There are a few key challenges that almost everyone will face in their lives when it comes to financial planning, and very few people are equipped to handle those challenges without professional input.
Even if you are a confident investor, there are times that you might be out of your comfort zone or simply not have the time to dedicate to such an important issue.
Below we’ve outlined particular challenges that you might be facing in 2020 that would be made substantially easier with professional guidance.
Retirement planning is a challenge that some people delay for as long as possible, but early planning a big factor in how the best outcomes are attained and the peace of mind that comes from having a well devised plan is priceless.
When a client comes to Sovereign Wealth for a financial review and a desire to get a retirement plan together we start at the destination and work backwards to find our way there.
When do you want to retire?
What does your dream retirement look like?
How big does the retirement pot need to be to achieve that?
Once we’ve found out this basic information, we can calculate a savings plan that incorporates potential income, growth rate assumptions and a number of other variables to figure out if you’re on track.
If the answer is yes then we can help find ways to maximise the value of the hard work you’ve already put in and if it looks like there will be a shortfall then we can work with you to fill the gap.
Inheriting a Lump Sum
It might be from the sale of an asset like a home or a business, or possibly an inheritance, but a cash lump sum can significantly change your life for the better if handled appropriately.
‘Appropriately’, in the context of a lump sum, means careful consideration of your individual circumstances and maximising the benefits of your available tax allowances and reliefs, allowing you to retain more of your money.
Applicable tax rules, reliefs, benefits, and allowances change frequently which is why financial advisors spend a great deal of time staying up to date with current legislation. Not only will an advisor be able to identify the best way to retain the maximum amount of your lump sum, they will be able to recommend next steps i.e., how to invest it in order to achieve your financial goals.
Inheritance Tax and Estate planning
For those who may be liable to Inheritance Tax (IHT), the average IHT bill is £198,8521; that’s probably not the kind of legacy you hope to leave your family and forward planning can save thousands.
The first thing to do if you’re concerned about a potential Inheritance Tax liability is to figure out whether you would be liable and for how much.
Inheritance Tax is designed to prevent wealth being passed in its entirety from generation to generation. The current rate is generally 40% (20/21) on the value of a person’s estate. This often includes property, money, investments, and other possessions that are not IHT exempt, above the value of £325,000 (or £650,000 for a couple).
Although the tax was originally designed to only apply to the large estates of the very richest in society, the threshold has not kept pace with inflation and therefore many people are surprised to find that they are considered ‘rich enough’ to be liable simply because they own their own home and have other provisions in the form of savings. If you are unsure of your liability, speak to a professional.
You have a pension pot that will exceed £1.073m
As of tax year 2020/21 the lifetime allowance for your pension pot is £1,073,000. Deposit more than that allowance and your withdrawals could be taxed at up to 55%.
If you’ve worked hard enough to build a pension pot of this size, then it would be a shame to see more of half of it go to the taxman whenever you finally get round to enjoying it.
For individuals or couples who are nearing or have already reached their lifetime allowance it may be worth the time to speak to a professional who knows the latest rules and regulations in order to ensure that your portfolio is as tax efficient as possible.
If you’re unsure, speak to us today.
You have multiple and complicated pension pots
Many people, after a lifelong career and many different jobs, have several different pensions scattered across various organisations. It can therefore be extremely useful and beneficial to consolidate those pots into one easy, simple, and professionally managed pension portfolio.
However, there are often a number of variables that people don’t consider. Older pensions sometimes have benefits that are no longer available within any modern financial product. Conversely, some pensions have extremely steep exit fees. Navigating the advantages and disadvantages of all these schemes and having them transferred to a new, consolidated account can be challenging and time-consuming.
A financial adviser can review your pensions for you and create a tailored plan to maximise the historic benefits and minimise the cost of transfer.
What to do next…
We recommend speaking to a financial adviser at least once every 6 months, but if you have concerns about any of the above challenges then we you can book a no obligation telephone consultation HERE.
We would encourage you to get started!
If you want to talk this over, simply call us on 01858 791182 or get in touch here.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief depends on individual circumstances.
Get in touch.
We work with many local business owners and directors across the Midlands, helping them and their families to become financially independent.
Whether you are a startup looking to scale or a seasoned business owner planning your next journey, we will take the time to understand your objectives and plan a course of action.
You can call us on 01858 791 182 or email us at the link below.Contact Us