Financial Fairy Godmother

Financial Fairy Godmother Karen MacDonald is the Financial Fairy Godmother. She helps people to live the life they want witho

The Financial Fairy Godmother is here to help you assess where you are now financially, where you want to be in the future, and then take steps to meet these requirements. Whatever your needs - a growing family, savings to invest, retirement planning or planning for care for you or a loved one, Karen will take you step by step to achieving your financial goals.

Do I Need Life Cover? Life cover is very important, but what cover do we really need and how much? How much money would...
18/10/2022

Do I Need Life Cover?

Life cover is very important, but what cover do we really need and how much?

How much money would your family need to maintain their standard of living, if you died, or if a serious illness left you unable to work?

Once you know what they’d need, you might insure for a lump sum that would be able to repay debts, or fund a certain level of income. A cost-effective option can be a Family Income Benefit policy, which pays out a regular income on your death for the remainder of a selected term. This means that each year you survive, the total that is paid out will reduce. For example if you were to cover yourself for £1,000 per month of Family Income Benefit for twenty years, and you died at the end of year two, it would pay out £1,000pm for the remaining eighteen years (a total of £216,000). If you died in year ten it would only pay out about £120,000 over the next ten years. Because the cover decreases over time, it is cheaper than a fixed lump sum.

The two main types of sickness cover are Critical Illness insurance, which pays out a lump sum if you suffer one of a predefined list of conditions, and Income Replacement which provides an ongoing income if you’re unable to work due to sickness after a pre-agreed period of time. Whilst Income Replacement policies can only replace a proportion of your income, you’re covered for all illness that affects your ability to work, whereas Critical Illnesses are more specific. Stress and back pain are not considered to be Critical Illness although they’re a common problem.

For many people, the ideal solution is a combination of one or more of these policies, and a review can help work out how to do this most costeffectively.

Registration of Trust Funds With a 1 September 2022 deadline for the registration of trusts we have been spending time ...
04/10/2022

Registration of Trust Funds

With a 1 September 2022 deadline for the registration of trusts we have been spending time making sure that our clients are registering their trusts. Do you have any trust funds and if so have you registered them? Even if you have missed the deadline you will still need to register.

Funds are often put into trust to protect them during the settlor/owner’s lifetime and to ensure their estate is securely and safely passed on.

Previously a trust had to be registered if it became liable for certain taxes, but now many trusts have to register and obtain a Unique Taxpayer Reference (UTR).

The Trusts Registration Service (TRS) is a new online service that provides a single route for trustees and personal representatives of complex estates to comply with their registration obligations under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.

Some trusts are exempt, including pension trusts, most life policy trusts and charitable trusts, but many other trusts, including will trusts and those created for inheritance tax planning, may need to register.

Changes in regulations can often lead to confusion, so if you would like to have your hand held through the registration process please pick up the phone and give us a call today to book a free without obligation consultation.

Many of us realised that life would not be easy once COVID restrictions were lifted, but of course we had not foreseen a...
11/08/2022

Many of us realised that life would not be easy once COVID restrictions were lifted, but of course we had not foreseen a war in the Ukraine. This has impacted the equity markets, whilst inflation concerns and rise in interest rates have affected corporate bonds and gilts, which themselves affect investments.

My advice remains, as ever, that when an investment has fallen in value, don’t panic, sit tight. Observing the percentage drop rather than looking at the monetary drop can be less frightening. When markets are down it is often considered to be a good time to invest: as Warren Buffet said, “Be fearful when others are greedy. Be greedy when others are fearful.” I am aware however that the biggest concern with this is that you don’t know how far the markets still might fall.

With energy bills soaring, interest rates on the rise and when even trying to escape from it all on holiday has its own problems, seeing your investments going down could be even more depressing, and that’s why I believe that talking to a financial adviser is even more important during this difficult period. We can hold your hand through times like this. Again, our most important role is often to be a sounding board, bringing to mind another famous adage, “A problem shared is a problem halved.”

Ethical and Sustainable FundsInvesting Responsibly is becoming a far more common discussion with clients, and not just a...
23/06/2022

Ethical and Sustainable Funds

Investing Responsibly is becoming a far more common discussion with clients, and not just at Monetary Solutions. Research has shown that investments in this area have grown in the last 5 years*. But what does all the jargon mean?

Ethical Investing – funds which focus on 'negative screening', for example, aiming to avoid investing in what could be viewed as 'bad stuff' such as to***co, weapons and gambling.

Environmental, Social and Governance (ESG) – funds with a focus on environmental (eg climate change), social (eg diversity in recruitment practices, human rights or animal welfare) and governance of companies they are investing in (such as the ability for shareholders to vote on important issues).

Socially Responsible Investing (SRI) – a blend of the above, where 'negative screening' is combined with identifying the companies that have good environmental, social and governance policies.

Impact Investing – focusing on the outcome/impact of an organisation.

Sustainable Investing – elements of all the above including both 'positive' and 'negative screening' and a focus on companies’ output and impact of their operations on the environment.

Choosing which funds to use will depend on the result you are trying to achieve and how specific you want to be, for example whether you want to avoid a certain type of company or whether you just want to invest responsibly. To find out more, book a free no-obligation consultation.

* Recruit UK 6th April 2020

Most of us suspected that life after lockdown was not going to be easy, even before the war in the Ukraine. Now the cost...
09/06/2022

Most of us suspected that life after lockdown was not going to be easy, even before the war in the Ukraine. Now the cost of energy is on the rise, together with an increase to the Bank of England base rate to 1%, the highest level for 13 years.*

With the price of many of our essentials on the increase, how would I suggest we approach this period of time? As always, I say budget. We can’t know how long this period of increased prices will continue and it's important to avoid getting into debt. If you led a simpler life in lockdown, can you continue this at all?

It is very easy at times like this to contemplate stopping pension and life insurance premiums. However Covid was a reminder of the importance of insurance, not knowing what is round the corner.

It can often be hard to see the benefit of putting aside money into a pension for a period of time in the far future, whilst at the same time we are struggling to put food on the table and pay for heating. Even so, think very carefully about this. Time goes by very quickly and we can always find reasons for not reserving funds for our future.

However, it is important to remember in retirement we will generally have little or no income, and we will be totally reliant on the assets and savings we have accumulated. If you haven’t already, look at how much you’ll need to live on in retirement and whether you’re on target to have this amount by your chosen retirement age.

Karen MacDonald is an independent financial adviser with Monetary Solutions (www.monsols.co.uk). If you do need help with budgeting, book a free, no obligation consultation on 07970 179413 or [email protected].

*BBC news 05.05.2022

How can an IFA help a business? A few years ago, I met someone who had recently joined a company where the sole directo...
18/05/2022

How can an IFA help a business?

A few years ago, I met someone who had recently joined a company where the sole director was left in a coma following an accident. No one had power of attorney, so no decisions could be made and no bills could be paid for the business.

It brought home to me how important it is for a business to have an IFA, just as much as it is for an individual.

I often say the most important thing an IFA offers is a sounding board to help you consider different scenarios. For example, when considering protection you have to look at cover for sickness as well as life insurance. In both cases, you need to consider the impact on the business-owner as well as on the firm.

A business owner needs to decide how they would replace their income if they fall sick, and should consider taking out:

Critical Illness insurance which will pay out a lump sum if they are diagnosed with a critical illness such as heart attack, stroke and some forms of cancer

Income Replacement insurance which is designed to replace income lost during illness or accident

The business needs to consider Key Man insurance to cover employees whose long- term sickness would affect the company’s bottom line. This not only helps to protect your business profit but could also allow time for another individual to be trained up.

Different issues need to be considered to protect the business against the death of an owner. Generally speaking, when a director or a partner dies, the value of their share will pass to their estate. Often, shares will then pass to a spouse or family member who might have no desire to be tied up in the business.

Shareholder or Partnership Protection is designed to pay out a lump sum equal to the value of the share in the business. This enables the remaining directors/partners to buy back the deceased’s share, which ensures the family gets the value they deserve whilst at the same time protecting the business. When planning this, you should also consult your solicitor because other legal agreements need to be in place to make this happen.

At Monetary Solutions Ltd, you can book a free initial consultation about any financial matters, so please call us on 01403 288078 or visit www.monetarysolutions.co.uk.

What if… Covid restrictions are now disappearing and while life is quickly returning to “normality”, I think it's import...
01/05/2022

What if…

Covid restrictions are now disappearing and while life is quickly returning to “normality”, I think it's important to reflect on the impact it’s had. From conversations I’ve had about the pandemic it seems many people now realise how quickly things can change.

The first news of the virus was at the end of 2019 but by the end of March 2020 we were in lockdown, and this has certainly made me realise the swift impact of the crisis. While we plan for a long healthy life it's important to remember that things can happen along the way and this has shown how quickly our lives can be affected.

During the pandemic we saw many people suffer death, job losses and sickness. We all had different experiences of the virus and certainly some people are still suffering. For the luckier ones it's important to realise that it really was pot luck if you were in an industry that was not badly affected.

When we plan finances we use what we call “what if” situations to see how individuals’ finances would fare under different circumstances. So if you weren’t badly affected by the pandemic, why not sit back and consider “what if” this hadn’t been the case, based on the stories of others who did not fare as well as yourself during this time. If you realise that in different circumstances you would have had issues coping financially, maybe you should consider some financial planning to reduce this risk if this happens again in the future.

Karen MacDonald is an independent financial adviser with Monetary Solutions (www.monsols.co.uk). If this or any other area is concerning you, book a free, no obligation consultation on 07970 179413 or [email protected].

Equity Release allows you to access capital and keep your home. This may seem a good option, if you’ve exhausted intere...
24/04/2022

Equity Release allows you to access capital and keep your home.

This may seem a good option, if you’ve exhausted interest-only mortgage deals, or wish to help with family weddings, house deposits or school fees. Funding home improvements or special holidays can be difficult on a fixed income, and it’s tempting to borrow on the house.

However, Equity Release can be costly, with upfront fees for financial and legal advice, and it will reduce your equity in the house. This means that if the house is someone’s inheritance, they will receive less. The money raised could also affect tax or any means-tested benefits.

Is there an alternative?

Could you could raise the money elsewhere, from savings, through a standard mortgage or loan, by downsizing, or borrow from family? There are local authority grants for some home improvements.

Could you avoid borrowing? Budget strictly, or increase your income: can you still work, or take in a lodger? Check www.entitledto.co.uk for any benefits due to you. Not all benefits are means-tested.

Equity Release may involve a lifetime mortgage or home reversion plan, which will involve either a loan secured on the main residence or the sale of all or part of a property. As a result, the value of your assets and/or estate may be reduced. It should not be entered into lightly and professional advice should be sought to understand the features and risks involved.

Please contact me if you'd like to discuss Equity Release further.

The Lifetime Allowance was introduced on 6th April 2006, at £1,500,000. Over the first few years this increased and peak...
10/04/2022

The Lifetime Allowance was introduced on 6th April 2006, at £1,500,000. Over the first few years this increased and peaked at £1,800,000, then decreased to £1,000,000 by 2016/2017. Since then there have been a few increases, but it has now been fixed at £1,073,100 until 2025/26.

At first I remember thinking, as an adviser, that it was unlikely to affect many, but with these reductions more and more people are affected.

The Lifetime Allowance is the maximum you can build up within pensions while still enjoying full tax benefits. Pension benefits are tested against this allowance, usually when pension benefits are taken. Any value in excess of the Lifetime Allowance is subject to a tax charge.

It is possible for individuals to have a higher Lifetime Allowance by having a form of Protection, which you can still apply for.

Are you near or over the current Lifetime Allowance? If you are, get advice. Paying tax is not always a bad thing but there may be things you can do to help your position. Don’t stop paying into a pension just because you are near to this Allowance, as there can be other benefits to keeping the pension, for example if your employer pays into it.

If you have any questions about this do get in touch

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Over the years I have seen many changes in our industry and noted a change in focus from products to outcome, but myster...
02/04/2022

Over the years I have seen many changes in our industry and noted a change in focus from products to outcome, but mystery still pervades what we financial advisers do, so here’s a sample:

• Personal advice - A financial adviser finds tailor-made solutions for you. We create a full picture of who you are and what you need.

• Market knowledge – Not being tied to any particular bank or provider we can research the market place for suitable products.

• Extra benefits - For example, protection policies eg cover for Critical Illness varies between providers, so we help decipher the best product for your needs.

• Peace of mind - We investigate your existing policies, report on any shortfalls, taking your employers’ and state benefits into consideration, and ensure you only have the policies you need.

• The buck stops with us - We abate your worries about getting it wrong, keep you updated and take responsibility for our advice.

• Practical help - If you need to make a withdrawal or claim we guide you through the process, researching paperwork that needs completing. Especially useful during emotionally challenging times.

• Proactive Support - If you opt for an ongoing service we will go on providing support, making sure the policies you have stay
suitable for you.

If any of these areas resonate with you then do get in touch for a free, no obligation meeting.

Pension Contributions You might be wondering whether you should top up your pension before the end of this tax year. Her...
21/03/2022

Pension Contributions

You might be wondering whether you should top up your pension before the end of this tax year. Here are some of the benefits.

While interest rates on savings are still very low, the tax relief a Pension can attract adds to its growth.

Example

If you earn £55,000 and want to add £10,000 to your pension fund, you would only need to pay £8,000 yourself, with the other £2,000 being added in the form of tax relief. (This example assumes you are making no other pension contributions.) You could then claim a further £2,000 tax relief via your tax assessment, meaning it costs you only £6,000 to put £10,000 into your Pension.

Pensions can be valuable for inheritance tax planning, and are also attractive to businesses, as they can claim tax relief on employer pension contributions.

However, there are restrictions on how much you can pay in each year as well as the total you can accumulate over the lifetime of a pension. There are penalties if you exceed these limits so, as always, it's wise to seek professional advice.

For a free initial consultation, pleaseget in contact

This is the busiest time of our year for IFA's as the end of the tax year is approaching. It’s an ideal time to review i...
21/03/2022

This is the busiest time of our year for IFA's as the end of the tax year is approaching. It’s an ideal time to review investments. We suggest:

Review your interest charges on any outstanding debts and check to see if there is anything you are paying for which you no longer need.

Complete a financial health check. We look at monthly expenditure and take this away from your monthly income to see what your disposable income is. You may be surprised by how much surplus there is.

Review your investments. For savings accounts check the interest rate is still competitive. Look at your investment funds. There are companies who analyse investment funds and rate them, for example Financial Express (FE). FE Crown Fund Ratings enable investors to distinguish between funds that are outperforming the benchmark against those that are not. For example the top 10% of funds are awarded five FE Crowns and so on. See what crown ratings your funds have.

Finally, as we are at the end of the tax year, consider if you are being tax efficient. Have you utilised your ISA allowance? Could you pay more into a pension? Have you utilised your personal allowance?

You may prefer to seek advice from a financial adviser. I see myself as a sounding board. I can discuss with you the issues I have addressed above and help you to decide how to plan for your future.

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