Please click the link below for our latest monthly figures for the five model portfolios. The figures show the performance of our model portfolios versus various indices over the month of March.
Establishing a regular savings plan out of surplus income could be an extremely effective way to help you build your wealth and achieve your financial goals over the medium to long term. As we are at the start of a new tax year, this is particularly relevant as funds can be invested in a Stocks and Shares ISA, whereby UK residents over the age of 18 have an allowance of £20,000 per tax year. Junior ISAs can be considered for children, where the allowance is £9,000. Any growth and income from such ISAs if free of tax and therefore can be very effective as a savings plan.
There are a number of benefits to “drip-feeding” even small sums of money into an investment portfolio such as an ISA each month via direct debit, as I will outline in this article.
Firstly, it can help to achieve smoother returns and balance out the risk. Part and parcel of investing is the fact that investments go up and down in value. Investing after prices have fallen means buying into your portfolio at a lower price and bringing down the average price you have paid since the start of the investment. This is known as “pound-cost averaging” and through regular investing, the peaks and troughs will be ironed out or smoothed over the longer term.
Furthermore, market timing is extremely difficult and even investment professionals do not have a crystal ball and cannot predict with any certainty which direction markets will move in the short term. Therefore, regular investing helps take the guess work out of when to invest, as investments will be made automatically on a given date each month. In fact, the average investor tends to follow the herd and invest more when the market is rising and less when it is falling, which will lead to worse returns over the long term.
Investing smaller sums on a regular basis could enable you to start investing sooner than if you were to wait for a lump sum to build up. This gives you more time to take advantage of the growth potential of compounding investment returns.
You also do not have to commit to a fixed amount each month, and can change the amount invested if required to suit your circumstances. Even investing a relatively small amount each month can lead to a significant pot over the long term, as shown in the following table, which assumes net investment returns of 4% per annum.
|Monthly Investment||10 Years||20 Years||30 Years|
Another benefit is the fact that you will not forget to invest as the investments are made automatically and you should view the investments as part of your regular monthly spending.
Finally, when investing a larger lump sum, you may be committing all of your money to the markets in one go. By “drip feeding” money into the market every month, if the stock market does fall, you have only invested some of your savings and therefore future payments benefit from the cheaper share prices.
When it comes to investing, we highly recommend that you seek financial advice and we are happy to discuss your requirements with you.
Please remember that past performance should not be seen as an indication of future performance. The value of investments and the income from them may go down as well as up and investors may not get back the amount they originally invested and in some cases you may not get back anything at all.
Chartered Financial Planner
Please click the link below for our latest monthly figures for the five model portfolios. The figures show the performance of our model portfolios versus various indices over the month of February.
We are delighted to announce an exciting development for our company.
We have now joined the Truinvest Group, one of the country’s most innovative emerging financial services groups. We will be the core business within the group, offering our investment management service via our discretionary platform to other companies within the Truinvest Group.
Truinvest was established in 2019 by co-founders Mark Smith and Micky Johal, former colleagues at wealth management advisors Mattioli Woods plc. Truinvest has the backing of Stonewood Wealth Management, a prominent family office that looks after assets in excess of $2.5 billion.
The addition of NLP Financial Management to the Truinvest Group, results in a new Group already handling assets under advice and management of almost £1.1 billion. This also provides a great platform for the NLPFM group to develop and provide new avenues for the delivery of financial services and bespoke specialist advice to our clients, complementing how financial planning has been “traditionally” delivered.
There will be no changes in the day to day management of your affairs, it’s business as usual from our point of view. Adam Katten remains NLPFM Managing Director and Lee Pittal, Chief Operations Officer. Adam and Lee will also join the Truinvest Leadership Team.
We look forward to continuing to provide you with a high quality and ever-improving financial planning service.
If you do have any questions about this exciting development, please do not hesitate to contact your usual financial planner or contact us at [email protected]
The 12 months between the March 2020 budget and the one delivered on 3rd March 2021 has been, to coin a popular phrase – “unprecedented.” We have seen 3 lockdowns, the economy shrink by 9.9%, Coronavirus support measures costing upwards of £280 billion and a tragic death toll within the UK from a pandemic we simply never saw coming.
As a result, Government borrowing – the budget deficit – is expected to rise from a forecasted £55 billion to about £355 billion by the end of 2020-21. Meanwhile, national debt is already approaching 100 per cent of GDP at £2.1 trillion and could rise to 120 per cent of GDP during the first half of the decade according to the Office for Budget Responsibility (OBR).
The widely respected Institute for Fiscal Studies (IFS) warned late last year that around £40 billion of tax rises will be needed by the middle of the decade to keep borrowing down to £80 billion a year and debt down to 100 per cent of GDP, prompting intense speculation that they could come as soon as this Budget.
With the Conservatives having committed in their 2019 General Election Manifesto not to raise the rates of Income Tax, National Insurance or VAT, there was much speculation about where and how the Chancellor would start to recoup these huge losses and over what period of time.
Thankfully, the UK is feeling the optimistic effects of a robust vaccination programme which at the time of writing has seen more than 20 million people vaccinated against Coronavirus, with set dates in the diary for the pathway out of lockdown.
So what does this new Budget mean for you and your personal finances? Read more in our highlights document and as always, if you have any questions about your financial goals, investments or portfolio please do get in touch.
Please click the link below for our latest monthly figures for the five model portfolios. The figures show the performance of our model portfolios versus various indices over the month of January.
We are pleased to announce that Jacob H Schmidt PhD, has been appointed Assistant Professor in Finance (from Senior Lecturer in Finance) at Regent’s University London, a private university where he has been teaching and researching Finance and Economics since 2002.
Dr Schmidt, who is our Chief Investment Analyst and leads our team of five investment analysts, is a published academic and investment professional with over 30 years of experience in financial markets. His most recent research has focused on sustainability in financial markets, wealth tech and women in fund management. His research is both quantitative and qualitative in nature.
At NLP Financial Management he runs the fund selection, credit and counterparty risk analysis and due diligence on platforms. Jacob sits on our investment committee and continues to play a crucial role in ensuring our client care and service levels have remained consistently high during the challenges of the past 12 months.
Despite the ongoing Covid pandemic, Professional Adviser (an information service for UK-based regulated financial advisers) has continued to celebrate the successes and achievements of financial adviser firms by moving their annual awards for 2021 online and we have just been announced as a finalist for the Adviser Firm of the Year in London, for the 8th year in a row!
In a list of only eight finalists for London Financial firms, we are consistently proud of this achievement especially as there are now 968* financial services organisations listed with headquarters in London*. We are also aware that no other London firm has been recognised this consistently over a similar period of time.
This announcement highlights our determination to ensure the pandemic did not adversely impact our clients in terms of our customer care, service and desire to be a safe pair of hands for our clients throughout all stages of their financial journey.
With these awards now in their 16th year, more than 200 advisers, firms and providers were taken into consideration during the 2021 selection process. We will discover in March, during an online awards event, whether we have won, however we are intensely proud of our team for this ongoing accolade and recognition, underpinning our perpetual drive to remain a leading firm of financial planners.
We have recently been advised that for the third year in a row, NLP Financial Management has been shortlisted as one of Professional Adviser’s “Best Financial Advisers to Work For”.
To remain on this list for three consecutive years, especially during the tumultuous year that we have all experienced, demonstrates our dedication to our team and the support we have shown them during 2020. This award is submitted through all staff completing a survey, which in turn underlines the fact that our people are consistently happy to work here, developing their chosen careers in an environment that allows them to thrive.
We will discover in early 2021 whether we have been announced as the winners, which sadly is unlikely to be in person due to the current restrictions. Regardless of the final result, we are delighted to have sustained our shortlist position and are exceptionally proud of our team, who have really pulled together this year living and breathing our company ethos. As we move forward into 2021, we will continue our commitment to being an employer of choice that attracts, retains and nurtures exceptional talent within the financial services industry.
There are a number of tax wrappers available when building an investment portfolio, and this article explores what offshore bonds are, their tax treatment and how they can be effectively used in certain circumstances to invest tax-efficiently.
The advantages can be summarized as follows:
Managing Investment without Tax
An offshore bond is an investment wrapper offered by a life insurance company, held in a jurisdiction with a favourable tax regime, like the Isle of Man. The funds grow in a virtually tax-free environment, in what is referred to as “gross roll-up”. The gain on the bond is ultimately subject to income tax when a “chargeable event” occurs but in the meantime, you can buy and sell funds within the bond without paying tax.
Annual Tax Deferred Income
Investors can withdraw up to 5% of their original investment each year for 20 years, without incurring tax and unused allowances can be carried forward. For example, someone investing £200,000 into an offshore bond could withdraw £10,000 per annum without any immediate tax liability.
Chargeable events include surrendering the bond, withdrawals in excess of the 5% tax-deferred allowance or the death of the life assured. When such an event occurs, a calculation takes place to assess the tax liability and the gain is subject to income tax at one’s marginal rate.
Bonds are split into “segments”, and withdrawals can be taken by either encashing whole segments or across the whole policy, providing further flexibility depending on one’s circumstances.
Offshore bonds can be effectively used when an individual retires abroad. For example, someone who emigrates from the UK can potentially encash the offshore bond and avoid tax altogether!
IHT and Other Tax Planning
Parents may use offshore bonds to save for children, as they retain control of the investments until they feel it appropriate to gift them where importantly such gifts do NOT give rise to income tax. Therefore, the option to gift part or all of a policy to a lower rate taxpayer can reduce tax on gains. They can also be used effectively through the tax deferred withdrawals to fund school fees.
Many providers offer access to a wide range of investments within offshore bonds, including Discretionary Fund Managers, enabling diversified portfolios to be implemented to suit different risk profiles and objectives. Bonds can sit alongside ISAs and Unit Trust portfolios as part of a broad investment strategy. With a Unit Trust portfolio, gains above one’s annual exemption of £12,300 are subject to Capital Gains Tax, and whilst CGT rates have historically been lower than income tax, this may change in the next Budget, making offshore bonds an attractive alternative in certain cases.
In summary, offshore bonds provide tax-efficiency, access to the funds, broad investment opportunities and flexibility. However, they can be complex and are not suitable for all investors, so it is essential to seek financial advice.
Elliot Gothold is a Chartered Financial Planner with NLP Financial Management Limited and can be contacted on 020 7472 5555 or at [email protected].