Financial Education is now compulsory in all secondary schools throughout the UK (and in some areas, primary schools as well). Whilst this is a very positive step for school children, there are generations of adults who will not have benefitted from this kind of education and who therefore lack the knowledge to make effective financial decisions during their lifetime.
With 62% of employees aged between 45-54 years not knowing how much they’ll have to retire on* and one in 5 working Brits with no retirement savings at all** , it’s becoming increasingly important for us all to gain a greater education in how to make our money work. This education could be found in the workplace with 38% of employees claiming they’d consider moving to a business that prioritised their financial training. Final salary pensions are now a rarity and with the average pension pot standing at £50,000, relying on companies’ auto-enrolment schemes may not provide sufficient income as we’re living longer, with no guarantees that the state pension will offer a future security blanket.
Gaining a financial education will vastly increase individuals’ wellbeing, sleep and stress levels. Knowing that you’re making a solid provision in later life also provides a level of security and comfort so you can just get on with living your life more comfortably without any nagging worry about the future.
So if you think you could benefit from learning how to make your money work what can we do?
- We can consider developing a strategy to achieve your long term financial goals, to realise your anticipated lifestyle. This can include your pension, property and other forms of investment
- It’s possible to avoid unnecessary tax payments by utilising allowances that are very infrequently used. Only 700,000 people in the UK used their Capital Gains Allowance in 2017 to generate tax free returns of £11,300
- We can advise on how to mitigate the 60% tax rate for earnings over £100,000 p/a
- It’s important to know the part that pension schemes can play in your longer term financial goals, as well as the legal limitations on pension contributions and the benefits they provide, (e.g. the 55% tax charge on pension funds, in excess of the Lifetime Allowance)
- There are many benefits and disadvantages to the wide range of investment options that are available to assist you in building capital savings outside a pension fund
- We can look at ways to ensure maximum capital goes to a family, if they were to die in employment
Being forewarned is to be forearmed. If we gain enough knowledge to plan early, then retirement can be approached positively. After all, you don’t know what you don’t know.
Britain’s younger generation are likely to get left behind due to debt and high house prices creating an inequality of wealth, according to a new report.
Commissioned by Channel 5, the report revealed that fewer than half of millennials (those born between 1981 and 2000) are expected to own their own home by the age of 45, while debt amongst this group is also rising. This also poses issues for the children of these millennials who will have no property inheritance passed down to them and a greater need to focus on saving for retirement.
A separate study recently conducted by the Financial Conduct Authority (FCA) found that 25-34 year olds have above average debts. On top of this one fifth of 25-34 year olds have no savings and a further third have less than £1000.
According to the IPPR (the Institute for Public Policy Research), “every generation since the post war baby boomers has accumulated less wealth than the generation before them and at the same age. The next generation is set to have less wealth, largely due to housing inequalities.”
Home ownership has been falling across all age groups since the mid-2000s and is at its lowest in nearly 30 years. For 25-34 year olds, it has fallen from 59% in 2003 to 37% in 2015. In fact in London house prices are now over ten times the average salary for first time buyers.
This makes it “increasingly hard” for the younger generation to share in the UK’s wealth, according to the report, unless they have “substantial” support from family. A survey undertaken by YouGov/Royal London, shows a growing intergenerational divide where wealth is held by older generations (aged 75-85) who are keen to pass some of this wealth directly to their grandchildren, split on average between 4-5 recipients. However, less than a quarter of those aged 25-44 (4 million out of 17 million) will inherit from grandparents, leaving many younger family members excluded altogether from inheritance, especially as their parents are in many cases already part of the “Generation Rent” with private renters accounting for more than 20% of the housing market. It is this “sandwich generation” (aged 45-64) who feel under more pressure to pass on any accumulated wealth as they can see for themselves the pressures their children are and will be facing.
Whilst the Government will be called upon to take action over this generational wealth gap, experts also agree that it is down to individuals to review their savings and focus on building a financially secure future. Talking to an independent financial adviser such as NLP Financial Management Limited will allow people to explore options they may not have previously considered to enable them to build a financial nest egg to either help with the purchase of property or go towards their retirement in later years.
We Have Achieved Another Award!
At NLP Financial Management we are proud and delighted to have been awarded Adviser Firm of the Year – London – at the 2018 Professional Adviser Awards held on 8th February at The Brewery in London.
In their 13th year, these awards not only celebrate “excellence in financial advice” but also recognise companies that go above and beyond in providing outstanding client service, engagement, multi-asset investing and platform provision. In total, more than 200 advisers, firms and providers were taken into consideration.
We pride ourselves on putting our clients at the centre of everything we do; leading, supporting and assisting them in their financial planning throughout all stages of their lives. We take a transparent, professional approach to help guide our clients to reach their financial goals and they in turn benefit from a secure, personalised service tailored exactly to their individual needs. It is therefore particularly rewarding to see our dedication publicly acknowledged.
We would also like to take this opportunity to congratulate all the winners and runners-up whose professionalism was recognised at the event and to thank the judges and everyone involved with the Professional Adviser Awards. Winning this award for the second time in 5 years acknowledges our consistent drive to be a leading firm of advisers within our industry and we look forward to adding more awards to our portfolio in the future.
NLP Financial Management’s Directors Adam Katten and Lee Pittal with Consultant Elliot Gothold at the 2018 Professional Adviser Awards dinner.
A committee of MPs has been told by a leading economist that women aged between 60 and 65 have on average less than half the pension pots of men of the same age.
Michael Johnson, research fellow at the Centre for Policy Studies, told the Treasury Select Committee that only 3.5 million women had defined contribution pensions – less than half the number of men and that their male counterpart had “more than double” the pension pot of the average female saver (£55,000).
Mr Johnson gave evidence of household savings alongside economists Ashwin Jumar of the Joseph Rowntree Foundation and Torsten Bell of the Resolution Foundation. All three of the economists believe that the disparity in savings and pensions between various groups in society was significant.
People do not have enough pensions savings,” said Mr Jumar. “There are probably about a third of pensioners who are just doing well, but there are also probably about two thirds of people – owner-occupiers or renters – with low pensions.” The panel also told the committee that Government incentives to help savers were only currently being used by those who were already in the upper percentiles of wealth. “We need to ask ourselves the question why is it that approximately 70 per cent of the Treasury’s total investment in incentivising people to save goes to 15 per cent of the income distribution who are in least need of it,” Mr Johnson said.
The economists recognised that young people had experienced 15 years of stagnant wages, and increased living costs, which may lead to many opting out of planned increases to contributions in auto-enrolment pensions over the next few years.
There’s been a lot of noise in the media this week about MiFID II or to give it its full name “Markets in Financial Instruments Directive” but what does it mean for UK consumers?
The principle behind MiFID II is to produce a transparent, level playing field for all EU residents when purchasing financial products listed in the EU, such as stocks and shares ISAs and pensions.
The focus is on the underlying investments and funds that sit within these financial products, the details provided about what costs are incurred, as well as how suitable these investments are for you, the consumer. The companies providing each investment need to decide on the target market – in other words the types of clients who would be most appropriate for each investment, and the Independent Financial Adviser (IFA) then needs to ensure these are the right fit for clients that fall into that category.
If you’re an existing investor with investments managed on a discretionary basis, then your portfolio valuation updates you receive periodically will now be provided on a quarterly basis. You may only see your adviser once or twice a year, but under the MiFID II rules, you will receive information on your investments each quarter giving you greater visibility over your finances.
If you’re still yet to take the plunge into the world of financial investment, MiFID II will, put simply, allow you greater transparency, confidence and protection.
There are several other measures introduced by MiFID II that are “behind the scenes” improvements aimed at providing additional security for investors, allowing the regulatory bodies the ability to monitor transactions more closely and identify any that look suspicious. As a client you’re also likely to hear more messages stating “your telephone call is being recorded”, providing greater clarity in the event of any confusion, with records being maintained for a minimum of six years!
If you are a charity, trust or other form of corporate entity you may also be required to apply for a Legal Entity Identifier (LEI). If you are buying or selling certain investments you will need to provide your LEI before the transaction can take place. For consumers this is typically your National Insurance number that is used as your unique identifier, the LEI is the equivalent for corporates, although it is 20 digits not 9!
Although MiFID II started on 3 January 2018, there will over time undoubtedly be additional aspects to follow, and clarification on how some elements were expected to be interpreted.
The main message for clients is not to worry! There may be some additional information required before investments can be made, but this is based on increasing the protections you receive on an ongoing basis.
With the BBC’s “The Apprentice” show in its thirteenth series, it isn’t just Lord Sugar who hires apprentices. With university students facing ever increasing debt and many school leavers not wishing to go onto higher education, apprenticeships are proving to be an ideal stepping stone between academia and the work place. Whilst the perception of apprenticeships tends to be “trade” orientated, many more sectors are now seeing them as ideal opportunity to boost their workforce with record levels of apprenticeships – 491,300 – starting in the 2016/17 academic year*.
Within the financial services industry, the NLPFM group, consisting of Birchwood Investment Management Ltd and NLP Financial Management have between them taken on 4 apprentices over the last 4 years, 3 of whom are now full-time employees. All 4 apprentices said that whilst at school, the emphasis was purely on university places with little or no advice for those students who wanted to work straightaway, or were unsure of where to take their career.
Charlie Ferry joined Birchwood in 2013 age 17, as an apprentice through John Laing Training (JLT). Initially he worked as a paraplanner support administrator. After passing his GCSE’s with the costs involved of going to university he decided to build on his entrepreneurial spirit (he still sells Christmas trees during the festive season) and apply for an apprenticeship to earn as he learned. Fast forward 4 years he’s worked hard to develop his position and is now an established member of the team, storming through his para-planner exams with his eyes firmly focussed on eventually qualifying as a financial adviser.
As Charlie moved up in Birchwood, his original role became vacant, so following advice from Charlie, Sam Rafferty applied through the same apprentice scheme and started at Birchwood in mid 2014. Sam, who was 24 when he joined, had already worked in a few companies, but had also experienced redundancy and zero-hour contracts and credits the apprentice scheme for giving him a pathway into the financial industry that he would never otherwise have found. Like Charlie, Sam became a permanent member of the team after his first year and is now half way through his studies to become a fully qualified para-planner and then financial adviser.
Whilst Dom Mason was at school, he knew he didn’t want to go to university so after a stint working at a ‘well known’ DIY retailer, he started looking around for roles that would provide him with more prospects. Having not initially thought of financial services, in 2016 aged 18, he applied for an administration apprentice position (also via JLT) that Birchwood needed to fill and has never looked back. Now permanently employed as an administrator, Dom loves the responsibility of his role and sees his future firmly within Birchwood and the world of finance.
Denise Amagyei had started university to study accountancy but felt it wasn’t the right fit for her. Following retail work she needed a full time role and applied for a JLT administration apprenticeship at NLP Financial Management starting in March 2017. Although she’s still unsure of her future, Denise has learnt invaluable skills working within an office environment but would highly recommend her experience of earning whilst receiving “on the job” learning.
For the NLP FM group, working with apprentices has been a positive and mutually beneficial experience. They’ve secured 3 new team members who have had bespoke training from the bottom up and gained helpful insights from the perspective of younger people entering the workplace.