Finance

Guide to Financial Advice for Business Owners

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Download your Guide to Financial Advice for Business Owners

Running your own business often brings with it greater risk, stress and pressure. But the rewards, both financial and personal, can be tremendous and the satisfaction of seeing your business grow immense.

That’s why your corporate and financial planning should work together hand-in- hand. Achieving your personal financial goals will generally be dependent upon the success of your business. This means there are a number of key areas that need consideration, planning and regularly updating to ensure you achieve the outcomes you want.

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Guide to Financial Advice for Business Owners

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Building A Reliable Income for your Golden Years

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Annuity Shopping

When it comes to using your pension pot, buying an annuity is one option that provides a regular and guaranteed retirement income for either your lifetime or a fixed term. However, it’s important to note that purchasing an annuity is typically an irreversible decision.

Do you know that shopping around for an annuity could earn you £15,000 more over your retirement? Recent analysis has shed light on the benefits of exploring your options regarding annuities. Therefore, it becomes crucial to carefully consider your options, select the appropriate type of annuity and strive to secure the best possible deal.

Valuable tool for retirement planning

Annuities are a valuable tool for retirement planning as they offer a reliable and predictable income stream, often lacking in other investment options. Furthermore, certain annuities can be linked to inflation rates, providing stability during periods of economic volatility. This makes annuities attractive for individuals prioritising risk aversion in their pension savings strategy.

The primary difference between annuities and pension drawdown products is that annuities require using the entire pension pot to purchase an insurance product that provides a fixed retirement income. In contrast, pension drawdown products allow flexible income withdrawals with the remaining funds invested.

Balance security and flexibility

Unlike pension drawdown arrangements, annuities do not typically pass down any remaining funds to beneficiaries after the holder’s death. However, it is possible to balance security and flexibility by partially combining annuities with pension drawdown.

According to the analysis, a 66-year-old with a £100,000 pension pot can now purchase

an annuity with an annual income of £6,790. This represents an increase of £842 compared to the previous year. The surge in interest rates has resulted in the highest demand for annuities in years.

Importance of shopping around

Data further emphasises the importance of shopping around. It has revealed that the difference between the best and worst annuity rates available can be substantial. For a 66-year-old with a £100,000 pension pot, rates can differ by as much as 9.1%, translating to a potential annual income difference of £622 or a staggering £14,928 over the average retirement period.

The recent focus on annuities can be attributed to rising interest rates, which have a tangible impact on the income of those who have already purchased an annuity. However, it is essential to understand that while record rates are advantageous, they should be considered part of a broader discussion.

Looking for a guaranteed income throughout your lifetime?

Annuities continue to be attractive for individuals seeking peace of mind and the assurance of a guaranteed income throughout their lifetime. If you are contemplating an annuity, speak to us and we will explain how to assess all your options. As the research suggests, shopping around is crucial in securing the best possible deal for your retirement income.

If you’d like to discuss your retirement income, please get in touch using the form below:

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Meet the Financial Adviser: Andy King

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Andy is here to help you with a holistic financial planning service, including tax planning, tax and inheritance tax mitigation, savings and investments, insurance and protection, pensions and retirement and estate planning. He uses sophisticated cashflow modelling software to help you develop lifetime financial plans and to bring your financial future to life.

If you’d like to know more about Andy and how he can help you achieve your financial goals, take a look at his profile: https://www.ellisbates.com/meet-your-advisers/andy-king

Free guide: Successful Wealth Management

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Key traits for successful wealth-building

Developing an investment strategy tailored to your goals

 

Committing to a financial plan is crucial for building wealth and achieving long-term financial goals. When you have a plan, you are more likely to stay focused on your objectives and take the necessary steps to reach them.

If you’d like to find out more about how to build your wealth, download our free guide.

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Passing on wealth through your pension

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New research reveals that almost a fifth of those aged over 55 (18%) do not plan to access their tax-free pension cash, to enable them to pass on more wealth to loved ones without incurring Inheritance Tax charges. Men are more likely to do this than women, and 38% of workers also plan to leave their tax-free pension cash where it is, three in ten over-55s say they were unaware of this.

If you’d like to discuss how to transfer wealth through your pension, please get in touch:

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Meet the Financial Adviser: Matthew Stirling

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Working with individuals, couples and businesses alike, Matthew is here to help you achieve your financial goals and be your go-to financial expert whatever your age and circumstances.

Using tools such as cashflow modelling, Matthew will work with you to look at your personal and family circumstances, to fully understand what you would like to achieve financially and then create a financial plan for the short, medium and long term to get you where you want to be.

If you’d like to know more about Matthew and how he can help you achieve your financial goals, take a look at his profile: https://www.ellisbates.com/meet-your-advisers/matthew-stirling/

Will you make the right decisions around your pension pot?

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Will you make the right decisions around your pension pot?

The announcement of the removal of the Lifetime Allowance (LTA) from the 2024/25 tax year in the Spring Budget 2023 has made defined contribution pensions even more appealing for wealth transfer. This benefits individuals over 55 who intend to leave their tax-free lump sum intact with their pension to maximise their benefits.

There may be further changes to pension allowance rules. However, removing the LTA charge allows for an unlimited sum tax-free for individuals who pass away before age 75. After the age of 75, the sum will be subject to taxation at the beneficiary’s marginal rate. It is important to note that although the charge has been removed, an LTA check still takes place to work out available tax free cash and the taxation of certain lump sum payments.

Without incurring Inheritance (IHT) Tax

New research* reveals that almost a fifth of those aged over 55 (18%) do not plan to access their tax-free pension cash, to enable them to pass on more wealth to loved ones without incurring Inheritance Tax charges. Men are more likely to do this than women, and 38% of workers also plan to leave their tax-free pension cash where it is, three in ten over-55s say they were unaware of this.

Pensions usually don’t count towards a person’s estate for IHT purposes, and can be passed on completely tax-free if someone dies before the age of 75. With no LTA charge and an increased annual pension allowance, pensions have become attractive for those looking to mitigate IHT.

Pension as a tax-free lump sum

The research also found that almost half of all consumers (46%) believe that the amount that can be taken out of a pension as a tax-free lump sum should increase in line with inflation. It is worth noting that since the LTA has been abolished, an LTA check still takes place to work out available tax free cash and the taxation of certain lump sum payments. This means that individuals are currently limited to withdrawing a maximum of 25% of the previous LTA as a tax-free lump sum from their pension, unless any protection is in place.

Tips to ensure your beneficiaries benefit from your pension:

  • Check if your pension offers death benefits: Not all pensions provide the same level of flexibility when it comes to death benefits.
  • Check with your provider to see if your pension plan allows you to nominate beneficiaries who will inherit your pension savings, as beneficiary drawdown may not be an option.
  • Specify your beneficiaries: While making a Will can be beneficial in many ways, it usually doesn’t control who inherits your pension savings. Your pension provider or trustees have the final say in where your pension savings go.
  • Name your beneficiaries directly with your pension provider or employer to ensure your wishes are considered.
  • Regularly review your beneficiaries: Life circumstances change, and reviewing and updating your beneficiaries as needed is essential. Major life events like the birth of children, marriages or divorces can impact who you want to receive your pension savings. Ultimately the trustees of a scheme have discretion. So although there are no guarantees, by keeping your beneficiaries up to date, you can ensure that your desired
  • Beneficiaries are considered first when it comes to your pension savings should you pass away.
  • Consider the tax implications: Pensions can be a tax-efficient way to pass on your wealth since they are not typically subject to
  • Inheritance Tax. With the removal of the lifetime allowance charge, pensions offer an even more attractive option for passing on your wealth to your loved ones. However, it’s essential to consider any potential tax liabilities your beneficiaries may face when receiving your pension funds.

Remember, seeking professional advice tailored to your specific circumstances regarding financial planning and pension matters is essential.

Do you want to discuss creating a retirement plan to give you the confidence to enjoy later life?

Retirement should be the golden age of your life. It’s when you finally relax, enjoy new hobbies, travel or spend time with loved ones. But retirement can only be fully enjoyed if you have financial freedom. To discuss your options or to find out more, please get in touch with us using the form below:

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*Opinium conducted research for Standard Life among 2000 UK adults, aged 18+ between 12-16th May 2023, results weighted to nationally representative.

Planning For a Secure Future

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The journey to financial freedom begins with a roadmap.

To start you can outline your current financial situation and this will pave the way towards your desired destination – your financial goals. It’s time to ask yourself, what are these goals? Saving for retirement, building an investment portfolio or establishing an emergency fund? The more precise your goals, the more tailored your roadmap can be.

Charting your course: the power of goal-based planning

Once you’ve defined your objectives, the magic begins. Goal-based financial planning allows you to invest systematically and in a disciplined way. It keeps you focused on your destination, unswayed by the market’s short-term turbulence.

While everyone’s goals vary depending on their life stage, they can generally be bucketed into three categories: essential needs, lifestyle wants and legacy aspirations.

ACHIEVING FINANCIAL SUCCESS: A COMPREHENSIVE APPROACH

Navigating the terrain of financial success in these areas can be challenging. It demands a holistic understanding of everything from complex retirement plans and investment products to risk management strategies and tax laws.

Your financial roadmap should be your beacon of clarity. It should encapsulate every facet of your vision – your hopes, fears and goals, vividly depicting your financial future.

What are some of the questions to ask yourself?

  • Can I sleep soundly knowing my future is financially secure?
  • Do I have a clear direction for my journey
  • Will my current lifestyle be sustainable in retirement?
  • Am I financially equipped to live the life I want now and in the future
  • Have I planned adequately to ensure I don’t run out of money?
  • Do I fully understand my financial position?
  • What is my financial ‘magic number’ to secure my current and future lifestyle?

The cost of your future lifestyle: Understanding your number

Start by identifying your financial goals and the time frame to achieve them. Determine their current cost, factor in a reasonable inflation rate, and voila – you’ll know what they’ll likely cost when you aim to achieve them. This exercise helps you uncover ‘your number’ – the money you need to secure your future lifestyle without fear of running out of funds.

Your financial roadmap is your guide to making informed financial decisions, striking a balance between current responsibilities and future aspirations. It’s designed to help you sustainably achieve your lifestyle goals and objectives over time.

We have produced a comprehensive guide to help you build a more secure financial future. To download your free guide, fill in the form below:

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Effective Wealth Creation Strategies

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There’s no one-size fits-all answer to how to build a plan for financial freedom.

Building wealth is a cherished ambition for many, yet it can often feel daunting.

Success in this endeavour requires time, commitment and self-discipline, so be wary of promises of instant wealth and opportunities that seem too good to be true, as they can lead you astray.

The silver lining here is that tried and true principles and strategies can aid anyone in accumulating and maintaining wealth over the long haul. Furthermore, the sooner you begin applying these principles, the higher your chances of success.

We have produced a comprehensive downloadable guide delving into the fundamental principles for wealth creation. These include goal setting and plan development, investing in education and skills, debt management, savings and investments, asset protection and shielding your investments from tax implications.

Fill out the form below to receive your free guide.

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Watch now: When can I retire?

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On 7th December we held our ‘Ask the Financial Adviser: When can I retire?’ webinar.

If you missed the webinar and would like to watch the recording, please fill out the form below to receive your link.

Watch our webinar 'When can I retire?'

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