Offshore Wealth Planning

When I'm 64: British workers expect to retire five years later than they thought a decade ago

2013-02-20T23:00:00.003-08:00

British workers are resigning themselves to the increasingly likelihood that they will have to retire several years later than they had planned.

Ten years ago, workers had hoped to give up their day job and enjoy their retirement at the relatively early age of 59, but a survey by NFU Mutual has found that these people now expect to retire when they're 64 - most of them because they have not saved enough. And the picture for future pensioners is even more bleak with 60 per cent of those due to retire in the next 10 years telling an MGM Advantage survey that they are totally unprepared for life without a salary.

Steve Meredith, retirement and pensions specialist at NFU Mutual, said: 'Our research into retirement planning showed us that many people get a surprise when they come to the point when they expect to retire – finding their savings won’t give them the retirement they want. 'More people need to make financial provisions for their retirement and take some time to plan for the future.

'While some people choose to work longer, there’s a growing number of "retirement rejectors" who don’t ever expect to finish working because they simply can’t afford to.' The fear that millions of Britons will reach retirement with not enough money saved up to sustain themselves through their later years has prompted the Government into action through auto-enrolment. But the pensions cliff may be sooner than they think, with nearly one in 10 of those surveyed saying they did not expect to retire at all, while 65 per cent of parents believe that in the future, nobody will be able to afford to retire.

One in six are preparing to find new work after they retire, aiming to set up their own businesses, or find extra work in teaching, journalism, or handy-work. Midlanders are the most optimistic about their retirement, expecting to live off £22,000-a-year from their savings and investments. Those in the south west and Wales meanwhile are more pessimistic, expecting their retirement savings will provide an income of around £10,760. NFU Mutual has this week launched the first in a series of animated films to draw attention to the 'retirement rejectors' who are not planning for later life and appear to be in denial as they approach retirement, which will be available on its website.

The MGM Advantage Retirement Nation 2012 report found that 60 per cent of Britons over the age of 55 admit to being unprepared for retirement, with those in London the worst prepared. Money is naturally the main worry as retirement approaches, with two-thirds saying it weighs heavily on their mind, while 20 per cent are concerned about the cost of long-term care. Aston Goodey, director of sales and marketing at MGM, said: 'It is obvious that the current generation of pre-retirees is quite significantly under-prepared for retirement. 'A high percentage of those approaching retirement are concerned about how much money they will have and the impact ageing will have on their health.'

Source: http://www.thisismoney.co.uk/money/pensions/article-2281143/When-Im-64-British-workers-expect-retire-years-later-thought-decade-ago.html

How to plan for a richer retirement: A guide for savers in their 30s, 40s, 50s, or 60s

2013-01-30T19:17:00.000-08:00

Ever wondered if you're on track for a comfortable retirement? Whatever your age, there's a plan for you. Follow our decade-by-decade guide...

Fancy surviving ice-cold winters without heating? Or rummaging through value ranges at the supermarket for cheap reconstituted meat every week? Didn't think so. Unfortunately, that's the prospect for millions of Britons who reach retirement and have to make do on the measly £107.45 a week state pension, having failed to plan effectively. The stark reality is that putting something aside for old age has become an unavoidable necessity these days.

As life expectancy rises, many of us can expect 45 years in employment followed by 30 years of retirement, possibly living on until we're in our nineties. So, how can you make sure you're not left out of pocket for three whole decades? Simple answer: plan effectively. How, exactly, to do this is a tricky question. After all, it varies greatly depending on how far you've journeyed through life.

So to make things a little simpler, we've put together this easy-to-follow guide on making sure your golden years are rich and fulfilling. We've recruited the help of two highly-regarded pensions experts, to keep you on track. One is Mike Morrison, a man with a treasure trove of experience in the pensions industry and currently head of pensions development at Axa Wealth. The other is Martin Bamford, the managing director of award-winning IFA, Informed Choice.

Follow our decade-by-decade guide below...

›› IN YOUR 20s

Key points:

Focus on clearing your debts
But make sure you open an Isa.
Then save what you afford.

In your twenties you probably have your first proper job with a proper salary. But retirement will seem a long way in the future. At this stage, it's reasonable to allow other financial objectives to take priority.

According to Mike Morrison, those in their 20s should first look into repaying any student debt, especially more expensive bank and credit card debt, cover all living costs, and then see if there's enough left to squirrel some away.

How to pick the best Isa

Martin Bamford says that saving something, however small, is better than nothing: 'Starting a pension this early is a great way to build up a bigger retirement fund for later in life, as you add more contributions over your lifetime and they have longer to grow. Even if you can only afford a small amount, this is about forming a healthy savings habit.'

One of the best places for younger adults to put savings is a tax-free Isa.

'It might be better practice to save using an Isa where you are still building financial resources for the future but have greater flexibility in terms of access to the money,' says Bamford.

At this stage, a pension is by no means a necessity.

›› IN YOUR 30s

Key points:

Reassess your debts and outgoings
Join your company pension scheme as soon as possible
Think long-term with your investments.

So you're in your 30s. This can be a busy decade from a financial perspective. All of us face new challenges, with the costs to go with them. You may be getting married, starting a family or buying your first house. Or a combination of the three.

First things first, then: re-establish what debt you have and find ways to address it. Once you've done this, says Mike Morrison, you should ask yourself a set of questions: 1. Do you now have your own family to consider? 2. Do you have sufficient 'rainy day' savings? 3. Have you bought / are you looking into buying a house?

This should help you establish a overview of your key financial outgoings. There is a fine balance to be struck between saving for the future and paying off debt, particularly expensive unsecured debt such as credit cards and personal loans.

Once this is done, there's no time to waste. Explore your retirement saving options as soon as you can. Your first point of call should be to find out if your company offers a pension scheme. If so, they'll make contributions on your behalf. This is effectively a pay rise – if you don't take it, you're turning down free money.

Martin Bamford says: 'Make sure you are a member of your company pension scheme if one is offered and take an interest in how this money is being invested. Too many pension scheme members select the default investment option rather than something tailored to your own financial objectives'

Take a long term view on your pension investments. You can afford to take on more risk – in the form of shares - as there is a high chance this will pay off in 30 years' time. The old adage, 'shares outperform savings accounts in the long run', still rings true.

But remember, adds Bamford, that retirement planning is about more than just building a big pension fund - make sure your budget is under control and clear debts where possible.

›› IN YOUR 40s

Key points:

If you haven't started saving, do something about it!
Keep building your Isa
Your earnings should be peaking - dedicate some to a pension

Ideally, by the time you reach your 40s you'll already have built up some retirement savings, whether in the form of Isas or a company or personal scheme.

But if you haven't already started, it's not too late. It will just require more effort. This is a crucial time for your retirement planning, and it's imperative that you act now. Your earnings are likely to be approaching their highest during this decade, and you should now be on top of your debts. All in all, you should be in a good position to start dedicating some real money towards planning for the future.

Try our pension pot calculator to get a better picture

'Make the most of pay rises and bonuses to boost your retirement savings, rather than simply increasing your expenditure each time,' says Martin Bamford. 'This is the time to take your retirement planning seriously, and that means having a target retirement age and understanding what your lifestyle will look like in retirement. You might not be able to paint an accurate picture of your retirement just yet, but you should be thinking about it in broad terms and making sure your financial plans are on track to deliver.'

The least you should have is an Isa, says Mike Morrison. Keep contributing to this over the years and try to build up your tax-free savings. Crucially you'll need to start planning the sort of income you expect to receive in retirement. If you plan to pack it all in early, then factor this into your thinking and make sure you increase your savings contributions.

›› IN YOUR 50s

Key points:

Maximise your contributions
Remove risk from your pension investment plan
Consider using a Sipp for greater control

Right, it's time to get serious. This decade is perhaps the most important of all when it comes to retirement planning.

Firstly, do you have a retirement date in mind? It might not be definitive, but it should serve as a guide. Then calculate the sort of income you want. 'Perhaps work out a minimum and a 'nice to have',' says Mike Morrison.

Next, take a detailed look at your pension and where it's invested. You'll need to be positioning your pension fund for your choice of retirement income option.

'If you are likely to purchase an annuity when you retire, you should be phasing out volatility from your pension fund so there is less risk of a big dip in value a short time before you take benefits,' says Bamford. Take money out of risky equities and put it into safer cash investments. There could be nothing worse at this time than seeing a stock market lurch take a chunk out of your pot just as you're about to dig in.

Hopefully, you'll have accumulated a sizeable pension fund by this age. If this is the case for you, consider using a Self Invested Personal Pension (Sipp) to exercise greater control over the way in which it is invested.

How to find the cheapest Sipp

Consider maximising your contributions, too. Particularly if you are a higher rate taxpayer (remember that pensions can be tax-efficient). You may have grown up children you wish to support financially, but try to strike the balance. As much as you can should go towards your pot - you won't have many other chances to maximise the size. If, and when you purchase an annuity, this can make a serious difference to your annual income.

›› IN YOUR 60s

Key points:

Check that all your debts, including mortgage, are in order
Decide on whether you'll buy an annuity immediately or take drawdown
Talk to an IFA before you take any action.

You're almost there. During this decade you will be making important decisions about how your pension fund produces cash and income in retirement.

'These are often lasting decisions that can have a major impact on your finances in later life, so it is the time to seek expert independent financial advice,' says Bamford.

This is particularly true in the case of annuities, where the options are varied. Essentially annuities are like insurance in reverse - you hand over a large lump sum (your pension pot) to an annuity provider, and they give you regular monthly payments in return for the rest of your life.

You may qualify for a higher annuity rate if you are a smoker or have an illness. This is called an enhanced annuity.

Deals: Find the best annuity rates
Forecast: What next for annuity rates?

Martin Bamford says: 'Making choices at retirement is about so much more than simply choosing the most competitive annuity rate. It is becoming increasingly popular to use an Unsecured Pension to have greater control over income flexibility in retirement, often phasing the payment of tax-free cash over several years to reduce income tax bills. This is a more complicated strategy than buying an annuity but can really pay off over the longer term.'

Mike Morrison says that it's important to make sure all your debts are in order. Hopefully you will have been able, or are close, to paying off your mortgage, but what about children on your payroll? Are you still supporting them and their young families? These are important issues to discuss with an IFA before you sign up to an annuity.

Additionally, you may be fit and able and want to keep working. This is now possible because the government is set to prohibit employers from forcing their staff to retire at 65. It may be beneficial to keep working for a period and top up your pensions as much as you can.

'Don't forget,' says Morrison, 'pensions contributions get tax relief, so any immediate contribution gets an uplift from the taxman.'

Source: http://www.thisismoney.co.uk/money/pensions/article-1695630/How-plan-richer-retirement.html

Retiring this year? Then you'll be £3,400 worse off than those who stopped working five years ago

2013-01-14T01:28:00.002-08:00

People due to retire in the next 12 months will be more than £3,000 a year worse off than those who retired in 2008. Prudential's 'Class of 2013' research has found that people retiring this year expect an average annual income of £15,300, a drop from £15,500 last year and a significant fall of 18 per cent on the £18,700 reported in 2008. Not only are their incomes being squeezed, but this year's pensioners will have to contend with the rising cost of living, with Prudential finding that to have the same spending power as a pensioner in 2008, someone who retired last year would have needed a yearly income of £21,400 as inflation has risen 14.7 per cent in this time.

Vince Smith Hughes, a retirement expert at Prudential, said: 'People entering retirement this year are continuing to feel the squeeze as their expected incomes have fallen for the fourth time in five years, to a new low. 'The continuing trend is even more concerning, when you consider that rising inflation is eroding pensioners' spending power in real-terms.' The figures compiled take into account what a person can expect to bring in each year through workplace or personal pensions, and what they will get from the state pension.

Broken down by regions, those living in the West Midlands expect to retire on the lowest annual income, around £12,500 on average, while those in London expect to retire with the highest income of £18,200. Future generations of pensioners have been advised to begin saving into a pension as soon as they can to ensure they have a good retirement pot to supplement the income they get from the state pension.

Mr Smith Hughes said: 'Those who are still working should think about saving as much as possible as early as possible, to give themselves the best chance of building up a decent pension pot to help to ensure a comfortable retirement.' The research comes at a time when annuity rates are in the doldrums, with the income a retiree can get from a £100,000 pension pot having more than halved in the past 18 years. A report released by MoneyFacts also highlighted the discrepancy in retirement income today compared to 2008, when a £100,000 pot could have bought a man a £7,000 income, whereas today it would only be £4,920.

Expected income: Prudential has provided a regional breakdown of how much people retiring this year can expect to draw in retirement income.

Source: http://www.thisismoney.co.uk/money/pensions/article-2260256/Retiring-2013-3-400-worse-2008.html

Which countries will be the next China or India? Where to invest for 20 years of growth

2013-01-09T17:27:00.000-08:00

China and India predictably top the league of the world's most promising investment prospects - but there are some surprising up-and-comers including Uzbekistan, Iraq and Tanzania.

They are all tipped in a new 'growth markets index', which identifies the 30 economies most likely to generate significant investment returns in the next two decades.

Countries were tested on a huge range of issues, such as most thrusting middle classes and enlightened trade-friendly governments, and least exposure to eurozone woes and dependence on commodities.

The leaders were heavily concentrated in Asia, with Brazil (6) and Nigeria (8) the only regional exceptions in the top 10 of the index compiled by global risk analyst Maplecroft.

Asian economies are the world-beaters largely due to their openness, stability and favourable population trends, according to the firm.

But it said Latin America was the new region to watch, with 'promising signs for catch-up growth'.

Eastern European countries lost out because they were marked down for their exposure to the eurozone crisis. The ones that look most likely to overcome this obstacle to growth are Turkey (19) and Poland (29).
No advanced Western countries made the index - they were penalised for lack of population growth and limited future productivity gains.

Surprises, non-surprises and the ones to watch

The most unexpected inclusions in the top 30 were Tanzania (12), Uzbekistan (20), Iraq (22) and Uganda (30), says Said Hirsh, associate director of Maplecroft.

They performed well due to projections of future population growth and potential gains from reforms, he explains.

China (1), India (2) and Indonesia (3) unsurprisingly came out on top, according to Hirsh.

This is mainly due to the sheer scale of their economies - he points out that a small economy, even if it is growing at 20 per cent a year, is still not of huge interest to investors.

Iraq and Myanmar (63) are identified as offering high potential in the future if reforms are implemented.

Iraq is politically unstable and dependent on commodities, while Myanmar suffers from poor infrastructure and low levels of health and education. But they both have significant scope to change their fortunes as they start from a low base and have favourable demographic profiles.

What about Russia?

Russia is a member of the 'BRIC' club of fast-growing developing nations along with China, Brazil and India - but it is only eleventh in Maplecroft's index of most promising investment destinations.

Hirsh puts this down to long-term challenges to the economy, including a falling working-age population, a poor regulatory framework, corruption and a heavy reliance on commodity exports.

He says: 'In Russia's case population growth is almost flat and it's not projected to have population growth rates similar to any of the other emerging markets.

'The other side of it is it's still in a very poor position on regulatory reform and corruption, which harm the business environment.'

Hirsh also notes Russia's dependence on commodity exports. Some countries are able to successfully manage this but others will mismanage revenues, particularly those lacking a strong regulatory framework, failing to save for future generations and neglecting their manufacturing sectors.

But Hirsh adds that Russia could well be on the move up the rankings if it brings in reforms.

Source: http://www.thisismoney.co.uk/money/investing/article-2242307/Where-invest-20-years-growth.html

Our monthly income is being cut by 58%': Pressure grows for a U-turn over drawdown pension rules

2012-11-07T18:02:00.000-08:00

Furious pensioners who saved diligently throughout their working lives – only to have their retirement income savaged by new Government rules – have contacted Financial Mail to voice their anger.

They want the rule changes reversed urgently and accuse the Government of treating them like children by suggesting that they could deplete their pension plans by taking too much income, potentially becoming a future burden on the State.

Most of those affected – 10,000 a month according to experts – are successful business owners who are proud they have saved for a secure retirement and would never dream of turning to the State.

So far, the Government has refused to budge on the issue, despite MPs, Treasury Ministers and officials being bombarded with correspondence. Representatives from the pensions industry and experts such as Ros Altmann, director general of over-50s group Saga, have also pressed the Government to make a U-turn.

Altmann describes the issue as ‘yet another pension scandal’ and says the fault lies squarely with the Government. She also says the changes do not make sense because they have reduced tax revenues and the purchasing power of thousands of pensioners at a time when the Government is desperate to get people to spend and to boost its tax take.

About 400,000 pensioners are potentially at risk because of changes to income drawdown policies that came into force in April last year. These allow those with private pensions to take income without being required to buy a lifetime annuity.

Drawdown has proved increasingly popular with people who have sizeable pension pots and who are comfortable with leaving their pension fund invested while taking an income. Until April last year, the rules on income drawdown, overseen by the Government Actuary’s Department, were generous.

An individual could take an income from their pension based on the prevailing yield from a 15-year Government bond (gilt) – the so-called ‘GAD’ rate. The maximum income that could be taken was set at 120 per cent of the GAD rate at the time income was secured, with payments reset every five years according to the prevailing GAD rate.

However, the Government changes removed the attractions of income drawdown at a stroke. Fearful that some were depleting their pension funds too quickly, it reduced the maximum that could be taken to 100 per cent of the GAD rate. It also shortened the review period to three years. As a sop, it removed the requirement for individuals to buy an annuity with their remaining pension fund once they hit 75.

The impact of the changes has been dramatic. Combined with sliding 15-year gilt yields, a result of the Government’s attempts to kick-start the economy by printing yet more money (quantitative easing), individuals who have had their income drawdown policies reviewed have suffered immediate income cuts of more than 50 per cent.

According to analysis by pensions company AJ Bell, someone aged 65 five years ago would have been able to take maximum annual income of £8,760 from a drawdown plan with a fund value of £100,000.

Today, as a result of 15-year gilt yields at a paltry two per cent, and the Government changes, a 65-year-old with the same fund would only be able to take a maximum annual income of £4,100. This is less than the £4,813 the same person could secure by using their pension to buy an annuity.

Brian Jones, former owner of a West Midlands office equipment company, has been told the monthly sum he can take from his income drawdown plan with Skandia Life (now part of Old Mutual) is being slashed by 58 per cent this month to just below £800. He describes the cut as ‘ludicrous’.

Brian, 68, who lives with his wife Marion, 65, near Kidderminster, Worcestershire, says: ‘Throughout my working life I worked hard and I saved diligently into a pension. I have never relied on State handouts and for as long as I breathe God’s air I have no intention of seeking them out.

‘I am disgusted that politicians can suddenly do what they want with the pension I have built through my own hard work and prudence. It’s my pension and my money.

‘I will be fine because I knew the cut was coming and I have other investments, but I am still fuming mad about this.’

Brian and his financial adviser, Wayne Poulton, director of Kidderminster-based Eastmills Investments, have both contacted their respective MPs on the changes to income drawdown but have not been impressed by the responses.

Mark Garnier, Conservative MP for Wyre Forest, the constituency that Poulton lives in, said it was imperative drawdown should be ‘sustainable’ and that there was a ‘risk that large withdrawals could exhaust a scheme, leaving some people with very little savings and potentially in serious difficulty.’

Philip Dunne, Tory MP for Ludlow, contacted the Treasury, which wrote that ‘any reduction in drawdown that people may be experiencing is only partly due to the drawdown policy changes implemented by the Government’. Brian describes this as ‘poppycock’. Poulton believes the Government must act.

At present, the GAD rate used to determine income drawdown payments cannot be below two per cent. He suggests this should be four per cent. Alternatively, he backs an idea from Andy Bell, chief executive of AJ Bell, where instead of income payments being linked to GAD rates, they are based on a straightforward percentage of an individual’s pension fund value, with older people entitled to draw down a higher percentage of income.

Someone like Brian who is aged between 60 and 69, says Bell, should be able to take annual income of six per cent while for those in their 70s it should be seven per cent.

Bell says: ‘A combination of the drawdown rules introduced from April 2011 and the continued reliance on 15-year gilt yields as a means of calculating maximum drawdown income have caused an imbalance between the need for risk mitigation and the flexibility that many people like. Our proposal is simple, tax-friendly in terms of producing more revenues and is a vote winner. What more could a Government want?’

The Treasury told Financial Mail: ‘The changes to income drawdown policies have given individuals more choice over the use of their pension savings to provide a retirement income.

‘Before the Government made these changes, those over 75 were effectively compelled to use their pension fund to buy an annuity. Since the risk of funds being depleted increases significantly at higher ages, we have had to strike a balance between generosity on capped drawdown and ensuring that people do not exhaust their pension funds prematurely.

‘The Government recognises gilt yields are currently low, and we have sought to provide some protection to individuals receiving drawdown pensions who are facing their drawdown pension review.

‘If the 15-year UK gilt yield should drop below two per cent, the scheme administrator will calculate the basic amount for drawdown purposes using the gilt yield figure of two per cent.Interestingly, it added: ‘The Government keeps its pension policies under review.’

Why bother saving?

Mick Hollyhead has yet to take income from his drawdown pension with Standard Life. In fact he is still working part-time as a manufacturing operations manager for a brick-making company in Telford, Shropshire, to make ends meet.

But he is appalled by the restrictions that the Government has applied to the amount of income that can now be taken from a drawdown scheme. The changes mean he has now delayed indefinitely his retirement.

Mick, 60, is married to Jane, 58, a trainer in health and safety issues.

He says: ‘The State wants to govern my own pension fund that I have painstakingly built over the years – on the basis, I presume, that I will not become a burden to the State later in life. But what about others who have not saved when they could have done?

‘Does it not matter that they become a burden to the State? I now wonder why anyone should save for retirement. They would be better off enjoying their money and then letting the State look after them in retirement.’

Last week, he fired off a letter to Sajid Javid, Economic Secretary to the Treasury, complaining of the changes. He has yet to receive a response.

Source: http://www.thisismoney.co.uk/money/pensions/article-2227425/Pressure-grows-Coalition-U-turn-drawdown-pension-rules.html

'I will never retire': Hundreds of thousands of over-65s cannot afford to give up work

2012-10-28T00:00:00.000-07:00

Two out of five over 65-year-olds who are still working believe they will never stop - and most of them blame a lack of savings for their situation.

An estimated 1.4million people are still in employment although they have reached the age when they can draw their state pensions, according to research by NFU Mutual. Of the half a million pensioners who are working and plan to continue, some 57 per cent can't afford to give up because they don't have enough savings and investment income.

But 52 per cent said they didn't want to stop work, and had chosen to remain in their job or begin a career in a new field. 'Not everyone wants to give up work completely when they reach the retirement age, nor should we expect them to,' said Steven Meredith of NFU Mutual. 'What's important is that people have the choice to retire if they want to. Unfortunately this study shows that for growing numbers, retirement might not be one option they can afford to take.'

Meredith said at the root of the problem was 'a mismatch between expectation and reality', and more people needed to save for their retirement to bridge the gap. He warned against relying on owning a home, saying: 'While property can be a good investment for the future, property prices are often impacted by external factors such as economic conditions. Just like any other investment you cannot predict future performance.'

Meanwhile, a separate report by professional services firm Towers Watson revealed that people are increasingly concerned about how much money they will have in retirement. Most of the 2,500 British workers questioned said retirement security had become a higher priority over the past three years, especially among those aged over 40. Workers in the UK were more pessimistic than in the U.S., France or Germany. Tess Wishart, of Towers Watson, said: 'In our experience, we have never seen such an awareness and concern for retirement provisions from the workforce. 'People are clearly worried and by the same token any Government initiative that impacts on pay can be very emotive.'

A Department for Work and Pensions spokesman said: 'The good news is more of us are living longer. This means people are going to have to work beyond the traditional retirement age if they are to afford a good quality of life in retirement, and that's why the state pension age will rise over the coming years for men and for women. 'We are also helping to encourage more people to put something aside for the future, by automatically enrolling eligible people into a workplace pension.

'The Government's major new advertising campaign is helping to raise awareness, and employers have a responsibility to inform staff of this major change. With many more organisations coming on stream between now and 2018, we expect to see plenty of innovative and imaginative examples of employee engagement.'

Source: http://www.thisismoney.co.uk/money/pensions/article-2221783/Half-million-pensioners-wont-stop-work-finds-NFU-Mutual-survey.html

2012-04-19T20:47:00.002-07:00

As an expatriate it is often difficult to get a foothold, or build up a property portfolio in our homes countries.

Access to mortgages and good property investments are difficult to find and research, if you are away for the majority of the year how do you get a feel for whether a property is a good buy or not? It is difficult and as a property investor myself, I have experienced the same dilemma, find a property, look at it, make a decision , get a mortgage....all within a two week holiday. Hard work.

I do believe the UK property market to be one the markets with the best upside in the next five to ten years, of all the major property investment markets. Little new property being built, net migration of over 250,000 per annum, 24 million unused bedrooms in "empty nester" homes. The largest single problem is that few lenders willing to offer more than 75% loan to value mortgages, this means that a new purchaser is going to need GBP25000.00 to buy a GBP100000 property and with the employment market, taxes and savings capacity in the UK under severe pressure, many do no have this for a entry level property, let alone a average house price of GBP260,000.00

Many expatriates are able to save deposits, but then have the original problem mentioned above...no time.

When looking at investment property I suggest to clients that they view the purchase as they would a company share or unit trust, if you are not going to live in a property why do you need to see it? What really matters, as with company shares or unit trusts is will it make money. Will it make money for me and do the financials add up.

A number of developments that I have helped clients (and myself!) buy into in the UK are St George's in Birmingham http://www.montpeliermalaysia.com/services_property.html and Speke Property in Liverpool.

The former has a interesting way around the deposit issue, in that they can be purchased simply using a monthly payment of approximately GBP1000 per month to build the deposit and can come with a guaranteed rental for five years via City Suites. The Speke properties are what is known as BMV or below market value properties, which means no deposit required and excellent rental yields of up to 13% and ate cash flow positive. They are already tenanted and so offer a gear investment opportunity.

As George Soros said on buying stocks, although I am probably misquoting him, "if you are not buying for ten years, don't think about it for ten minutes", the same applies to property.

2012-04-19T20:34:00.000-07:00

Dutch property market weakness threatens AAA rating....

Spain

has 750,000 homes on the market; Eire has a 52% fall in property prices...now Holland feels the cold wind…

The warning, from Fitch, comes as Dutch property tips into deeper slump, with the inventory of unsold homes nearing South European levels. According to Eurostat data from 2010, household debt is the eurozone’s highest at 249pc of income, compared with 202pc in Ireland, 149pc in the UK, 124pc in Spain, 90pc in Germany, 78pc in France and 66pc in Italy.

The

Netherlands

is caught in a "negative feedback-loop" as recession and house price falls feed on each other. Building permits have dropped 9pc from a year ago, the lowest since 1953. "The housing market is in a coma," said the Volkskrant newspaper.

Maarten van der Molen from Rabobank said home prices have fallen 11pc from their peak in August 2008, or 15pc in real terms, leaving up to 500,000 people in negative equity.

"We expect prices to drop 5pc in 2012," he said. The Dutch real estate federation NVM said the picture could be significantly worse if the stamp tax holiday expires in July as planned, leading to a jump from 2pc to 6pc. The stock of unsold properties has doubled to 221,000 since 2008 as "Te Koop" signs proliferate on Dutch streets, almost double the declared level in the US on a per capita basis. Low unemployment (4.9pc) has kept arrears below Irish,

or US rates, but job loses are creeping up.

The economic woes are infecting state debt dynamics. Public debt will climb to 76pc of GDP by 2015, according to the official Bureau for Economic Policy Analysis (CPB). A €32bn bail-out of ABN Amro Bank has not helped but the chief cause is back-to-back recessions.

Central bank governor Klaas Knot said Dutch borrowing costs would rise by 100 basis points if the country loses its AAA, warning that Holland does not have safe-haven status like the US and risks "losing the confidence" of investors if it pushes its luck. The Netherlands has been a vocal critic of fiscal excess in Greece but is now in breach of EU rules itself, an unexpected casualty of the eurozone’s contractionary policy mix. Critics cite the troubles in Holland - and Belgium - as evidence that the European Central Bank has been too tight, asphyxiating credit for the whole bloc. The M3 money supply contracted over the winter on a month-to-month basis.

Premier Mark Rutte is struggling to put together an austerity package before a deadline this week but he relies on support from populist leader Geert Wilders, who has threatened walk out of talks. His Freedom Party calls for a return to the guilder.

Mr Rutte aims to cut the deficit from 4.6pc to 3pc of GDP, though the official CPB said it would be unwise to treat the EU target as the "Holy Grail" of 3pc regardless of circumstances. "This could have a detrimental effect on the economy," it said. The International Monetary Fund has also urged caution, saying "automatic stabilizers ought to be unhindered". It warned that excessive tightening could itself "endanger financial stability". Hans Wijers, head of the chemicals group AkzoNobel, said it was more important to hold the fragile coalition together than precipitate chaos by trying to meet an abstract target. "Nobody wants a crisis and new elections right now," he said.

The central bank said in its Financial Stability Report that the country faces a nasty mix of problems. "The outlook for financial stability in the Netherlands is worrying. Dutch households have almost the highest debt in the world. Declining real wages and rising unemployment are putting pressure on incomes. The steady fall in house prices are weakening their position while also increasing the likelihood of debt problems."

The report said credit outgrew the deposit base of lenders during the property bubble, leaving banks dependent on fickle capital markets. "Short-term funding may dry up overnight, as in 2008 when the interbank market stalled and again in the summer of 2011. a drop in house price will compromise the issue of mortgage-covered bonds, while significant loan losses may lead to margin calls by the owners of such bonds," it said.

The regulator said Dutch pension funds are deeply underwater. They need €90bn in extra funding to meet future obligations, and $200bn to restore buffers. Critics say Holland’s policy of full tax deductibility on mortgages as well as loan-to-value caps of 112pc (with stamp tax) encouraged a debt spree along Anglo-Saxon lines. The country has less monetary flexibility to cope with the consequences, though it has other strengths. Fitch Ratings said the Netherlands has the cushion of a current account surplus above 7pc of GDP and a history of credible governments. "The country has been run for a long time by sensible parties and this allows us to be a bit more generous."

"Geert Wilders has not been irresponsible in fiscal policy, but if a situation arises where his presence is no longer compatible with stable government, we would expect the other parties to draw the proper conclusions," said Mr Pryce.

Thanks to the Telegraph newspaper for figures

2012-04-02T22:08:00.002-07:00

'A new world for pensions': Gold-plated retirement payouts to loyal workers set to go into freefall

By Becky Barrow

The value of gold-plated retirement payouts to loyal workers is set to go into freefall as Britain enters a 'different world in pensions', a Government minister warns today.
Official figures show the value of the average defined benefit pension, such as final salary schemes, will peak this year at £7,100 per annum. But the Department for Work and Pensions analysis predicts this figure will fall every year for the next half century.
By 2060, the average value will be just £2,400 a year.

Steve Webb, the Pensions Minister, said: ‘It is clear that we are facing a different world in pensions. ‘A generation ago, employers provided final salary pensions and took on all the uncertainty. It was the perfect retirement solution for those lucky enough to have one.’ The golden age of pensions allowed millions to retire at the age of 55 or 60 on a gold-plated, inflation-proof income.

The collapse is fuelled by the fact that the number of private sector workers who will retire with this type of pension is plunging.

The vast majority of young private sector workers today do not even get a pension from their boss. If they do, it is highly unlikely to be a final salary scheme.
Just 10 per cent of firms in the private sector have a final salary pension scheme which still allows new recruits to join, and the number is falling rapidly. The average value of contributions, by both the worker and the boss, into a defined benefit pension scheme is an impressive 27 per cent of salary.

By comparison, the average contribution into the cheaper alternative, known as a defined contribution pension, is between 7.5 per cent and 13 per cent. This illustrates why the size of pension which will be paid to future generations of retiring workers will be paltry compared to the pension typically paid to their parents. To make matters worse, the Government is increasing the state pension age, currently 61 for women and 65 for men. By 2020, it will have risen to 66 for both men and women, will rise again to 67 between 2026 and 2028, and will continue rising. Experts predict that babies born today will not get their state pension until the age of 80.

In a bid to ease the pensions crisis, new rules are coming into force in October which for the first time will make all bosses pay into a pension for their workers. All employees aged 22 and above, and below state pension age, will be automatically enrolled into a pension scheme if they earn £8,105 or more, though they will be able to opt out.They must contribute 4 per cent of their salary and their boss must pay in 3 per cent plus tax relief of 1 per cent, making a total contribution of 8 per cent.
Mr Webb said: ‘Workplace pension reforms are critical, bringing millions of people into pension saving for the first time.’

2012-03-19T23:28:00.001-07:00

Budget 2012: A big debate about small numbers

With the Budget to be announce tomorrow I have posted this Article written by Stephanie Flanders of the BBC.

Here's the best news about tomorrow's UK budget: it's not going to be about the big numbers.

Here's the bad news: it's going to revolve instead around whether George Osborne is cutting taxes on Britain's highest earners.

Why is that bad news? Because it's a question that may well be all but impossible to answer on the day.
If all goes as expected, the Chancellor will replace one, possibly not very effective, tax on high earners with a collection of other taxes on the rich, whose effectiveness will be even more difficult to judge. It will not be an easy one to call.

A quick reminder where we stand on the big numbers, before returning to the small ones, that may cause so much pain tomorrow.

Lest we forget, the UK economy and the public finances are still in a horrible state. At the time of the Pre Budget Report the OBR forecast Britain's national output would expand by just 0.7% in 2012. Only a year ago, it thought we would grow by 2.5%. And even that was not so hot, for an economy recovering from the steepest recession since the 1920s.

But as far as Mr Osborne is concerned, the bad news is also old news. The economic outlook hasn't got any bleaker since November. And when it comes this year's borrowing numbers, the picture is even looking a bit brighter.

Shadow Chancellor Ed Balls always says the government is "cutting too far, too fast." That's up for debate. But what does seem to be true is that government departments and local authorities have cut further, and faster since last spring than Mr Osborne asked them to.

In the first ten months of the financial year, central government current spending fell by 1.2%, year on year. Over the full year, the plan had been for spending to rise by almost the same amount (which would still have meant a real terms cut.).

In the same ten months, borrowing by local governments rose by £1.2bn, relative to a year earlier. That sounds bad. But Mr Osborne was actually expecting their borrowing to rise by nearly £8bn over the course of the year.

The upshot is that, even with some "catch-up" spending in the last month or two, government borrowing for 2011-12 is likely to come in at least £3-5bn below the OBR forecast for 2011-12 of £127bn.

City economists are divided as to whether this reflects a lasting improvement in the public finances, or a one-off. But the message from the Treasury is that Mr Osborne is not assuming this will last.

Fitch, the ratings agency, helpfully made the Chancellor's point for him last week when it put the UK's AAA rating on negative watch. If Mr Osborne still has his heart set on preserving the country's top rating - and he apparently does - he will not see this modest reduction in borrowing as a reason to ease up.

So, for the first time since 2008, the "big" issues in tomorrow's Budget will be politically explosive, but in economic terms, very small beer indeed.

We seem destined to be talking about: lowering the top rate of tax from 50 to 45p; a clampdown on tax avoidance by the very richest, including the purchasers of expensive UK property; not removing child benefit from certain relatively well-off households, and an increase in the standard personal allowance.

Of these, only the last - an increase the personal allowance - affects the majority of taxpayers and potentially involves a lot of money. That is why we have to assume he will not raise it by very much.

The personal allowance is already going up by 630 this year, 210 higher than if it were simply being indexed to inflation. To raise it to £10,000, as the Liberal Democrats have said they ultimately want to do, would cost around £9bn in 2012-13. Even raising it by another £200 in 2012-13 would cost nearly a billion.

Assume we have some modest further increase in the tax allowance. The question of the hour, when Mr Osborne sits down tomorrow, will be how this modest giveaway to Britain's "hard-working households" compares with any change in taxes for the top one per cent.

This is when we would usually want to refer to one of those nice charts, showing how tax - and benefit - changes are likely to affect households at different parts of the income scale.

The problem is that, as F Scott Fitzgerald might have said, the top one per cent are different from you and me. And one of the things that's different about them is that they don't fit neatly into distributional charts. Not least, because their income tends to be a small and highly 'flexible' proportion of their wealth.

Assume, as many now expect, that Mr Osborne announces a phased reduction in the top rate of income tax from 50p to 45p, starting in April 2013. Assume, also, that the report into the top rate suggests that the tax is raising less than expected - say, £750m.

On its own, that would sound like a tax break for the rich - albeit a very small one. (Remember, income tax alone will raise £160bn this year.) So Mr Osborne is also likely to throw in the "tycoon tax" - a long list of anti-avoidance measures targeted at the very rich, which he may say are "paying" for that increase in the personal allowance.

It will be difficult to say there's been a big tax cut for the rich, if the tax that is being cut was not actually raising any money - though expect there to be plenty of argument over that report.

But the claim that the richest are paying more will also be rather tricky to prove. After all, Chancellors always say they are going to close loopholes and cut down on avoidance - Mr Osborne promised to raise a billion with such measures only a year ago. We'll never know exactly how that turned out, either.

It's not that the forecasts are dishonest. It's just that, to put it bluntly, the money all looks the same when it comes in. The wealthy entrepreneur doesn't usually attach a note saying that he usually manages not to pay much tax but this year he'd been forced to cough up.

Perhaps tomorrow will be different. It will all be clear and easy to prove. But it's difficult to see how.
If Mr Osborne has his way, a budget for jammy dodgers will miraculously turn into a budget fit for Robin Hood. But good luck to the man - or woman - who has to establish whether the Chancellor's numbers "add up".

2012-03-15T21:14:00.002-07:00

If you don't want to increase your pension income by at least 20% or increase your pension commencement lump sum to 30% whilst also increasing the income your spouse can receive when you die AND reduce any potential Inheritance Tax all at the same time then don't read the following.

If you are currently living offshore or are planning or considering retiring offshore and have a UK pension scheme or an underfunded final salary scheme, then by switching it to a Qualified Recognized Overseas Pension Scheme (QROPS) you can achieve all of the above.

Increasing Income:

Currently all UK pensions are paid net of basic rate tax (20%) regardless of whether you are a UK tax payer or not. A QROPS is paid gross, increasing your income straightaway. With a QROPS the rules behind how much income you can take are also more flexible allowing an extra 20% more than schemes in the UK.

Increasing your Lump Sum and receiving it earlier:

A UK pension will currently allow you to take no more than 25% of your fund as a lump sum. Within a QROPS this can be taken at age 55, compared to 60 or 65 with most final salary schemes.

Increasing your death benefits:

If you die whilst in receipt of a UK pension, your spouse may have to pay up to 55% tax on the remaining fund or receive a reduced income and if you have children they may not receive anything.

A QROPS is not subject to any of these rules and a lump sum or income can be paid out to any beneficiary FREE of any UK tax.

Increased growth potential:

Most UK pension funds are placed in a fund and then usually left to grow, 'buy and hold'. However, investment returns can be increased through proactive management. The underlying investments within the QROPS are particularly suited to this type of management.

In summary, increased income, a higher lump sum, better death benefits and much more flexibility make QROPS a sensible option to anyone with a pension. If your plans change and you end up moving back to the UK then the QROPS will then be subject to the normal UK tax rules.

2012-03-14T18:09:00.002-07:00

Keep it simple: Run winners, cut losers, stick with what you know and keep your eye on directors' deals

I have recently read an interesting article by John Cotter from Barclays Bank about how to invest successfully. If you have the time then following his basic common sense tips will help increase your chances of good investment returns. However don't do half a job use a professional this is what they do but as always don't be afraid to ask why they have made certain decisions. The following is his article:-

1. Get online. The research and help available on websites means that it’s never been easier or cheaper to manage your own investments. If for whatever reason you can't get online I would suggest you either simply track markets cheaply using physical based Exchange Traded Funds or pay someone else to manage your investments for you.

2. When you buy shares in a company you become a part owner of that business. It makes sense to focus at least initially on sectors of the market that you are familiar with, work in, or at least interest you. Warren Buffett calls it ‘the investors circle of competence,’ Peter Lynch refers to it ‘investing in what you know’. I would call it common sense.3. Feed money into the markets slowly. This is a brilliantly simple and effective way of reducing risk. Much of the risk in the stock market is short term. Feeding money in over time, and not investing in one large sum, means you remove much of the risk of getting your short-term timing wrong.

4. The impact of directors deals. If you believe like I do that actions speak louder than words then pay great attention to these especially the larger deals in smaller Companies when there is more than one Director buying at the full market price.

5. Run your gains and cut your losses. This is one of the oldest bits of advice in the market yet most people don't. They hate to sell a loser as until they do they can hide behind the fact that a loss is not a loss until it is crystallised and it can’t be categorised as a 'mistake'. On the other hand they are happy to sell a winner as it confirms they were right. They end up selling winning shares too early and holding losers too long and even sometimes having a whole portfolio of losers as they have cashed in all their winners!

They should take on the advice of [legendary investor] George Soros: 'It’s not whether you are right or wrong that's important but how much money you make when you are right and how much you lose when you’re wrong'

2012-03-13T22:24:00.001-07:00

Are rewarding investment returns passing you by?

If no one is actively managing your investments, fast-changing market conditions could result in under-performance

It is a dilemma that, in truth, may never go away. Is it better to invest your money into a passive fund, with lower costs; or should you pay more to invest into an actively managed fund, in the hope of achieving stronger returns?

A passive investment fund typically involves your money being invested into one equity market – such as the UK FTSE 100TM Index – and subsequent returns are entirely linked to its performance. In contrast, actively managed funds involve a pro-active fund manager or team implementing and overseeing an investment strategy, which fits within certain risk and reward parameters.

Unlike a passive fund seeking to track a particular index, many active fund managers invest across the full range of asset classes – including property, cash and fixed interest – to try to boost overall performance.

They also have the flexibility of making quick changes, to make the most of market opportunities they identify and to protect the value of your investment when certain assets under-perform.

As an example within equities, heavy stock market volatility in 2011 prompted global market falls that impacted negatively on investors’ returns. Actively managed fund managers retained the ability to reduce their fund’s exposure to under-performing areas – such as banking and mining – in favour of other sectors – for example, pharmaceuticals – which delivered stronger returns.

If you held investments in a passive fund, your money could have been left fully exposed to these equity market falls. You might need to decide whether to switch to an alternative fund then switch back later – but by doing so you risk missing out on strong returns from the original fund if the index it is linked to starts to rise again. Meanwhile, an active fund manager can quickly change its holdings back and forth, to benefit from upturns.

Costs are an increasingly important consideration in this difficult economic climate, and so the cheaper investment option might look more tempting. An active manager will charge approximately 1.5pc per year – with the costs of a multi manager fund typically being higher. Meanwhile, passive funds typically cost around 0.5pc per year.

Yet when it comes to the latter, there are other considerations aside from the costs. You may want to manage your investments yourself, which will take up more of your time. If the fund you are invested into under-performs, it will be up to you to determine if it is better to switch your money to a different fund. If you feel you do not have the expertise and confidence to consistently make such decisions, the lower cost of a passive fund may not be suited to your needs.