These changes will ensure:

• Advisory firms and advisers tell you how much their services cost and agree with you how much you will pay.
• Advisers who offer you independent advice must consider all relevant options for you and do so free from any restrictions (such as working with only a select group of product providers) or bias (such as being paid by commission). This makes sure that the advice offered to you is truly independent and, if it is not, the adviser must clearly explain to you why not.
• You will receive advice from competent, trained professionals who subscribe to a code of ethics ensuring they act with integrity and treat their customers fairly.

What changes come into effect on 31 December 2012?

From 31 December 2012, advisers (excluding those who recommend securities and derivatives) will have two choices. Either they offer totally unrestricted independent advice (Independent Financial Advisers) from across the market, or restricted advice (Restricted advisers – tied to one or more products). Where they offer restricted advice, they will have to explain to you what the nature of the restriction is.

Every adviser (including those who recommend securities and derivatives) will have to meet new consistent professional standards. An overarching code of ethics for investment advisers will be introduced, ensuring they act with integrity clients are treated fairly. The level of qualifications advisers must have has been modernised and raised, and systems are in place to improve how they keep their knowledge up to date.

The aim is to ensure that you can have greater confidence in the advice you are being given. Your adviser will be able to consider a broader range of products, or clearly state which products they can advise on. Their advice will be free from bias towards any one product provider because of how much that provider pays them in commission. In addition, you will know how much the advice is costing you, and the advice will be from an individual with a higher level of technical expertise due to the new professional standards advisers must meet.

Investment advice has never been free. The price you currently pay for advice is often hidden within the charges of the product you buy and that price is currently set by the product provider, not you, the customer. These changes are not altering how much the advice should cost, but rather enabling you to agree how much the adviser gets paid, rather than that decision being taken for you by a product provider.

The new charging system will not stop investors with modest means being able to afford financial advice. If you prefer, you will still be able to get advice without having to write a cheque. For example, you could instead agree with the adviser to have their fee taken from your investments; the difference in future is that you will agree with your adviser, in advance, how much you will pay for their advice.

The FSA is serious about the Retail Distribution Review changes being in place at the end of 2012. A recent attempt by the Treasury Select Committee, in mid-June 2011, to delay implementing the Retail Distribution Review by 12 months was immediately rebuffed by the FSA!

If you want to find out more, contact one of the team who will be happy to help.

It’s also important to understand what those risks might be, like the risk of losing some of your capital, the risk of fluctuating returns, or the risk involved in holding cash in the bank as inflation eats away at the value of savings.

You can’t avoid risk, it’s inevitable. The trick for the canny investor is to manage it carefully, by creating an investment portfolio with a risk profile that matches their needs.

Of course the needs of different individuals can vary enormously. A 59 year-old hoping to retire at 60 probably won’t be willing to risk the capital in their pension pot, so they may choose to accept a lower return in exchange for greater security. While a 25 year-old with far less capital may be willing to accept much higher risk in the hope of benefiting from higher growth.

There’s also individual “appetite for risk” to consider. But of course it’s not actually the “risk” that people hunger after, it’s the potential rewards – and investors should think carefully about what they’re willing to put on the line before they go chasing them.

‘Interest rates keep annuities low.’

‘Pension companies still overcharging.’

‘Stock market falls wipe billions off pensions.’

There’s no doubt at all that if you’re in a final salary pension scheme – or you’re in a private scheme where the employer is matching your contributions – a pension is the best way of saving for your retirement.

The same comment applies if you’re a high earner who can take advantage of the very attractive tax breaks available on pensions – particularly if you can channel money into a Self Invested Personal Pension.

But what if you’re not? What if you’re an average self-employed person who needs to fund his or her own pension, or you’re in a company scheme where your employer doesn’t contribute? After reading headlines like the ones above, you’d be forgiven for thinking that a pension wasn’t worth it. And there’s no doubt that a significant proportion of the population would agree with you. A recent poll in the Guardian showed that despite successive Governments’ encouragement, 43.7% of people thought that pensions were no longer worthwhile.

As with many aspects of financial planning, there isn’t a definitive right and wrong answer: the answer is what suits you best, given your own individual circumstances. But to help you gain a more informed opinion, here are three arguments in favour of pensions, balanced by three arguments against them.

1. First of all, pensions enjoy generous tax breaks. Every £1 you contribute has another 25p of tax relief added to it. The pension fund grows largely tax free and when you come to take your benefits, up to 25% of the total fund can be taken as tax free cash.

2. Recent reforms have meant that there’s now much more flexibility when it comes to taking the benefits from your pension. It’s no longer the case that you have to buy an annuity and that’s it. For example, you can now ‘drawdown’ an income from your pension, meaning that some of your accumulated pension pot could even be passed on to your children.

3. Finally, the fact that money in a pension is “locked away” until you retire is a real advantage. However much you might want to, savings in a pension can’t be accessed for a new car or kitchen extension, something which isn’t the case with other forms of saving. If you’re the type of person who isn’t very good with money, this could help to protect your retirement savings.

But what about the other side of the coin? Here are three arguments which suggest that alternative forms of saving might be better than a pension.

1. Pensions are inflexible: they simply don’t fit in with the fact that many people have lots of different jobs during their working life. Far too many people end up with several different pensions which are hard to keep track of and even harder to value – meaning that accurate retirement planning becomes almost impossible.

2. Despite the tax breaks pensions enjoy, the charges levied by the providers, the fund managers and the salesmen significantly erode growth. And in many cases the default funds suggested by the product providers give poor returns.

3. Yes, the recent changes to pensions legislation give more flexibility at retirement – but the vast majority of people will still end up taking an annuity. At the moment low interest rates mean that annuities are very poor value for money – and that situation is likely to apply for some time to come.

There you have it – two completely contrasting points of view. Pensions will be an essential part of some people’s financial planning, but completely wrong for others. Two things though are undeniable: we’re all living longer – and some form of saving for your retirement is essential. It might be a pension: it might other routes such as an ISA or National Savings.

That’s why taking independent financial advice is so important. An IFA will be able to advise you on your existing pension scheme, look at pensions you might have from previous jobs and advise you on the method of saving that is right for you. Above all, he’ll be able to tell you how much you need to save and he’ll stress the one key point about saving for your retirement – doing nothing is not an option.

Although the budget wasn’t expected to contain many surprises as most of the key points had already been “leaked”.  It certainly wasn’t a budget without some interesting changes.

Below we have summarised some of the key points from the budget, if you would like to read the complete budget it can be downloaded here.

Over the coming days as more of the detail of the budget is analysed financial planning opportunities may arise, if you would like advice with an Independent Financial Adviser (IFA) please do not hesitate to contact me on 01622 804504 or james.etheridge@focusedfinancialplanning.co.uk .

The chancellor started by looking at the latest economic forecasts,

• UK growth in 2012 to be 0.8% – up 0.1% from previous forecast.
• Growth forecast for 2013 is 2%.
• Growth forecast for 2014 is 2.7%.
• Growth forecast to be 3% in both 2015 and 2016.
• Eurozone growth forecast is -0.3% – down 0.8% in previous forecast.
• 2012 borrowing forecast £126bn – £1bn less than forecast in Autumn Statement.
• 2013 borrowing forecast £120 bn and set to reduce to £21bn by 2016/2017.

Income Tax

• Additional rate reduced to 45% from April 2013.
• Personal income tax allowance increased to £9,205 from April 2013.
• Age related allowances for pensioners to be frozen from April 2013 over time and removed in full once the personal allowance matches them in value.
• Cap on unlimited tax reliefs to be introduced set at 25% of total income for anyone claiming more than £50,000 in a year.
• New general anti-tax avoidance rule to be introduced.
• No changes to pensions tax relief.
• Personal tax statement to be sent to 20m taxpayers from 2014.

Child Benefit

• Child benefit to be withdrawn from households which have an income of more than £50,000 at the rate of 1% for every extra £100 earned over £50,000.  Households with incomes in excess of £60,000 will not receive child benefit.

State pensions

• Basic state pension to increase by £5.30 a week to £107.40 from April 2012.
• Automatic review of state pension age to ensure it keeps pace with increasing life expectancy.
• New single-tier state pension for future pensioners to be set at about £140 and based on contributions to replace Basic State Pension and additional state pension.

Housing

• Stamp duty on residential properties over £2m that are bought via a company will increase to 15% from today.
• Stamp duty on properties worth over £2m increases to 7% from midnight tonight.
• Consultation on annual charge on residential properties worth over £2m that are already owned via a company.
• Retrospective action to be taken on any scheme that evades the above new stamp duty charges.
• Extra funding to help construction firms building new homes.

Business taxes

• Corporation tax cut to 24% from April 2012 and reduced to 23% in 2013 and 22% in 2014.
• Simplified tax system for small firms with a turnover of up to £77,000.
• Bank levy to increase to 0.105% from January 2013.
• Tax credit to be introduced for video games, animation and high end TV industries.

VAT

• Plans to remove VAT loopholes and anomalies but maintain exemptions for food, children’s clothes, books and newspapers.

Duties

• Tobacco duty to rise by 5% above inflation from 6pm today – the equivalent of 37p on a packet of cigarettes.
• No change to alcohol duty.
• Machine Games Duty to be introduced for gambling industry at a standard rate of 20% and a lower rate of 5% for low prize machines of 5%.
• Gambling tax regime to be reformed so tax is levied at the place of consumption rather than place of supply, ie in the UK rather than overseas for most online gaming.
• No further changes to fuel duty – to rise in line with inflation from August 2012.
• Fair fuel stabiliser to be introduced so that above inflation rises in fuel duty will only happen if price of oil falls below £45 a barrel.
• Vehicle excise duty to go up in line with inflation – frozen for road hauliers.

Public sector pay

Government to publish independent review on local pay rates for public sector. Some departments given the option to move to local pay for civil servants whose pay freeze ends this year.

Energy

• Substantial tax changes to boost oil and gas extraction in North Sea, together with £3bn new field allowance west of Shetland.

Unemployment

• Unemployment forecast to be at 8.7% in 2012 falling to 6.3% by 2016/2017.

Economic development and infrastructure

• Further electrification of the rail route between Manchester and Sheffield and improvements to the railways between Manchester and Preston and Manchester and Blackpool.
• Announcements in summer about the lack of airport capacity in South East England.
• Funding for superfast broadband and Wi-Fi in the UK’s 10 largest cities.
• £100 million of support for new university science research facilities.
• Government support for £150m to help councils promote development and an extra £270m for the Growing Places fund.
• New enterprise areas in Scotland and Wales.
• Government considering enterprise loans for young people to start their own business.

Planning

• Planning regulation to be reformed to introduce “presumption in favour of sustainable development”.

Sunday trading laws

• Sunday trading laws to be relaxed for eight weeks from 22 July for Olympics and Paralympics.

Armed forces

• 100% relief on average council tax bill for armed forces serving overseas
• Extra £100m to be spent on accommodation for soldiers.

One of the starting points of financial planning is establishing what money is available in an emergency.  The unexpected often happens and if you don’t have any money immediately available then you might struggle.  What would you do if your boiler stopped working, your car stopped working or you lost your job?  Would you have money immediately available to help?

We normally recommend to clients that ideally you should have three to six months of income set aside as an emergency fund.  This isn’t money to be dipped in to for holidays and other luxuries it’s there for those times when you really need it.  This money is to give you short term security and peace of mind, not sunning yourself on the beach!

It should be instantly accessible and at the best rate that you can get but not at the expense of locking the money away in a notice account.  Cash ISAs (Individual Saving Accounts) make an excellent place to hold this money.

The only time that having an emergency fund is not necessarily a good idea is if you have debts, as normally the interest being paid on debt is far greater than the interest you can get by holding money in cash.

Illness

Of those that were questioned by Aviva 42% admitted that they had been seriously affected by illness and still did not have any protection in place.  Of those that had been affected 25% of families had experienced the impact of the main breadwinner being unable to work due to illness.

Planning

When going through the financial planning process considering various what ifs such as what would happen if I died or what if I was unable to work and the impact this would have on our family are really important considerations.  Although these thoughts can often not be nice it is really important to consider what lifestyle you would want your family to have if anything did happen.  With our clients we review and discuss these issues with and help them to provide financial security for their families.

If you would like to discuss your situation with us please do not hesitate to contact us.

With the smallest incident normally bringing the traffic in Maidstone to a standstill it’s likely to cause problems in Maidstone and the surrounding area.  The Town centre manager for Maidstone has warned that “queues have been predicted as far back as the M2.”

For clients visiting us at our offices in Knightrider Street there will be access through Brunswick Street and Priory Road with Knightrider Street becoming two-way for access only.

As always you are welcome to visit us at our offices in Maidstone but we are happy to visit you at your home or place of work.

In total 2,485 customers were affected, they were advised by HSBC subsidiary NHFA to invest in order to pay care fees.

They have been fined £10m and will have to pay a further £29.3m in compensation to those clients affected.

Age

The reason the fine is so large is because the average age of the clients was 83 and they were in or entering long term care.

The average size of the investments was £115,000 and the money was to be used to fund their care fees.

When investing, the usual rule of thumb is that the time frame should be no less than five years, due to the age of the clients involved often they lived for less than five years.

NHFA

At one time NHFA was the leading provider of advice in the long term care market.

HSBC said that it realised there problems at NHFA and closed it earlier this year.

Clients affected will be contacted in the coming weeks to offered compensation.  If the client has since died HSBC will be contacting families or those who inherited the estate.

Advice

If you or a relative require advice on how to pay for long term care fees always make sure you seek advice from an independent financial adviser who holds the required qualifications.

The researchers who carried out the investigation were all over the age of 60 and were inexperienced investors.  That didn’t stop 17 advisers recommending investment bonds that had high exit fees, in some instances as high as 12% if you wanted to access your money in the first 5 years.

Of the 37 advisers, 18 claimed that the advice was free.  Even though they were being paid commission which had been deducted from the investment.  A Yorkshire Bank adviser failed to disclose the commission that was being paid on a £50,000 investment even though it was £4,400 equivalent to 8.8% of the investment.

Of the three visits made to HSBC, two advisers did well but on the third visit the adviser provided one of the worst instances of advice.  The researcher expressed on 4 occasions that they didn’t want to take on much risk, however 83% of the money was invested in a way that was above his risk tolerance.

When seeking investment advice always get independent financial advice, an independent financial adviser will be able to source solutions from the whole of the market and won’t be restricted to one company.

Investment advice is never free so always make sure that the charges are disclosed and explained to you.

Price Changes

Food prices fell as a result of heavy cost cutting by the supermarkets and good harvests.  Flight costs are known to fluctuate wildly and are 6% lower than they were last year.  The cost of us filling our cars up with fuel has also decreased with petrol 0.5p a litre lower.  Items increasing in price were clothing, electricity and gas.  Energy supply companies have recently been increasing bills and this is expected to have an impact on November’s inflation figures.

Dear George

The latest figures mean that Mervyn King, the Governor of the Bank of England has had to write to George Osborne the Chancellor of the Exchequer to explain why inflation is above the 2% target.

In his letter he says that the high level of inflation is due to “the increase in the standard rate of VAT earlier this year, and previous steep increases in import and energy prices.”  He goes on to say that without these temporary measures inflation would be below the 2% level.