRQWKH strength of the institution holding the cash. Even with cash holdings, unless \RXDUHHDUQLQJPRUHLQLQWHUHVWWKDQWKHUDWHRI LQĂ DWLRQ\RXUFDSLWDOZLOO gradually be eroded. Balanced Moving up the risk scale, you could have 50% in shares and between 20% and 25% in bonds. You can be a little more adventurous by adding global funds to core holdings, with a touch of spice from the east and emerging markets, plus higher yielding bonds. Adventurous If you have a strong stomach, you could put between 80% and 100% of spare cash into equities. The longer your time horizon, the more risk you can afford to take. A general rule of thumb is that your age expressed as a percentage should equal the amount of cash you hold in your portfolio. So a 20 year old should have 20 per cent in cash and the rest invested, while a 40 year old should have 40 per cent in cash, and so on. In any event, re-evaluate your portfolio regularly and also seek professional advice when reviewing your investment strategy.







10 ways to cut your Inheritance Tax bill. In March 2011, Her Majestyâ&#x20AC;&#x2122;s Revenue and Customs (HMRC) collected from the people ÂŁ2.7bn in inheritance tax (IHT). This is set to increase further in 2012, but with some careful planning you need not be caught in this trap. Here are 10 great tips...


Make a will.

7KLV LV WKH Ă&#x20AC;UVW VWHS WRZDUG DYRLGLQJ ,+7 ,I  \RX GLH LQWHVWDWH \RX will have no control over how your assets are distributed and you may end up paying IHT unnecessarily. For example, you may have intended to leave everything to your spouse but, in the event of intestacy, other relatives may be entitled to a share and IHT would have to be paid.




Be Generous sooner rather than later.

All gifts made more than seven years before the donor dies are free RI  ,+7 +RZHYHU LI  \RX UHVHUYH DQ\ EHQHĂ&#x20AC;W IURP D JLIW ² VXFK DV continuing to live in a house you have given away â&#x20AC;&#x201C; then HMRC may apply â&#x20AC;&#x2DC;gift with reservationâ&#x20AC;&#x2122; rules to apply tax as if the transfer had never happened.


Make it a wedding to remember.

Donors donâ&#x20AC;&#x2122;t need to survive seven years for some gifts to become IHT-free. If you cannot afford to give big money away, it makes sense to use the smaller allowances such as the ÂŁ3,000 per person annual allowance for gifts to anybody and the ability for parents to give up to ÂŁ5,000 to their children when they marry, and that could be ÂŁ5,000 from each parent to each adult child.


Make regular gifts from income.

For those with a substantial income who make a habit of distributing some of it can dramatically cut their tax bills. For the gifts to be IHTfree, they must satisfy three key tests; they must be made out of income as opposed to selling assets to fund them, they must be regular or at least the intention must be for them to be regular and they must not reduce the donorâ&#x20AC;&#x2122;s standard of living.


Do mention the war!

Where injuries suffered during military service are a contributory factor in anybodyâ&#x20AC;&#x2122;s death, then that personâ&#x20AC;&#x2122;s estate may become IHTfree. Not many people are aware of this exemption but it enabled a Duke of Westminster to avoid IHT when he died many years after injuries sustained during the Second World War and it may now be relevant to more people, following our military intervention in Iraq and Afghanistan.


Beware the ISA pitfalls.

Individual Savings Accounts (Isaâ&#x20AC;&#x2122;s), are a popular way of avoiding tax on income and gains from a wide variety of savings and investments, but they confer no protection against IHT, so itâ&#x20AC;&#x2122;s always best to seek specialist advice that can take all your assets into account.


Keep in in the family.

Discretionary trusts can be set up for about ÂŁ500 and enable assets up to the nil rate band of IHT of ÂŁ325,000 per person or ÂŁ650,000 for a married couple or civil partnership to be sheltered from IHT, so long as the donor survives seven years. Unlike outright gifts, these trusts let donors (for instance a parent) retain control of the assets and are a useful way to avoid IHT.


Become a gentleman farmer.

Complex rules govern business property and agricultural land reliefs, so professional advice should be taken, not least about the risk of losing your capital while trying to avoid tax. But, in general, agricultural land which is let out can become IHT-free after seven years and could be IHT-free after two years if you play a part in farming it.


Unlock wealth tied up in bricks & mortar.

Now that it is impossible to shelter the family home from IHT and remain living in it, another solution is to spend some of the wealth in that asset before it can be taken into account for tax. Equity release schemes marketed by members of the Safe Home Income Plans (Ship) trade body promise borrowers they will never be in negative equity.


Leave the country!

Even more extreme than it sounds. Changing your domicile, the FRXQWU\ ZKLFK \RX UHJDUG DV KRPH LV PRUH GLIĂ&#x20AC;FXOW WKDQ FKDQJLQJ the country in which you are deemed to be resident for tax purposes. 2QHGHĂ&#x20AC;QLWLRQRI GRPLFLOHLVWKHFRXQWU\LQZKLFK\RXLQWHQGWREH buried. If you are domiciled overseas, then only assets based in Britain will be subject to IHT, whereas IHT would cover your worldwide assets if you were domiciled here. financialSense





Remember, weâ&#x20AC;&#x2122;re here to help! Here are some of the basics...

ISAs the season to be Jolly!

01 You can invest your full allowance of up to ÂŁ11,280 in a stocks and shares ISA. If that feels too risky, you can save up to ÂŁ5,640 in a low-risk cash ISA, and invest a further ÂŁ5,640 in stocks and shares.

02 Your investment returns are free of income tax and capital gains tax.

03 The ISA is a â&#x20AC;&#x153;tax wrapperâ&#x20AC;? that you place around a range of eligible cash accounts and investment funds. Almost every bank and building society offers a cash ISA, and you can choose from thousands of funds from hundreds of asset managers.

04 You canâ&#x20AC;&#x2122;t use your cash ISA like a bank account. If you withdraw money, you have lost that part of the allowance for good.

05 If youâ&#x20AC;&#x2122;re unhappy with your existing ISAâ&#x20AC;&#x2122;s, you can transfer them to a different company. But there is one restriction: while you can switch money from cash into shares, you canâ&#x20AC;&#x2122;t switch from shares into cash (sorry, we donâ&#x20AC;&#x2122;t make up the rules).

ISA SEASON Like Christmas, the ISA season comes around every year. Okay, itâ&#x20AC;&#x2122;s not quite as exciting as Christmas, but it does seem to keep getting earlier each year plus itâ&#x20AC;&#x2122;s much better IRU\RXĂ&#x20AC;QDQFLDOO\RKDQGLI \RX¡YHJRWDQ\VSDUHFDVK you donâ&#x20AC;&#x2122;t want to miss it. Every UK adult can save up to Â&#x2026;LQDWD[HIĂ&#x20AC;FLHQWLQGLYLGXDOVDYLQJVDFFRXQW ,6$  WKLVĂ&#x20AC;QDQFLDO\HDUDQGWDNHWKHUHWXUQVIUHHRI DQ\LQFRPH tax and capital gains tax. But you have to act before the 5 April deadline, because if you donâ&#x20AC;&#x2122;t, you have lost this yearâ&#x20AC;&#x2122;s allowance for good.


Use it or lose it, as they say. Youâ&#x20AC;&#x2122;ve probably already noticed an increasing number of ,6$DGYHUWVDSSHDULQJDVWKHĂ&#x20AC;QDQFLDOVHUYLFHVLQGXVWU\ is gearing up for the start of the season and with so much money currently under funds, is it any wonder that some banks and investment fund managers will even keep their GRRUVRSHQULJKWXSXQWLOPLGQLJKWRQWKHĂ&#x20AC;QDOGD\WRJLYH the Mr & Mrs Come-Latelys a last chance!

All rates subject to change without notice. Please check all rates and terms before investing or borrowing.

Nationwide BS Online ISA (Issue 3)

3.10% fixed 2.10% bonus until 30/09/13

However, donâ&#x20AC;&#x2122;t leave it to the last minute, start planning now! The ISA rules still confuse many people, so donâ&#x20AC;&#x2122;t use that as an excuse to squander your allowance. If you donâ&#x20AC;&#x2122;t pay tax (and donâ&#x20AC;&#x2122;t expect to in future), you donâ&#x20AC;&#x2122;t need to worry about an Isa. Everybody else should seize the opportunity (if youâ&#x20AC;&#x2122;ve got the money in these cash-strapped times). But \RXVKRXOGDOZD\VWDNHLQGHSHQGHQWĂ&#x20AC;QDQFLDODGYLFHĂ&#x20AC;UVW ,6$¡VFDQDOVRKHOS\RXEHDWLQĂ DWLRQ,I \RXHDUQRQ a cash ISA, thatâ&#x20AC;&#x2122;s the equivalent of almost 3.45% if youâ&#x20AC;&#x2122;re a 20% taxpayer, and 4.6% if youâ&#x20AC;&#x2122;re a 40% taxpayer. Over the years, it can make a big difference. For more information and to arrange your ISA, why not call or email us now.

Cheshire BS Direct Cash ISA (Issue 1)

3.06% fixed 2.06% bonus until 30/09/13

Barclays Bank Loyalty Reward ISA The ISA rules still confuse many people, so donâ&#x20AC;&#x2122;t use that as an excuse to squander your allowance.

3.05% fixed 1.00% bonus 1st 12 months

ING Direct Cash ISA 2011/2012

3.00% fixed

Guaranteed rate for 12 months

Virgin Online Easy Access Cash E-ISA

2.85% fixed 8








Junior I SA . Donâ&#x20AC;&#x2122;t just assume ISAâ&#x20AC;&#x2122;s are there for adults. Theyâ&#x20AC;&#x2122;re also a great tax efficient way to save for your children. We set out all you need to know so you can take full advantage of Junior ISAs. The recent closure of the Government backed Child Trust Funds to new applicants in January 2011, left little choice if you wanted to save for your childâ&#x20AC;&#x2122;s future. But in November 2011, we saw the launch of the new Junior ISA and once again parents had a tax free haven for their childrenâ&#x20AC;&#x2122;s savings. What is a Junior ISA? Most parents want to save for their childrenâ&#x20AC;&#x2122;s future. Whether to help fund university fees or to put down a deposit on their Ă&#x20AC;UVWKRPH-XQLRU,6$¡VDUHD tax free savings account for your little ones. Available from 1st November 2011, the Junior ISA is designed to replace Child Trust Funds and encourage parents to invest for their childrenâ&#x20AC;&#x2122;s future. Theyâ&#x20AC;&#x2122;re currently open to any child under the age of 18 who didnâ&#x20AC;&#x2122;t qualify for a Child Trust Fund account, meaning if your child was born on or after the 3rd January, 2011, or before 1st September 2002 theyâ&#x20AC;&#x2122;re eligible.

10 financialSense financialSense

Whatâ&#x20AC;&#x2122;s more, subject to the ÂŁ3,600 per tax year limit, anyone can deposit money into a Junior ISA on a childâ&#x20AC;&#x2122;s behalf. Switching Junior ISAs between providers Each child can only have one cash and one investment ISA at any one time, but the annual ÂŁ3,600 allowance mentioned above can be split between the two types of account. Itâ&#x20AC;&#x2122;s also possible to switch the account from one provider to another, although if you have an existing Child Trust Fund, you canâ&#x20AC;&#x2122;t transfer this to a Junior ISA. When can the money be accessed? Under current Junior ISA regulations, neither children nor parents are allowed to withdraw money from a Junior ISA until the child turns 18. When the child reaches 16 theyâ&#x20AC;&#x2122;ll be able to manage their Junior ISA savings themselves, but still not access the cash until they turn 18. If they decide to hold onto their Junior ISA account it will automatically turn into a standard adult ISA.

When & Where? Available from 1st November 2011, the Junior ISA is designed to replace Child Trust Funds and encourage parents to invest for their childrenâ&#x20AC;&#x2122;s future.

Income Protection. A large number of people unfortunately have no insurance policy in place to protect them in the event that they become injured or suffer an illness which places their income in jeopardy. 6RZKDWKDSSHQVLQWKHVHLQVWDQFHVZLOO\RXVWLOOUHFHLYHDVXIĂ&#x20AC;FLHQW monthly income to accommodate the most of your outgoings, especially the essential ones? Income protection insurance could make the difference between ensuring you continue a normal life whilst you recovered or up until you retired, ZKLFKHYHUFDPHĂ&#x20AC;UVW With any income protection insurance policy, you need to be thorough and look at all the different points of a particular policy, as each one can offer GLIIHUHQWOHYHOVRI FRYHUDQGEHQHĂ&#x20AC;WV For more information and to discuss your mortgage, why not call or email us now.

In Numbers... 24m The number of people without income protection insurance.

2.63m 3HRSOHFXUUHQWO\OLYLQJRQVWDWHEHQHĂ&#x20AC;WV because they are unable to work.

14.5k The average amount such people would be underinsured by.

75% The drop in income an average person ZRXOGIDFHLI WKH\KDGWROLYHRII EHQHĂ&#x20AC;WV

33% Of people think they could live on less than 35% of their current take-home pay.

17 days The length of time most people could support themselves if they could not earn a wage.

20% Of people likely to be off work for longer than six months before they are 65.





Could you knock years off your mortgage? With rates so low, you could save a lot more interest by overpaying on your mortgage than you can earn by putting surplus cash in a deposit account!

Rule of thumb A good rule is to make sure that youâ&#x20AC;&#x2122;ve got at least three months of working capital as a buffer fund in the bank; in case of redundancy or temporary loss of income.

A question on many home ownersâ&#x20AC;&#x2122; lips is what to do with the spare cash in their pockets now rates have been slashed so dramatically. Some borrowers on tracker mortgages for example, are now paying less than 1% in interest. Should they simply enjoy the lower repayments and save the extra cash, or start overpaying to knock years, and possibly thousands of pounds in interest off the mortgage?

be down from ÂŁ1,375.77 to ÂŁ1,159.92. But a borrower who opted to keep repayments at the original, higher level would save over ÂŁ69,000 in interest and be able to clear the mortgage four years early, which is very impressive. With savings accounts currently offering very low rates, many home owners will save more in interest by overpaying than they can earn by putting money away. Indeed, the number of customers making overpayments at some banks has increased by 50% in the past year. It is a safe haven for any surplus money and at the same time reduces the mortgage!

So what happens if I overpay?

Overpaying also has important benHĂ&#x20AC;WVLQWKHOLJKWRI IDOOLQJKRXVHSULFHV and the threat of negative equity, as borrowers can maintain or possibly increase their equity in the property; a strategy that could prove vital when borrowers reach the end of their deal.

If we take a ÂŁ200,000 repayment mortgage with 20 years remaining and an interest rate that has fallen from 5.5% to 3.5%; the monthly cost would

Overpayments are not without their GDQJHUV:LWKXQHPSOR\PHQWĂ&#x20AC;JXUHV still rising, can we risk piling money into our mortgages? It is normally bet-

ter to pay off the mortgage as quickly as possible, but practically, you need to have some savings put aside in case of an emergency. A good rule is to make sure that youâ&#x20AC;&#x2122;ve got at least three months of working capital as a buffer fund in the bank; in case of redundancy or temporary loss of income. However, itâ&#x20AC;&#x2122;s important to remember that you may not have a free hand in the amount of overpayment you can put into your mortgage. For example, while standard variable rate deals usually permit unlimited overpayments, others will only allow overpayments of 10 per cent of the mortgage value each year and some may have early repayment charges. Itâ&#x20AC;&#x2122;s also worth noting, that in some cases you may be better off using surplus cash to pay for accident, sickness or unemployment (ASU) insurance. This enables you to cover your mortgage for up to 12 months in the event of being unable to work. For more information and to discuss your mortgage, why not call or email us now.

YOUR COMPANY REGULATORY DISCLAIMER Your Company Ltd is an appointed representative of Your Network Ltd, which is authorised and regulated by the Financial Services Authority (FSA 123456). <RXU1HWZRUN/WGUHJLVWHUHGLQ(QJODQG1R5HJLVWHUHG2IĂ&#x20AC;FH1HWZRUN+RXVH1HWZRUN6WUHHW/RQGRQ$$$$7HOHSKRQH YOURfinancialSense HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE. 12