Finance

Meet the Financial Adviser: Colin Welsh

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“I understand how important it is to listen in order to understand your needs and firmly believe in building strong and long-lasting relationships to achieve the best possible financial outcomes for my clients.

I take great pride in delivering expert and qualified advice on a wide range of financial planning areas including investments, tax planning, pensions, inheritance tax planning, retirement planning, insurance and protection and estate planning. My goal is to enable you to achieve your financial dreams and goals – be they medium or long term, for both you and your family.”

– Colin Welsh, Chartered Financial Planner

If you’d like to know more about Colin and how he can support you with your financial goals, take a look at his profile:

Colin Welsh

Create personalised, tailored financial plans

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Ellis Bates Directors Ben and Alan discuss how Ellis Bates incorporate the principles of Consumer Duty into every aspect of our client responsibility to offer relevant and effective products and services.

Watch our latest video to find out:

How the Ellis Bates in-house Investment Team help you create your personalised, tailored financial plans
How Ellis Bates independently select the products and services individually tailored to your financial plans
How Ellis Bates tailor the right financial products and services throughout your lifetime and its ever-changing circumstances
How Ellis Bates scan the whole of marketplace to carefully select the right products and services for you to achieve your financial plans
How the Ellis Bates in-house investment team create a suite of products and services geared specifically to your financial plans

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Free Guide: Making the most of your money

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Wealth planning isn’t a one-time event. It involves comprehensively evaluating your current and future financial state regularly to formulate and evolve a plan to help meet your financial goals.

We have produced a free guide to making the most of your money to help you at every stage of your financial journey:

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Your financial planning future all on one page

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Ellis Bates Directors Ben and Alan discuss how Ellis Bates incorporates the principles of Consumer Duty into every aspect of our responsibility to ensure clients are on track with their financial planning.

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How Ellis Bates can show you your financial planning future all on one page
How you can get the interactive power of cash flow modelling behind your financial planning
How to uncover and mitigate shortfalls in planning your financial future
How Ellis Bates will keep you on track with your financial planning

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Financial commitments and pension planning

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A Delicate Balance 

Financial commitments and pension planning 

The challenge of managing bills and other financial obligations while simultaneously saving for a pension may seem daunting. However, it is certainly achievable with the right planning and timely action. The sooner you start, the more advantageous it could be if you contribute to a defined contribution pension. 

This is a type of pension where the amount you receive when you retire depends on how much you put in and how much this money grows. Your pension pot is built from your contributions and employer’s contributions (if applicable), plus investment returns and tax relief. 

Here are 6 practical strategies you can consider 

Utilising Salary Increases for Pension Contributions

Let’s begin with a straightforward approach if you find contributing as much as you’d like to your pension challenging. Initially, contribute an amount you can comfortably afford. Then, whenever you receive a salary increase, allocate a portion of it directly into your pension. This method ensures that you do not become accustomed to spending the additional income while still benefiting from the pay rise. 

Maximising Employer Contributions 

Many employers offer to increase their contributions if you decide to increase yours (up to a certain limit). Therefore, by contributing an extra per cent or two of your salary, they might also contribute more. It would be beneficial to inquire about your employer’s pension contribution policy. 

Boosting your Pension with Lump Sum Payments 

If you encounter a windfall, consider making a lump sum payment into your pension. This is a quick and effortless way to enhance your pension fund. As with regular contributions, the government will top up lump sum payments with tax relief (subject to certain limits). 

Delaying Access to Your Pension Pot 

Allowing your pension to remain untouched for an extended period can potentially lead to its growth. Leaving your pension invested for a few more years could make a substantial difference if you’ve had your pension for a while. However, it’s crucial to remember that there’s no guarantee of growth as investments can fluctuate. 

Being Selective with your Investment Choices 

Your investment choices for your pension can significantly influence your returns at retirement. For example, your scheme’s ‘default’ investment option may not be the most suitable for you. Therefore, it’s worth examining the investment funds where your money is placed. 

The process of making changes to your pension will vary depending on the type of scheme you have. With many modern schemes, alterations can be made online with just a few clicks. Check your policy information or speak to your employer for further details.  

Investing more when regular expenditure ends 

A similar strategy can be employed when you’ve completed regular payments. For instance, once a car loan is fully paid off, consider redirecting the freed-up funds into your pension plan. Even modest increases like these can yield significant results over time. Plus, should you need to reduce your outgoings in the future, it’s typically possible to decrease your contributions.

If you’d like to discuss your pensions with a professional Financial Adviser, please get in touch:

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Planning for an early retirement  

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Living life to the fullest and accomplishing long-held dreams. 

It’s common for individuals to either overestimate or underestimate their lifespan. As average life expectancy gets longer, some people may spend over 20 years or more in retirement. 

Early retirement typically signifies reaching financial autonomy before the statutory pension age, usually in the mid-60s. In the United Kingdom, retirees can begin drawing their State Pension at age 66. However, this retirement benchmark is set to increase to age 67 by 6 April 2028. 

Consequently, the early retirement age could be anywhere in your early 60s. Yet, for most, the concept of early retirement begins at age 55, when individuals can start drawing on their personal or workplace pension savings. However, this age is also due to increase to 57 from 6 April 2028. 

Aspects of Life 

During the early retirement phase, the focus tends to be on living life to the fullest and accomplishing long-held dreams. One’s spending might then reduce as activity levels decline, only to surge again later, possibly due to rising care needs. 

It’s common for individuals to either overestimate their health or underestimate their lifespan. As average life expectancy gets longer, some people may spend over 20 years or more in retirement – over twice our grandparents’ duration. Yet, as with many aspects of life, this depends on luck. 

Complex Calculation 

In fundamental terms, full retirement implies that your lifetime expenses should not surpass your income plus any remaining assets, such as savings and investments. This can be a complex calculation in many instances. It will require you to weigh your pension and other income sources against your expenditure and evolving needs as you age. 

Simultaneously, it’s crucial to consider investment returns and inflation, which refers to the rising cost of living. As we have recently witnessed, everyday prices can escalate rapidly, significantly diminishing the purchasing power of a fixed income or cash savings. 

Multiple Factors 

Embracing early retirement doesn’t necessarily translate to a full-stop on professional life. Instead, many individuals transition into more flexible, part-time roles or switch towards volunteering. This shift allows retirees to sidestep less appealing aspects of working life, such as long commutes or stressful work environments while reaping employment benefits. 

Unfortunately, early retirement due to ill health isn’t a choice but a necessity, creating unique challenges for some. Time constraints limit opportunities to plan and build retirement finances. Additionally, careful planning for care and support becomes a priority. Making the decision to retire early is significant and requires thorough consideration of multiple factors. 

To determine whether you can retire early, you will need to assess your financial standing. This means calculating your total pension pots, tracking lost ones and considering other possible income sources or debts. Additionally, you need to envision your ideal early retirement lifestyle and estimate its costs. 

Assessing your Financial Health 

To begin, you need to calculate your total pension pots. This includes private or workplace pensions and any final salary pensions you might have. If you’re considering early retirement, remember that the State Pension won’t be included in this income. 

Reclaiming Lost Pensions 

It’s not uncommon to lose track of pensions over time. The government’s free Pension Tracing Service can assist if you suspect a missing pension but lack any supporting information. Visit their gov.uk website or phone them on 0345 600 2537. Consolidating your pensions might also be a sensible strategy. 

Understanding your State Pension 

Check up on your State Pension to understand how much you’ll receive and when the payments will start. This is crucial for your overall retirement planning. 

Identifying Additional Income Sources 

Consider other potential income sources after retirement. This could include savings and investments, property ownership, or even starting a part-time job or your own business. 

Managing Debts and Loans 

Take stock of any outstanding debts or loans. Consolidating them could potentially expedite their clearance. Set a specific date to pay them off entirely. 

Estimating Retirement Income 

We can help you estimate your retirement income and offer valuable insights into your financial future. 

Envisioning Your Retirement Lifestyle 

Next, plan your essential retirement spending by mapping out mortgage repayments, utility bills and other necessary expenses. Then, envision your ideal retirement lifestyle. What do you want your life to look like once you’ve retired? How much will it cost? 

Factoring in Responsibilities 

Consider any responsibilities that might impact your retirement plans. Will your children still be dependent on you? Might you need to care for older parents or relatives? Are there any other responsibilities you should bear in mind? 

Deciding Where To Live 

Housing decisions are a crucial part of retirement planning. Do you want to stay in the same house, release equity with a lifetime mortgage, move somewhere new, downsize and release some money, or even move to a cheaper region and upscale? 

Estimate Retirement Spending 

Finally, combine all the above factors to estimate your total retirement spending. There’s a lot to consider here. But as you work through it, you might realise that you’re more prepared to retire early than you initially thought. 

If you are considering early retirement and would like professional retirement advice, please get in touch:

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What do you need to consider when planning an early retirement?

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There’s a lot to consider if you are planning an early retirement. But as you work through it, you might realise that you’re more prepared to retire early than you initially thought. 

If you aspire to retire early, it’s vital you plan your finances to be sustainable for the long term and our expert team of Financial Advisors are here to help you every step of the way.

If you’d like to speak to us about early retirement, please get in touch:

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Planning for Inheritance Tax

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Plan for Inheritance Tax

Whenever someone dies, the value of their estate may become liable for Inheritance Tax. If you are domiciled in the UK, your estate includes everything you own, including your home and certain trusts in which you may have an interest.

Inheritance Tax is potentially charged at a rate of 40% on the value of everything you own above the ‘nil-rate band’ (NRB) threshold. The nil-rate band is the value of your estate that is not chargeable to UK Inheritance Tax.

Gift assets while you’re alive

The amount is set by the government and is currently £325,000, which is frozen until 2026. In addition, since 6 April 2017, if you leave your home to direct lineal descendants, the value of your estate before tax is paid will increase with the addition of the ‘residence nil-rate band’ (RNRB). For the 2023/24 tax year, the RNRB is £175,000.

One thing that’s important to remember when developing an estate preservation plan is that the process isn’t just about passing on your assets when you die. It’s also about analysing your finances now and potentially making the most of your assets while you are still alive. By gifting assets to younger generations while you’re still around, you could enjoy seeing the assets put to good use, while simultaneously reducing your Inheritance Tax bill.

Make use of gift allowances

A non-exempt gift from one individual to another constitutes a Potentially Exempt Transfer (PET) for Inheritance Tax. If you survive for seven years from the date of the gift, no Inheritance Tax arises on the PET.

Some exempt gifts are immediately out of your estate: Each tax year, you can give away £3,000 worth of gifts (your ‘annual exemption’) tax-free. You can also give away wedding or registered civil partnership gifts up to £1,000 per person (£2,500 for a grandchild and £5,000 for a child). In addition, you can give your children regular sums of money from your surplus income.

You can also give as many gifts of up to £250 to as many individuals as you want, although not to anyone who has already received a
larger gift from you that tax year. None of these gifts are subject to Inheritance Tax.

Invest into IHT-exempt assets

For experienced suitable investors, another way to potentially minimise Inheritance Tax liabilities is to invest in Inheritance Tax exempt assets. These schemes are higher risk and are therefore not suitable for all investors, and any investment decisions should always be made with the benefit of professional financial advice.

One example of this is the Enterprise Investment Scheme (EIS). The vast majority of EIS-qualifying investments attract 100% Inheritance Tax relief via Business Relief (BR) because the qualifying trades for EIS purposes are very similar to those which qualify for BR. Qualification for BR is subject to the minimum holding period of two years (from the later of the share issue date and trade commencement).

Life insurance within a trust

If you’re looking to potentially minimise any Inheritance Tax your estate may be subject to, then consider placing life insurance within an appropriate trust. This allows the pay out from the policy to be given directly to your beneficiaries, which won’t be included in the calculations for any Inheritance Tax.

Taking this step can offer peace of mind for you and financial security for your heirs. Remember your life insurance policy is likely to be a significant asset – by putting it in an appropriate trust, you can manage the way your beneficiaries receive their inheritance.

Keep wealth within a pension

A defined contribution pension is normally free of Inheritance Tax, unlike many other investments. It is not part of your taxable estate. Keeping your pension wealth within your pension fund and passing it down to future generations can be very tax-efficient estate planning.

If you die before 75, your pension will be passed on tax-free (as long as no Lifetime Allowance charge applies). However, if you die after 75, your beneficiaries will pay tax on any payments they receive at their marginal Income Tax rate. Your pension will not usually be covered by your Will, so you will need to ensure that your pension provider knows who your nominated beneficiaries are.

Preserved wealth for future generations

We all have one thing in common: we can’t take our assets with us when we die. If you want to ensure that your wealth is preserved for future generations and passed on efficiently, an estate plan is crucial.

If you want to know more about Inheritance Tax and planning for your future, please get in touch

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Inheritance Tax

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You may well want to pass your estate onto your children when you die, but unless you make suitable plans your children will pay 40% inheritance tax (IHT) in the UK on all your estate above £325,000 which in today’s property market is most people’s property value alone.

You worked hard to earn your wealth, so let us work hard preserving it and help you and your family maintain its financial strength from one generation to the next.

If you are worried about Inheritance Tax and want to plan for the future, get in touch with us today:

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Free Guide: Estate Planning

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What is the importance of estate planning?

Estate planning is about more than just tax. It is about making sure the people left behind are financially supported, that your assets are protected and that the tax your estate pays is fair.

Wealth preservation and wealth transfer are becoming an increasingly important issue for many families today.

Your estate consists of everything you own. This includes savings, investments, pensions, property, life insurance (not written in an appropriate trust) and personal possessions. Debts and liabilities are subtracted from the total value of all assets

There are various ways to legally avoid paying inheritance tax and we have produced a free Estate Planning guide to support you with Inheritance Tax Planning:

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