Have you forgotten about a pension?

Have you forgotten about a pension?Pensions can be easily misplaced, although it can be slightly more serious than dropping some loose change down the back of the sofa.

New research from Aviva has found one in eight people hold a pension that they had forgotten about.

The researchers asked almost ten thousand savers about their pensions and discovered more than 2.5 million pension policies are currently sitting in the back of people’s minds.

Among those with a forgotten pension, most believe they have misplaced one pension pot, although 17% think they have forgotten about two and 6% have forgotten three or more.

According to Government figures, there is an estimated £400m in unclaimed pension savings.

At the same time, almost three in five UK adults are worried about not having enough money to last them in retirement.

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These forgotten pension pots could go some way towards filling the pension savings gap.

Although tracking down a lost pension can provide a valuable boost to retirement income, those who delay could receive a smaller amount than expected.

Forgotten pensions may have been subject to charges and not invested in the best way suited to the policyholder, making it worth less than it would have been if it was actively managed.

This new research comes after Aviva revealed the lack of engagement around pensions earlier this year.

More than a quarter of savers (28%) admitted to never reviewing their retirement savings, while almost a fifth (19%) of those with a pension said they review it less than once every 5 years.

Because pensions are often the second largest assets we own, after our homes, it is really important to keep them under regular review to make sure they are invested appropriately for retirement.

Aviva also revealed that since the introduction of auto-enrolment over three years ago, the number of pension savers who are unaware of their fund choices or have never reviewed them has risen to almost 1.5 million people or 15% of private sector employees.

This is up from 9% at the start of 2013.

According to Andy Curran, Managing Director, Corporate and Business Solutions at Aviva:

“It’s unsurprising that so many people have pensions they have forgotten about. The ‘job for life’ is now a distant memory with people much more likely to change employer on a regular basis.

“With auto-enrolment doing such a great job of getting more people saving for retirement, we are likely to see the number of pension pots that people hold increase further as each time a person gets a new job they get a new workplace pension.

“People need to be aware of the potential risks of having a number of different pension pots with small amounts of money in each. It’s likely that there will still be charges taken out of those pots for their management and administration and that can have implications if you are no longer contributing into them.

“Consolidating all your pension pots into one place can have its advantages, but needs to be looked at carefully as some pensions come with valuable guarantees that could be lost.”

One option for discovering forgotten pensions is to use the Government’s pension tracing service.

You can use this service to find contact details for your own workplace or personal pension scheme or someone else’s pension scheme, if you have their permission.

Whilst the Government’s pension tracing service won’t tell you whether you have a pension, or what its value is, it is a useful tool in helping to track down the details of a previous employer or pension provider, so you can continue your search with them.


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Autumn Statement 2016 Highlights

Autumn Statement 2016 HighlightsChancellor Philip Hammond presented his Autumn Statement to the House of Commons at lunchtime today.

This is Hammond’s first Autumn Statement and the first since the UK’s decision to leave the European Referendum in June.

The Chancellor promised “fiscal headroom” to help support the British economy through Brexit.

He shared the latest Office for Budget Responsibility (OBR) growth forecast, which was upgraded to 2.1% in 2016, then downgraded to 1.4% in 2017.

OBR is now forecasting economic growth of 1.7% in 2018, 2.1% in 2019 and 2020 and 2% in 2021.

The Chancellor said:

“While the OBR is clear that it cannot predict the deal the UK will strike with the EU, its current view is that the referendum decision means that potential growth over the forecast period is 2.4 percentage points lower than would otherwise have been the case,”

The deficit, measured by public sector net borrowing as a percentage of GDP, is forecast to fall from 4% in 2015 to 3.5% in 2016. This deficit is forecast to keep falling over the next five years, before reaching 0.7% in 2021/22.

Hammond explained that this will be the lowest deficit as a share of GDP in two decades.

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On productivity, a National Productivity Investment Fund of £23bn is announced. This money will be spent on innovation and infrastructure during the next five years.

There will be a £2.3bn housing infrastructure fund which will help provide 100,000 new homes in those areas with the greatest demand and £14bn to help provide an extra 40,000 affordable homes.

On pensions, the triple-lock for escalation to State Pensions will remain in place until the end of this parliament.

No further changes to corporation tax, which will fall to 17%, the lowest rate in the G20.

Employee and employer National Insurance thresholds to be aligned at £157 a week, resulting in a marginally higher cost for employers next year.

Insurance Premium Tax will rise from 10% to 12% from next June.

The money purchase annual allowance, which applies to people taking a taxable income from their pension pot, will be cut from £10,000 to £4,000.

There is a ban on salary sacrifice arrangements, although this appears to exempt pension contributions and childcare for the moment.

The income tax personal allowance will rise to £12,500 by 2020.

Government will consult on how best to ban pensions cold calling and take wider action on pensions scam.

A new savings bond will be introduced through National Savings & Investment, with an expected interest rate of 2.2% and a three year term. It will be limited at £3,000 per saver. Details will be announced in the Budget next year.

Big changes to the Budget and Autumn Statement system. The Spring Budget next year will be the last too, moving to an Autumn Budget. There will then be a Spring Statement, responding to the OBR forecasts.

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How much do you need to feel wealthy?

How much do you need to feel wealthy?One part of the Financial Planning service we offer is helping our clients identify their ‘number’.

This concept was made popular in the The Number: What Do You Need for the Rest of Your Life, and What Will It Cost? by Lee Eisenberg, published back in 2006.

Some new research from Lloyds Bank has found that this number might not be as high as we originally thought.

In fact, those who feel wealth aren’t always earning a fortune.

The research found that people that feel wealthy on average earn £65,810 a year and have a household income of £86,170.

These average salaries are significantly higher than the average UK salary which stood at £34,576 in July 2016, but the research showed that there are more factors that contribute to a feeling of being wealthy than just income.

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However, many people who feel wealthy have significant levels of equity in heir homes and own an investment property, which probably contributes towards this feeling of wealth.

The research also found that there is a correlation between income and the perception of wealth, as we might expect to see.

According to Sarah Deaves, Private Banking Director at Lloyds Bank:

“Feeling wealthy is about more than just the amount of pounds people have in their pocket to spend. We know that in particular homes, but also cars, investments and lifestyle also play a part.

“Those that feel wealthy today tend to be middle aged. They have perhaps benefited from better pensions, large house price inflation, no university fees and have lived through a number of years of a low inflation, low interest rate environment.

“Given the wide range of uncertainties faced today with, amongst other things, stretching affordability for housing, education and care in later life, taking financial advice can help people feel more in control of their options.

“Making a considered plan for monthly income and expenditure can help to improve people’s perception of their wealth and how they allocate their money, no matter their income level.”

The research also uncovered some interesting findings around property ownership and feeling wealthy.

The biggest monthly expense for many people in their mortgage payment.

For those who say they feel wealthy, more than three quarters own their property with no mortgage.

This compares to around a third nationally.

In addition, more than two in five respondents who felt wealthy own an investment property, compared to closer to one in ten for the national average.

Half of all those who feel wealthy have a detached house, this is more than twice the percentage for the average population.

Their average property value stands at £737,220, with an average of £606,670 of equity in the property as a result of modest outstanding mortgage debts.

Financial holdings also tend to be more common among those who feel wealthy.

47% of those that are wealthy hold stocks and shares compared to just 16% nationally.

However, there is a divergence of views amongst those that are wealthy about how they manage their investments.

Just under one in four get professional advice about their investments at least every three months, but a further quarter have never sought any financial advice.

Most people say they are either financially ‘managing’ (36%) or ‘comfortable’ (37%) and just 2% of the UK population feel that they are ‘wealthy’.

Those that do feel they’re wealthy are generally male (59%), 47 years old on average and significantly more likely than the national average to be in full time employment (59% vs 36%).

How much do you need to feel wealthy?

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Getting fund managers in better shape

Getting fund managers in better shapeIs the FCA going to be able to get fund managers in better shape in the UK’s £7trn asset management sector?

That’s the question the Financial Conduct Authority has set out to answer in their asset management market study.

The project started last November with the publication of a terms of reference and has now published an interim report.

It’s an important project, due to the size and impact of the sector.

With over three quarters of UK households holding occupational or personal pension assets, most of us are users of the services offered by asset managers.

The FCA have found that price competition is weak in a number of areas of the industry.

They reported that, while the price of passive funds has fallen, active prices have remained stable.

Despite a large number of firms operating in the market, the asset management industry has seen sustained, high profits over a number of years.

In addition, investors are not always clear what the objectives of funds are, and fund performance is not always reported against an appropriate benchmark.

Finally, the FCA have identified concerns about the way the investment consultant market operates. With many small pension schemes relying heavily on the advice of consultants, this is a big deal too.

In order to remedy the current problems identified at this stage of the asset management study, the FCA is proposing a significant package of remedies to make competition work better in this market, and protect those least able to actively engage with their asset manager.

These proposals include a strengthened duty on asset managers to act in the best interests of investors, reforms to hold asset managers to greater account, introducing an all-in fee to make it easy for investors to see what is being taken from the fund, and measures to help retail investors identify the most appropriate fund.

The regulator will also launch an investigation into investment consultancy services.

Responding to the FCA’s interim report to its asset management market study, Ian Sayers, Chief Executive of the Association of Investment Companies said:

“This is a detailed and comprehensive report, which will take some time to consider fully.

“One focus of the report is fund governance and how improvements in transparency could help investors to make better decisions. However, evidence from the report also demonstrates that retail investors often do not use the information that is currently available.  For example, around half of retail investors were not aware of the existence of fund charges.

“This is where the governance of an investment company can be of real benefit, as investment company boards are there to uphold the interests of all shareholders.  A third of investment company boards have reduced their management fees in the last four years.

“They are also introducing more tiered fees where the percentage paid reduces as the investment company increases in size.  This captures some of the economies of scale on behalf of investors in a way which the report notes is rarely seen elsewhere in the funds sector.

“The report also focusses on equity investment and the relative costs of active versus passive investment.  One of the advantages of the closed-ended investment company structure is the ability to invest in a wider range of assets, making them particularly suitable for illiquid investments which are hard to replicate in a passive strategy.”

A consultation on the findings and proposals in the FCA’s interim report closes on 20th February 2017 and then we expect the publication of their final report in the second quarter next year.

It will be interesting to see the outcome from this asset management market study and any intervention from the regulator.

Healthier competition, more transparent charges and objective measurement of fund performance are all factors both advisers and investors should welcome.

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Weekly Round-Up – Friday 18th November 2016

Informed Choice Weekly Round-UpHappy Friday, readers! It’s time to catch up.

Here are some of the things that we covered at Informed Choice this week.

On the blog this week

With the dust settling after the US Presidential election result last week, who are likely to be the investment winners and losers under President Trump?

Could the combination of parents and children banking on financial support from each other lead to a financial tug of war between the generations?

The latest podcast episodes

Martin spoke to financial journalist Rodney Hobson about the history of scams, how modern technology makes it easier to be scammed, and why sophisticated investors are just as likely to fall victim.

Jon Beckett, affectionately known in the industry as ‘JB’, has long been an outsider of the City. He chats to Martin in this episode about the life of a professional fund selector, the relevance of human fund selection in an increasingly digital world, using liquid alternative investments in the current economic environment, and the danger of super tanker funds.

In the weekly episode of Informed Choice Radio, Martin talks about solving the biggest problem with living longer. There’s also a roundup of the latest personal finance news.

Before you go

It’s the Cranleigh Christmas Lights switch-on event tomorrow, on Saturday 19th November. Nick and Bodders will be giving away baby Christmas Trees from outside Sundial House from 10am until midday. Do pop along to see them and collect your free tree!

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Investment winners & losers under President Trump

Investment winners & losers under President TrumpWith the dust settling after the US Presidential election result last week, who are likely to be the investment winners and losers under President Trump?

Tom Stevenson, investment director for Personal Investing at Fidelity International, has suggested healthcare, infrastructure, gold and retailers as potential winners once The Donald takes residency in the White House in January.

According to Stevenson, Trump’s victory could provide a much-needed tonic for the beleaguered US healthcare sector, which has struggled under the Obama administration.

Investors have been selling biotech and healthcare since last summer, when Clinton was rising in the polls. This resulted in the sector falling by 8.4% for the year.

Stevenson says that a ‘relief rally’ in the pharmaceutical sector could prove good news for funds with significant healthcare investments in the UK and globally.

He also suggests infrastructure could get a boost under President Trump.

Something Trump and Clinton both seemed to agree on as Presidential candidates was fiscal spending, and in particular spending on infrastructure.

Stevenson thinks infrastructure spending is likely to get a significant boost, with a focus on roads, bridges and airports.

During times of political change and uncertainty, gold has been the traditional safe haven for investors.

Stevenson points to the near 4% rise in the gold price on election night last week, to $1,316 an ounce at one point.

That was the biggest jump for the yellow metal, which is often seen as one of the world’s safest assets, since the shock Brexit vote.

Investors have a range of options for exposure to gold in their portfolios, either directly in the asset or indirectly by investing in the shares of mining companies.

Stevenson explains that Trump wants a tax cut “across the board”. According to the Tax Foundation, this means that even middle class earners, who earn roughly $50,000 a year, will be more than $1,000 a year better off.

Trump also proposed a cut in the corporate tax year, from 35% to 15%. This is not just for large corporations but also the self-employed and small business owners.

If this policy encourages more new businesses, it is likely to boost the economy.

Stevenson says this all adds up to suggest that consumer spending will see a boost – benefiting retailers and restaurant operators in particular.

He also highlighted a potential investment loser when President Trump come to office.

Stevenson says that opinions remain split on the effect of Trump’s policies on the financial sector.

On one hand, he has appeared unwilling to saddle banks with more regulation. And financial stocks will certainly benefit from the loosening of the Dodd-Frank regulations.

On a shorter-term basis though, a sell-off in global markets is expected by many analysts to deter the Federal Reserve’s long-awaited interest-rate increase in December.

And that would lower long-term borrowing costs and squeeze the banks’ profitability further.

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Financial tug of war between the generations

Financial tug of war between the generationsCould the combination of parents and children banking on financial support from each other lead to a financial tug of war between the generations?

New research from SunLife has found that while 17% of 55-65s are expecting to be supported financially by their grown up kids when they retire, 19% of adult children are relying on inheritance from their parents.

This is up from 17% last year, as more adult children become dependent on financial support from their parents.

The latest Cash Happy report from SunLife also found that one in ten adult children are so reliant on an inheritance they believe their parents are spending too much money!

SunLife’s research revealed this financial ‘tug of war’ is affecting many people’s lives.

A fifth of 18-34s are providing financial support to their parents, while one in seven 55-65 year olds are providing financial support to grown up children no longer in education.

However, while a huge 80% of the 18-34s who are finically supporting their older parents are finding it a struggle, with half of those saying it is a constant struggle, less than two thirds of the 55-65s who support adult children find it a struggle, and only one in seven of those find it a constant struggle.

This may be explained by the fact that, as a percentage of income, older people are generally better off than younger generations; those age 55-65 have 37% of their income allocated to fixed costs, compared to 39% for 18-34 year olds.

According to Ian Atkinson, head of brand at SunLife:

“We’re seeing an older generation with high home ownership spending their savings, investments and income on enjoying the best years of their life, knowing they can still leave their home as a legacy.

“It’s not really fair to call them ‘SKIers’ (Spending Kid’s Inheritance) – it’s their money in the first place, and perhaps it’s only right that, when they’re reaching an age of more free time and fewer responsibilities, they’re using that money to fulfil some lifelong ambitions.”

Earlier this year, 83-year-old Joan Bakewell, who has a fortune of around £5million, announced she would be leaving her kids nothing, saying ‘I don’t mind admitting that as I’ve grown older I’ve grown fond of posh restaurants, nice clothes, good handbags. I feel I’ve earned the right to indulge myself.’”

And with life expectancy now at 79 for men and 83 for women, those in their 40s and 50s who are ‘expecting’ an inheritance could be waiting a long time.

Analysis by The Telegraph revealed that in 1999, the average Briton who inherited money was aged just under 53.

Today, as a result of rising life expectancy, it is rapidly approaching 60.

Rather than assuming our financial futures will be secured by an inheritance, parents and children should plan together.

By financial planning like this, it is possible to avoid a financial tug of war between the generations and work together towards common goals for family wealth.


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Weekly Round-Up – Friday 11th November 2016

Informed Choice Weekly Round-UpHappy Friday, readers! It’s time to catch up.

Here are some of the things that we covered at Informed Choice this week.

On the blog this week

An influential committee of MPs has recommended the State Pension triple-lock should be scrapped.

New figures from the ONS have highlighted the changing shape of family life in the UK, with home alone over 65s and full nest parents having implications for retirement and financial planning.

As a company, we remain entirely neutral in a political sense. We do however have some concerns about how the US election might impact you and, in particular, your investment portfolio.

Impact investing, once a niche area of the investment market, appears to be entering the mainstream.

The latest podcast episodes

A traditional economics education is failing to equip us for future challenges. Cahal Moran, chairman of the Post-Crash Economics Society and co-author of The Econocracy, explains why.

Craig Palfrey, author of The Wealth Secret, shares this thoughts on restoring the savings habit in adulthood.

Can you save for retirement without using a pension? Martin talks about this and brings you a weekly roundup of the latest personal finance news.

Informed Choice in the press

Standard Life has completed its acquisition of AXA Elevate, creating the largest wrap platform in the UK. Martin comments for Money Marketing on potential teething problems ahead.

Before you go

To celebrate the Cranleigh Christmas Lights switch-on, we are giving away 100 tiny Christmas Trees on Saturday 19th November. Do pop along to Sundial House on the day to say hello and pick up your free tree!

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Impact investing becoming mainstream

Impact investing becoming mainstreamImpact investing, once a niche area of the investment market, appears to be entering the mainstream.

Something we have noticed at Informed Choice in recent years is a growing number of our clients expressing an interest in socially responsible and ethical investing.

Impact investing describes investing in companies and investment funds which have the ability to generate positive social and environmental impact, as well as financial returns.

It describes an approach described in my recent podcast interview with Lisa Stanley, founder of Good With Money, is matching a vision of selecting financial products which are both a good deal financially and ethically.

According to new Standard Life Investments research, carried out by The Wisdom Council, 80% of UK respondents think human rights, equality and eradicating poverty are important considerations when investing.

The same number do not expect to sacrifice investment performance when investing in values-based funds.

The research highlighted that under 40’s are more likely to use values based investing, invest in funds that aim to make a positive difference and are familiar with the term impact investing.

There is an increasing recognition that publicly traded corporations have the ability to generate significant environmental and social benefits.

By channelling large amounts of mainstream capital into publicly listed companies whose primary business models address pressing environmental, social and economic challenges, investors have the ability to achieve positive impact at scale.

Amanda Young, Head of Responsible Investment, Standard Life Investments, said:

“The case for impact investing is strong. It represents a tangible way for socially and environmentally aware investors to deploy their capital in a manner that meets their environmental, social and financial goals.

“As we move forward we will no doubt see a wider range of investment vehicles, as well as more diverse impact targets. Measurement will also become increasingly sophisticated and standardised.

“Our research highlights that we expect demand for socially responsible, values-based investments to continue to grow, particularly among millennials.

“For asset managers and advisers that embrace impact investing and offer suitable products to cater for this market, the future looks bright.”

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Bracing for the Trump dump

Bracing for the Trump dumpAs I write this, Donald Trump is on the brink of securing a historic US Presidential election victory.

Each candidate needs 270 electoral college votes; Trump stands at 244 and Clinton at 215. We expect Trump’s victory to be called by US television networks within a couple of hours.

As a company, we remain entirely neutral in a political sense. We do however have some concerns about how the US election might impact you and, in particular, your investment portfolio.

It is no secret that investment markets dislike uncertainty and this year has been packed with uncertainty, prompting a reasonably high level of volatility, albeit not unprecedented by any stretch.

A Trump victory is expected to produce a sharp negative stock market reaction.

Forecasters will probably adjust their numbers downwards, arguing there will be a Trump impact on economic and market confidence; not only in the US but globally.

In the longer term if Mr Trump manages to do even half what he wants economically it means more growth.

He would offer a substantial fiscal stimulus by both spending more and cutting tax rates.

Whilst he argues that the lower tax rates will bring in more revenue from more activity, that takes time to come through.

He wishes to offer an incentive to US large companies to bring back substantial cash from overseas, which could help with revenue on a one off basis and provide more company cash to invest. It would be better for shares than for bonds.

Periods of uncertainty such as this reaffirm the importance of holding a diverse portfolio, tailored to your individual circumstances and personal risk tolerance.

From this perspective, we remain confident that our clients’ investments are well positioned to ride out any market turbulence, regardless of the outcome.

We do remain focussed on the long term outlook for the investments held on your behalf: we invest rather than speculate. Accordingly, it would be inappropriate to trade around the market volatility.

There is a range of scenarios that could materialise, each of which would generate winners and losers. As these scenarios take shape, we will of course seek to identify long term investment opportunities.

If you have any concerns whatsoever about the impact of a Trump victory on your investment portfolio, please do call your Financial Planner at Informed Choice.

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