In my last session, my life planner was trying to establish my vision, the ‘V’ in the five-stage EVOKE process described by life planning guru George Kinder. I have now undergone the third part of the process, ‘O’, and left feeling very positive after a session devoted to the subject of obstacles.

Beforehand, I did not feel this session would be particularly productive. I was concerned I was not giving my planner enough material, worried my life was too simple, that I had too few financial commitments and no dependants. I have no children and my parents are not yet old enough for that classification. I thought my planner would not have enough to get his teeth into.

I need not have worried. Although at 60 minutes it was the shortest session so far, I was able to leave with a clear sense of what I needed to do and when, plus a handful of new issues.

I now have the beginnings of a compact but meaningful set of life puzzles that we will set about solving together through a structured approach to my finances.

Making time for friends and family

The big spend on the horizon has started to take shape: a trip to Australia to visit family with whom I have lost touch.

The obstacles are: lack of money, lack of ability to manage money, lack of time, which is taken up with work and the 10-month long rowing calendar (a particular problem because if I am going to travel half the world, I will want to make it a long trip), not knowing when I would want to go or could afford to go, and finally, because I wouldn’t be travelling alone, whether I could co-ordinate my finances with my travel partner.

Fortunately, Chris Mellor, director of Amersham-based Inspired Financial Life Planning, had a smaller challenge for me to start on. It presents the same challenges for me but in a microcosm: a trip to Gloucester. It may not seem much but I have a problem with procrastination, so for this trip (to see a university friend with whom I think it is important to keep in touch) I must use calendars and telephones and act today rather than tomorrow or the next time I’m not so busy.

As for Australia, we agreed a realistic timeline of 2014, giving me time to save. This brings us to the other big subject of the meeting; saving.

Developing the savings habit

I do not a have a good history of saving. That was one of the reasons I was interested in being life planned and financially advised. I hoped it would help me find a way to achieve a more prudent existence; indeed, a more structured and, above all, more predictable existence.

I want the power to plan, to know I will have the facility to do things a few months down the line, secure in the knowledge that the money I spend will not, and cannot, take away my ability to pay the bills.

To start with, I am buying a piggy bank. This idea filled me with a great deal of positivity because it is tangible and I know I will respond to that.

It’s an idea we came up with right at the end of the session. Mellor asked if there was anything else I wanted to talk about. I said I was worried the costs taken up by my rowing (fees, training camps, hotels, travel and suchlike) would interfere with my savings plans.

This is particularly bad during Henley Regatta week in June, when food, accommodation and other miscellaneous expenses quickly add up to hundreds of pounds. That cost puts a very nasty hole in my monthly finances and even payday cannot undo the damage because I have less at the beginning of the next month than I need.

Mellor asked how having the money put aside would make me feel? Relieved and much happier, I replied. So he asked me how much I needed and I roughly estimated £200. That’s £50 a month for four months if I started in February and finished in May. Bringing my own lunch in to work would save £25 in a week.

My piggy bank

In case I fail to make my own lunches though, Mellor advised depositing £5 in a jar every day as a separate exercise. He suggested I might enjoy taking the money out of the bank during the day only to put it in the jar the same evening. This, he reckoned, rightly I suspect, would be more satisfying than assigning the money digitally via a new current account. The key was buying the jar, an act of ownership, so at the very least I could empty in my loose change at the end of each day.

The £50 would supplement the £100 we agreed I could afford to put aside each month for the Australia trip.

But I said I was not comfortable ferreting money away just yet. I felt I first needed to make one month’s spending vaguely resemble that of the month before. My worry was that, beyond the fixed costs of bills and rent, there seemed to be mystery expenses that each month left me short.

In reality, there is no mystery: it is all there to see in my bank statements, but I don’t like reading those. Mellor’s advice was to not feel guilty or embarrassed by my spending. If I spent the money, it was on something I needed or wanted. Either way, it was a legitimate decision, he said. However, he said I may want to make different spending decisions in the future and that required reading the statements. Oh, well.

Doing the maths

Mellor has recommended using a software package to help manage my finances. This sounds a bit like cheating from a financial adviser (I’m sure it’s not), but we haven’t talked about specifics yet.

In preparation for this session, I filled out a long-winded questionnaire on all my outgoings. Although the figure I arrived at was lower than my income, even net of tax, I still feel I am overspending. This means there are costs I am not keeping track of. Adding up cash machine withdrawals should provide the answer, though I haven’t done this yet. As I said, I don’t like bank statements.

My progress

The tone is now much more informal between Mellor and I and I am more relaxed and open with him. The meeting took place over coffee in a quiet bar rather than the office meeting room that hosted our previous two encounters. The sessions are meant to be personal and Mellor had offered to visit my home to ensure comfortable surroundings. The café was a good compromise.

One issue raised was whether I felt I had created the goals being set or that he was setting them for me, albeit based on what I was telling him. I wasn’t immediately sure.

This point lies at the very core of life planning. Unless the goals originate from me, according to Kinder, I’ll lack motivation to follow them through. As I see it, there must be a fine line between originating goals myself and my life planner guiding me towards choosing them.

Mellor said the ideal was for the planner to create an environment through questioning and listening techniques for these goals to spring forth from the client. This, I think, is what Kinder refers to as lighting the torch. These are the moments of inspiration that life planners evangelise about. However, I think some people will need more guidance and signposting than others.

The next session is the ‘K’, for knowledge, stage and will hopefully teach me some important lessons in how to manage my personal finances.

The new year began with many of the same overriding preoccupations that characterised 2011 although share prices were boosted during January amid rising optimism the global economy would manage to weather the worst effects of the eurozone’s ongoing sovereign debt crisis.

Nevertheless, there appears to be little room for complacency. The International Monetary Fund (IMF) believes the global economy is “deeply into the danger zone”, with the organisation’s managing director Christine Lagarde warning: “No-one is immune in the current situation. It is not just a eurozone crisis it is a crisis that could have spill-over effects around the world.”

January also saw Standard & Poor’s (S&P) downgrade the credit ratings of nine eurozone member countries, including France, which lost its coveted AAA rating. Austria, Cyprus, Italy, Portugal, Slovakia, Slovenia, Spain and Malta were also downgraded, with the ratings agency citing “insufficient” measures taken by European policymakers to address the debt crisis.

S&P furthermore downgraded the rating of the European Financial Stability Facility as, having cut back the ratings of France and Austria, there were insufficient AAA-rated guarantors for the European bailout fund to retain its top status. In Germany, the DAX index rose 9.5% during January, while in France the CAC 40 index rose 3.3%. At the end of the month, a new European Union treaty, which is aimed at strengthening fiscal discipline, was signed by every member state with the exception of the UK and the Czech Republic.

In the UK, the FTSE 100 index rose by 2% during January. Hopes of a resolution to the eurozone’s debt crisis were tempered by fears over another UK recession, following the news the UK economy had contracted by 0.2% during the final quarter of 2011. In the US, the Federal Reserve announced that it does not expect to increase US interest rates until late 2014. The Dow Jones Industrial Average index rose 3.4% during January while the S&P 500 index rose 4.4%.

In China, the Shanghai Composite index rose 4.2% during January, boosted by optimism that policymakers might start to loosen their monetary stance. China’s government has taken extensive steps to cool the country’s expansion and promote a more sustainable rate of long-term growth. Meanwhile, the Nikkei 225 index rose by 4.1% during January, although sentiment was tempered by the news Japan had posted an annual trade deficit for 2011, caused by the effects of the Great East Japan Earthquake.

Following on from our hugely successful and enlightening presentations last year, we are widening our circle of guests and would like to invite you to our first Discretionary Investment Management Presentation for 2012.

We would like you to join us for lunch and an afternoon of insight into future investment direction.

The structure of investing is changing as is the approach of financial advice to encompass a much more thorough and proactive service tailored to an individual’s, personal and financial, lifelong needs.

It is with great pleasure that we announce that four of our Managers will express their views on their portfolios, the markets and how they see the future. In these difficult investing times this will be exceptionally valuable information.

Presenting will be:

Newscape Capital Group, Vestra Wealth, Evercore Pan-Asset and Seven Investment Management and The Financial Management Group (tfmg’),  Michael Moore (Life & Pensions) .
 
We are also delighted to announce that one of the presenters will be Justin Urquart Stewart, a director and co-founder of Seven Investment Management. He can regularly been seen and heard on television and radio commenting on financial matters. You might more commonly know him as, ‘the financial guy off the TV with the red braces’.
 
We would also like to extend an invitation to a guest of your choice whom you consider might either be interested in and benefit from tfmg’s Client Service Investment Proposition or be seeking the services of a Financial Planner. We would expect to approach them after the presentation and seek about 40 minutes of their time to highlight what we do and the benefits that tfmg might be able to offer them.
 
This will be an independent, informative and innovative afternoons approach to wealth management which we feel will be of great interest and benefit to you . There will be a panel Q&A session after the Presentation.

The presentation is to be held in the beautiful surroundings of Hazlemere Golf & Country Club, Penn Road Hazlemere, High Wycombe, Buckinghamshire HP15 7LR. 

The club is set in an Area of Outstanding Natural Beauty in the Chiltern Hills and is home to some breath-taking views from the Club House.

Tuesday 31^st January 2012: A buffet lunch will be served from 12 noon and the first presentation will be from 1.30pm. Drinks, tea and coffee will also be available throughout the afternoon and we expect to finish at about 4.00pm.

Please email events@tfmg.co.uk to reserve your place.  When confirming, please indicate the number of places you require and any special needs or dietary requirements. Maps and directions will be sent by email upon receipt of confirmation.

If you have any questions that you would like answered, please feel free to forward them beforehand so that they may be incorporated in to the presentation.

Should you have either any questions or queries on the above information or wish to discuss any aspect of your financial affairs please contact our Financial Planners who will be happy to assist.

Vince Smith-Hughes, Prudential’s retirement income expert said; “the current economic climate has created a perfect storm for people in the run up to retirement. The impact of the credit crunch, banking crisis, recession, and concerns over the Eurozone has been reflected in the fact that expected retirement income levels have hit a 5 year low.

TFMG comment: This highlights the fact that it is important for clients to save for retirement to provide future income, especially as in November 2011 the Government expressed its intentions to increase the state pension age (SPA) in the future. The original aim was to increase the SPA to age 67 between 2036 and 2038. It is now proposed to make this change 10 years earlier between 2026 and 2028.  It also has to be said that valuable tax brackets are still available for those wishing to make their own retirement provision.

Most recently, the oil group Shell UK announced it would no longer allow new employees to join its final salary pension scheme, becoming the last FTSE 100 employer to close its doors to new members.

TFMG comment: As well as trying to keep companies trading profitably and afloat in the current economic climate, companies will be under even more pressure to fill in the pension deficits and keep their promises of future retirement income to employees.

While the hunt for income continues apace, recent figures released by the Association of Investment Companies (AIC) demonstrate that 33 per cent of conventional investment companies are yielding more than the FTSE 100 average annual yield of 3.2 per cent. Of these, 66 per cent are trading at a discount to net asset value.

Annabel Brodie-Smith, Communications Director of AIC, said: ‘The investment company sector has long recognised the importance of dividends and it’s encouraging to see such a significant proportion of the sector yielding more than the FTSE 100 annual average.

‘Investment trusts have the ability to sustain their dividends by building up their revenue reserve in good years, which allows them to pay dividends in difficult years. They do this by retaining up to 15 per cent of the income they receive each year and transferring this to their revenue reserve. Known as ‘smoothing’ dividends, this is one of the defining characteristics of the sector.
‘Income-seeking investors should not get carried away by yield alone. Investors need to consider their risk profile when making an investment decision and if investors are in any doubt they should consult their financial adviser.’

Highest yielding sectors
The Property Direct UK sector has the highest average dividend yield of 7 per cent and is on an average discount of -4.2 per cent, followed by UK High Income (6.6 per cent average yield, -0.6 per cent average discount), Global High Income (5.4 per cent average yield, -2 per cent average discount), Sector Specialist: Infrastructure (5.3 per cent average yield, 1 per cent average premium), UK Growth & Income (4.5 per cent average yield, 0.3 per cent average premium), Global Growth & Income (4.5 per cent average yield, 0.8 per cent average premium) and hedge funds (4.2 per cent average yield, -7.4 average discount).

Dividend and discount data to 31 October 2011. Source: AIC using Morningstar.  AIC Members only. Excludes VCTs and split capital investment companies, leaving 246 companies. FTSE 100 average annual yield over last 12 months to 31 October 2011. Source: Datastream. The value of these investments and the income from them can go down as well as up and you may not get back your original investment. Past performance is not an indication of future performance. Tax benefits may vary as a result of statutory change and their value will depend on individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.

 TFMG comment: This could be a good reason for clients to review their policies and underlying investments to ensure they meet future needs and objectives.

With further tax increases likely on the horizon, there really is no time like the present to take a step back and look at how you could reduce your taxes and improve your financial planning strategy.

The end of the current 2011/12 tax year is 5 April. We have provided an overview of the key areas you may wish to consider that could help you achieve a more secure future for you and your family.

Make use of personal allowances

Every person in the UK is allowed to earn a certain amount of money each year without paying income tax, known as a personal allowance. This tax year, the personal allowance is £7,475, with higher allowances available to those aged 65-74 (£9,940) and age 75 and over (£10,090). If you become 65 or 75 during the year to 5 April 2012, you are entitled to the full allowance for that age group. If you earn income above £100,000 you start to lose the personal allowance (at a rate of £1 for each £2 you earn above this limit).

If you are married and one partner is not working, if appropriate, it could be beneficial to transfer savings accounts to them, so that you pay less income tax as a couple. If you don’t make use of your personal allowance in any tax year, you cannot carry it forward to the next year.

Use your Individual Savings Account (ISA) allowance
ISAs allow you to save tax-efficient money. Within an ISA you pay no capital gains tax and no further tax on the income. You don’t even need to declare ISAs on your tax return. This tax year, you can invest up to £10,680 in a Stocks and Shares ISA or, alternatively, you can invest up to £5,340 in a Cash ISA and the balance in a Stocks and Shares ISA. Any allowance not used by the 5 April deadline will be lost forever. The value of tax savings depends on your circumstances and tax rules can change over time.

Top up your pension contributions

The annual allowance for the tax year 2011/12 is £50,000, inclusive of your own contribution and any other amounts paid into an approved pension scheme. Contributions paid by you to a personal pension plan or a stakeholder pension scheme are made net of 20 per cent basic rate tax. This means that for every £100 you want to save, you pay only £80. Tax relief of £20, topping your contribution up to £100, is then added by HM Revenue & Customs (HMRC).

If you are a 40 per cent higher rate tax payer, you may be able to claim additional tax relief. If you are a 50 per cent additional rate tax payer, you may also be able to claim additional tax relief at your highest rate. Depending on how much you earn over the higher rate tax band, and your level of contribution, any additional rate tax relief would range between a further 1 per cent up to a maximum of 30 per cent.

Plan for Inheritance Tax (IHT)

Effective IHT planning could save your family hundreds of thousands of pounds. If you haven’t done anything about a potential IHT bill, now is the time to take action. Currently, IHT is charged at 40 per cent on anything you leave over £325,000 when you die (£650,000 for married couples or registered civil partnerships). With rising property prices in recent years, this has resulted in more people being subject to IHT.

Start by writing a will, making it clear to whom you want to leave your money and possessions when you die. You may then want to try and minimise any potential IHT bill by giving regular small gifts away. Currently, you can give away a lump sum of up to £3,000 in each tax year without paying IHT – known as your ‘annual exemption’ – or £6,000 this year if you haven’t used last year’s allowance.

You also have a ‘small gifts exemption’, which means that you can make small gifts of £250 each year free of IHT. There is no restriction on the number of small gifts but they must each be to separate individuals. You cannot use your annual exemption and your small gifts exemption together to give someone £3,250.

Reduce your capital gains tax (CGT) liability

If you have made a taxable gain from the sale of property, shares, investments, businesses or any form of capital gain, make sure you don’t make unnecessary CGT payments. CGT is a tax charge that arises from the disposal of assets, such as shares or buy-to-let properties, charged at 18 per cent for lower and 28 per cent for higher rate tax payers. Every individual has an annual CGT-free allowance, which currently stands at £10,600 for the 2011/12 tax year.

The limit applies to each individual, so if you are married or in a registered civil partnership you each have an annual exemption and should ensure that each of you maximises your CGT-free gains.

There are different ways to reduce CGT bills, for example, equalisation or joint ownership of investments will transfer income to the lower-taxed one. This can be done CGT-free for married couples and registered civil partnerships. By transferring an asset into joint names, you could both make use of your tax-free allowance so that up to £21,200 of any gain can be tax-free in the current tax year. But the transfer to your spouse or partner must be a genuine outright gift, so this might not be a suitable strategy for everyone.

It may also be appropriate for some unmarried couples to equalise non-CGT assets such as bank accounts, which could mean that it becomes possible to equalise or transfer assets on whichever gains are less than their annual CGT exemption. Even if an asset is only put into joint ownership the day before it produces income – for example, through interest or a dividend – that income will still be split equally between both owners.

If you immediately sell employee shares that you get through a Save-As-You-Earn share option scheme, company share option scheme or enterprise management incentive scheme, you may have a CGT bill. Consider selling in several tranches, so that each year’s gain is within your annual tax-free allowance.

Some 6.1m of today’s over-50s expect to work past the current state retirement age, according to data from LV=’s Working Late Index. The report reveals that, on average, those planning to work past state retirement age will work for an extra six years, which could see them retiring at age 71 for men and 66 for women based on today’s retirement age.

Affordability, the key reason

One in five over-50s said they expect to work for at least a decade past the current state retirement age. Affordability is the key reason stated by 51 per cent of over-50s who plan to work beyond the state retirement age, while a further 11 per cent want to delay taking out their pension in the hope its value would increase over time.

Continuing to work for financial need

The data from last year’s Working Late Index showed that 43 per cent of those planning to work beyond state retirement age said they would do so because they enjoyed the job they do. In 2011 this had fallen to 37 per cent, which LV= claimed represented a shift to continuing to work for financial need rather than enjoyment.

Moreover, these trends are likely to continue as the state retirement age increases to age 65 for women in 2018 and to age 66 for both men and women in 2020.

Taking professional advice

Ray Chinn, Head of Pensions at LV=, said: ‘The trend of people retiring well into their 60s, or even their 70s, has been increasing slowly over the last few years. ‘The rising cost of living, low interest rates on savings and the fact that as a nation we are living longer has had a significant impact on our retirement aspirations and the amount of money we need to live a comfortable retirement.

‘Our findings have shown a shift to continuing to work for financial need rather than enjoyment and we’re likely to see this increase further.’

Working later in life

Ray Chinn continued: ‘In recent years we have seen many people cutting back on the amount they are saving towards retirement. As a result many will have no choice but to work later in life to maintain an adequate standard of living in old age.

‘We urge those nearing retirement not to give up on saving at such a crucial time and to consider all the options available to them.’

All statistics are from LV=’s data taken from a survey of 1,522 British adults, all aged over 50.
25 November 2011.

On 29 November 2011, the Chancellor of the Exchequer, George Osborne, announced the Autumn Statement, which provided an update on the government’s plans for the economy based on the latest forecasts from the Office for Budget Responsibility. These are the key announcements from his speech.

Pay, taxes and allowances

Public sector pay awards will be frozen at 1 per cent at the end of the two-year pay freeze.

Most working age and disability benefits will be uprated by the September inflation figure of 5.2 per cent and the child element in the child tax credit will be increased in line with inflation, rising by £135 a year in 2012/13. But the £110 above-inflation increase that was planned for 2012/13 will not go ahead.

The state pension age is set to rise from 66 to 67 from 2026. Mr Osborne said that it will save £59bn and will not affect anyone within 14 years of receiving their state pension today.

The state pension will rise by £5.30 to £107.45, in a move which Mr Osborne said was the largest ever cash rise. Pensioners receiving pension credit will also benefit from an increase worth £5.35.

January’s planned 3p rise in fuel duty was cancelled and August’s increase will be limited to 2p.

Housing

The Right to Buy scheme for council house tenants is back, offering a 50 per cent discount and the money going to build new homes to stimulate the construction industry. A £400m scheme will jump-start stalled construction projects in England.

The government will underwrite mortgages for 100,000 young families trying to get on the property ladder.

Transport and infrastructure

The government is publishing a National Infrastructure Plan, identifying over 500 projects for the next decade.

Budget savings will enable the government to put £5bn into these projects along with a further £5bn it is committing over the next spending period. It has also struck an agreement with two groups of British pension funds to unlock an additional £20bn of private investment.

Infrastructure measures to be funded by a new £30bn include electrifying the TransPennine Leeds-to-Manchester rail route, building a new railway link between Oxford, Milton Keynes and Bedford, and extending the Northern Line of the London underground to Battersea, which will create 25,000 jobs.

Mr Osborne confirmed that rail fare increases would be limited to the Retail Price Index (RPI) plus 1 per cent, rather than RPI plus 3 per cent.

Families, education and employment and skills

Families in the south-west of England will have their water bills cut by £50.

A further £380m will be invested by 2014/15 to extend the government’s offer of 15 hours of free education and care a week for disadvantaged two-year-olds, covering an extra 130,000 children.

The government will provide an additional £1.2bn for capital investment in schools in England, including an extra £600m to fund 100 additional Free Schools by the end of this Parliament.

A £1bn youth contract will fund measures including wage incentives for 160,000 young people to make it easier for private sector employers to take them on and at least 40,000 incentive payments for small businesses to take on young apprentices.