Roman philosopher Seneka said “If a man does not know what port he's steering for, no wind is favourable to him.”
So to start the journey to your financial future you need to have a crystal clear picture what do you want to achieve.
Some people know it very well, for others its more vague.
As it is a life journey the right plan is a good thing to have.
Before starting to make the plan ask yourself the below questions:
It is important to analyse your current financial position, your income and expenditure, your duties (obligations) and cash flow, your family needs and expectations. This analysis is the bases of the information needed to create a plan which will guide you through your financial journey.
The detailed plan will help you cut losses, secure gains, and avoid the pain & panic of financial or lifetime crises.
On another level, a plan is a simple way of listing your needs & wants, then deploying your money in right direction so that you have it when needed.
1) Start by setting financial goals
2) See where your money goes, put expenditures under control by using 50/30/20 proportion
3) Secure your family & finances and cover your life time risks
4) Get rid or reduce toxic debts (payday loans, credit card balances, high mortgage payments)
5) Choose the investment strategy that suits you and be aware of it, stay alert!
Capital or portfolio investments are a collection of assets owned by an individual or by
an organisation and designed with the anticipation to produce a return, having a direct
correlation between expected risk and reword.
Quite often it is used for medium/long-term investment needs & objectives.
The vast range of asset holdings which are available for portfolio investment makes it a great alternative to the bank accounts, as even with a very low risk profile the annual return will be far higher than that of the bank.
The advantage of portfolio investment, as opposed to direct investment, is that there is a grated spread of assets within one investment structure.
The management of the portfolio is made by professionals in an active, day-to-day way and very much centred on the client’s risk profile and his long term wishes.
The portfolio lets you simultaneously hold and trade between the following assets in any mainstream currency:
This all means that investments cannot be held as if they were stamp collections; they
must be managed diligently in the light of changing markets. It is certainly true that we
are witnessing incredible integrations of the global economy, and the speed of markets
reaction has considerably risen in the last 10 years.
What is the risk?
The value of a portfolio depends on the performance of the assets chosen and that is why it is imperative to have professional active management.
What are the benefits?
- Investments designed for maximum flexibility
- Investments designed to match an investor’s risk profile
- Personally managed by professional Asset Managers
- Highly competitive charging structure
- Online valuations
- Free withdrawals
- 24-hour access to investment information
- Regular updates and reviews
If you are currently a UK resident or have once worked in the UK, you may have a previously held
DB or DC pension scheme.
What are they and what you can do with them:
Defined Benefit Schemes
A Defined Benefit scheme is an occupational pension scheme provided by an employer for its employees, where the benefits at retirement are defined as a proportion of salary at, or close to, retirement.
Defined Benefit schemes are also often referred to as Final Salary Schemes.
As required by the Pensions Freedoms Act April 6th 2015, any Defined Benefit Scheme over £30,000 must take additional FCA advice from a Pension Transfer Specialist.
The accrued pension is a reflection of years worked and your final salary before leaving. The Cash Equivalent Transfer Value (CETV) is based upon Gilt rates, which are presently at a record low, thus producing such high cash value (CETV) considering the length of service.
Moving this and other schemes to ROPS (recognised overseas pension scheme) offers fairer and more flexible choices, the main one being that your spouse and children (regardless of age) continue to receive 100% of your pension as well as the residual pension “pot “.
Defined Contribution Schemes
The contributions into a Defined Contribution scheme are used to establish a pension fund. The size of the fund is determined by the amount of contributions (by both the individual and the employer), the charges deducted by the pension provider and the investment returns achieved over the term to retirement.
Defined Contribution schemes are often referred to as Money Purchase Schemes.
As these schemes are invested in Stocks and Shares, most clients have no current advisor or assistance with these plans!
Either you have a DB or DC pensions it is vital to know the advantages of transferring a pension:
1. ROPS offers greater investment freedom than your current arrangements.
2. You can consolidate your various pensions by transferring to a single pension plan.
3. A ROPS allows you to access your lump sum and pension from the age of 55 onwards.
4. There is no requirement to purchase an annuity.
5. In the event of a plan holder’s death the entire pension fund may be passed to your beneficiaries without any Inheritance Tax.
6. ROPS offers a broad range of investment options to suit the client’s requirements. These include equities, fixed interest investments, cash deposits and mutual funds.
7. Investments held by a ROPS are usually tax exempt meaning that the scheme assets grow free of capital gains tax.
8. ROPS is a trust based pension arrangement where the scheme assets are held for the member by the scheme trustees.
9. The trustee’s role is to ensure that the scheme reports to HMRC and the scheme assets are fully in-line with the financial regulator’s requirements.
10. Regular Investment reviews and reports are provided with all the information of investment structure, performance and fees.
Issues to consider before transferring to a ROPS
ROPS v SIPPs
The two vehicles for pension transfers are either a ROPS, as mentioned above or a SIPP which is a
self invested pension plan which is primarily housed in the UK.
There are two distinct advantages of a ROP scheme over a SIPP scheme and they are:
Let’s say you are a young person after leaving college and have a new well paid job, maybe
even have left home. The amount of things that suddenly become available to you is colossal.
How strong is the pull to spend all that new income, however, how vital it is to quickly develop the right habit of saving!
It is essential to have an emergency fund set aside to cover unexpected expenses, normally 3/6 months of usual expenditure.
It is good to have some savings in case of the unexpected and not planned “what ifs”…
What if you will decide to open a new business in 5 or 10 years and the banks will not give you the support you might need at that time, possibly ruining your dream business. Savings will put you in control!
What if you will be desperate to buy that new car - your savings will let you negotiate a much better price as you will be buying it with cash, without monthly car payments!
What if you decide to buy a house and will need your own deposit. Your negotiating will go much better when you have a significant amount to put down as a payment for your new home. Very likely the interest rates would be lower and more than likely your financial position will allow you far more choice!
What if you wanted to step out and travel the world for a year, having money for this would make your journey so much easier!
What if you would want to give your money for the charity purposes to help build a school, or buy Christmas presents for the children in an orphanage, savings would facilitate this too!
There can be 1 million ‘what ifs’ and whatever the reason it is always best to be prepared!
When you have children, you want to make sure that your children’s future is secured,
especially when it comes to their education. With the cost of education rising every year,
it’s best to start investing as soon as possible.
Most parents realise that it will be many years ahead before their children grow and understand what they want to do in their lives, it is therefore important to be able to help them to make the best decisions, including financial support.
Quality education is a good starting point for your children, it provides them with a firm foundation for life.
When is it best to start?
The earlier the better!
The best time for education planning is around the time your children are born as in this case there are more years ahead for you to build money in an education fund.
Why save for education?
Because you want your children to have the best opportunities!
As parents there are many unanswered questions like: - what will my children do with their lives, which career will they choose, which country will they live in, which industry will they work in. In other words, what is the life style they will prefer, these are some of the many questions centred around parent’s desire to “see their children right “!
How much do I need to save for education?
There is no exact answer to this question as education costs are different from country to country. Some people will prefer to send their children to private schools, others will go to the public schools. In some countries university costs are low or even free whilst in others they cost a fortune.
It is therefore difficult to know what size an education pot you may need, however there are some certainties: the cost of college fees, living support, ancilary college activities and educational expenses like books and special assignment activities. All these aspects mount up to produce a substantial need of funding!
How to save for your child’s education?
Setting aside money on a regular basis over the years, leading up to the time for funding your child’s needs, is a must. Whether that be with capital injections or regular monthly savings.
Regardless of the choice of university or college, parents certainly should start preparing well in advance, as said, the earlier the better!
Setting money aside, in this way, allows parents to be certain that whatever may happen to their finances in the future it will not affect their children’s education.
Without a doubt, whatever age you are, people believe that when the time comes for them to
stop working there will be enough money to enjoy life to the full.
Most people believe this but few actually achieve it without some sort of sacrifice.
As governments worldwide are failing to provide for your pension, you must take care of this part of your life yourself.
An old maxim was always ‘to look after the old person you have to start young’ and this is a very sensible way to view pension planning.
To create a solid retirement plan you should answer these questions:
- What is my current income?
- What are my current financial commitments?
- When will these commitments change?
- How much money will I need when I retire?
- How much money do I want when I retire? - the “real question”
- When do I plan to retire?
- What sort of life do I want when retired?
- Will my current pension arrangements (corporate & private) be sufficient to pay for that life?
- What can I do now to improve the situation?
If the answers to any of the above questions doesn’t make you happy now it is the right time to take some vital action, whether it is by either:
SSo future pension planning and maximising your existing arrangements are both of paramount
Pension planning has two basic stages:
1) The accumulation of capital
Small regular contributions during your working career can accumulate into significant capital.
Please be careful while choosing the instrument for it. Make sure it will be flexible enough to be able to follow your life circumstances, will have low maintenance fee, now withdrawal fees or fees for missing payments, as high fees can ‘eat’ a lot of the potential growth.
2) Spending the capital at retirement
When it comes to the retirement you can chose to cash out whole your savings and use them in a way you want or you can keep the capital amount and take the sufficient income on monthly, quarterly or annual basis - let’s admit it, this part is more pleasant.
Plan your pension to provide the desired amount of income, based on the standard of living to which you are currently accustomed to and want to retain!