Don’t let freedom go to your head

by Mike LeGassick, Independent Financial Adviser, Manning and Company

The recent Budget announcement on pension reform heralds a seismic shift in the personal pensions market.

Until now those who have diligently saved into their pension pot have had certain limitations imposed on how it may be spent, and when.  As a result most pension pots have had to be spent on an annuity – a form of insurance policy which provides a guaranteed income for life.

The Budget means that as from April 2015 you have much more freedom.  You will be able to invest it in other ways; or take the whole pot in cash if you like (although still not until you are 55, unless you’re prepared for a tax penalty). 

After the first tax-free 25%, there’ll be tax to pay on the rest.  But the point is you will have choice, like never before. 

Budget 2014

In honour of the new twelve-sided pound coin announced on Budget Day, here are our twelve top headlines from the Budget 2014.

First, for individuals:

1.  ISAs are becoming simpler, and the annual tax-free limit is rising to £15,000 in July.  Savers will be allowed to save the maximum amount in cash, instead of splitting their money between cash and stocks and shares – sure to be a popular move. If you don’t already have an ISA, this is the perfect opportunity.  Talk to us for advice.

2.  Junior ISAs will see an increase in the annual tax-free limit to £4,000 per year. A good way to get the younger ones in your family engaged with saving!

3.  A new pensioner bond from National Savings & Investments will allow those aged 65 and over to save up to £10,000 at better interest rates than currently available on the market – a figure of 4.0% for a three-year bond has been indicated.  If you’re eligible and have the wherewithal to save, take advantage of this.

Mortgage lenders tighten up after recent Mortgage Market Review (MMR)

By Lisa Burton, Financial Adviser and Specialist Independent Mortgage Adviser, Manning and Company Independent Financial Advisers.

If you want a mortgage after 26th April you’ll need to prepare yourself for the mortgage lender’s scrutiny over your household’s monthly living expenses.

Due to a change in policy brought about by the recent Mortgage Market Review, all lenders will have full and complete responsibility for assessing whether customers can afford the loan. It is hoped this will ensure good lending practices take place and everyone avoids the fall-out of the last mortgage lending crisis.

What does this mean for you, the borrower?

We recommend getting yourself financially fit before even making a mortgage application.  Lenders will be looking at 6 months’ worth of finances to assess if you really can afford the mortgage repayments and not just at this moment in time but for future affordability too.  If you’re not sure where to start, speak to an independent financial adviser.

For those who would just scrape through now, bear in mind you may not at the end of April.  If you already have a mortgage offer but haven’t found a house, get your skates on as you may find you no longer meet the lender’s new criteria at the end of April, when you will need to be re-assessed under the new policy.

UK Government boosts property market with the ‘Help to Buy’ scheme

By guest blogger, Paul Trueman, Independent Mortgage Adviser - Anthony Trueman & Co Ltd

In April 2013 the government introduced the ‘Help to Buy’ scheme to help revive Britain’s property market. The scheme will run for 3 years and is intended to help first-time buyers and people who already own their own home to move house more easily.

However, since its launch a year ago the media has reported a great deal of controversy surrounding the scheme, asking if it really is helping the property market or instead simply inflating house prices and creating an artificial housing bubble.

Regardless of the view point, it is important any individual thinking of applying for the scheme gets good independent advice before embarking on any type of mortgage commitment.

What is Help to Buy?

So, what is Help to Buy and how does it work? Well, there are two main schemes available in the UK: equity loan and mortgage guarantees.

Just 16 days to the breadline for families in the South West

By Patrick Goddard, Financial Adviser, Manning and Company Independent Financial Advisers

The money could run out in just 16 days for families in the South West and 26 days for the UK as a whole.

According to a recent report, if the main breadwinner was taken seriously ill or suddenly died, families in the South West had on average just 16 days before all their savings ran out and they found themselves on the breadline.

According to the report, the average household savings in the UK was just £1,010. But if you thought that was low, 33% of UK households had no savings at all - meaning they could be on the breadline tomorrow.

Optimistically, people had believed they could survive 3 times longer (48 days on average) compared to the reality of 16 days.

Without any other means of income, what about relying on friends and family? The average monthly amount they could spare was £107; however 66% of households said they would not expect to receive any financial support from friends and families.

This year it doesn’t get better; with welfare reforms, austerity measures and cuts - how long could your family survive financially if the worse was to happen?

If this makes you feel vulnerable, then arrange a free meeting with a Manning and Company financial adviser who will review your finances and discuss what protection measures you could put in place.

Research - Legal & General Deadline to the Breadline Report 2014