sanctuary-financial

Can I Change My Buy-to-Let Mortgage to Residential?

Fri, 08 Mar 2024 11:13:20 GMT

Can I Change My Buy-to-Let Mortgage to Residential?

The question of whether you can switch from a buy-to-let (BTL) mortgage to a residential one is one that many property owners may find themselves pondering. Whether due to changes in personal circumstances, or a desire to return to living in your investment property, understanding the possibilities and implications of such a switch is crucial. This blog explores the key considerations, the process involved, and how to make the transition as smooth as possible.

Understanding the Difference

Firstly, it's important to grasp the fundamental differences between a buy-to-let and a residential mortgage. A BTL mortgage is specifically designed for properties that will be rented out to tenants, while a residential mortgage is for properties in which you intend to live. The eligibility criteria, interest rates, and terms and conditions vary significantly between the two, reflecting the different levels of risk perceived by lenders.

Reasons for Switching

The reasons for wanting to switch from a BTL to a residential mortgage can vary widely. Perhaps you originally purchased a property as an investment but now wish to move back in. Alternatively, your financial situation may have changed, making living in the property a more viable option. Whatever the reason, it's important to approach the switch with careful consideration.

The Process

Switching from a BTL to a residential mortgage involves several steps and considerations:

- Permission from Your Lender: The first step is to contact your current mortgage lender to discuss the possibility of changing your mortgage type. Some lenders may allow the switch under certain conditions, while others may not permit it at all.

- Affordability Assessments: For a residential mortgage, you will need to pass a different set of affordability tests compared to a BTL mortgage. This often includes proving your income, credit history, and employment status to ensure you can keep up with the mortgage repayments.

- Potential Costs: Be aware that switching mortgage types may incur costs, such as early repayment charges, administration fees, or a higher interest rate. It's essential to factor these into your decision.

- Legal and Tax Implications: Changing the use of your property may have legal and tax implications, including changes in stamp duty, capital gains tax, and your tax position on rental income. It's advisable to seek professional advice to fully understand these implications.

Seeking Professional Advice

Given the complexities involved in switching from a BTL to a residential mortgage, seeking professional advice is highly recommended. Mortgage advisors can provide tailored advice based on your specific circumstances and help navigate the transition.

While changing a buy-to-let mortgage to a residential one is possible, it requires careful consideration and planning. Understanding the process, costs, and implications is vital to ensure the switch aligns with your financial and personal objectives. If you're considering making such a change, or if you need guidance on any aspect of your mortgage, don't hesitate to reach out to Sanctuary. Our team of experts is here to support you every step of the way, ensuring you make informed decisions about your property and mortgage .

Ready to explore your options or need more information? Contact us at Sanctuary today to discuss how we can assist you in transitioning from a buy-to-let to a residential mortgage seamlessly. Let us help you make your property work best for you.

Do I Need a Financial Advisor For My Pension UK?

Fri, 09 Feb 2024 16:47:38 GMT

Do I Need A Financial Advisor For My Pension UK?

Navigating the complexities of pension planning in the UK can be a daunting task for many individuals. As retirement approaches, questions about how to maximise benefits, mitigate risks, and ensure financial security become increasingly pressing. In such circumstances, enlisting the expertise of a qualified financial advisor can make a significant difference.

Pension Options

The landscape offers various options, including state, workplace, and private pensions. Each option comes with its own set of rules, regulations, and potential benefits. Navigating through these options can be overwhelming without expert guidance. An advisor can help you understand the intricacies of each type, assess your eligibility, and devise a personalised strategy tailored to your needs and goals.

Maximising Benefits

One of the primary objectives of pension planning is to increase retirement income. A financial advisor can evaluate your current financial situation, projected retirement needs, and investment preferences to develop a comprehensive plan aimed at optimising your benefits. By leveraging their expertise in investment management, tax planning, and retirement income strategies, they can help you make informed decisions that can significantly enhance your income during retirement.

Managing Investment Risks

Investing in pension funds involves inherent risks, including market volatility, economic uncertainties, and inflation. Without proper risk management strategies in place, these risks can jeopardise your retirement savings and long-term financial security. An expert in this field can help you assess your risk tolerance, diversify your investment portfolio, and implement risk mitigation strategies to safeguard your assets against market fluctuations and unexpected events.

Staying Informed and Compliant

The regulatory landscape is constantly evolving, with frequent changes to legislation, tax rules, and regulations. Staying abreast of these changes and ensuring compliance can be challenging for individuals without specialised knowledge. Having someone with this knowledge as your trusted resource will allow you to keep you informed about relevant updates, advise you on compliance requirements, and help you adapt your strategy accordingly.

Providing Peace of Mind

Perhaps one of the most valuable benefits is the peace of mind it offers. Knowing that you have a dedicated professional overseeing your pension planning and investment management can alleviate anxiety and uncertainty about your financial future. They act as a proactive partner, continuously monitoring your portfolio, making necessary adjustments, and providing reassurance that you're on track to achieve your retirement goals.

Navigating Complex Decisions

As retirement approaches, you may face complex decisions regarding pension withdrawal options, annuity purchases, and inheritance planning. Making these decisions without expert guidance can lead to costly mistakes and missed opportunities. Having an expert to help you evaluate your options, weigh the pros and cons, and make informed choices that align with your retirement objectives and financial circumstances.

Entrusting your pension planning to a qualified financial advisor is a prudent decision that can yield significant benefits in the long run. From maximising benefits and managing investment risks to staying informed and making informed decisions, the expertise and guidance of an expert can make a world of difference in securing your financial future. Take the first step towards a financially secure retirement by consulting with our expert advisors today.

What is a Deferred Pension? Planning for a Secure Retirement

Fri, 26 Jan 2024 11:10:42 GMT

Planning For A Secure Retirement

Retirement planning is an essential aspect of financial security. One significant component of retirement planning is understanding and preparing for different types of pensions. It is one such concept that many individuals may encounter during their careers.

What is a Deferred Pension?

It is a type of retirement benefit that allows you to delay receiving your payments until a later date than the normal retirement age defined by your plan or employer. In other words, instead of starting to receive it immediately when you retire, you choose to postpone the payments to a future date.

This decision can be particularly advantageous for various reasons. For example, if you retire early and don't need the income right away, or if you decide to continue working for some time after reaching your normal retirement age, opting for this can provide significant financial benefits down the road.

How Do They Work?

The mechanics can vary depending on your specific plan or employer. However, some common principles apply to most arrangements:

1. Accumulation Period: When you choose this, your contributions or benefits continue to accumulate during the period when you're not receiving payments. This means that your pension pot will keep growing until you decide to start receiving it.

2. Growth: By deferring you could benefit from further investment growth on the accumulated contributions during the deferral period. This can help your fund grow substantially over time, potentially resulting in larger payments when you eventually start drawing it.

3. Choice of Start Date: Typically, plans allow you to choose the date when you want to begin receiving it. This can be anytime after your normal retirement age, depending on your plan's rules. The later you start, the larger your payments are likely to be.

4. Actuarial Adjustments: Some plans may make actuarial adjustments to your payments based on the age at which you begin receiving them. This means that if you start receiving it earlier than your normal retirement age, your payments may be reduced, whereas starting later could result in increased payments.

5. Vesting and Conditions: It's important to understand the vesting requirements and conditions of your plan. In some cases, you may need to meet specific criteria, such as a minimum number of years of service, to be eligible for a deferred one.

Why Choose a Deferred Pension?

There are several reasons why individuals opt for deferred ones as part of their retirement planning strategy:

1. Increased Benefits: One of the primary advantages of deferring is the potential for increased benefits. This can be especially beneficial if you anticipate a longer life expectancy and want to ensure a more comfortable retirement.

2. Tax Efficiency: Delaying your payments can also have tax benefits. In the UK, pension income after tax free cash is subject to income tax. By deferring, you can potentially reduce your taxable income during your working years and pay less in taxes.

3. Flexibility: Deferred ones offer flexibility in retirement planning. You can coordinate your start date with other sources of retirement income, such as benefits or part-time work, to create a more comprehensive and well-balanced retirement strategy.

4. Early Retirement: For those who want to retire early but are concerned about financial security, a deferred pension can act as a safety net. You can retire when you choose, knowing that it will be waiting for you when you're ready to start drawing on it.

Challenges and Considerations

While they offer numerous advantages, they also come with certain challenges and considerations:

1. Long-Term Commitment: Opting for this means committing to a longer-term financial strategy. You need to be sure that delaying it aligns with your retirement goals and lifestyle plans.

2. Inflation Risk: Over time, the purchasing power of your payments may erode due to inflation. It's essential to factor in inflation when planning for your retirement income and consider investments that can potentially outpace inflation.

3. Health and Life Expectancy: Your health and life expectancy play a crucial role in deciding when to start your deferred pension. If you have health concerns or anticipate a shorter lifespan, it may make sense to start your it earlier.

4. Tax Implications: Tax laws and regulations can change, affecting the tax treatment of your income. Consult with a financial planner to stay informed about the tax implications of deferring.

5. Investment Choices: If it involves investment growth, you'll need to make informed investment choices to ensure that your fund grows steadily over time. This may require a level of financial literacy or the assistance of a financial advisor.

How to Plan

Planning requires careful consideration of your financial goals and circumstances. Here are some steps to help you create a solid strategy:

1. Review Your Plan: Understand the terms and conditions, including the vesting requirements, age-related adjustments, and investment options.

2. Set Retirement Goals: Determine your retirement goals, including when you want to retire, your desired lifestyle, and your expected financial needs.

3. Consider Other Retirement Income Sources: Assess other sources of retirement income, such as state pension, personal savings, and investments. Evaluate how it fits into your overall retirement income strategy.

4. Consult a Financial Advisor: Seeking guidance from a financial advisor(link homepage) can be invaluable when planning for one. They can help you make informed decisions based on your unique financial situation.

5. Regularly Review Your Plan: As your circumstances change, periodically review and adjust your plan to ensure it continues to align with your goals and needs.

A deferred pension can be a powerful tool in your retirement planning arsenal. It offers flexibility, potential for increased benefits, and tax advantages, but it also requires careful consideration and long-term commitment. Remember that every individual's situation is unique, so consult with financial experts and pension plan administrators to tailor your strategy to your specific needs and goals.

Can I Change My Mortgage to Buy to Let?

Fri, 12 Jan 2024 15:33:00 GMT

Can I Change My Mortgage To Buy To Let?

Changing your mortgage from a residential one to a buy-to-let can be an attractive option for homeowners looking to invest in rental properties or transition into a new phase of their financial journey. However, this decision is not one to be taken lightly, as it involves various considerations, financial implications, and potential legal hurdles.

Understanding the basics

It's essential to grasp the fundamental concepts of a residential mortgage and a buy-to-let mortgage.

Residential Mortgage

- A residential mortgage is designed for individuals or families who intend to live in the property.

- The interest rates for residential mortgages are typically lower than those for buy-to-let mortgages.

- Repayments are based on the homeowner's income and affordability.

Buy-to-Let Mortgage

- A buy-to-let mortgage is intended for investors who want to purchase property for rental income.

- Interest rates for buy-to-let mortgages are often higher than those for residential mortgages.

- Lenders assess the property's rental potential and may require a larger deposit.

Can You Change Your Mortgage to Buy to Let?

Yes, it is possible to change your residential mortgage to a buy-to-let mortgage, but it's not a straightforward process. Here are the steps you need to take:

Check Your Current Mortgage Terms

Review your existing mortgage agreement to see if there are any clauses prohibiting you from renting out your property. Some residential mortgages have strict owner-occupancy clauses that may prevent you from switching to a buy-to-let arrangement without penalty.

Contact Your Lender

If your current mortgage terms allow for a change, reach out to your lender to discuss your intentions. They can provide guidance on the process and any associated fees.

Assess Your Property's Rental Potential

Lenders will want to evaluate your property's suitability as a rental. They may request a rental income projection, so it's essential to research the local rental market and determine the potential rental income.

Meet Lender Requirements

Buy-to-let mortgages often require a larger deposit (usually around 25% to 40% of the property's value) and may have stricter eligibility criteria. Ensure you meet these requirements.

Legal Considerations

Changing to a buy-to-let mortgage may have legal implications, such as notifying your local authority and changing your property's insurance to a landlord policy.

Benefits of Changing to a Buy-to-Let Mortgage

Now that you understand the process, let's explore the advantages of switching to a buy-to-let mortgage:

1. Rental Income:

The primary benefit is the potential for a steady rental income stream, which can help cover your mortgage payments and provide additional income.

2. Property Investment:

You can build a property portfolio and potentially benefit from property appreciation over time.

3. Tax Benefits:

In some cases, landlords can deduct mortgage interest, maintenance costs, and other expenses from their rental income, reducing their taxable income.

4. Diversification:

Investing in real estate diversifies your investment portfolio, potentially reducing risk compared to relying solely on stocks and bonds.

5. Future Flexibility:

Changing to a buy-to-let mortgage allows you to explore different financial opportunities and investments.

Challenges and Considerations

While there are clear benefits, it's essential to be aware of the challenges and considerations:

Higher Interest Rates: Buy-to-let mortgages typically come with higher interest rates and fees, reducing your overall profit margin.

Market Volatility: The property market can be volatile, and property values may not always increase as expected.

Responsibilities as a Landlord: Becoming a landlord involves various responsibilities, such as property maintenance, tenant management, and legal obligations.

Tax Changes: Tax laws and regulations regarding buy-to-let properties can change, impacting your financial situation.

Market Research: Thoroughly research the local rental market to ensure there is demand for rental properties in your area.

Exit Strategy: Consider your long-term goals and have an exit strategy in place if you decide to sell the property or change its use in the future.

Changing your mortgage from residential to buy to let can be a viable option for those looking to enter the property investment market or generate rental income from an existing property. However, it's crucial to thoroughly research and understand the process, benefits, and challenges involved. Consult with financial advisors and lenders to make an informed decision that aligns with your financial goals and circumstances. With careful planning and the right approach, transitioning to a buy-to-let mortgage can be a rewarding investment journey.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

Navigating the UK Mortgage Market and the Impact of New 20 MPH Speed Limits in Wales

Wed, 30 Aug 2023 06:50:13 GMT

Welcome to another insightful episode of our financial planning podcast

Today, we embark on a journey to demystify the intricate landscape of the mortgage market, shedding light on recent developments, such as the new 20 mph speed limits introduced in Wales.

Unraveling the Complexities of the UK Mortgage Market

The UK mortgage market can often feel like an intricate labyrinth, particularly given the current economic climate. With the recent interest rate hike by the Bank of England, many are left pondering its potential impact on inflation. However, amidst these changes, a concerning trend has emerged - a growing reliance on loans for essential bill payments rather than indulgent purchases. This shift suggests that individuals may be grappling with the rising costs of everyday living.

Cracking the Code of Self-Employed Mortgages in the UK

For our self-employed listeners, the journey to secure a mortgage can be even more challenging. Here, we emphasize the importance of thorough due diligence and the invaluable guidance of experienced mortgage brokers. Self-employed individuals often find themselves navigating ambiguous territory, where real estate agents, financial advisors, and buyers converge. We explore the motivations behind estate agents advocating for their own financial advisors and solicitors, along with strategies to navigate enticing online mortgage deals effectively.

Driving Change: The New 20 MPH Speed Limits in Wales

Switching gears, we delve into the potential repercussions of the recently introduced 20 mph speed limits in Wales. While the primary aim is to enhance road safety, these limits have broader implications. We consider their impact on electric vehicles, public transportation, and the environment. Questions arise about noise pollution, emissions reduction, and how this shift might influence commuting habits, potentially boosting the appeal of public transport.

Charting Your Course in the Mortgage Maze

Navigating the intricate world of mortgages demands a keen understanding of the finer details within mortgage agreements. Seeking professional advice is a prudent step, especially in these uncertain times. Additionally, staying informed about evolving regulations, such as the new speed limits in Wales, empowers us to comprehend the broader societal and economic changes taking shape.

In our next episode, we'll take a deeper dive into the UK mortgage market, exploring its labyrinthine pathways with even greater precision. Whether you're a homeowner, a prospective buyer, a financial advisor, or simply someone intrigued by financial markets and current affairs, our podcast endeavors to furnish you with profound insights and actionable advice. Keep your ears tuned for more!

For further information and expert guidance on financial planning in the UK, explore our website and connect with our team of experienced professionals. Your financial journey begins here.

Strategic Pension Planning: How a SIPP Helped Slash a £30,000 Corporation Tax Bill

Wed, 23 Aug 2023 20:13:08 GMT

Strategic Pension Planning: How a Standard SIPP Helped Slash a £30,000 Corporation Tax Bill

In the dynamic world of financial planning, few accomplishments rival the satisfaction of discovering a solution that not only trims substantial sums from a client's expenses but also secures their financial future.

Recently, I had the privilege of working with a client who, through the art of strategic pension planning, managed to reduce their corporation tax bill by a significant £30,000. Even more noteworthy is that this shrewd financial strategy paved the way for their retirement with peace of mind.

The Client's Distinctive Scenario

Meet my client, a thriving business owner, who held a Standard Self-Invested Personal Pension (SIPP). This pension vehicle offers a plethora of unique advantages:

Flexibility: A SIPP provides remarkable flexibility in investment choices, spanning stocks, bonds, and various funds and commercial property.
Tax Efficiency : Contributions to a SIPP qualify for tax relief, rendering it a tax-efficient avenue for accumulating retirement savings.

The Ingenious Strategic Approach

To abate their corporation tax liability while bolstering their retirement security, we meticulously crafted a strategic blueprint:

Maximising SIPP Contributions: We strongly advised our client to optimize their contributions to their pension. This served the dual purpose of creating a robust retirement strategy and chiselling away at their corporation tax bill.
Tax Relief Windfall: Contributions to a SIPP are also eligible for tax relief pegged at the individual's highest income tax rate. In this instance with the blessing of their accountant were able to save them a huge corporation tax bill.

The Remarkable Financial Outcome

With these strategic manoeuvres firmly in place, our client substantially amplified their contributions to their pension, capitalising fully on the available tax relief. As a resounding testament to the effectiveness of this approach, they succeeded in reducing their corporation tax bill by a substantial £30,000. This was nothing short of an exceptional achievement, met with jubilation by our client.

Why Pension Planning Deserves Every Business Owner's Attention

The case of our client serves as a compelling illustration of the tangible merits of pension planning for business proprietors. Here's why this avenue warrants your exploration:

Tax Savings Galore: Pension planning can yield substantial reductions in your corporation tax bill.
Retirement Assurance: Beyond the immediate tax advantages, active participation in a pension plan guarantees a secure financial cushion during your golden years.

In conclusion, strategic pension planning possesses the potential to be a game-changer for business owners.

Not only does it curtail your corporation tax liability significantly, but it also empowers you to craft a plush retirement nest egg.

If you've yet to embark on the journey of pension planning, the present moment is opportune. The prospective rewards are considerable, and the financial security it affords is truly invaluable.

Decoding the Wealth of Corporate Giants and the Challenges of Fitness

Wed, 23 Aug 2023 19:13:52 GMT

Decoding the Wealth of Corporate Giants and the Challenges of Fitness

In our latest podcast episode, we delve into the intriguing world of corporate giants and their immense wealth. As we unravel the enigma of companies like McDonald's, Amazon, and Apple, we take a closer look at their astronomical market values. The financial worth of these companies is truly unfathomable, especially when considering the astounding paychecks of their CEOs. It is intriguing to explore the labyrinth of financial worth and understand the reasons behind their mammoth market values.

As we navigate the financial maze, we also explore the ripple effects of online returns on businesses. The seemingly simple process of returning a product purchased online can have significant impacts on the cash flow of a business. The cost of returns for businesses, coupled with the evolution of products and the true value of ready-to-drink beverages, presents an intricate financial web.

Furthermore, we discuss the often overlooked realm of pension complaints. Poor pension servicing levels and difficulties in accessing pensions are issues that need more light shed on them. We touch on some of the top culprits in this area, revealing an underlying problem in the pension industry that needs addressing.

Transitioning into the fitness realm, we dissect the ups and downs of bodyweight exercises. While they are an effective way to improve fitness, these exercises can also put a strain on muscles and joints. It is important to understand the potential risks and benefits associated with these exercises to ensure a balanced approach to fitness.

Finally, we tackle the ever-present challenge of maintaining a healthy diet while on vacation. The allure of buffets, the temptation to overindulge, and the reality of sizing up can all present hurdles to healthy eating while on holiday. However, we discuss the importance of balance and the joy that can be found in simply taking a walk around a new location.

In conclusion, our journey through the worlds of finance and fitness reveals a complex network of factors influencing wealth and wellness. From the intricate web of corporate finance to the challenges of fitness and diet, we provide insights and discussion to enlighten and entertain.

Returning from Sabbatical: Deep Dives into Finance, Property, and Life Updates

Tue, 15 Aug 2023 11:37:42 GMT

Returning from Sabbatical: Deep Dives into Finance, Property, and Life Updates

Welcome back to our podcast, fresh from our sabbatical! We're thrilled to take you on an exhilarating journey filled with insightful conversations on business, finance, and personal experiences. We dive into everything from visa requirements for non-European travelers to discussing a heartwarming family show on Channel 4.

Our return is marked by light-hearted banter on the highs and lows of golf, body weight exercises, and a peek into our recent office move. Not to forget the saga of the never-ending carpet issue which might leave you chuckling!

But it's not all laughs. We venture into the serious territory of financial planning, specifically retirement. With the landscape of retirement morphing, we share our concerns about inadequate savings, the impact of inflation, the growing wealth gap, and the challenges of acquiring property in the present market scenario.

Our discussions are anchored in the reality that a significant proportion of people are not saving enough. This could lead to a generation that may be forced to work until they die unless they receive a substantial inheritance. We delve into the changing dynamics of retirement with people potentially living in retirement for up to 36 years. The concept of retiring in the mid-50s is explored, alongside how inflation may be higher than what is being reported. We examine the repercussions of people living beyond their means, leading to a widening gap between the rich and the poor.

Property and finance intricacies are dissected, as we explore the complexities of finding the right loan rates. The risks of using generic online calculators to find the right deal are also discussed. We emphasize that paying into a workplace pension is always a good idea, despite the inability to access the money until later in life.

Our conversation also covers the realities of financial planning, which often intimidate individuals, leading to a bury-the-head-in-the-sand approach. We advocate the need for informed financial decisions, and hope to provide you with the tools to make these decisions confidently.

Remember, being informed is being empowered. So join us on this journey as we unravel these complex issues and help you navigate the choppy waters of finance, property, and life's many updates.

Small, but mighty

Mon, 07 Nov 2022 11:00:33 GMT

Small, but mighty

Funding in an ‘area the size of Wales’

Wales may be small on the map but it packs a real punch with the amount of business owners looking for commercial finance. It’s certainly a hive of activity. We are seeing London investors looking to buy here as you get a bit more bang for your buck when it comes to rental returns and investment.

Under pressure

Both the mortgage and commercial finance market are under huge pressure with less staff, more bureaucracy passed down from the regulator, and more people looking to obtain finance. The knock-on effect is that in a large proportion of the market the lender service standards have been very poor and with very little in my opinion actual care for how this affects us the broker and ultimately the customer. Your challenger style lenders on the other hand have really come to the forefront and lead with example in the customer care side of the market. Not only from a broker point of view but also from the view of clients. However, I won’t bore readers with the issues we face with the high street commercial lenders… if you know, you know. I think as a country we have some huge challenges ahead but with challenges comes great opportunities. The lenders who give the most during these times are the ones who will stand when all others fall.

Closer to home

There are however a few challenges that we face when trying to support our clients here. Let’s take a typical Valleys area property with a sub £100,000 purchase price and then a loan of less than this price. The very first hurdle for many is that this falls below many lenders’ minimum loan amounts. This is even more evident with some specialist commercial lenders who want a minimum loan of £250,000, which certainly slims the market here in Wales. One trend we at Sanctuary Financial Planning are seeing is the growth of short-term council accommodation required especially in the Unaccompanied Asylum Seeking Children (UASC) area. Now, as you can imagine this is a huge challenge for lenders, it is such a niche requirement that it can spook many lenders unfamiliar with the concept. At last count less than a handful are comfortable with this risk. Their standard objection is that there is a ‘reputational risk’; whilst we do understand that stance, as a pure investment opportunity it remains a very profitable area. The UK is home to approximately 1% of the 27.1 million refugees who were forcibly displaced across the world. With this area growing and the need for accommodation for the homeless likely to increase with an unavoidable recession on its way, there is a hope that more will put their heads above the parapet and come to the market. There is a need for funding in this area and there are too few lenders operating here. This needs to change.

" The lenders who give the most during these times are the ones who will stand when all others fall "

Gareth Shears Co-Founder & Chartered Financial Planner at Sanctuary Financial Planning

How to Boost Your Investment Returns by three percent?

Mon, 22 Aug 2022 11:45:38 GMT

How to boost your investment returns by 3%… watch this

Yes this is a true fact you can potentially boost your investment returns by 3%..

No this isn’t some scam investment in wine, cheese or some random offshore property fund that never actually builds any property….

This is about using the right professionals to help you with your investment journey.

I’m Gareth Shears and I am a chartered financial planner and one of the co-founders of the multi award winning Sanctuary Chartered Financial planners and I have been advising clients on all aspects of financial advice for over 14 years.

What’s this all about then?

Vanguard have been carrying out there adviser alpha concept since 2001.

In creating the Vanguard Adviser’s AlphaTM concept in 2001, they outlined how advisers could add value, or alpha, through relationship-oriented services such as providing wealth management via financial planning, discipline and guidance, rather than by trying to outperform the market.

Since then, their work in support of the concept has continued. This paper takes the Adviser’s Alpha framework further by attempting to quantify the benefits that advisers can add relative to others who are not using such strategies. Each of these can be used individually or in combination, depending on the strategy.

They believe implementing the Vanguard Adviser’s Alpha framework can add about 3% in net returns for clients and also allow them to differentiate their skills and practice.

Like any approximation, the actual amount of value added may vary significantly, depending on clients’ circumstances.

This is how they say you can get up to an extra 3% returns using an adviser.

Now let me caveat this.

This is not guaranteed and will vary from adviser to adviser, but you will be better off.

Suitable asset allocation: Making sure you have a well diversified portfolio of the great companies of the world.
Cost effective implementation: Cost is one of the biggest destroyers of wealth so ensuring you don’t pay too much for your platform and funds is one part of what a financial adviser should do. We can control cost we can’t control what happens in markets
Rebalancing: Making sure your investments stay aligned to the original set up is key as you don’t want too much in bonds to lower your risk or too much in equities to increase your risk. Rebalancing is a job that no one ever sees when using an adviser as it happens in the background. Advisers will also ensure this is done in the most tax efficient way ensuring you don’t pay any unnecessary taxes.
Behavioural coaching: This is actually the biggest part to what proper financial advice should be. Stopping your from doing the wrong thing at wrong time for wrong reasons. Making sure you don’t try and jump out of your investments when you see short term volatility in the markets. Staying strong and trusting in the process and what history tells us.
Tax allowances: Making sure you use your tax efficient allowances each year, pensions, ISAs, VCTs and many more. This saves you huge amounts of tax on growth of your investments meaning your overall performance is better.
Withdrawal order: Making sure if you need to take money out it’s done so in the right order.

Here is a simple example:

Inheritance tax is 40%. We have many clients coming to us with large cash sums and they are drawing all their income from their pensions. Money held in pensions in the format of defined contribution are protected from inheritance tax.

Therefore it may make sense to draw from your cash reserves at the outset to help reduce your estate value naturally and keep your pensions until you really need it. You can leave your pension to your partner, children, grandchildren or even Barry down the pub if you want.

There are lots of other benefits of an adviser you may actually never see.

What we do isn’t just about investing money there is a lot more to it than that.

To summarise using a financial adviser has huge benefits to ensure you stay on track with your financial plans for the future.

And Yes it can boost your investment returns.

SO don’t listen to all these people saying using a financial adviser is a bad thing.

I actually think trying to do it yourself is the fastest way to destroy your wealth rather than build it

Why you need to be prepared for having sudden unexpected Wealth in your life?

Mon, 22 Aug 2022 11:15:14 GMT

Why you need to be prepared for having sudden unexpected Wealth in your life?

Sudden Wealth Syndrome (SWS) is the name given to the psychological condition in which overwhelming pressure from sudden, and/or sudden, wealth may result in emotional and behavioural disorders. Sudden Wealth Syndrome may also impact a persons finances and relationships, usually through emotional and behavioural distress associated with receiving large amounts of unexpected money. The symptoms of Sudden Wealth Syndrome, as well as changes in lifestyle and relationships, may often lead the individual to engage in self-destructive, self-defeating behaviours as a reaction to their new financial situation.

Coming into sudden wealth, either through an inheritance, career windfall, or good fortune with a lottery, can cause significant emotional and financial challenges to individuals who did not have much money during their lives. For some young people, windfalls can become an emotional and financial catastrophe. Coming into a big lump sum of cash all at once can certainly be an emotional moment in your life. Coming into large amounts of money can bring about many emotions, ranging from the harrowing joy of winning a lottery, to the mix of sadness, guilt, and gratitude that may come with inheritance.

Even when people are good at handling a financial windfall, they cannot always handle one emotionally. If money is not as unlimited as newly rich people believe, their newly found riches disappear very quickly, leading to more stress. The newly wealthy struggle with even the smallest decisions on what to do with their newfound wealth.

The newly wealthy are afraid that their newfound wealth will somehow disappear as suddenly as it appeared. The newfound wealth of the newly wealthy gives them freedom to enjoy travel and other luxury items some friends cannot. We are all familiar with the cliché about a friend who is newly rich, who suddenly looks for a handout. When you are suddenly rich, it is easy to become caught up in the spending behaviours your friends cannot readily keep up.

If you have no experience dealing with wealth, you might feel like you have all the money in the world. When your finances change so drastically suddenly, you lack experience, knowledge, and even the network of people who could counsel you about what you could do with or what you should do with the newfound wealth.

Consider becoming more financially educated, or hiring a financial adviser experienced in asset management, to find out how you can grow and protect your wealth. Before making any decisions to help friends or family members with their finances, seek the advice of a financial professional who can ensure your ideas are tenable. At a minimum, a financial adviser can help you to alleviate different situations that you might have to navigate. To aid with the assurance, a wealth adviser can be a resource both with regard to managing your money and in steering you through the emotional challenges.

Instead of going to multiple professionals to handle your sudden wealth, we can enlist the services of experienced professionals who will look at all aspects of your wealth and advise you how to invest, save, and spend it as efficiently as possible. We can help develop a plan that supports your goals and ambitions, all the while keeping your newly found wealth intact. If you are looking for assistance managing your sudden windfall, know that we are very experienced in these situations and are more than happy to guide you through your newfound wealth. Your team can help you grow your wealth while maximizing after-tax, risk-adjusted returns with a holistic approach.

Sudden wealth can be wonderful news for you and your family, being cautious may help you avoid pressure to hand over your cash to family, friends, or charities that might seek a share. Big money changes expectations that family and friends may have for you, and it can severely strain tight relationships. While these issues are mostly financial, emotional and personal stress may arise as well, with friends and family wanting access to your newfound wealth.

Whether it is because you cannot believe that this has actually happened, or fear the reaction of your family, friends, and neighbours, you might feel paralyzed economically. Instead of feeling empowered and decisive, you feel paralyzed and unable to make decisions about how you are going to spend your money.

Any one of these feelings could result in a failure to make decisions, on one hand, or in acting impulsively in ways that cause you to destroy wealth, on the other. These feelings of confusion and uncertainty about ones self and what ones values can lead to denial of actual choices, which may combine with a passive, un-deserving attitude towards ones money. If an individual feels guilty or anxious about ones sudden wealth, it is likely to erode the achievements or situations that led to ones good fortune.

Many people start developing symptoms, problems, reflecting their anxieties, feelings of guilt, and uncertainties surrounding having and/or inheriting wealth. Symptoms include constant thoughts of money; anxiety and depression caused by volatility in the stock market; feelings of extreme guilt; poor decision-making as one feels unworthy of the riches, and confusion of identity. We are seeing an increasing number of people who experience the constellation of problems and symptoms associated with stress caused by a sudden success or gain in wealth.

Its very own financial term, by psychologist Steven Goldbart, describes feelings of pressure, guilt, and similar emotions associated with gaining a frequently surprising financial windfall. While the negative emotional effects of becoming suddenly rich are not listed in the Diagnostic and Statistical Manual of Mental Disorders (DSM) -- the bible of mental health diagnoses -- some therapists working with individuals in such situations have coined the term "Sudden Wealth Syndrome". Ironically, getting too much wealth too fast may actually harm your finances over the long run. Ironically, an unexpected infusion of money can interfere with smart financial planning.

It is important to develop a realistic view of exactly what you can afford to do, yet still leave enough to live on throughout your life. If you are stumbling onto lots of money all of a sudden, here are a few things that you can do for both the short-term and the long-term, in order to keep yourself wealthy, healthy, and, hopefully, happy.

Cited Sources

What Can Retiring at 55 Look Like for You?

Mon, 11 Jul 2022 14:32:16 GMT

What Can Retiring at 55 Look Like for You?

We all dream of that magical age of 55 to retire. Is this just a dream or a reality? What does it really mean to actually retire at 55? Well here are our thoughts….

While the mantra might be “life begins at 40”, over 55s are planning to live their life to the fullest as Covid-19 restrictions lift. Retirement might be associated with taking it easy and putting your feet up, but over 55s are planning to explore new places and tick other items off their bucket list in the coming years. However, finances could hold some back.

With more free time and fewer commitments, retirees are finding they have an opportunity to pursue their dreams. According to a Royal London survey, 64% of over 55s are planning to travel more once the pandemic is over, and many others are hoping to tick off once-in-a-lifetime experiences. The survey found the top bucket list items are:

Seeing the Northern Lights (53%)
Travelling on the Orient Express (42%)
Visiting one of the seven wonders of the world (36%)
Moving or purchasing a home abroad (25%)
Going on safari (22%)
Taking a hot air balloon ride (20%)
Going to a major sporting event (20%)
Driving a supercar (16%)
Volunteering for charity (13%)
Going to a festival (13%)

How do you want to spend your 50s and 60s?

Thinking about what you want to achieve in your 50s and beyond can set you on the right track for reaching your goals. Whether you want to travel more in the next few years or spend time on a hobby, creating a plan means you’re far more likely to be able to tick off your aspirations and live the lifestyle you want.

Setting out your goals now means you can put a plan in place to achieve them. While the research found over 55s are keen to carry on experiencing new things, it also discovered they could be held back.

Nearly half (43%) of over 55s said they’d regret not achieving their bucket list items. A third (36%) cited a lack of money for the reason they haven’t yet achieved goals. For others, work and family commitments, or poor health was holding them back.

Making your goals part of your financial plan can mean you have the confidence to pursue them. Do you have enough to complete your bucket list?

As you retire, it can be difficult to understand how your assets will create an income. Often, you’ll need to bring together multiple sources of income and consider how your needs will change over decades. As a result, you may not be sure if you’re able to tick off bucket list items without placing your financial security at risk.

Financial planning can help you understand if you have enough to reach all your retirement goals. It can help you understand how all your assets, including pensions, savings, and property, can work together to provide an income in retirement.

However, for those unsure, if they have enough for once-in-a-lifetime experiences, the real value of financial planning comes in understanding how their decisions in early retirement will affect the rest of their life. If you withdraw a £30,000 lump sum from your pension to travel the world, would you still have enough for the rest of your retirement? What would happen if you needed care later in life? Would spending now to turn a dream into a reality means you’d have less choice?

We can help you put these decisions into perspective. Using cash flow modelling, we can help you visualise how spending to complete your bucket list will affect your income in the short and long term. This means you understand the full implications of the decisions you make.

In many cases, we find retirees can meet their goals or that there are steps they can take to release capital from other assets. Financial planning can give you the confidence to pursue your dreams, whether that’s booking an exotic holiday or booking tickets to a sporting event you’ve always wanted to attend.

If you’d like advice as you retire that considers your aspirations, please contact us.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

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

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.

Why Financial Advice is Important

Mon, 11 Jul 2022 13:48:12 GMT

Why Financial Advice is Important

I might be biased, well yes, I am but financial advice is important.

Studies have shown that taking advice from a qualified financial planner can be a game-changer.

Millions of people are missing out on financial advice that could help them reach their goals because of misconceptions, research finds. Speaking to a planner can help you organise your finances, understand the impact of your decisions, and make sure you’re on track to reach future goals.

According to Royal London , 9.4 million people in the UK choose not to look for a financial adviser despite being open to the idea of advice. While there is a range of reasons someone may choose not to take financial advice, the survey suggests that some are not seeking advice due to misconceptions.

Among them are:

1. Financial advice is too expensive

Almost half (47%) of respondents said that one of the reasons they didn’t seek financial advice was that the cost would be too expensive. Interestingly, 40% also admitted they didn’t know how much it might cost to seek financial advice.

How much advisors charge varies depending on the firm and your circumstances. This may be a one-off cost or an ongoing percentage of your assets. Financial advisers must be clear about the cost of advice. Many will also offer an initial meeting free of charge so you can meet them, discuss your needs and understand if they can help you. If you’d like to discuss our services and fees, please contact us.

When weighing up the cost, it’s also important to look at the bigger picture. Recent Vanguard research¹ shows that your adviser not only adds peace of mind but also may add about 3 percentage points of value in net portfolio returns over time.

2. I can look after my own money

Over a third (35%) of respondents said they didn’t take financial advice as they felt confident enough to do it themselves. Even when you’re in control of your finances, working with a professional can still add value.

Advice can help you understand all the opportunities you have and how best to reach your goals. It can also make sure you are taking advantage of tax-efficient options to help make your money go further. Working with a financial planner doesn’t mean giving up control of your assets but provides you with additional support so you can be confident in the decisions you’re making and the long-term impact they could have.

3. Financial advice isn’t for someone like me

You may think that your net worth or a particular asset has to be above a certain figure to make financial advice worthwhile. However, financial planning can help a range of people. The ILC report mentioned above found those deemed “just getting by” benefited from financial advice more than wealthy clients. Clients in the “just getting by” category saw their pension wealth increase by 24%. This compares to an 11% increase experienced by “affluent” clients. If you’re not sure if financial advice is right for you, please give us a call.

4. It isn’t something I’ve thought about

For one in five (22%) financial advice simply isn’t something they’ve thought about. With day-to-day decisions to make, thinking about your medium- and long-term finances can be a task that gets put off. However, taking even small steps now can help you have a more secure future that meets your aspirations. Booking an initial meeting with a financial planner is a simple step to take in that direction.

5. I don’t like talking about money

Talking about money is still something of a taboo subject. Even among family and friends, money is something we rarely talk about, so it’s to see why some people may be put off talking to a financial planner. In fact, 17% said they were too proud or too embarrassed to talk to someone about how to manage their finances. If you’ve put off seeking financial advice, for this reason, focusing on how an open discussion about your finances can help you reach goals, from retiring early to creating a nest egg for children, can help.

Meeting with a financial planner isn’t all about discussing how much your assets are worth either. While your finances play a role, understanding what you want to achieve and how your assets and decisions can help you reach them are just as important.

If you’re ready to discuss your finances or have any questions about how we could help you, please get in touch.

I Have Multiple Pension Pots, What Shall I Do?

Mon, 11 Jul 2022 13:04:25 GMT

I Have Multiple Pension Pots, What Shall I Do?

When you decide to stop working or reduce your working hours, you may need a retirement income; currently, from age 55 you can use a pension to create an income. But changes to working habits could make it far more complicated for today’s workers. As a result, taking an active role and managing pensions now is vitally important to know what you have, how they are doing and where they are invested.

People are more likely to swap jobs frequently, to suit their lifestyle and career goals. It gives people the freedom to balance their work and personal life and climb the success ladder in terms of career progression. However, each position is likely to come with a pension and it can make managing retirement savings a headache with many different pots.

Research carried out by an investment and pension company, Aegon found that 66% of workers in the UK think that a job for life is a thing of the past. The trend now is for people to switch jobs more frequently than previous generations.

Further stats show that just one in twenty workers aged 18-34 expects to spend more than 20 years within a single role or with the same employer. This is in stark contrast to those over 55 of which 48% either already worked for a single employer, or expect to work for a single employer, for more than two decades.

Auto-enrolment has been extremely successful in getting more people to save for their retirement. The one downside of this is those people who move from company to company may have to have a new scheme set up each time, meaning lots of many pension pots.

Auto-enrolment is based on the following criteria:

Those aged between 22 and State Pension age
Earn at least £10,000 per year
Usually work in the UK

Auto-enrolment, allows you to save for the future, you contribute 4% of your pensionable earnings each month, and you can increase this if you wish. The government give you 1% if you are a basic rate taxpayer and your employer contributes 3% of your earnings, though some employers may offer higher contributions.

If you don’t fit the criteria above, you still have the option to join and your employer may also still contribute on your behalf.

If you don’t take an active interest in your retirement planning when you are working, you will find it very difficult to understand if your numbers are on track to allow you to reach your goals.

Having many pension pots can make this more difficult.

When you come to retirement and are deciding how to access your pension, having it in multiple pots can cause a headache too. Once again, you’d need to bring together the values of different pensions to understand the income and lifestyle your retirement savings can deliver.

On top of the challenges multiple pensions can cause when trying to understand your retirement, it can mean your investments don’t go as far. For example, charges on a smaller pension can effectively wipe out investment gains. In some cases, consolidating your pension can improve returns and make retirement plans easier to manage.

Consolidating allows you to transfer pensions into another existing pension. This way you’re able to reduce how many pensions you have to manage. It can make it easier to keep track of investments.

For many, consolidating pensions, especially if you have multiple small pots, will make sense. It can help you reduce the impact of charges on investment performance. At the point of retirement, it can also make it easier to access your pension to create an income.

However, sometimes consolidation isn’t the most appropriate choice. For example, some pensions will come with additional benefits that may lose if you were to transfer out. This may include the ability to access the investments earlier than the normal retirement date It’s important to fully understand your pension before you decide to consolidate them.

You also need to consider where your pension is invested too. There are many areas to consider, including long-term investment performance, charges and your current Workplace Pension scheme.

Please contact us if you’re juggling several pensions and want to make them easier to manage. We’ll work with you to create a long-term plan that not only factors in ease of managing pensions now but consider your retirement too.

This blog is for general information only and does not constitute advice.

Sudden Wealth Syndrome

Fri, 08 Jul 2022 15:02:07 GMT

Sudden Wealth Syndrome

You heard me right… Sudden Wealth Syndrome.

This is a real thing!

Sudden wealth syndrome is defined as the distress that affects people who suddenly come into wealth.

Examples of this are:

Lottery winners
People who receive large inheritances
Crypto gamblers
People selling their business

You may be thinking … Don’t be daft If I had a big windfall I wouldn’t feel overwhelmed.

Well let’s put it like this, you suddenly have this huge change in fortune, and you have let’s say £3 million in the bank.

Prior to that things were tough and you lived a life where you never saved, your pay check got spent each month and you couldn’t afford those luxuries.

Now you have all this money and maybe not a worry in the world, but then these feelings start creeping in:

You feel uncomfortably different from your friends and you're afraid to tell them how you feel about your new status.
Being wealthy makes for more guilt than pleasure.
Instead of feeling powerful and decisive, you feel paralyzed and unable to decide how to spend your money.
You can't stand the envy of friends and acquaintances -- you find yourself becoming more isolated.
You feel like you don't quite deserve the money and you can't believe it's really yours.
You suffer from "sticker shock" and become obsessed with watching the stock market.
You're afraid that you'll lose your money and your good fortune will simply vanish overnight.

One we have experience of is business owners when they sell and this is a whole other video

Now let's look on the bright side…

Here are 5 ways to avoid sudden wealth syndrome

Don’t spend it straight away

It's all new to you and it's tempting to go and buy that shiny new car or throw the towel in on your job. Don’t do any of that just yet. Take some time to absorb what has just happened and think before you spend

Surround yourself with the right people

It's all too easy to just take advice from anyone. Assembling a team of trusted professionals who have your best interest ahead of their own can add significant value. Consider consulting and hiring financial, tax and legal professionals.

Don’t let your bank control what you do

As soon as that money hits the bank your now very friendly bank manager who had no interest in you before will be on the phone inviting you in to discuss this lovely windfall and how they can invest it for you. They will roll out the red carpet.

They have no interest in what’s best for you. All they want is the nice pat on the back from head office for investing your money in an expensive poor performing bank managed investment portfolio. Trust me this will happen as we have seen it. They are like vultures

Create a financial plan

Find your self an adviser or planner who wont just talk about your money. You need someone who will talk about your long term goals, needs and aspirations. If they immediately start talking about the best return they can get or that offshore bonds are the best structure for you without asking you what really matters to you, run a mile. Don’t get me wrong investing the money correctly is important but no one should be talking about that until they have really established what is important to you and what really makes you tick

Try and stay discreet

This may seem a strange one but you will be surprised what happens when you win money. The people who come out of the woodwork who think you owe them something. People will turn up offering you the next best investment idea or business venture. It may seem tempting but don’t do it. If you do want to do it consult your professional team.

New wealth can be good but you need to do the right things to make sure it lasts for as long as possible.

So that is sudden wealth syndrome… a real thing!