Too good to be true…that’s an old adage which applies as much to day as it ever has.  And it applies to one of the fastest growing “businesses” in the UK…fraud!

In a recent Sunday Times article, journalist, Ben Marlow, warns of the risk of such things as Boiler Room Scams where you are contacted by a caller with an opportunity that literally is too good to be true.

We have heard of one such case where one of our clients was contacted regarding an investment in shares in a business which he had never heard of but the value was going to going to sky rocket in value because of some event only the seller seemed to know about.

He lost £80,000!!

Alternatively the “investment” might have been a piece of land that has “planning permission” and whose value is going to go up rapidly in the short term (so called Land Banking). If you think about it, why would someone who has land with planning consent want to sell parcels of it to small investors?!

All of these are no more than scams so beware. If you invest in them you will lose your money.

The FSA maintain that on average people lose about £20,000 and money they can ill afford to lose.  So the old adage does apply so if you get a call like this say no and hang up!!!

The Chancellor, George Osborne, delivered his third Budget to the House of Commons yesterday

With a speech lasting for 1 hour, Mr Osborne did spring a few surprises but also some nasty shocks for pensioners, bankers and smokers. Announcing that ‘Britain needs to earn its way in the world’ he also stated that it would be a budget which would reward work and repair debts. Whether it does, remains to be seen.

Amongst his announcements were that the 50p income tax rate on individuals earning more than £150,000 introduced in April 2010 would be cut to 45p from April 2013 and that he also plans to increase the personal allowance by £1,100 to £9,205 as of April 2013 but plans to phase out age related tax allowances.

Child benefit is being phased out for those with a household income exceeding £50,000, falling by 1% for every £100 earned over this £50,000 threshold. This means that households with incomes of over £60,000 will not receive any child benefit.

Smokers also took a hit with the cost of duty on all tobacco products to rise by 5% above price inflation. This will add 37p to a pack of 20 cigarettes.

In the world of business the Government will cut the main rate of corporation tax to 24% in April with the intention of cutting it to 22% by 2014.

The banks however will face an increase in their levy 0.105% from January in a move by Osborne to ensure that banks do not benefit from plans to cut corporate tax.

Profiles Commentary

Even though the increased personal allowance was widely expected the phasing out the age-related personal allowance has come as a bit of a shock. Those in retirement will need to carefully review their investment income in line with these measures.

Seeing the top rate of tax reduced to 45% in April 2013 could present some tax planning opportunities around the timing of pay and pension contributions.

We were pleased to see no major tinkering with pension rules in this Budget. It had been widely thought that the annual allowance would be cut or access to tax-free cash from pensions would somehow be restricted. However, the new cap on tax reliefs set at 25% of total income for anyone who is claiming reliefs exceeding £50,000 a year will have an impact on some of our clients and will need to be carefully examined to ensure full tax relief is obtained on any tax efficient investments made during the course of the year.

On a more positive note the lower corporation tax rates will hopefully mean a more competitive environment for business. We would have liked to have seen some more cutting of red tape as the main simplification measure appears to only benefit very small companies. If the British economy is going to get moving again, the Government needs to create a much more productive environment for all small and medium sized enterprises.

As with every budget the devil is often in the detail. As more detail comes out and planning opportunities arise we will issue further blogs.

However do call us on 01768 840000 or email us at info@profilefm.co.uk if you wish to discuss your own investment, pension or financial planning requirements.

It should be noted that the details provided above is not an exhaustive description of every measure described in the Budget and you should seek professional independent financial, tax or legal advice where necessary.

This information is provided for general consideration only and the information contained herein is not to be acted upon without professional independent financial advice. Profile cannot accept any responsibility for any loss occasioned to any person no matter howsoever caused or arising as a result of or in consequence of action taken or refrained from in reliance of the contents herein.

The Office for National Statistics (ONS) has published a summary of the pension results from its latest labour market survey. This shows some worrying trends in the pension marketplace.

In 2011, the proportion of employees who belonged to a workplace pension scheme was 48%. This was the first time the proportion had fallen below a half since ONS began the measure in 1997. The 48% membership number hides a significant difference between sectors:

83% of public sector employees were members of a workplace pension scheme; but only 33% of private sector employees were members of a workplace pension scheme.

The fall in overall membership since 1997 has been driven mainly by the fall in membership of defined benefit occupational pension schemes over the same period, down from 46% to 30%. Membership of defined contribution occupational pension schemes also fell, from 9% per cent to 6%, but group personal pension membership (including stakeholder pensions) rose from 1% to 10%.

With auto enrolment on the horizon this will see membership of workplace pension schemes increase over time but the gap between the public sector and private sector remains.

We are shortly coming into what we would term as the ‘ISA season’ and if previous years are anything to go by people will be rushing to get contributions made before the deadline.   If you are reading this not really having a clue what I am talking about or you have heard about ISAs but don’t really understand them, then read on.

ISA stands for Individual Savings Account. They are available to anyone resident in the UK aged 18 or over for a Stocks and Shares ISA or 16 for a Cash ISA.

Cash ISA or Stocks & Shares ISA?

So what is the difference between a Cash ISA and a Stocks and Shares ISA?

A Cash ISA is basically very similar to any savings account you will get from a Bank or Building Society; you open an account and will receive an interest rate.  The interest rate is unlikely to be very exciting, perhaps 2-3% pa, but you know the value of your savings will not rise and fall on a daily basis.

With Stocks and Shares on the other hand you invest your money in investment assets. Typically we think of shares listed in a global stock exchange such as the FTSE 100 but other asset classes such as gilts, corporate bonds and commercial property are also available.

In fact, having your money spread around the major asset classes is sensible so that you don’t have all of your eggs in one basket.

The general principle is that by investing in a Stocks and Shares ISA you are exposing your money to investment risk so that in return for better returns over the long term compared to Cash ISAs there is a chance that the value of your ISA fund can fall over a day, month, week or year.

What makes them attractive?

They are attractive because any capital gains made on the growth is free from capital gains tax and any income received into the ISA is free from income tax (with the exception of a non reclaimable 10% tax credit on dividend payments from UK Shares).

So what is the ‘ISA Season’?

So what do we mean by the ISA season as referred to earlier; this is the period before the end of the tax year (5th April) when savers and investors rush to make their ISA contributions before it is too late.  Every tax year there is a maximum limit that can be contributed to an ISA so if the deadline is missed the opportunity to save or invest that much is lost.

The total ISA limit for the current 2011/12 tax year is £10,680, of which only £5,340 can be saved into a Cash ISA.

So, you have the choice to put £10,680 into a Stocks and Shares ISA or £5,340 into each.

From the 6th April 2012 the allowance is increasing to £11,280 (£5,640 for Cash ISAs) and will increase each subsequent tax year in line with inflation.

Junior ISAs

I mentioned earlier that ISAs were only available to individuals aged over 16. However, since November Junior ISAs have been available for children.  The Junior ISA limit is only £3,600 a year and the fund cannot be accessed until age 18 but they do allow parents and family members (anyone in actual fact) to save for a child’s future.

Are there any disadvantages?

Other than the fact that the contribution levels are limited and there is a chance of investment loss with Stocks and Shares ISAs, compared to other investment options there aren’t really any disadvantages.

Unlike pensions you can access the capital at anytime should you need it (unless you have saved into a fixed term Cash ISA account).

In fact, ISAs are an important part of an individual’s personal financial planning so if you have spare capital you want to work harder it is important to consider them in good time so you don’t miss the current deadline.

Equally, if you have ISAs currently it is important to review them to make sure you are still getting the best return possible and they are invested in a suitable way to meet your objectives.

2011 is likely to go down in history as the year that everything happened. Inflationary fears took centre stage as the year began, with food prices outpacing their 2008 highs and oil prices tipping the $100/barrel mark. As the first quarter continued, though, three major events shook the world: firstly, a devastating earthquake in Japan, and its subsequent nuclear crisis; secondly, the evident beginning of the ‘Arab Spring’ in the Middle East; and thirdly, not only did the EU deal on a Greek bailout package fail to calm market fears, but the Portuguese government fell, prompting all out fear over the European sovereign crisis. Throughout the spring, most economic data points were weaker than expected, in part due to supply chain disruptions resulting from the Japanese earthquake, but probably also owing to the ongoing Chinese slowdown. Market focus gradually moved back towards the outlook for monetary and fiscal policy: the US debt ceiling was reached on 16th May, tensions escalated between ECB officials and EU leaders about a possible Greek debt restructuring, and Spanish and Italian ruling parties suffered massive losses at regional elections.

The summer months were then characterised by global market mayhem, as escalating US political tensions saw a lack of agreement on the debt ceiling and threats of debt downgrades from rating agencies, while in Europe a series of bailouts – direct and indirect – attempted to calm the chaos. China witnessed further rate hikes, while Japan and Switzerland enacted currency interventions, and it became clear that global growth was slowing.

The European soap opera held the market’s attention throughout autumn, and after much stalling and fanfare, a broad framework devised by euro zone leaders – including a debt haircut of 50% for private investors, recapitalisation of banks, and a three-year €489 billion ECB bank liquidity programme – had a more positive market impact than many predicted. There were new leaders for the ECB, Italy, Greece and Spain, and an alarming rise in most euro zone government bond yields. Elsewhere in Europe, the Bank of England introduced a new, four-month £75 billion cycle of quantitative easing. In the emerging markets there was a general loosening of monetary policy, while the US witnessed the rebirth of Operation Twist (last seen in 1961) with a $400bn plan to buy bonds, but started to see more reasonable macroeconomic activity and data, regarding housing in particular.

As the year drew to a close, a divergent world appears to be emerging, with signs of improvement in the US, Europe in recession, and the emerging world facing a softer landing than some had feared.

2012 will of course hold extreme austerity across Europe, and problems are also arising in emerging economies, with Chinese inflation back to 2008 levels and the Indian economy slowing fast. However, there is some optimism to be found on the horizon. The EU (minus the UK) is showing some unity at last, and the ESM (a new primary bailout mechanism with €500bn firepower) is set to be available by July 2012. The US is witnessing signs of decent components for recovery, particularly in auto, housing and manufacturing. Demand is resilient consumers are spending, and initial jobless claims are at their lowest since May 2008, signalling employment growth. GDP expectations for 2012 are also improving slightly, pointing to a brighter new year.

So not all doom and gloom but given the over-arching uncertainty surrounding the global economy, it is likely that the volatility seen in 2011 will continue to blur the story in 2012.

Local financial advisers, Profile Financial Management have seen a surge in enquires and new business from people seeking independent financial advice. With a loss of confidence in the banking sector and a well publicised Which? report reflecting poor investment advice amongst bank and building society advisers, this has pushed many people to seek impartial and personal advice from local experts they feel they can trust.

An undercover investigation undertaken recently by consumer watchdog Which? had discovered a number of bank and building society advisers had given substandard advice. Only five out of 37 advisers gave good advice about investments after visiting branches of seven leading banks and three building societies.

Which? claimed that the majority of advisers demonstrated a “poor understanding of the risks of investing, and made misleading statements about the features and costs of available products”

The research also revealed that 18 of the advisers claimed their advice was free. However, banks and building societies make money through commission paid for the products they recommend – but only a handful of advisers admitted this.

Interestingly, at the end of 2012, financial advisers will be banned from receiving commissions from firms for recommending their investment products, under rules designed to stamp out mis-selling to consumers.

The investigation showed that “the high street isn’t the best place to go for investment advice” and states that “if in doubt, consumers should always talk to an independent financial adviser.”*

With this in mind Profile Financial Management has recently expanded its team and has grown into larger premises. The firm now occupies the charming “Honeysuckle Cottage” that was the original visitor centre for the Lilliput Lane ceramic firm at Skirsgill Business Park near Penrith.

Richard Utting Director of Profile explains: “The Financial Service Ombudsman 9/10 review* shows that 98% of all complaints have been against large financial institutions such as; banks & building societies (63%), insurance companies (27%), investment houses, mortgage brokers & stockbrokers’ (7%). Only 2% of complaints during were against Independent Financial Advisers.”

These numbers clearly show that customers want a more personal and individual approach to managing their finances. As a result, Profile Financial Management has seen a significant surge in interest in their services and have expanded their operation in the past 12 months.

Profile has refurbished the interior of Honeysuckle Cottage to create a relaxed and informal atmosphere for clients. In addition, Profile has also created a presentation and seminar room to provide local customers with events and seminars of general interest as well as offering this as a function room for local businesses.

Richard explains: “We wanted to create a place where our customers feel comfortable and relaxed. The surroundings of Honeysuckle Cottage provide an informal and unusual environment that you wouldn’t expect to find in a financial services company. Everyone really enjoys visiting our offices.”

Profile Financial Management was one of the first financial services company in Cumbria to stop taking commissions on products and introduce a fee-based approach to financial services. At the heart of the company’s impartial and independent service is a highly respected financial planning method using cash-flow modelling. This approach allows the company to create an integrated financial plan, from which informed decisions can be made. Once created the plan is reviewed and updated annually to ensure it continues to meet the aims and objectives of the client. In this way Profile can provide financial planning to people who require long term proactive advice about their finances.

With growing uncertainty in economic markets recently, the trend for growing complaints within the financial services industry is not going to go away. The ethos of Profile is about doing things differently, taking a personal approach and ensuring customers feel secure in their financial choices. They work to simplify people’s financial life; managing risk, consolidating debt and giving them a secure future. Profile Financial Management offers some relief to consumers during this turbulent time; providing a relaxed environment, trustworthy independent advice and somewhere to turn for people with any financial worries.

As you will be aware The Chancellor, George Osborne, delivered his Autumn Statement last week in which he confirmed a range of measures designed to stimulate economic growth.

Even though it has been forecast by the independent Office for Budget Responsibility that the UK would not enter recession next year, as had been predicted by the OECD, our economic destiny remains firmly in the hands of Europe.

However there was some good news with motorists seeing the 3p fuel duty increase planned for January scrapped and commuters will see regulated rail fares increase by 1% over inflation, rather than the planned 3%.

There is some long-term pain with the state pension age due to increase to 67 by 2026, eight years earlier than previously planned. In the short-term, the value of the state pension will increase by £5.30 a week in April 2012.

The key theme of the Autumn Statement was investment in infrastructure and enterprise. It seems that two groups of UK pension funds will help to fund investment in infrastructure projects over the course of the next decade. Generous income tax relief will be available to investors in Enterprise Investment Schemes, aimed at providing funding to start-ups.

However as you will appreciate with every Budget and Autumn Statement, the devil is often in the detail. As more details come to light, we will add blogs on specific planning topics to our website at www.profilefm.co.uk

Do call us on 01768 840000, email info@profilefm.co.uk, or follow us on Twitter @profile_fm.

We look forward to hearing from you.

At the end of last year we invited Justin Urquhart Stewart, TV and Radio financial pundit, to come to Profile to meet local professionals and business people of Penrith.

The intention was for him to come in the spring but unfortunately, due to an operation on his leg in March of this year (which incidentally has made him 2 inches taller), he was unable to attend. However after some discussion he was able to make it last week (22nd November).

And what a day we had…

Following a presentation to local accountants and solicitors at Honeysuckle Cottage at lunchtime in which he highlighted areas of the Trustee Act and answered general questions from the floor, Justin went on to do two radio interviews, one with ourselves on our new local radio station Eden FM and one with Radio Cumbria.

In the evening he went on to do a presentation to members of the Penrith Chamber of Trade and Commerce which was sponsored by Profile Financial Management.

Justin touched on many areas of the world economy particularly the UK. What he did portray, as he had all day, was a very much more positive picture of the economy than one would hear on the BBC.

Justin is a truly inspirational speaker who has endeared himself to the public and media alike, as he did in Penrith last week. His no-nonsense and prolific views on the complex world of personal finance are a breath of fresh air and we hope that he will visit Penrith again in the not too distant future.

See pictures from the event here

Record numbers of women are saving adequately for their retirement, according to a recent Scottish Widows report, with half putting aside sufficient amounts, compared to 43% last year.

The findings, from the ‘Scottish Widows Women and Pensions Report 201’1, show that women are putting aside on average 12.9% of their income, including employer contributions, compared to the 12.6% men contribute, according to The Telegraph.

But men’s higher average salary of £28,091 compared to £22,490 for women helped them save more for retirement. The report also warned than more women than men – 23% versus 17% – were not saving for retirement at all.

For more information on saving for retirement contact us here at Honeysuckle.

Although it’s too late to do much about tax for 2010-2011, now is the time to start to think about mitigating your tax liability for 2011-2012.

Family budgets are being squeezed, and with the starting threshold for 40% income tax falling from £37,400 of taxable income to £35,000, more couples will have one partner paying a higher rate of tax. There is scope for tax mitigation by transferring assets to the lower rate taxpayer: every £1,000 of investment income transferred from a 40% taxpayer to their spouse who is a non-taxpayer saves £400 a year in tax.

1. Restructuring investment holdings

If one partner receives all the investment income it is possible to utilise the other partner’s personal tax allowance of £7,475 and lower tax band to reduce the overall tax bill for a couple.

The rates paid on dividends for the 2011-2012 tax year are the 10% dividend ordinary rate deducted at source, 32.5% dividend upper rate for those in the 40% tax bracket, and the 42.5% dividend additional rate for 50% taxpayers. There is scope for reducing taxable income by transferring assets to the lower rate taxpayer or a non-taxpaying partner.

HMRC usually treats income from property held jointly as if it were equally held by the two parties. Income tax is charged on each partner on half of the income. If you want to be taxed on your actual shares, you will need to provide evidence that your beneficial interests in the property are unequal, for example by a declaration or deed of trust and completed HMRC form 17.

This also applies to bank and building society accounts that are held jointly as well as property, and you must file the form 17 within 60 days of the declaration of trust, or it is not valid for tax purposes. Assets transferred between husbands and wives and civil partners are free from capital gains tax (CGT) until sold, when the acquisition price used in the CGT calculation is that paid by the first partner.

2. Mitigating ‘clawback’

Older taxpayers who are up against the £24,000-a-year income level where ‘clawback’ of the higher personal tax allowances takes effect may be able to avoid clawback by transferring assets between spouses or moving taxed income from investments into a tax free ISA.

The same applies to those who are up against the £100,000 income threshold, where ‘clawback’ of personal allowances takes place so that at an income of £114,950 (2011-2012) they receive no tax allowance. Making pension contributions can reduce liability and help restore tax allowances.

For every £2 of taxable income over the threshold of £100,000 (£24,000 for a pensioner) £1 of personal allowance is clawed back. In the case of pensioners the personal allowance is never reduced below the standard level of £7,475, so they are back to standard allowances once their income hits £28,930.

3. Tax-free investments

Remember to use your full ISA allowance of £10,680 per person in 2011-2012. You can also contribute up to £50,000 a year or 100% of income, whichever is less, to a pension scheme and get tax relief at your highest rate paid.

There have been recent changes to the Enterprise Investment Scheme (EIS) that make it more attractive as a tax saver. Companies may now obtain 30% tax relief on their investment, as well as doubling the annual investor limit to £1 million.

However investors need specialist advice to take advantage of this tax break.

4. Capital gains tax

Couples who have profits to realise may find it worthwhile restructuring holdings so that both CGT allowances (£10,600 for 2011-2012) are utilised as well as making use of the fact that a basic rate taxpayer pays CGT at 18% while a higher rate taxpayer is liable for 28%. You can also save by switching investments on which income could be taxed at up to 50% to growth stocks, where you will pay a maximum of 28% CGT.

After a dreadful year in the stock market many will be sitting on losses, and now is a good time to review your portfolio. Losses can be carried forward if they are realised and set against future gains or used to offset against gains made in the current tax year. You may want to use cash realised to take up any unused ISA allowance or to make pension contributions into a SIPP.

5. Inheritance tax

Assets such as shares or mutual funds on which you are showing a loss are also prime candidates for gifting to mitigate inheritance tax. You will have no CGT liability when you gift them to the beneficiary – but you will have incurred losses to set against future gains.

You can also make gifts of £3,000 a year (£6,000 for a couple) and any number of small gifts of £250 to a variety of different beneficiaries. If you have not used last year’s allowances you need to do so before April 2012 or they will be lost, and they can only be carried forward for one year.

Perhaps the most valuable inheritance-tax mitigation scheme is making regular payments out of income, such as a unit trust regular saving scheme written in trust for a grandchild or godchild. Provided the loss of income does not affect your standard of living, then the gifts are immediately outside your estate for inheritance-tax purposes.

For more information on this and other financial planning areas please do not hesitate to contact us.