If you consult an accountant, doctor or solicitor you expect them to be fully qualified to a high standard – so why should you accept anything less from a financial adviser and what qualifications should you look for in an adviser?

Chartered Financial Planner

This is awarded by the Chartered Insurance Institute and is achieved by the adviser attaining a minimum of 290 exam credits including 180 Diploma level credits, or they have completed the Advanced Diploma in Financial Planning.

Chartered Financial Planners must also have five years’ relevant industry experience and at least three years’ continuous professional development. The adviser must agree to follow the CII’s Code of Ethics and Conduct.

Certified Financial Planner (CFP)

This is awarded by the Institute of Financial Planning. It involves having either AFPC or Diploma qualification or equivalent from another professional body and three years’ industry experience.

The adviser must also successfully complete an assessed case study aimed at measuring the adviser’s financial planning abilities and application of technical knowledge. Holders of the CFP are required to maintain continuous professional development.

Proud to be Independent and Chartered

Financial Planning Week has been our opportunity to fly the flag for all Chartered and Certified Financial Planners in the UK who are committed to raising standards in our profession through formal study and continuing professional development. 

At FPC, we are completely independent and not part of any network, so we advise you without bias or conflict of interest. As well as holding individual professional qualifications, in 2008, we were one of the first firms in the UK to be awarded Chartered Financial Planner status, a standard that is assessed year on year.

Whilst the benefits of financial planning are being promoted to individuals in the UK, it is clear that the €urozone would also benefit from some comprehensive financial planning.

The politicians are still “kicking the can down the road” and with Greece, Italy and now Spain changing the team at the top we wonder who is next for the chop?

Merkel, Sarkozy and Obama all face re-election in 2012 and it would appear that as a result, rather than deal with the unpleasant consequences of their plight, they are all avoiding taking the decisive action that is required.

 As for the banks! 

The 2007/8 financial collapse was triggered by banks financing poor quality, over-valued, mortgage backed securities that had a high likelihood of default.  This time, banks have lent money to imprudent governments rather than individuals – perhaps evidence of the culture that exists within retail banks; one of short term profit over long term sustainability.

A plan of action

Firstly, there is a need to accept that the balance sheets of Europe’s banks (including those in the UK) are still in an unhealthy position.

There then needs to be an honesty session between Central Banks, regulators, politicians and bank shareholders, with all sides accepting that all of our futures are inextricably linked. Once a complete picture is established, those responsible could then develop a credible plan of action.

The wealthy investor’s dilemma

At FPC, we question why a wealthy investor would seek investment advice from a large bank, given their recent track record. There is a mistaken belief that they have extra special resources of global knowledge and expertise that others lack, yet we find no evidence to support it.

Do feel free to share your views and feedback, so we can end Financial Planning week with a round-up of your thoughts. Just email ku.oc.cpfnull@gniknihtprahs

Sadly, the recent issue of National Savings and Investments (NS&I) tax free Index Linked Savings Certificates proved too popular and were quickly withdrawn.

Not missing a trick, this gap in the market is being filled by similar-looking offerings from several major banks and even the National Grid and the Post Office.

But are they as attractive as they might first appear? 

According to the governor of the Bank of England Mervyn King, inflation is likely to fall significantly in the next 18 months, so the prospect of inflation-linked returns of 5% plus 0.25% is probably pie in the sky!

Nevertheless, we should still fear inflation as even with only 3% inflation, the purchasing power of your money almost halves over a 20 year period.

FPC’s view on the current offerings

None of the current offerings come close to that (previously) provided by NS&I, for two major reasons: taxation, and investor protection.

• Where gains are taxed as income, taxation will erode the gross investment return unless the product is held in an ISA or a SIPP, or the holder is a non-taxpayer.  This is in contrast to the NS&I Certificates, where any gains were free of all taxes.
• In terms of investor protection, NS&I is backed by the UK government and so is probably one of the ‘safest’ places for your money imaginable.  Some of the other offerings will be deposit-based, in which case up to £85K is usually covered under the Financial Services Compensation Scheme or FSCS.  However, some may potentially have no protection arrangements at all, e.g., if you are lending money to National Grid (or similar).

Without being too cynical, the products being offered by the banks are opportunistic and probably more for their benefit than the saver.

Our view is to hold fire as our government is going to need to raise more money soon so index linked savings certificates could make a comeback! 

Any questions?

If you have any questions about the NS&I offerings or other investment opportunities, please call Mark, Moira or Bernice on 01704 571777

According to new research produced by Clydesdale and Yorkshire Banks – almost half of parents believe that teaching children the value of money is one of the most important lessons in life but very little financial education takes place at school.

Junior ISAs

Teaching a young person to operate and manage their finances with a day to day bank account is a good place to start and from 1st November, millions of children (aged under 18) also became eligible for a Junior ISA, which replaces the Child Trust Fund (CTF). 

An overall annual limit of £3,600 per tax year can be invested and this limit will rise annually in line with inflation, starting in the 2013/14 tax year.

The account is opened by the person with parental responsibility for the child and from age 16 they can manage the investment until they assume full ownership from the age of 18. 

Anyone starting to twitch yet?! 

Potential benefits

The tax benefits are similar to ‘adult’ ISAs – no further tax to pay on income, and no tax on gains.

Bearing in mind many young people are non taxpayers anyway (with their own personal allowance) this may not seen such a big deal but it can be a help for parents who are funding the arrangement as the current income tax anti-avoidance rule on parental gifts to children that generate more than £100 gross income, will not apply.

Also unlike the adult Isa, anyone can contribute to the junior Isa allowing parents, relatives and friends to save for the child in a single vehicle. This ought to be preferable to the fragmentation created when individual investments are all over the place.

A word of caution

Over a 10 year period, assuming modest investment returns of say 3% net of costs per annum and with contributions increasing in line with inflation (assumed 2.5%), this could result in a future fund value of around £47,290 (or £36,945 in today’s terms).

One would hope that the future 18-year old would have been persuaded that these funds are to be used for the sensible purposes of education funding, house deposit, or other useful venture however they could also be used to fund a really good time so, whilst we welcome another tax break (we need all we can get) we would urge caution.

You need to be very happy to sign this over to your offspring or grandchildren at age 18 before you embark upon any significant funding. You also need to make sure your own investment needs are met and that you are utilising your own ISA allowances before you utilise anyone else’s!

Helping the next generation

If you want to save for your children or grandchildren, we can help you with advice on estate planning opportunities, the creation of family Trusts and gifting programmes.

You can also download our handy guide to Inheritance Tax allowances which sets out all the gifting allowances available.
Are you using yours? 

Any questions?

If you need guidance, please call Mark, Moira or Bernice on 01704 571777

The maximum pension contribution on which an individual can receive tax relief has been reduced to £50,000, but there is an opportunity for some individuals to carry forward unused annual allowances from up to three previous tax years.

In certain circumstances, a contribution of up to £200,000 can be paid in the current tax year and tax relief obtained at your top rate.

This could be 50%, or 60% if you get your personal allowance back (it is progressively lost if your taxable income is between £100,000 – £115,000) or even more if you organise an employer contribution through salary sacrifice and save the employer’s NIC too!

An opportunity not to be ignored

This is an opportunity that should not be ignored. However, any decision needs to be viewed in the context of your overall financial planning and it is vital to consider the tax efficiency of the decision in the longer term.  

Questions you need to ask yourself

Will you benefit from at least 40% tax relief on the contribution?

Are you happy that the additional future pension benefits you will receive represent value for money compared to the loss of cashflow now?

Are you confident that you will not breach the upper Lifetime Allowance for pension funding (£1.5m) when you come to take benefits?

If you answer no to any of the above, pension funding should not be your automatic choice and you should seek advice before taking any action.

As ever, the smallprint

Care has to be taken to ensure that any contribution paid is accounted for in the correct tax year.

Just because a contribution is made before 5 April 2012, it is not automatically counted against the £50,000 annual allowance for 2011/12.  It all depends on the actual arrangement’s Pension Input Period (PIP) and in many cases this is not aligned with the tax year.

Personal contributions

Personal contributions need to be within 100% of the individual’s relevant UK earnings (exclude dividends and interest) for tax relief purposes in the actual year the contribution is paid.

Employer contributions

Employer contributions can also be used for carry forward and are therefore subject to the annual allowance. They can exceed an individual’s relevant UK earnings but will be subject to the HMRC ‘wholly and exclusively’ rules for corporation tax relief purposes.

Important point

HMRC confirmed that anyone who is a member of a registered pension scheme for a particular tax year will be able to make use of carry forward from that tax year. There is no requirement for the member to have paid any contributions or had benefit accrual.

Any questions?

Please call Mark, Bernice or Moira on 01704 571777.

But is it a good idea? 

A few points (and alternatives) to consider

Provision for retirement is vital, especially for the next generation who are typically disengaged from pensions funding in general. However, often a greater and more pressing objective is to become mortgage free as this generation typically has a far greater debt burden than their parents or grandparents, so help with mortgage repayment might be at the top of their list.

Also, if tax relief is only being secured at basic rate  a programme of ISA funding might give greater flexibility.  These funds could then be used in the future to make a pension contribution at a time when the individual can secure higher rate tax relief.

Will they have the discipline to save like you have? 

The advantage of all pension funding is that the funds are essentially tied up until age 55 at the earliest, so a forced discipline applies – they can’t spend the money!

However, we can’t guarantee what rules will apply in the future as they have changed continually over the years, so the certainty of access via alternatives such as ISAs might give greater flexibility.

Family ISAs

For those clients with existing ISA or personal portfolios on our platform, we can offer a family ISA, so do call us if you think this might be something you may want to consider.

We can also advise on more significant gifting, the establishment of Family Trust funds and school and university fees funding programmes.

Further guidance?

Please call Mark, Bernice or Moira on 01704 571777.

This is due to the forthcoming reduction in the Lifetime Allowance, which reduces from £1.8 million to £1.5 million from 6 April 2012. So, if you personally have substantial pension savings or you advise clients who do, then taking out fixed protection should be at top of your financial planning ‘to do’ list.

You could benefit from up to £165,000 in tax savings.

The importance of fixed protection

By taking out fixed protection, you can retain the current Lifetime Allowance of £1.8m and so benefit from a tax saving of up to £165,000. The Lifetime Allowance valuation includes all retirement sources, both personal and occupational pensions.

Timescales

There are strict timescales and conditions to be met before an individual can benefit from fixed protection including:

• Submit the request before 5 April 2012 (relevant forms have just come available)
• Ensure that no pension contributions or pension accrual occur after 5 April 2012

Full details of the conditions for fixed protection are set out in the HMRC website:

http://www.hmrc.gov.uk/pensionschemes/lifetime-allowance/savings.htm#13

The next step

We will be organising completion of the necessary protection for all those FPC clients who are affected.

However, you may wish to raise this matter with friends, colleagues and clients to make sure they are aware too.

Any questions?

Please call Bernice, if you have any questions, or want to gauge how individuals may be affected.

FPC was one of four local corporate sponsors who helped the team raise more than £7,000 so far for Marie Curie Cancer Care, a charity that provides high quality nursing, totally free, to give people with terminal cancer and other illnesses the choice of dying at home, supported by their families.

Well done, Amy, Claire, Graham and Natalie!

A big thank you goes to more than 70 FPC clients who joined us at the Haydock Thistle on 22nd September for our ‘Where next? seminar – a topical question to consider in the light of profound shifts in the economic landscape and significant national and international events, like the political unrest in the Middle East and continuing fears of a Eurozone meltdown.

The enthusiasm made for a warm, lively and interactive atmosphere – and one of the best turnouts we’ve ever had.

Guest speakers

As well as the FPC partners, Peter Stanyer – independent economist and renowned author, and Martin Brookes – Director of Prudential’s Portfolio Management were on-hand to share their expert knowledge and answer questions on an array of  issues, including ‘are your banks safe?’ and ‘are we headed for a double-dip recession?” 

The team of FPC and guest speakers who shared their views on 'Where next?' Peter Stanyer, Moira O'Shaughnessy, Mark Ralphs, Bernice Blundell and Martin Brookes

Attendee comments

“Interesting to see it from the perspective of ‘big picture’ investment decision making”

“A thoroughly interesting and informative morning, many thanks”

“Congratulations on the seminar yesterday which was very informative, well organised and interesting. It was also a pleasant and enjoyable event and thank you to you and the FPC team for your efforts and hospitality”

What we got right

• 94% felt the seminar was pitched at the right level
• 94% were happy with the venue location
• The majority felt annually was about the right frequency for our main client seminar, supplemented by topical workshops

What we can improve

Some guests would have appreciated the opportunity to get to know other guests and have a little more time for questions. We will certainly look at this when we plan future events, which according to the survey, should cover a broad range of areas, including investment planning, pensions & retirement and business planning.

There’s still time to complete our online survey

Your views and comments are valuable to us and we use them to improve all future events.  If you attended the ‘Where next?’ seminar, but haven’t yet shared your views, we would really love to hear from you. Please take a couple of minutes to complete our online survey 

If you need any follow up information, please contact Moira, Bernice or Mark. In the meantime, we are busy organising our 2012 seminar plans and will be in touch soon.

What has actually happened?

Moody’s has reduced specific ratings for specific aspects of some of our larger and smaller banks. The recent Moody’s rating actions include a one-notch downgrade of Lloyds TSB Bank plc (to A1 from Aa3), Santander UK plc (to A1 from Aa3), Co-Operative Bank plc (to A3 from A2), and a two-notch downgrade of RBS plc (to A2 from Aa3).

What does it mean for your savings?

The short answer is ‘not a lot’ if your savings are in a major UK bank. Lesser UK banks and overseas banks are considered less likely to get the support from the British government in the event of another major financial crisis, but the British tax payer is still a major shareholder in Lloyds and RBS.

Increased guarantee limits for savers

Please also bear in mind that from last December, the Financial Services Compensation Scheme (FSCS) guarantee limit for savers was increased from £50,000 to £85,000 per individual, per authorised firm. The increase to £85,000 brought the limit in line with the compensation level available across most of Europe. For joint accounts, a total compensation limit of £170,000 applies to savings per authorised firm.

The rating agencies’ action – FPC’s view

Moody’s has said that: “The downgrades do not reflect deterioration in the financial strength of the banking system”. 
To us, it looks like the credit rating agencies are trying to re-establish credibility after the misplaced endorsement of Lehman Bros and Enron just before their respective disastrous collapses.

It appears that they are trying to reflect and drive through better capital adequacy and governance because of the government’s stated wish to not only pull out of bank ownership, but to avoid any further bail outs. This implies that the “too big to fail” argument is being addressed by these downgrades.

What should you consider?

It’s all about risk of loss!  It is unlikely that a large UK bank will fail and you will lose your deposits, but smaller UK banks and overseas banks are now considered less likely to be bailed out in the case of financial collapse. It is really about the return of your capital rather than the return on your capital. However, even in the UK smaller banks, the compensation scheme is in force up to £85,000.

Conclusion

Until the politicians stop pussyfooting around and become decisive, the markets will continue to be volatile. The Eurozone debacle has, in part, contributed to these downgrades because many banks either hold Greek Government Bonds or they have lent to other banks that have invested in Greek Bonds.

It is highly probable that Greece will default and this is priced into the markets.  Because this is reflected in the balance sheets of nearly all banks, the rating agencies feel obliged to downgrade them.

Will this lead them to lend more to businesses, homeowners or pay you more interest on your deposit?  Your view is probably the same as ours. Highly unlikely!

We hope you will sleep easier, but if you still have any concerns or questions, please do give Mark, Moira or Bernice a call on 01704 571777.