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Planning for your ‘Financial Independence’

One of the critical aspects of Retirement Planning; or as we like to call it, your Financial Independence, is structuring your financial affairs to make sure that you have enough money to ensure that, if and when you stop working you can spend your time the way you want to, doing those things that you always intended to do.

 Too complicated to think about – A survey conducted by BlackRock’s Investor Pulse showed that in the main, the biggest financial priority for individuals surveyed was ‘funding a comfortable retirement’. Yet many people spend more time planning their holiday that their retirement – perhaps because planning for retirement seems too complicated to think about.

Don’t know where to start – We are all living longer, the State Pension Age is increasing and pensions legislation is ever changing. Understandably, we want an active, comfortable retirement but often don’t know where to start the savings process.  If confusion and a lack of understanding around your retirement needs have led to put you off planning and saving, you’re not alone – in fact, over half of people in the UK are in the same position.

However, the sooner you start to plan, the sooner you will start to consider the changes you can make to ensure that you are in control of your ‘financial independence’.

 Consider the following steps: –

Step 1 ~ Target

Know what you need – set yourself a target.

The closer you are to retirement, the more likely you are to know how much income you will need to cover your outgoings. If you have longer to go until retirement, it is still good to have an idea of what you are aiming for – and you should review this every year as you get closer.

Step 2 ~ Plan

Know what you already have.

Understanding what you already have will help you understand how far you are towards your retirement target. If you have several different pension plans, it may be worth considering bringing these all together into one account.  In addition to pension plans, your financial independence may also be reliant on other assets, investments or income so it’s important to consider these too.

Step 3 ~ Action

What you need to think about

  • Are you saving the right amount?
  • Are you invested in the right kind of funds?
  • When can you realistically retire / reach financial independence?

How close are you to reaching your financial independence? We can help you understand your own situation and retirement goals and then align these with what you already have in order to identify how close, or not, you may be to achieving your goals. We can then help you put appropriate measures in place to help you spend your future doing those things that you always intended to do.

What is Evidence-Based Investing?

Often in my blogs, you will hear me refer to ‘Evidence-Based Investing’ which reflects the investment philosophy adopted by Carpenter Rees Ltd.    This week, I thought I would share with you an Infographic which explains how this differs to ‘Traditional Active Investing’.   Whilst the two offer very different approaches to investing, at Carpenter Rees we don’t believe in timing markets, making knee-jerk reactions or acting on ‘expert’ opinions; we prefer to work with long term academic evidence in order to allow investments the time they need to do what we feel is most important to our clients ….achieve long term returns aimed at meeting their personal aspirations and financial goals.

Click here to view in detail our one page investment philosophy comparison.

 

 

You’re only as strong as your weakest link!

Unless you’ve spent the weekend on the moon or simply ‘switched off from the world’, you will be aware of the unprecedented cyber-attack ‘WannaCry’, which began as a ransomware attack on Friday morning, infecting over 230,000 computers in 150 countries and causing grave disruption to many organisations including the NHS.  Whilst the stories that hit the headlines related to large organisations, there will no doubt be many small businesses and individual users who have also been victims.

 It seems that everywhere you look we are being warned about the risks of cyber-crime; yet despite this, it is still the fastest growing area of crime, as criminals continue to take advantage of advancing technology and the vulnerability of systems and individuals.

According to statistics recently published by the Office of National Statistics, cyber-crime was one of the most common offences committed in 2016, with an estimated 2 million cyber-crime incidents compared to 686,000 domestic burglary offences!

It’s not surprising that individuals unwittingly fall foul of these increasingly sophisticated attacks, particularly when these often come from what appear to be genuine and respectable authorities.   A warning email I received on Friday morning from HMRC illustrated this perfectly.  It read “Customers are strongly advised to lookout for a new phishing scam. If you get an email with the subject, “Your 2016 Tax Report”, with an attachment, do not open!”

Now I know that HMRC would never email important documents to me and if I was in any doubt, I would telephone HMRC to check (after looking up the number from a genuine source and before opening any attachments), but, how many individuals would have been panicked by seeing ‘HMRC’ and immediately opened the attachment, resulting in who knows what malicious activity, financial loss, data loss, identity fraud or even psychological issues resulting from the stress of the attack.

The National Cyber Security Centre makes the following suggestions for keeping safe: –

  • Use proper anti-virus software and always download the latest software and app updates; they contain vital security upgrades which help protect your devices from viruses and hackers. The most common reason respondents across the UK gave for not downloading software updates was that it takes too long. In reality, it only takes a few minutes compared to the time it can take to recover from a cyber hack.
  • Use three random words to create a strong password. Weak passwords can allow hackers to use victims’ email to gain access to many of their personal accounts, leaving them vulnerable to identity theft and fraud.
  • Back up the data that is important to you – you can’t be held to ransom for data that you hold elsewhere.

 Of course, these activities alone can’t keep you completely safe. In September 2016, the ringleader of a gang responsible for the biggest cyber-fraud the Metropolitan police had seen was jailed for 11 years.  Their crime; defrauding innocent bank customers over the phone by pretending to be from the fraud department of the bank and persuading them to provide their internet banking details on the basis that their accounts had been hacked.   Within a matter of seconds and whilst the call was still taking place, the callers associate would gain access to the victims account and empty them!

Now you might think that you wouldn’t have fallen prey to this crime, but the criminals were so convincing that amongst the victims was a firm of solicitors who were fleeced out of £2,260,625! In fact, between January 2013 and October 2015, the gang took approx. £113 million from victims!

 Through its Cyber Aware campaign, the government are urging everybody to treat cyber-crime as seriously as home security.   For more information on keeping yourself safe, please visit https://www.cyberaware.gov.uk/

Carpenter Rees takes cyber-crime and the security of client data very seriously.  In October 2016 we successfully completed the Cyber Essentials badge demonstrating that we have the correct security controls in place which meet government endorsed standards.

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You can’t take it with you.

‘You can’t take it with you’ and ‘What’s the point of being the richest person in the graveyard’ are phrases I often use when looking over a financial model with clients.

What does dying with money left really mean?

  • You were a very successful saver?
  • You struck on an amazingly successful investment strategy?
  • You had an idea or business that made you lots of money?

Or perhaps it means that:

  • You died sooner than expected?
  • You were worried about running out of money so were cautious in your spending?
  • You never got to do all the things you wanted?
  • You wanted to leave money to your children?
  • You developed habits or attitudes from life that said you should not spend capital or thrift is good?
  • You never got ‘permission’?

Let’s be clear, any money you do not spend or give away which is left in your estate on death over the inheritance tax (IHT) threshold (currently £325,000) will be subject to tax at 40%.  If nothing else, this 40% loss to your wealth should make you stop and think about your money options.

Striking a balance between today and tomorrow

A great Financial Planner who has you and your family’s best interests at heart, will help you to identify how much money you need to ensure you never run out. I like to call this your ‘enough’.  With ‘enough’ ring fenced, your Financial Planner will then help you develop a strategy to:

  • Be kinder to yourself; maybe spend more doing the things you weren’t sure you could afford to do.
  • Free up your most precious resource – your time. Spending money to engage help (e.g. a cleaner or gardener or maybe even a PA) can make life easier for you.
  • Culture memories by spending money taking friends and family on fabulous holidays or experiences.
  • Give money to your family or friends when they need it, rather than when you die. With the added benefit that you get to see them enjoy your gift.

Use your money for ‘good’ to help causes which are close to your heart and can make a difference. Such giving may also provide income and capital gains tax benefits, along with a real feel good factor.

So, what are you waiting for?

We are all creatures of habit. It takes time to develop the confidence to change lifetime habits and feel comfortable to spend or give more.  But gifting does good and it feels good.  The ultimate win win.

In summary, if you are in the fortunate position of having ‘enough’ take action by spending or giving more now or perhaps build spending and giving into your annual expenditure.  After all, inaction may just lead to the resulting loss of 40% of your family wealth when you go….

If you’re not sure where you are in your accumulation of ‘enough’ or want to kick start your gifting plan, please get in touch.  We look forward to hearing from you.

Remember you can’t take it with you.

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Simple steps to becoming a wine tasting expert

In preparation for those long summer evenings, whereby we might get the chance to dine alfresco, I thought I would leave financial planning to one side today and talk instead about one of my other passions … wine!

For anyone who wishes to be able to evaluate and taste wine like an expert, there are a few simple tips you can follow.

 The right environment

 First of all, make sure you are in the right wine tasting environment. For example, a noisy or crowded room can affect your concentration, while any distracting smells can impede on achieving a clear sense of a wine’s aroma. You will also need the right glass – not a glass that is too small, the wrong shape or smells of detergent or dust. And there are other factors to take into consideration: what is the temperature of the wine? How old is the wine? Are there any residual flavours left from what you’ve been eating or drinking previously?

 The sight test

 Ensure that the glass is approximately one third full. Look straight down into the glass, hold the glass to the light and give it a tilt so the wine rolls toward its edges. This will allow you to see the wine’s complete colour range – and not just the dark centre – giving you a clue to the density and saturation of the wine. A murky wine may have chemical or fermentation problems, or it may just be a wine that was unfiltered or has some sediment due to be shaken up before being poured. A wine that shows some sparkle is always a good sign.

 Tilting the glass so the wine thins out toward the rim will provide clues as to the wine’s age and weight. If the colour is pale and watery near its edge, this suggests that the wine is rather thin. If the colour looks tawny or brown (for a white wine) or orange or rusty brick (for a red wine), it is either an older wine or has been oxidised and may be past its prime.

 Sniffing for aromas

 When it comes to sniffing the wine, give the glass a swirl but don’t bury your nose inside it. Instead, you want to be hovering over the top of the glass – think helicopter pilot surveying rush hour traffic. Take a series of quick, short sniffs, then step away and let the information filter through to your brain.

 You want to be looking for aromas that indicate that the wine is spoiled. A wine that is corked will smell like a musty old attic and taste like a wet newspaper – this is a terminal, unfixable flaw.

A wine that has been bottled with a strong dose of SO2 will smell like burnt matches; this will blow off if you give it a bit of vigorous swirling. 

And finally…

 It’s now time to start tasting the wine. Take a sip of wine into your mouth (not a large swallow), and try sucking on it as if pulling it through a straw. Again, you’ll encounter a wide range of flavours, and you should find that most will follow right along where the aromas left off.

 Learning how to taste wine is a straightforward adventure that will deepen your appreciation for both wines and winemakers. Starting with your basic senses and expanding from there, you will learn how to taste wines like the pros in no time. Keep in mind that you can smell thousands of unique scents, but your taste perception is limited to salty, sweet, sour and bitter. It is the combination of smell and taste that allows you to discern flavour.

Now that you understand the basic steps with our wine tasting tips, it’s time to experiment on your own. Enjoy!

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Spring Budget 2017

The Chancellor of the Exchequer, Philip Hammond, delivered his Spring Budget to Parliament on 8 March 2017. In our guide, we consider the key measures and outcomes and look at the impact on you, your family and your business.

This Budget was the last one to take place in the spring. The Chancellor said last year that he wanted to simplify the whole business of setting taxes and government spending, which had become too complicated.

So, Spring Budgets will again become autumn ones (the first will be later this year), while the other big set piece event, the Autumn Statement, will become a spring one (the first will be in 2018).

As the UK begins the formal process of exiting the European Union, this Spring Budget was relatively low-key, with many changes having already been announced.

Opening his statement, Mr Hammond said the UK economy ‘continued to confound the commentators with robust growth’, and promised his Budget would provide a ‘strong and stable platform’ for the Brexit negotiations to come.

The Chancellor increased National Insurance for self-employed people. He also made provision for £2 billion for social care services in England, as well as offering additional help for firms impacted by business rate rises.

Mr Hammond announced a reduction in the total amount of dividends company directors and shareholders can receive from businesses without having to pay taxes, from £5,000 to £2,000. He said the move was meant to ‘address the unfairness’ around the dividend tax advantage, which he claimed was ‘an extremely generous tax break for investors with substantial share portfolios’.

As predicted, there were improved economic forecasts via the Office for Budget Responsibility (OBR). On the economy, Mr Hammond said growth was expected to be higher – and borrowing lower – than forecast in November.

Want to discuss the impact of Spring Budget 2017 on your personal or business situation?

The Chancellor resisted making far-reaching tax changes in this last Spring Budget, but some of the announcements could have an impact on your personal or business situation. If you would like to discuss your situation, or if you have any further questions, please contact us.

Click here to view our Guide to the Spring Budget 2017.

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Merry Christmas

We would like to wish you all a very Merry Christmas and a Happy New Year and also thank you for your support over the last 12 months.

The office will be closed from 5pm on Friday 23rd December and will re-open on Tuesday 3rd January 2016.

As in previous years, we are not issuing Christmas Cards but have instead donated to the Alzheimer’s Society.

 

The US election: the one thing we can be sure about is uncertainty

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We are somewhat loathe to put out yet another piece about what might happen in the markets, as it risks focusing long-term, sensible investors’ minds on short-term events. The referendum on Scottish independence, Grexit, China’s slowdown and most recently Brexit, have come and gone, in market terms, with most investors sitting on healthy increases in their portfolios since 2014, despite uncertainty at the time. However, it is not a bad thing to revisit the robust rationale for the structure of our client portfolios, particularly at such a time.

A Wine Lover’s Guide to Investing

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I have no doubt that if you are like me you will have sampled some nice wine over the years. For me, vintage wine is one of life’s great pleasures. But often overlooked in the joy of consumption is the carefully calibrated journey from grape to glass. Similar levels of care are critical to good investment outcomes.

When loss is a good thing!

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Loss is often associated with negative connotations. When we think about losing something, we think about people, money, our jobs, precious items, even hours in a day; all things we can’t easily get back. Indeed, if you were to look up the word ‘loss’ in a dictionary you would find words such as, detriment, disadvantage and deprivation. But is loss always a bad thing?