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MONEY MATTERS

PENSION ADVICE

Taking your entire pension fund as a lump sum seems to be causing a few problems for many folk and I have had the same question posed to me a few times recently: - why is pension advice so expensive?

There are three main problems, knowledge, regulation and liability.

All IFAs must now be qualified to degree level to advise clients and must undertake continuing professional development involving a minimum of 35 hours a year on-going study. They must also have be authorised to advise on pension transfers etc. This all costs time and money which must be paid for.  Who would want to take advice from someone who was not up to date and knowledgeable about their subject?

The Financial Conduct Authority, the body that ensures that all advisers are qualified and obeying all their rules, has advised IFAs that if a client wants to fully encash their pension fund we should not help them do so if we think they are making a mistake. To know if they are making a mistake as well the “knowledge” IFAs must also know the client’s situation in quite some detail, which takes time and thus money again.

Although not an official term, we cannot also deal with what’s known as an “insistent” client i.e. a client who wants to proceed against the IFAs advice.   Off the record the Ombudsman’s thinking is that unless a client is “sophisticated” investor, i.e. someone who already has a sound knowledge of pensions and/or investment they cannot be expected to know what is the “right” thing to do with their pension pots and thus all IFAs will be liable if they obey the clients instructions to fully encash their funds and it turns out to be a mistake.

It’s this liability that costs money as IFAs must carry “professional Indemnity” insurance. (Insurance against claims in future) Such insurance must be paid for which increases fees.

The problem is that at any time in future if the client is in financial penury because they “blew” their pension funds in one go, they could then complain that the adviser should not have let them have their money as the adviser should have known better, and demand compensation.

It’s no wonder then that there is a problem getting good advice and why it must appear expensive in relation to the sums involved but please don’t let that put you off seeking advice. There are many alternatives to just taking a lump sum and IFAs have the knowledge to help you get the right result for you.
For further details call Georgina on 01277 630873


Sharing the cost of home ownership

 Sharing the cost of home ownership

That first step on to the property ladder can seem almost unachievable for many people in their twenties and thirties.   At the start of 2015, the average cost of a home in the UK was approximately 172,000, up 9% over the previous year.  The average age of the first time buyer is also on the rise: 30 in the UK as a whole but 32 for those buying properties in London. 

One solution for buyers daunted by spiralling home costs is to consider joint ownership, whereby the mortgage is shared with a partner, a friend or a relative.  Joint ownership can be an excellent route into home ownership but it is important that anyone considering such a commitment understands what will be involved. 

There are various types of joint ownership and these will have implications for couples who separate, friends and family members who pool resources to buy property together, and even married couples who want to minimise their inheritance tax liability. 

Joint Tenants
Under this arrangement, should one person die, their share passes automatically to the other co-owner(s), not to those named in the deceased person’s will.  Owners have equal shares, which do not necessarily represent the contribution they have made to the property purchase.  An example of an appropriate joint tenancy is a husband and wife in a first marriage who make a broadly equal contribution towards the purchase of a property that is not required for inheritance tax planning.

Tenants in Common
Co-owners can own the property in equal or unequal shares.  In these circumstances, their share would go to their next of kin – or those named in their will – should they die.  Tenants in common can fairly represent contributions from each person towards the purchase of the property, co-owners can hold unequal shares and there is flexibility regarding who owns what.  A possible disadvantage is that should a co-owner die, a sole surviving co-owner may be unable to sell the property.

If joint ownership seems attractive to you, seek legal advice before you make any commitments.  A little time spent in research – and a little money in legal fees – could save a great deal of heartache later on!

To discuss this, or any aspect of buying and selling your home, contact Janice Anderson on 01268 244153 or email janice.anderson@birkettlong.co.uk