It has also changed the behaviour of some of the husbands of the affected women – possibly because they are delaying their own retirement so they can both retire together or perhaps to cover their wives’ lost pension income with additional earnings. These findings are from new research recently undertaken by researchers at the Institute for Fiscal Studies.

Impacting on the labour market, employment rates among 60 year old women have increased by 7.3% and in April 2012 there were 27,000 more women in work than there would otherwise have been. Employment rates among their husbands also increased, by 4.2%, with 8,300 more men in work than there would otherwise have been. More women aged 60 were unemployed, with some 5,000 more women aged 60 not in work but looking for work.

The report also suggests that future increases in the state pension age will lead to a substantial increase in employment and will strengthen the public finances, estimating that effectively the UK’s public finances have been currently strengthened by around £2.1 billion.

The effects the study found are especially large given that most women (and men) do not retire at their state pension age. The employment rate for 60 year old women rose from 41.5% to 51.4% between 2010 and 2012. These effects have also been seen in the context of a weak economy which might have made staying in or finding work more difficult.

Women may be using the state pension age as an “anchor” in making their retirement decisions. In addition, there is evidence that some women did not realise quickly enough that their state pension age was no longer 60 and so did not take action, for example to increase saving and offset the effect.

Taken together, there were 35,000 more older men and women in work as a direct result of the increase in the female state pension age from age 60 to 61, which occurred between April 2010 and April 2012. Despite the weak performance of the UK economy over these two years, many have been able to limit the loss of state pension income through increased earnings.

The initial evidence is that rising pension ages can have significant positive effects on employment. However, what we have yet to understand more fully is what might the negative effects be within the wider and younger labour market.

• they were born between 1 September 2002 and 2 January 2011
• you were paid Child Benefit for them for at least one day before 4 January 2011
• your child was living in the UK
• your child wasn’t subject to any immigration restrictions before 3 April 2011.

All children who were eligible for a CTF account should now have one. Each child received vouchers worth £250 or £50, depending on when the child became entitled. The voucher to open a CTF account was sent to the person who got Child Benefit (or the European family benefit). HM Revenue & Customs (HMRC) would have opened an account for your child if either the voucher wasn’t used or a local council started to look after your child before you claimed Child Benefit. If you think that your child should have a CTF, you can use an online form from HMRC to find out where the child’s CTF is held.

It is estimated that six million people have £4.9bn invested in these obsolete accounts, held by 72 approved Child Trust Fund (CTF) account providers across the UK (mainly banks, building societies and credit unions). HMRC has a list of these providers. The CTF providers offer 3 main types of Child Trust Fund (CTF) account – the variable risk Stakeholder Accounts and Share Accounts and the more secure Savings Accounts.

You can add up to £3,720 a year to an existing CTF account. The money belongs to the child and can’t be taken out until they’re 18. Your child could also have got extra money paid directly into the account – for example, if you were on a low income. There’s no tax to pay on the CTF income or any profits it makes. It won’t affect any benefits or tax credits you receive.

If you’re the main contact for a CTF account, you’re called the ‘Registered Contact’. You have certain responsibilities until the child is 16 and can manage their own account. You’re the only person who can tell the account provider how to invest the fund and run the account, move the account to another provider or change the type of account. You hold your child’s Unique Reference Number – this is shown on the voucher, the statements for the account and details of the type of account and the provider.

You can open a Junior ISA instead, if your child wasn’t eligible for a CTF account. Junior ISAs are tax-efficient children’s savings accounts which replaced Child Trust Funds (CTFs). They’re available to any child under 18 who didn’t qualify for a CTF and who is resident in the UK. Unlike CTFs, new holders of Junior ISAs do not receive a lump sum to get them started. You can now switch CTFs into newer Junior ISAs which can offer higher interest rates, lower charges and a wider choice of investment fund. There is evidence that the gap between the CTF and Junior ISA interest rates is now widening, which could make a considerable difference in interest payments over the number of years to maturity.

According to figures published in April 2013, men will need 29 per cent more savings to reap the retirement income that they could have gained in 2009.

In 2009, a 65 year old man with a £118,000 pension pot at retirement would be able to secure an annual income of £5,000. This year however, the same person would have to have a pot of £152,800.

The cost of securing an income has grown more slowly for women, who would have had to have a pot of £133,500 in 2009 in order to secure a £5,000 yearly income.

The figures represent a dramatic fall in annuity rates in the last four years. If people’s expectations and financial plans are set by their historical experiences, without recognition of economic changes, then they are going to find shortfalls in their anticipated retirement funding.

In addition, it is suggested that too many people have sacrificed long-term retirement provision, choosing instead or by necessity, to provide for themselves higher income today.

Inflation proofing or organising pension pot savings has fallen by the wayside, contributing to the growing problem of inadequate retirement income provision and the realisation for many that they will need to work much longer to retirement than they had anticipated.

In the present world economic and increasing life expectancy situation, it is totally unrealistic for us to expect any government to step in and save more for our futures, beyond the provision of any low level safety net. The only way people can fix the problem is for them individually to save more money through adequate pension pot building.

Throughout the quarter US policy makers have taken a measured approach to fiscal reform, starting on New Year’s Eve by avoiding the potentially destructive fiscal cliff, choosing instead to reduce the fiscal drag to a more sensible 1.5% from a potential 4%. Although budgetary sequesters amounting to $85 billion did kick in at the start of March, the more crucial debt ceiling debate has been postponed until the end of September, leaving politicians with more time to reach a challenging compromise on the size of budgetary cuts and tax increases.

Despite further episodes of European crisis, market volatility has remained subdued and damage limited to local asset markets. The result of elections in Italy demonstrated the growing public rejection of European austerity and reform, with voters delivering more support for fringe parties leaving no party with a clear mandate to govern. By far the most disturbing developments occurred in Cyprus with bank depositors being “bailed-in” via a deposit levy to secure a Troika rescue package for the country. Although the levy was eventually only applied to depositors with over 100,000 EUR it does set an uncomfortable president for future bailouts whereby sovereign debt holders may be safer than uninsured depositors. At the very least Europe is now further away from the structural reform it needs to resolve its issues.

Economic data globally has been mixed and continues to signal a below trend growth environment heavily supported by central bank policy. US data has remained relatively robust, but has softened towards the end of the quarter. Retail sales and Non-farm payroll releases for March disappointed and ISM leading indicators suggest some slowing in Q2. The chart below shows developed market leading indicators for manufacturing have turned lower with the exception of Japan where sentiment has improved following the aggressive policies now being pursued by the Bank of Japan.

Please click here to read more of this months market commentary.

• to increase the £55,000 spouse exemption limit that applies to transfers by a UK domiciled spouse to a non-UK domiciled spouse to the level of the nil rate band which is currently £325,000 (and frozen at that level until 2017/2018). This new limit applies to transfers on or after 6 April 2013; and
•  to allow non-UK domiciled individuals to elect to be treated as UK domiciled for IHT purposes.

At Budget 2013, amended proposals were announced which meant that an individual making a lifetime election or a ‘post death election’ to be domiciled in the UK can choose for the election to apply from any date within the seven years before the election is made. This means that if an election is made any lifetime gifts made within the seven years before death will now also be able to benefit from the full spouse exemption even if no election was in place at the time of the gifts. However, the earliest date from which an individual can choose the election to take effect is 6 April 2013 and so it is only gifts made on or after this date that can benefit from the revised treatment.

CURRENT POSITION With effect from 6 April 2013:

• The spouse exemption limit on transfers from a UK domiciled spouse to a non-UK domiciled spouse has increased to £325,000 as originally proposed.
• A non UK domiciled spouse/civil partner will be able to elect to be treated as UK domiciled for IHT purposes.
• Electing for UK-domicile treatment for IHT purposes will mean that:
• transfers from a UK-domiciled spouse or civil partner will be fully exempt from IHT irrespective of the amount transferred, but
• the electing spouse/civil partner’s worldwide assets will be liable to UK IHT.
• Electing spouses/civil partners making either an election during lifetime or on death, can choose UK domiciled status to apply from any date within the previous seven years. Any lifetime gifts made during that period will then be covered by the election. The earliest date that can be specified is 6 April 2013.
• Elections that are made after the death of a UK domiciled spouse/civil partner must be made within two years following the death (unless HMRC agrees to a longer period). An election in these circumstances must be made on behalf of the non domiciled individual by their legal personal representatives.
• A lifetime election will be irrevocable whilst the electing spouse/civil partner remains UK resident. However, it will cease to apply if the electing spouse/civil partner is resident outside of the UK for more than four consecutive tax years.

This month’s edition has some interesting articles and the ‘funny’ clip at the end has been sent by clients Peter & Gillian- thanks to them. If you have any suitable clips, please email them to Karen on kharling@twpwealth.com and we will try to feature it.

Our main investment market commentary this month features the Quarterly Review of the managed portfolios run by London & Capital, who manage many of our clients’ portfolios. It is quite long, but hopefully will give you a feel for their investment style and their current thoughts. We have been very happy with the portfolios’ performance especially as they have kept within their volatility targets, thus delivering solid returns without the risks of a pure equity portfolio. Of course we have to state the value of investments can fall as well as rise.

So to TWP news from last month. Alison is on the mend having had her knee operation. She has now returned to the office to play ‘catch up’! Clare, Martin and Imran are training for various athletic endeavours; Clare is doing the Race for Life in aid of Cancer Research UK; Martin is doing the Wilmslow Triathlon and Manchester 10k in May for the Starlight ward at Wythenshawe hospital  whilst Imran is undertaking some ridiculously gruelling bike ride up some very steep hills in the Pennines! Staying with the sporting theme, over the next couple of months, David will be acting the gentleman playing cricket for the MCC against a variety of schools in the North West. We look forward to seeing him again in July!

Finally a warm welcome to John Roberts, the latest person to join TWP . With over 25 years in the profession, John’s experience is a welcome addition to the advisory team. When not in the office John can usually be found on the golf course or in the pub!

We hope you enjoy this latest edition.

]]> http://www.twpwealth.com/2013/05/dont-forget-the-fish-may-introduction-2/feed/ 0 http://www.twpwealth.com/2013/04/baby-boomers-regret/ http://www.twpwealth.com/2013/04/baby-boomers-regret/#comments Tue, 09 Apr 2013 12:33:20 +0000 cfmaster http://www.twpwealth.com/?p=5557 Nearly one in seven (15%) of adults responding, admitted wishing they had started a pension sooner, with the figure rising to one in five for those approaching retirement. Independent financial advisers have long warned about the adverse affect of starting a pension later.
The top five ‘baby boomer’ financial regrets identified ...]]> Research by Standard Life has evidenced that people in Britain’s baby boomer generation, now approaching retirement,  say that their biggest financial regret is not starting saving for retirement earlier.

Nearly one in seven (15%) of adults responding, admitted wishing they had started a pension sooner, with the figure rising to one in five for those approaching retirement. Independent financial advisers have long warned about the adverse affect of starting a pension later.

The top five ‘baby boomer’ financial regrets identified by Standard Life are:

1. I wish I had saved for retirement earlier.
2. I wish I had avoided running up debt on credit cards or store cards.
3. I wish I had set and stuck to a budget.
4. I wish I had spent less on nights out and saved more in general.
5. I wish I had sold things I no longer needed.

Those who start saving £100 a month at age 25, could receive an income of £3,570 a year by the time they are 65, according to Standard Life. On the same basis, with investment growth of 5% and increasing saving each year by 3%, someone saving the same amount from age 40 would have pension income of only £2,000 a year by the same age.

Official figures have shown how pension membership has rapidly declined. Less than half of all employees (46%) were part of a workplace pension scheme last year, according to the Office for National Statistics (ONS). That was the lowest figure since it started collecting similar data in 1997. Only 32% of private sector employees were saving into a workplace pension in 2012, in sharp contrast to the public sector, where more than 80% of employees were enrolled in a workplace pension scheme.

The ‘baby boomers’ interviewed by Standard Life were aged over 55. The wider definition of the term is those born during an explosion of births between 1946 and 1962, who today would be aged 51 to 67. This survey confidently concludes that many of these baby boomers are approaching retirement wishing they had been more money savvy when they were younger!

It’s easy to be flippant about the basket of goods, but the measurement of inflation is a serious business with serious implications – particularly for the UK’s older people.

That might surprise you. Surely the rate of inflation is the same for everyone? Yes, the Government announces a single rate of inflation across the country – but rising prices impact differently on different age groups. And the general rule is that the older you are, the more you are affected by inflation.

Clearly if you are living on a fixed income (one that doesn’t rise with the cost of living) then inflation is going to be very bad news. But even if your income does increase, the elderly will often find that their spending power is gradually decreasing.

The Government recently switched to using the Consumer Price Index (CPI) as the reference point for increasing the state pension and index linked pensions. This move away from the Retail Prices Index (RPI) immediately took a slice out of people’s spending power – simply put, the RPI increases at a faster rate than the CPI.

According to figures from Saga, someone who was receiving a £10,000 per annum pension in 2010 would have seen this rise to £10,846 in 2012, using the CPI – but had RPI been used, then the figure would have been £11,046. A difference of £200 may not seem much – after all, it’s only £4 a week – but imagine that difference compounded over 15 or 20 years. It adds up to a significant saving for the Government, and a significant loss of purchasing power for older people.

The reason older people are more affected by inflation is simple: they spend more of their money on the items which are going up most quickly, and – unfortunately – they have little choice in how they spend the money. Typically an older person will spend far more of their income on food, fuel and energy than someone who is still working. So a cold March like the one we’re currently having will be very bad news.

In the Autumn of 2012 Saga calculated that the previous five years had seen a general increase in the cost of living of 16.8%. But for those aged between 50 and 64 the rate was 19.6% and for over-65s it was a very painful 22.8%.

So what can older people do to avoid the ‘inflation trap?’ Fortunately one of the easiest steps to take is also one of the most effective – see an independent financial adviser and make sure your finances are properly organised and regularly monitored.

A good IFA will be able to give advice on the best – and most tax efficient – way to take your pension; guide you through the maze of buying an annuity and make sure you buy the very best one available; and help you get the highest interest rate on your savings.

Advice like this can make all the difference between being comfortably off in retirement – and not having quite enough. In addition, regular reviews from an IFA will ensure that your finances stay securely on track, providing essential peace of mind.

We are always happy to talk any clients or potential clients about their finances. Simply give us a call or drop us an e-mail: we’re here to help.

It is also a good time to check that you have your money in a Cash ISA with the best interest rate possible.

How many of us have a Cash ISA that has passed beyond its initial first year bonus rate and we haven’t done anything about moving our money to a better ISA? Many Cash ISAs currently yielding between 2-3% interest p.a. only have that rate because of an introductory bonus, designed to draw in the investor. Cash ISA rates dropping to 0.5% or lower after 12 months, are not unusual.

At the present low rates of interest, we can be forgiven for not bothering to look to transfer funds to a better rate ISA. However, the change process is relatively simple, particularly if you have to hand information on ISA products and a form to fill in from your provider, prompting you to take action. Many of us don’t move providers – we’re too loyal! But even if you are staying with your provider, a few minutes work can earn you a few extra pounds in interest.

The five checks and steps to take for a successful Cash ISA transfer are:

1) Check whether or not your new provider will allow you to transfer older ISAs to it, because not all do.

2) Beware of penalties: your existing provider can’t prevent you from transferring but, if you have a fixed-rate or notice ISA, you might incur charges.

3) Contact your new provider and request a Cash ISA Transfer Authority form. Never close your account and transfer the money yourself, as you will lose the tax benefits.

4) On your Cash ISA Transfer Authority form you will be asked to specify the amount you’d like to transfer. If you’re transferring an ISA from the current tax year, you must move the full amount. But if you’ve built up savings from previous years, it’s up to you how much you move.

5) It shouldn’t take longer than 15 working days for a provider to complete the transfer, so complain to your provider if you experience any delays.

Well the Budget came and went last month with little substance behind it. The common consensus was Chancellor George Osborne had very little room for manoeuvre; in essence with his hands so tied, it was more of the same. One positive was the reduction in corporation tax levels, and concessions on employers’ national insurance contributions for small firms. Hopefully both will encourage the creation of more private sector jobs. But it remains very tough out there for the economy. It could be worse. Thank goodness we didn’t join the Euro, otherwise we would probably have been mentioned in the same breath as Spain, Portugal and even Greece.

This brings me back to our reoccurring theme: The world’s macro data is pointing to a significant slowdown, and yet  stocks remain sanguine; buoyed by the promises of central planners everywhere that no harm will come to them. The disconnect between the equity markets and the economic reality deeply worries us that another market correction maybe due. Last week the markets wobbled on the worse than expected employment data from the US. On another day, such data might have made little impression on the equity markets; that it did was probably due to the events in Cyprus and possibly the war cries from North Korea. And that is the point, despite the Markets shrugging off bad news one day, with so many threats to the global economy (US Debt, Eurozone, recessions, various political tensions etc), if several of these come to a head simultaneously, it could trigger a serious market sell off. We cover more of this in our Investment Market commentary below.

Last week, Kevin, Jane B, David and Martin travelled to London for our quarterly investment meeting with London and Capital’s CIO, Pau Morilla Giner. Pau emphasised despite the recent good performance in the equity markets, the serious economic problems hadn’t gone away, and that caution was still needed. His thoughts closely reflected our own views.

We hope you enjoy this edition and also if you have any questions please contact the office.

With best wishes,

The Directors, Advisers and Staff at TWP