The impacts of Covid 19 are felt far and wide, in our sector, finances, the consequences have been severe. Since the start of 2020 the FTSE has fallen by over 20% causing some pensions, ISA’s and other investments to decrease in value, in some cases delaying planned retirement dates. And yet the top performing manager in the UK All Companies sector has returned a positive return of 21.4% over the past year, compared to the average of -8.1%. What this shows us is that now is not a time to panic, but rather an opportune time to revisit financial plans and ensure that investments and pensions are in the right place. The focus historically has been predominantly on the UK, but by looking further afield into the global landscape the best return over the past year has been 55%, showing the benefits of a properly diversified portfolio. We see too often a laissez-faire attitude to reviewing portfolios, or listening when investment managers or advisers indicate that they told you that investments can go down as well as up, there is always benefit in regular reviews even if it is to hear that no changes need to be made and that the performance of your portfolio has been strong relative to their peers. Do you know the charges that are applicable to your investments? Quite often we find that investors do not know the impact charges can have on their financial plans. This particularly impacts low risk portfolios as the expected returns are lower, commensurate to the type of investments managers select in this area such as Gilts, Corporate Bonds and Fixed Income Securities.
It is often said that “cash is king” but that is certainly not the case at present. The Bank of England base rate has not been above 0.75% for 10 years. This has deterred some investors from using the annual ISA allowances, currently £20,000 per person. Utilising these allowances is hugely important as monies are being moved from a taxed to an untaxed environment. Do not also be put off by the terminology of a “Stocks & Shares ISA”. Investments into these form of ISA’s do not merely have to go into stocks and shares, they can go into any form of regulated investment fund including a wide variety of low risk areas. We should instead think of these ISA’s as “Investment ISA’s”.
The basics of planning remain the same. Utilise all available tax allowances, remember the length of time you are investing for, ensure that you have adequate protection in place, and above all ensure that you have regular communication with whoever is looking after your money.
In terms of tax efficiencies, the government seems to be targeting higher income earners with punitive measures on pension contributions and removing personal allowances, but again there is always something that can legitimately be done. Venture Capital Trusts (VCT’s), for example, offer 30% income tax relief on contributions with providers coming up with ever more innovative ways of managing risk. Any unused pension allowances should be considered as personal income tax relief can be obtained and, following the Pension Freedom legislation, any monies accrued in pensions are outside of the estate for inheritance tax. You can also directly make payments to your children by using their annual pension allowance of £3,600, the net cost to investors being £2,880 as tax relief is available on these contributions. This form of long-term investment will also significantly benefit from compounding for the children to take advantage of in their retirement.
Aegis is an independent, directly authorised firm, with advisers that are hugely experienced at dealing with all kinds of financial matters. The financial services sector, we believe, has largely failed consumers and we endeavour to challenge the status quo and show that there is a different way that puts the needs of clients above all else. We provide a bespoke, professional service but one that is always personable. Often our clients become advocates of our proposition and introduce us to others. One thing that is also important to us is that we do not ask anyone to formally engage with us or pay any fees until we have fully demonstrated the value we can add.
If you would like a complimentary review of your existing investments or pensions, or would like to find out more about us contact 0333 358 2233 or email us at email@example.com.
Aegis Financial Planning Limited is authorised and regulated by the Financial Conduct Authority