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  • 21 Jan 2014 8:31 AM | Margaret George (Administrator)

    Can You Get Your Income Tax Refunded? - The EISy Option
    By Ray Prince

    It's only being human to feel that it would be great to be able to somehow get some of the considerable amounts of income tax we paid back to us.

    In the past, investors have been encouraged to fund more pensions because of the lure of getting tax relief and many doctors and dentists paying higher rate tax have taken advantage of this option.

    Many were not aware of the downsides of course, such as, in some cases, having to pay higher rate tax when they took their pension benefits and having little control over their options.

    Now there are extra barriers, namely the limit of how much you can have in pensions, called the Lifetime Allowance, being reduced yet again to 1.25m from next April.

    This brings most long serving NHS doctors and dentists earning even modest salaries within range of this limit. As you will no doubt be aware, anything over this limit is then subject to an additional tax charge.

    So if investing in more pension is now not a viable option, are there any other ways of getting some of your income tax back?

    In the past various suspect schemes abounded in the 90s and into the 2000s. We stayed well clear of these as there is no point in trying to get back some of your hard earned money if the scheme simply does not work (and is investigated and disallowed by HMRC).

    You would also probably not want the tax man to be taking an extra interest in your finances because you invested in a suspect scheme.

    Equally, there are valid schemes available that do enable you to legitimately claim income tax back, however are high risk to the extent that the capital you invested could well be depleted.

    So you would actually end up losing money overall, even taking into account any tax reclaimed.

    This is an area we are constantly keeping a close eye on as we know some clients are interested and that certain schemes do now have a track record of success going back, in some cases, eight years.

    These schemes are called Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCT), and are actively encouraged by the government and backed with a scheme certificate by HMRC.

    The reason for this is that a typical company that gets qualifying status is a 'start up' - for example to quote HMRC:

    "The Enterprise Investment Scheme (EIS) is designed to help smaller higher- risk trading companies to raise finance by offering a range of tax reliefs to investors who purchase new shares in those companies."

    So far so good on the legitimacy - you will get your tax credit.

    This is at 30p in the pound, meaning a 100k investment would give you a tax credit of 30k, typically sent to you by HMRC 6 to 12 months after investing.

    It should be noted that you cannot reclaim more income tax than you have paid!

    The rule is that if you invested in this tax year, the revenue would allow you to reclaim what tax you will pay in this and what you have paid in the last tax year.

    The next aspect we would want to see, bearing in mind that many investors view an EIS as primarily a tax planning exercise rather than an investment, is the timescale.

    Surely short term is preferable, as once your tax is repaid to you, you will want your invested capital back as soon as possible.

    So an EIS timescale of just over 3 years is preferable in our opinion to a VCT with 5 years plus. It should be noted that some schemes are open ended, and we would suggest avoiding these.

    Then we come to the actual investment itself.

    Clearly, investing in any start-up company is going to be riskier than an established one. Hence the government tax incentive.

    HMRC rules say it must be a trading company, and renewable energy companies have attracted a lot of attention including Solar Energy.

    Other increasingly popular choices are based on Broadcasting and the Media, as many of the successful EIS investments over the last eight years or so testify.

    TV programmers are very content hungry apparently, and here is a list of programmes and films you may recognise that have been funded by small investors via an EIS:

    Doc Martin
    Foyle's War
    Have I Got News for You
    Life of Pi

    One EIS company has stated that of the EISs that they offer, over 90 schemes have already returned money to investors, with none failing to return less than 95p in the pound.

    Other benefits that may appeal to investors are;

    Deferral of Capital Gains Tax - allows the gains made elsewhere on an investment to remain deferred for the life of the EIS investment
    Loss relief - can be used above and beyond the income tax relief granted
    If held for the full three years, there is no CGT on the sale of the EIS shares
    Business Property Relief - available after two years of investment; meaning that the money, if held until death, falls outside of the owner's estate on death. This can help with inheritance tax planning

    So who would be a typical investor for an EIS?

    It would normally be someone who has existing stocks & shares investments and have used their ISA allowances, and/or a property portfolio, who is looking for something even more tax efficient.

    Also, many doctors and dentists now operate via their own limited companies and because any withdrawals over and above the higher rate tax threshold are likely to be taxable, it's often the case that substantial amounts of cash can build within the company.

    This could mean that HMRC would view their company as an investment company not a trading company, leading to possible loss of Entrepreneurs' Relief, which would mean that a higher rate of CGT would be due when the business is sold (28% vs 10%).

    Another negative is that where money is retained within the company's bank account it invariably receives a very poor rate of interest (in line with most bank/savings accounts currently).

    So the idea of formulating a plan where they invest in an EIS, get their tax credit to compensate for paying tax on taking the money out of the limited company, and then can use this money as they see fit after 3 years, is attractive to many.

    Some investors are also getting their money back after 3 years, and then immediately reinvesting, creating a rolling series of schemes.

    In Summary

    Tax benefits are indeed attractive, however these alone should not be the only reason to invest in an EIS.

    This type of investment is high risk, and should not form a large proportion of an investor's portfolio.

    Existing mainstream tax efficient investments such as ISAs should be considered first.

    Key Considerations

    The EIS route can be a very tax efficient way to invest over the short term and some companies have now built up a track record over several years.

    But, as ever, make sure you consider the risks within the context of your overall situation.

    Action Point

    If investing through an EIS is attractive to you, then ensure you read up on all the pros & cons.

    Ray Prince is a fee based Certified Financial Planner with Rutherford Wilkinson ltd, and helps UK Resident Doctors and Dentists plan to achieve their financial objectives. Just visit where you can request your free retirement planning guide.

    Rutherford Wilkinson ltd is authorised and regulated by the Financial Conduct Authority.

    Article Source: [] Can You Get Your Income Tax Refunded? - The EISy Option

  • 12 Nov 2013 9:07 AM | Margaret George (Administrator)

    By Ray Prince

    Wikipedia describes compound interest as:

    Compound interest arises when interest is added to the principal of a deposit or loan, so that, from that moment on, the interest that has been added also earns interest.

    This addition of interest to the principal is called compounding.

    A bank account, for example, may have its interest compounded every year: in this case, an account with $1000 initial principal and 20% interest per year would have a balance of $1200 at the end of the first year, $1440 at the end of the second year, and so on.

    And it was Albert Einstein who said:

    "Compound interest is the eighth wonder of the world.

    He who understands it, earns it... he who doesn't... pays it."

    Let's look at some numbers so we can see compound growth in action.

    If I were to ask you which option you'd prefer, how would you (honestly) answer:

    1. 1p that doubles every day for a month

    2. 1m cash in your bank account immediately

    Now, you may be thinking that this is obviously a leading question and you'd be correct! But I'm guessing if the question was asked out of the blue many would opt for 2.

    In fact, option 1 would return in excess of 10m!

    The power of compound interest at work.

    I'll admit that it's unreasonable to expect a 100% return on any investment every single day, however it's the principle that I want to concentrate on.

    In effect, all interest earned on any investment is effectively free money and interest earned on interest is the holy grail.

    The 3 Rules

    The amount of money you'll get back on any investment is determined by:

    1. The amount you invest

    2. The length of time your money is invested for

    3. The rate your money grows at

    Back to some numbers.

    Let's say you have a target of 300,000 at age 60.

    Age     Years to 60     Growth Rate     Monthly Payment     Total Invested

    30             30                      5%                        366                 131,760

    40             20                      5%                        736                 176,640

    50             10                      5%                        1,936              232,320

    So as you can see, the longer you leave it the more it'll cost over the long term.

    Looking at another example, let's say you invested the 366 per month between the ages of 30 and 40 but then stopped.

    Here's how the numbers look:


    Years to 60............30..............20..........10

    Growth Rate..........5%.............5%..........5%

    Monthly Payment... 366.......... 369........ 971

    Total Invested....... 43,920..... 88,560..... 116,520

    Maturity Amount... 150,513.... 150,513.... 150,513

    As you can see, the 'cost of delay' is stark, so if you can afford to invest more at an earlier age you'll save a hefty sum, all factors being equal.

    So, time indeed can be your friend when investing.

    Looking at rule 3, how do the numbers look if the return is 7% pa? (remember, the target is 300,000)


    Years to 60............30..............20...........10

    Growth Rate..........7%.............7%..........7%

    Monthly Payment... 255.......... 588........ 1744

    Total Invested....... 91,800..... 141,120... 209,280

    As you can see, there's not a huge saving if you start investing at 50 (10%), however it's a different story at age 30 where you'd save 30%!

    And what about the cost of delay example at 7% pa where you invest the 255 per month between the ages of 30 and 40 but then stop?


    Years to 60............30..............20...........10

    Growth Rate..........7%.............7%..........7%

    Monthly Payment... 255........... 333........ 987

    Total Invested....... 30,600...... 79,920.... 118,440

    Maturity Amount... 169,738..... 169,738.. 169,738

    You get the point, I'm sure.

    Whilst there are a number of factors you should take into account before you invest, some of the key ones are (in no particular order):

    - Inflation

    - Investment fees

    - Transaction fees

    - Adviser fees (if you use one)

    - Product fees

    - Tax

    Key Considerations

    It's not always easy to invest the amounts you want when you have other commitments, however by budgeting and being more aware of where you're spending your money it's possible to find additional sums each month.

    Action Point

    If you do want to analyse where your money goes each month, the tool we recommend is You Need A Budget.

    After all, if you're able to invest another 100- 200 each month you'll be able to (potentially) enjoy the benefits of the 8th wonder of the world!

    Ray Prince is a fee based Certified Financial Planner with Rutherford Wilkinson ltd, and helps UK Resident Doctors and Dentists plan to achieve their financial objectives. Just visit where you can request your free retirement planning guide.

    Rutherford Wilkinson ltd is authorised and regulated by the Financial Conduct Authority.

    Article Source: [,-The-8th-Wonder-Of-The-World!&id=8109795] Compound Interest, The 8th Wonder Of The World!

  • 23 Sep 2013 9:11 AM | Margaret George (Administrator)

    By Ray Prince

    It's sad that some people do die young, either through illness or via external factors such as an accident.

    Whilst you may not wish to think about premature death right now, I do think it's a responsible person who leaves their affairs in an orderly manner as possible so that their next of kin, who have the pain and grief to deal with, do not have to deal with a financial mess, especially where the person was the one in charge of running the finances in the household.

    So, in an attempt to make this piece more upbeat and less morbid, let's look at the 7 'must do' steps you can take to relieve the pressure on your loved ones.

    1. Create an information document that includes:

      The name of the professional people to contact in the first instance (this could be your financial adviser / planner or accountant / solicitor)
      Location of where all your financial documents are held, with an overview of the amounts held in life insurance, savings, investments and pensions (may be in a filing cabinet or all scanned to PC)
      The action that should be taken with certain policies, eg cancelling income protection and claiming on life insurance / pension funds
      Details of what your wishes are, but hopefully this will have been discussed already! (eg paying off the mortgage, investing life insurance lump sums)
      Details of all email accounts with their log in details
      Details of any recurring payments that are being made via Standing Order or credit cards
      The location of all your online passwords. These days many of us use online password managers which store all the passwords in one place (a master password is required to gain access). Make sure the master password is stored in a different location! The service I use is Roboform.
      Details of any bank accounts held in your sole name
      Details of all online profiles to cancel and perhaps update initially about your passing
      Location of your donor card, if you have one

    My tip is to not overcomplicate this! I can tell you that the one I created is on 2 pages of A4, printed and stored on PC, which is updated periodically.

    2. Make sure your Will is in place.

    You do have a Will, don't you? Various surveys indicate that over half of adults in the UK do not have a Will.

    So, what they are saying is that they are happy for strangers to deal with their estate.

    Not ideal, I'm sure you'll agree!

    Enough said.

    3. Get your professional contacts in place

    Your family will need to use a good solicitor to deal with probate (as it's called), so it's a good idea to have them in place now. Maybe ask friends / colleagues for a recommendation.

    At the same time, the same applies with an accountant and financial adviser / planner. If you don't already use one, you may want to consider finding them now (keep in mind that this doesn't necessarily mean you'll be using their services right now).

    4. Plan your own funeral

    This will be a massive help to your family as it will ease the burden on them at a time when they will be dealing with the sudden reality of what has happened.

    It will give you the opportunity to write your own obituary, decide on cremation/burial and deal with paying for it up front (or at least have the cost factored into your financial plan).

    Lastly, you can leave your wishes of what type of service you want. For example, you could ask friends and family to treat it as a celebration of your life.

    5. Get your protection sorted

    If you are the main earner in your household and you have dependants, it makes sense to ensure that your family will be provided for. This will usually include ensuring you have sufficient life insurance in place.

    Make sure you do thorough research so that you purchase the right policy(ies) and cover as the cost is based on your age and health now.

    You may also want to consider placing it into trust so that the payout is made quickly to your intended beneficiaries.

    6. Clear your clutter

    What you may think is worth keeping may not be valued by your loved ones! So it always makes good sense to periodically clear the decks and get rid of / donate to charity any items that you don't need to hang onto anymore.

    And no doubt your spouse / partner will be happy to free up some space in the house.

    7. Discuss the details with your family

    Finally, make sure your family are fully aware of all the planning and preparation that you've done.

    This also makes sense as it will give you the opportunity to deal with any issues now, rather than the family picking up the pieces once you're gone.

    Key Considerations

    No doubt you'll agree that the 7 steps are not out of the ordinary. The key now is to take action and put them into place, as required, for your own situation.

    Ray Prince is a fee based Certified Financial Planner with Rutherford Wilkinson ltd, and helps UK Resident Doctors and Dentists plan to achieve their financial objectives. Just visit where you can request your free retirement planning guide.

    Rutherford Wilkinson ltd is authorised and regulated by the Financial Conduct Authority.

    Article Source:  The 7 'Must Do' Steps When Planning For The Worst

  • 30 Jul 2013 9:16 AM | Margaret George (Administrator)

    Budgeting Your Way To An Easier Financial Life
    By Ray Prince

    The dreaded 'B' word, you may be thinking...

    Here we go, I'm going to be lectured about saving my pennies and not buying the odd coffee here and there.

    Not at all!

    Let me explain.

    'How To Budget' has 1.2bn results on Google, so it's certainly a topic that many people are thinking about and perhaps struggling with.

    My belief is that, regardless of how much someone earns, we can all become more educated about where our money goes and make better, more informed decisions.

    So, with this in mind I'd like to share a resource with you that may well change how you think about how you manage your money. I've only recently started using it for our household and my experience so far is very positive.

    Let me give you a bit more background first.

    When we work with clients we always ask them to provide us with a breakdown of their household/personal expenditure. Whilst this gives us a good picture of their historical expenditure, what it doesn't do is plan what next year's expenditure is likely to be.

    This is where the 'You Need A Budget' (YNAB) software comes in.

    The idea behind it is that it will help you plan where you spend your money via YNAB's 4 rules:

    1. Give every pound a job

    2. Save for a rainy day

    3. Roll with the punches

    4. Live on last month's income

    Rather than me reviewing the software here, you can learn more at YNAB's website. They also offer training videos which are very useful.

    And here's a list of recorded traning classes that you can view.

    What I can do though is share with you what I'm using it for in Prince HQ.

    My wife and I run sole accounts as well as joint bank accounts. For the latter, we have one for fixed costs and one for variables.

    YNAB asks you to split all your spending into categories (we've called ours household, personal, cars etc) and then create sub-categories within each. It's entirely up to you what you call these (eg food, entertainment).

    Then, you allocate a monthly budget to each sub-category which, at outset, will give you an idea of what your monthly spend is across all areas. To provide some form of accuracy, I used our last 3 months spending.

    You then track your spending as you make purchases.

    We tend to do this on the go on our iPhones and then reconcile once per week as it's unlikely we'll record every item.

    It's all synched in the cloud so as soon as you update the data it's available on all devices.

    So, as you go along you should be able to build up an insightful picture of where you're spending your money. After all, if you run a business this is a similar process (financial forecasting) that you would go through, perhaps with your accountant.

    So why not with your personal spending?

    The idea is that if you overspend on a particular sub-category, rather than just move money from your savings to cover it you actually re-allocate money from other sub-categories where you have surplus available (assuming that's the case obviously!).

    The idea is that you try to limit your spending to the overall monthly budget that you set. YNAB's third rule, roll with the punches, simply means that there will always be the odd unforeseen expenditure so it's OK to be flexible.

    What I've found to be the big benefit using the software is that we've factored in all our annual expenditure, including amounts that are usually paid annually such as car tax plus insurance.

    It's then much easier to see how much money can be saved/invested elsewhere.

    The other plus is that, even after using it for a few weeks, my wife are talking much more about money and where we should be spending it.

    Key Condsiderations

    Budgeting really doesn't have to be a painful activity and YNAB have developed a tool that is actually fun to use.

    Action Point

    Go to the YNAB site.

    Download the software for your 34 day trial and start budgeting!

    Ray Prince is a fee based Certified Financial Planner with Rutherford Wilkinson ltd, and helps UK Resident Doctors and Dentists plan to achieve their financial objectives. Just visit where you can request your free retirement planning guide.

    Rutherford Wilkinson ltd is authorised and regulated by the Financial Services Authority.

    Article Source: [] Budgeting Your Way To An Easier Financial Life

  • 20 Jun 2012 8:20 AM | Margaret George (Administrator)

    By Dan Woodruff

    If you are a bank investment customer you will no doubt have been offered a product that sounds too good to be true - a structured product. These products are extensively marketed to bank customers and are portrayed as a low-risk way for risk averse customers to get the upsides of the stock market without all the downsides. The marketing materials explain how these products come with guarantees, but these guarantees are not always as cast iron as they might initially seem. We think that these products play to cautious investors' worse fears, but do not necessarily give the returns they should. their best use is in fl

    As always, things are not so simple, so here is a quick guide to the risks of structured products.

    While these products may seem attractive due to the guarantees provided by big institutions, you should always be aware of who is providing this guarantee. This is known as counterparty risk, and refers to how the risk of failure of the product is passed to a third party. Are you aware of how financially strong this 3rd party is (or even who this is)? There have been many examples in the past of these 'guarantees' becoming worthless since the company providing them is unable to back them up in times of severe stress.

    Also, it is common for these products to be launched when the stock market has dropped, meaning that equities are cheap anyway.

    Finally, you may not be aware that in certain circumstances your investments will not come with the backing of the Financial Services Compensation Scheme. With many products, if the counterparty guarantor goes bust the product will mature and you will not have any compensation payable.

    We generally believe that unless there is a really good reason for it, you should avoid complexity. If you are unable to explain a structured product to a friend then it shouldn't be for you since it will be too complicated. We feel that most of these products hide lots of complexity.

    High charges
    These are usually hidden in the typical way of banks. There are often high commissions paid to advisers selling these products along with other costs - up to 5-6% of the capital. This money comes directly from your investment even though it might not be presented exactly like that to you.

    Essentially you cannot divorce risk and return. We feel that you can achieve the level of returns of a structured product by having a low-risk diversified investment portfolio. Why invest in high charges and complexity when you can get the same or greater returns by a simpler method?

    The price of the guarantee usually means that returns are capped (meaning more profit for the bank in times of a rising market, not you).

    Dan Woodruff is a Certified Financial Planner based in Colchester, Essex, UK. He regularly writes articles on financial planning and investment management aimed at UK business owners and investors. Go to to find more content, or sign up for his free newsletter or financial planning blog.

    Woodruff Financial Planning is authorised and regulated by the Financial Services Authority.

    Article Source: The Risks of Structured Products

  • 04 Jan 2012 9:19 AM | Margaret George (Administrator)

    By Ray Prince

    We held a Retirement Seminar for dentists at our office recently. This being part of an ongoing series of educational talks and workshops to several groups of dentists in the north, and which also takes us to North Wales next year.

    It was good to see familiar faces in attendance, as well as new, with specialist dental accountant Alan Suggett also chipping in with a slot on the value of Practices and the complexity of Incorporation.

    Part of what we covered was how volatile the markets have been this year, and also how inflation can play havoc with your wealth over time.

    It is sometimes not appreciated how, over time, inflation can really damage wealth creation and preservation, and with inflation very high at present it is worth looking at this in more detail.

    Of course, the context here is the real value of money. When we talk about the 'real return' on your money, it means the return that you get (or don't get) over inflation.

    So if inflation is, say, 5% pa, and you are getting a return in the bank of 3% pa before tax, and 2.4% pa after basic rate tax, then you are not getting anywhere near a real return on your money.

    If this were to happen over many years, then the real value of your money would reduce markedly. In fact, with present rates at around the 5% mark and with many experiencing a salary freeze, some people will be seeing a fall in their standard of living.

    Let's take a look at the impact of inflation on some consumer items, as well as salaries, pensions and debt over a recent 10 year period.

    PRICE COMPARISON 1999 - 2009

    Price in 1999 Price in 2009 % change Source

    Milk (pint) 34p 45p 32.30% ONS

    White Loaf 51p 1.26 147% ONS

    Sugar (kg) 61p 88p 44.20% ONS

    Pint lager 1.93 2.79 44.50% ONS

    20 Cigs 3.37 5.39 60% ONS

    Petrol / l 63.6p 90.4p 42% Petrol Prices

    Ave salary 18,396 20,900 13.60% ONS

    Weekly state pension 66.75 95.25 42.70% PAS

    Level of UK consumer debt 565.4 1457.4 158% BOES


    Price of oil per barrel 8.80 28.70 226% WTRG

    Bottle of wine 3.55 4.18 18% W&STA

    Ford Focus 15,500 16,095 4% Ford

    McDonald's Big Mac 1.90 1.99 4.70% McDonald's

    Source: This is Money

    So those of you who like a pint and a fag while munching on a white bread sandwich will have reasons to moan!

    Whilst the wine loving burger fans may well have a smile on their face!

    For a bit of fun (answers below), have a guess at the price of these items in 1960 compared to the 2009 prices below:

    1. Fish N Chips - 4.50

    2. A Mini - 12,345

    3. Petrol - 86p (was it?!)

    So we can see that just 10 years can seriously erode the value of money, never mind 20, 30 or 50 years!

    So what is the best way to combat inflation with your savings and investments?

    The first thing to say is that there is no magic answer, and that there are 3 rules to investment return:

    1. Risk and return are related

    2. Risk and return are related

    and yes

    3. Risk and return are related

    Other factors are accessibility, tax and the time period you have to invest.

    Of course, in our opinion, the only reliable way in which you can find out what rate of return you NEED longer term so that you can be on track to achieve your goals in life is to devise a proper strategy, and have your own financial map called a cash flow forecast.

    This will be able to calculate what returns (and therefore risk) you need to take, with the aim to minimise any risk perhaps a sensible option. What such a plan will give you is how much to invest in the various asset classes, with each having their own expected rate of return & risk (standard deviation). So getting the right mix is vital.

    We covered some of this at the seminar, and using figures from a Scottish Widows UK Financial History graph (Barclays Index data), we could see that returns from some major asset classes made interesting reading.

    What one pound invested in 1950 to 2010 would be worth:

    Building Society (Cash) - 1,560

    Gilts (Government loans) - 6,146

    Equities (Stocks & Shares) - 117,500 (dividends reinvested)

    Retail Prices Index - 2,680

    Other methods would be to utilise products that give a return over a period that is guaranteed to be above inflation. Even Tesco had launched such a bond a little while ago - but as is the case with ANY investments/ savings accounts, watch out for the small print.

    Of course, the past is no guarantee of the future, but what do these figures tell us?

    Well, the most important one we feel is that in the longer term, say 10 years plus, it is important that any investments you have show a real return. That is a return that is higher than inflation.

    To give you the best chance of this, having a relevant risk assessed investment portfolio that has the right 'blend' of asset classes that lets you sleep at night on the one hand, and yet give you the return you need on the other, is a tried and proven route.

    Talking about inflation, we came across a couple of quotes to share with you:

    By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.

    - John Maynard Keynes

    And on a less serious note:

    "Inflation is when you pay fifteen dollars for the ten-dollar haircut you used to get for five dollars when you had hair."

    - Sam Ewing

    Mini Quiz answers:

    1. 6p - a 7,400% rise

    2. 496 - a 2389% rise

    3. 5p - a 1620% rise

    Source: National Statistics.

    The first one really is a surprise. The chip shop owners must have been salting their profit away for years! (sorry)

    The Financial Tips Bottom Line

    Really think about what you want in life and by when. Then measure the cost of this, and compare it to what assets you have.

    If you don't know where you are going, how do you know when you'll get there?!

    Use cash flow forecasts - how does it look for you?


    If you have an adviser, ask them to create you your own cash flow forecast. If they don't know how to do this, then maybe it's time to find a financial planner that does!

    Ray Prince is a fee based Certified Financial Planner with Rutherford Wilkinson ltd, and helps UK Resident Doctors and Dentists plan to achieve their financial objectives. Just visit where you can request your free retirement planning guide.

    Rutherford Wilkinson ltd is authorised and regulated by the Financial Services Authority.

    Article Source: [] Inflation and Your Money - What Is Its Real Value?

  • 09 Aug 2011 9:22 AM | Margaret George (Administrator)

    By Ray Prince

    Have you ever decided to clear out the garage or box room that is full of junk that has gathered over the years?

    It's a great feeling when all the hard work pays off and you suddenly find you could actually fit the car back into the garage, or have a new room in the house you can actually use!

    We find that this happens time after time with the subject of Financial Planning.

    Looking at the last few discussions we have had with doctors & dentists who call us with a question, there is a common theme once we start asking them questions.

    Let's look at a few...

    A Consultant in Cambridgeshire:

    He already has a Gold Excellence Award and is very likely to attain a Platinum. The implications for him with regard to the pensions Lifetime Allowance and the new Annual Allowance are massive, with potential large tax hits.

    When we asked him if he has applied for Primary or Enhanced Protection, designed to mitigate some of the problems for high earners, he said he had never heard of this. Certainly his accountant had not warned him, and he did not have a regular financial adviser.

    There was a lot of information flying around in 2006-2009 about this subject, but it is all too easy for a time poor busy Consultant to miss this sort of thing.

    A Consultant in London:

    This lady called explaining that she was confused by the decision she needed to make between opting for the 1995 NHS Pension Scheme as against the 2008 version.

    She had sent off the forms saying she wanted to go for the 2008 Scheme, as she intended to work to age 65, but was now having a crisis of confidence when talking to colleagues.

    Having got a handle on her situation, this decision was almost certainly the wrong one, as even if she were to work on past age 60, it would pay to take 24 hour retirement (which allows you to take your NHS Pension benefits, but simply carry on working full or part time).

    Very simply, any uplift of a few thousand pounds more on her pension by still contributing to the NHS Scheme between ages 60 and 65, would be made to look trifling compared to foregoing an income of say 50,000 every year for 5 years! It also means of course she can get early access to the tax free lump sum.

    The above presumes that no large pay rises occur after age 60 such as an Excellence Award, although these are likely to be far more difficult to attain in future and of course this would need to be taken into account as she approaches 60.

    Having had our discussion, she has contacted the Pension Options Team to ask if she can changes her earlier decision. Let's hope this works!

    A General Dental Practitioner in the North West:

    The big subject here was Inheritance Tax Planning (IHT), with an expensive life cover plan being queried in particular.

    This chap had been sold a second death life policy many years ago, designed to ensure that when both of them died, the children would have monies to pay the IHT bill. Certainly nothing wrong here in principle, as this sort of planning is very valid for clients in say their 40s into their 60s, as the premiums are usually quite reasonable. Perhaps 20-60 per month for a few hundred thousand pounds cover.

    "But I am paying 200 per month!" he said.

    On investigating further, this dentist had been sold the plan back in the 1990s, and was on what is known as the Standard Basis. This is designed to build up a fund of money in addition to providing the necessary cover. The idea being that as the plan is reviewed over the years with premiums rising to cover the additional risk to the insurance company of an older couple, these monies can be used to help with increased premiums.

    This fund value was now something like 24,000, which is quite a serious amount of money. So he could, if he chooses, replace this plan with a much cheaper option, and cash the old plan in (assuming he can obtain the new cover).

    Now it should be noted that if he chooses to cash in the plan, replacing it with the cheaper option, then there will be a premium review in 10 years' time, and then after another 5 years etc.

    If the same level of cover was kept, then undoubtedly (as he and his wife would be older) premiums would rise to a higher (possibly much higher) level. However, with the right strategy and using gifting for example, this could be a more sensible option for them.

    The disappointing aspect is that he was not given the choice.

    One of the reasons why there are quite a few of these types of policies around of course is that they were very popular - with the salespeople. The commission on a 200pm premium plan would have been much more than a 20pm policy!

    The other vital missing ingredient here was that he had not thought about gifting to his children, especially when into later life, as this can help to reduce IHT problems.

    We don't intend to go into the pros & cons here about this, but we then got talking about his overall need for IHT cover and how much. Amongst many assets, he had a large personal pension fund (300,000) that on his death was in his wife's name. This had been included in the total by the dentist to arrive at the sort of figure he felt he needed to cover.

    What he did not know was that he had the option to put the fund in his children's names instead of his wife. This would mean that if he died before taking any benefits (also did he need to take benefits?), this fund would be outside his estate for IHT purposes, saving a potential 120k.

    The constant theme is not being in control and not being organised. Of course this is not always obvious until an event occurs that makes someone sit up and notice!

    This means that doctors & dentists are missing out time after time on crucial information in order to be able to make the right informed decisions to safeguard their futures.

    One other aspect that repeatedly raises its head is that the vast majority of new medics & dentists we speak to do not and never have had a trusted adviser.

    They have had plenty salespeople selling or trying to sell them products, and occasionally their accountant will chip in with something, but no one with who they had an excellent ongoing relationship with who listened to them and gave them the answers and strategy they needed.

    Other Considerations

    We were just going to add that the Hutton Pension Review now also needs to be taken into account, when HOT OFF THE PRESS came some news.

    With this review we expect the normal retirement age to rise to age 65, and career earnings to be brought in as the basis for benefits to be worked out, as well as costs to rise for employees.

    So this news just announced by the government in trade newspaper Money Marketing has confirmed these thoughts:

    Treasury chief secretary Danny Alexander says: "Under the agreement that unions reached with the Government in 2009, contribution increases next year were expected. But because these are difficult times for everyone, public sector workers included, we are ensuring those with the broadest shoulders bear the greatest burden."

    Further increases in contributions are expected between now and 2014/15. The Treasury says higher earners will see the largest increase between now and 2014/15, but that their increase will be capped at 6 per cent of pay before tax.

    The Government is currently negotiating with unions about other changes to public sector pensions which could see final salary schemes replaced with career average schemes and bringing the public sector retirement age in line with the age at which you can claim a state pension.

    Full Time Pay Range Proposed additional rate for 2012/13

    Up to 15,000pa Nil

    15,001-21,000 1.2%

    30,001-50,000 1.6%

    50,000-60,000 2.0%

    Over 60,000 2.4%

    As the majority of our clients have 'broad shoulders', they will pay this extra 2.4% in 2012 on top of the 7.5/8.5% they pay now, and by 2014/15 will likely be paying 13.5/14.5% which is 6% more!

    Yes you get tax relief on this, but for a 100,000 earner it will still mean an extra 300 per month or so.

    We await more announcements and details!

    Back to what we were saying about being organised and having a trusted adviser!

    Hopefully the above examples help illustrate the importance of this, and with all these extra changes with the NHS Pension Scheme, how it is becoming even more important than ever!

    The Financial Tips Bottom Line

    Change is constant. It is vital that you are fully informed and respond and adjust to protect your financial future.


    What effect will The Hutton Report have on your finances?

    If you do all your financial planning yourself, make sure that you get organised to make your life a lot easier. Keep on top of the constant changes in legislation and how it affects you.

    If you use an adviser, are they on the ball with all the changes? Is it a service they offer, or is it more about
    product sales? Do you have a strategy, or simply a collection of policies?

    A trusted adviser will cover all areas and simply charge you a fee to look after you year after year.

    There are certain things we believe are essential for you to have to be able to go forward with planning your life.

    Seize the moment now and take proactive action to get yourself organised!

    Ray Prince is a fee based Certified Financial Planner with Rutherford Wilkinson ltd, and helps UK Resident Doctors and Dentists plan to achieve their financial objectives. Just visit where you can request your free retirement planning guide.

    Rutherford Wilkinson ltd is authorised and regulated by the Financial Services Authority.

    Article Source: Using Trusted Financial Advisers And Getting Organised

  • 31 Mar 2011 9:25 AM | Margaret George (Administrator)

    By Ray Prince

    As Financial Planners and Wealth Managers, we take our role in managing risk for clients very seriously.

    After all, we talk about the small (but very big) word TRUST all the time when we examine why a client will choose to put their faith, and money, with us.

    Of course, risk is ever more topical at the moment what with the terrible tragedy of the earthquake in Japan, the Libya conflict and massive unrest in many Arab countries. Events like these affect confidence which in turn affects stock markets.

    So we were interested to see the Financial Services Authority (FSA) revisit this subject recently, and the many discussions taking place in the financial trade press.

    One such trade journal, New Model Adviser (NMA), was launched in 2006 to reflect the growing number (although still small) of commission based advisers becoming fee based planners.

    The NMA states that the Financial Services Authority (FSA) has warned of some financial advisers':

     failure to account for clients capacity for loss
     over-reliance on and poorly worded risk questionnaires
     unwillingness to place client money in cash accounts which can lead to inadequate assessment of client risk
     failure to take sufficient account of the client's other needs, objectives and circumstances such as paying off debt

    Furthermore, the FSA said it had seen examples of firms failing to have a robust process in place to identify a client's real needs, and that it had concerns that risk profiling tools had "limitations, which means there are circumstances in which they may produce flawed results".

    The FSA said risk questionnaires used by advisers were often not clearly worded, and that the number of questions asked varied widely.

    "We have seen cases where the resulting risk category is effectively determined by the answer to ONE question".

    The regulator also singled out for criticism the use of words like 'some,' 'reasonable' and 'moderate' to describe attitudes to risk.

    It said it was also concerned that a number of advisers used vague labels to explain risk to clients, such as categorising risk tolerance on a scale of 1 to 10. "This was a problem because the risk represented by each number was subjective".

    The FSA also said some advisers were relying too heavily on information from a product provider when researching the suitability of an investment. "There were gaps in the provider's information and as a result the firm failed to understand the nature of the risks of the product which led the firm to inappropriately rate the product as lower risk".

    The FSA also reviewed 11 risk profiling tools and found 9 had weaknesses which could have led to flawed results. "Firms must not rely on the findings of risk profiling tools without understanding the assumptions used by the system", stated the FSA.

    "We are also concerned that our findings suggest many firms do not understand how the tools they use work, including what they are (and are not) designed to do. Firms should only use a tool where they are satisfied that it provides outputs that are appropriate and fit for purpose", said the report.

    What It Means To You

    Many financial advisers and planners have worked hard over the last few years to improve their standards and the service they offer to their clients.

    Unfortunately there is still a number who are satisfied to do the minimum, as long as they achieve the sale of the product/policy.

    So in our opinion, there are still too many salespeople out there and not enough advisers and planners who advise properly.

    One of the bugbears here is of course commission. If you need to sell a product to earn a living and you only have a hammer, everything looks like a nail!

    For those of you reading this who are not clients of ours, does any of the above sound familiar? Are you comfortable with the investments you have, and why you have them? What risk levels are you taking, and why?

    So, if you do use the services of a financial adviser/planner but are perhaps not certain what you're getting for your money (and yes, if you do pay via commission the advice/service is NOT free!), we recommend that you shop around for an adviser/company that:

     compiles you a (written) strategy based on your goals and timescale that covers what to do with debt, cash and serious longer term investments (if any) and why
     asks you to complete a rigorous risk assessment (questionnaire)
    (the one we use, Finametrica, has 25 questions)
     is able to inform you on an ongoing basis how much of your money is invested in cash, bonds, property, equities, etc
     conducts a 'stress test' that mimics what would happen to your money (in pounds) in a very volatile stock market - could you tolerate it if you were to lose thousands of pounds? (and how would that affect your long term financial plan?)
     examines your financial roadmap, which compares your assets to measured needs - does the portfolio chosen at the predicted rate of return mean that you are on target to achieve your goals in life (now and in the future?)
     if your roadmap looks very healthy, suggests to you to reduce risk further by choosing a different portfolio with a lower level of risk that still allows you to succeed

    You probably won't be surprised to learn that we cover all the above points. The whole point of the process is to do the best we can to get you from where you are, to where you want to be, with the minimum amount of risk.

    The Financial Tips Bottom Line

    Clients often tell us that the most valuable thing for them to have is peace of mind. In our experience this is achieved by having a strategy which involves not taking risks that you don't need to take, and being in control.


    If you are unsure of your investments and the risks attached, make sure you check this yourself or your adviser covers this with you in detail.

    Where is your money invested and why?

    What is the volatility (standard deviation) on these?

    Can you reduce risk, and if so how?

    Seize the opportunity and take action, don't put it off!

    Article Source: [] Investment Risk - What Does It Mean To You?

  • 21 Dec 2010 11:27 AM | Keith Churchouse

    2010 and the end of 2009 has not been a vintage season for savers with the Bank of England’s base rate remaining at 0.5% for all this year and part of last year. An unprecedented period of around 20 months (05 March 2009 to 0.5%) has elapsed since the based rate sank to this low level. With inflation on the rise (the Consumer Prices Index (CPI) rose to 3.30% in November 2010 from 3.20% in October 2010) the real capital value of savers deposits in most cases is falling in real purchasing value.

    For those with higher levels of deposit, there is also the problem of maintaining levels of deposit that enjoy the current deposit compensation/protection limit of holdings below £50,000 in the UK. Those deposit taking institutions that use the European protection system see those limits increase to €100,000, which is about £70,000 in sterling, although this fluctuates all the time with currency movements.

    From 31 December 2010, The Financial Services Authority (FSA) has announced this month (December 2010) that the current UK deposit guarantee/compensation limit is to increased to £85,000, from £50,000. This will at least have the beneficial effect of reducing the need to open various accounts and spread deposit funds around for those investors with significant funds to invest wishing to stay below this limit.

    Further details of this announcement can be found at the Financial Services Authority website here:

    The way you deal with your deposit funds is a key point to financial planning and this planning needs to be considered carefully, especially with this new deposit protection limit change in mind. A regular review of savings strategy is always worthwhile to ensure that the best is being made of your capital with historically low bank base rates and rising inflation. The beginning of a New Year might be a good opportunity based on your circumstances and needs?

    At the same time, you may wish to check your position with regards to the use of this year’s Cash ISA allowance of £5,100, if you have not used this in full.

    With this in mind, it should be noted that we are all different and your savings strategy will be individual to your needs, such as access and your overall tax position. Therefore, this article should not be seen or used as individual advice.

    Seek Independent Financial Advice (IFA) for your circumstances. Have a great New Year.

    Keith Churchouse
    Director of Churchouse Financial Planning Limited

    Churchouse Financial Planning Limited is authorised and regulated by the Financial Services Authority. The Financial Services Authority does not regulate taxation advice.


  • 06 Nov 2010 7:22 AM | Paul Gorman
    Recent research amongst British Chamber of Commerce members showed that only 4% of the business owners questioned had any shareholder protection in place.

    Amid the time-consuming, complex business of running a company, unfortunately very little attention is paid to what might happen if a shareholder dies, or becomes seriously ill, and the above figures bear this out. To a point this is understandable, as business owners primary focus is the success of the company. Sadly though success can quickly and easily turn to failure if a business owner dies or is seriously ill.

    So who should be responsible for raising the awareness of what can go wrong ? To my mind, this should rest with the company’s professional advisers - be they financial planner, accountant or solicitor, after all each one has a vested interest in a company’s continued success.

    A business comprised of major shareholders will be aware that the long-term success of their business will depend on their contribution. But they may not have thought through the potential disastrous implications that could ensue if one dies or becomes seriously ill.

    A company’s Articles of Association deal with the issues of transferring and selling shares. In most cases the deceased or critically ill shareholder’s shares pass to their beneficiaries who obviously have a right to their inheritance. After inheriting the voting rights, the beneficiaries have the right to a say in the running of the business.

    This can cause problems as the beneficiaries may not have the necessary skills and experience to take on a role within the company. They may not share the same aspirations and objectives the surviving shareholders have for the business. They may not get on with the surviving shareholders and are likely to prefer a cash sum rather than shares.

    The surviving shareholders may prefer to continue in business on their own and prefer to purchase the shares, but may not have sufficient capital available. Without the necessary capital an outside third party, potentially hostile bidder, or even a competitor, could purchase the shares.

    The likelihood is that the surviving shareholders will want to retain control of the company and the beneficiaries will want  a cash equivalent value for the shares. Many companies adopt a pre-emption clause in their Articles of Association which allow the shareholders the right to buy the shares of the deceased or critically ill shareholder. Companies without any Shareholder Protection in place often try to borrow the money from banks to do this but not only can this create a large debt for the company, the banks can be reluctant to lend if they feel that the deceased or critically ill shareholder was key to the running of the business.

    Shareholder Protection overcomes all of these potentially disastrous scenarios as it provides the funds necessary to allow for the beneficiaries to receive cash in lieu of shares and the surviving shareholders to continue in business on their own without any inexperienced or unwanted involvement and without any threat from third parties.

    It is essential that the solution is implemented correctly, the protection plans are written to match the business set up, the right associated agreements are in place and the appropriate amount of cover is provided and thus it is usually advisable for the business owners professional advisers to communicate and confer to make sure this is the case.

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