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Income from Savings

Almost unbelievably interest rates have fallen even more and if you are relying on income from cash, this must be your worst nightmare - but why oh why have all your savings in cash?

When people are asked why they don’t invest their money properly the answer always seems to be that they are worried about losing their savings. Not an unreasonable attitude but sadly it causes so many problems. I think fear of the unknown and lack of understanding makes the situation worse.

You may have seen TV ads offering 4, 5 or even 6% interest. This is “peer to peer” lending. These companies lend your money to specific people or companies. Why do they pay more interest than the banks? In one word – risk.

The higher the risk you won’t get your money back the higher the interest rate you could receive.

Dividend income, however, income from shares, is pretty simple. Some companies keep the profits they make to grow their business, some distribute their profits to their shareholders and these distributions are called dividends.

The problem with dividends is that they can go up and down and, of course, if the company paying them goes bust then you lose your capital. To avoid this is to invest in lots of  companies; the chances of them all going bust at the same time is remote.

The easy way to invest to do this is by investing in Unit Trusts. You buy units in a fund rather than shares in individual companies. The fund managers invest normally in between 50 and 100 companies, which reduces the risks considerably.

At the moment (September 2016) there are 42 UK funds producing over 4% dividend income and a further 26 producing over 3%. Some companies will do well and increase dividends in future, some will not, but your Unit Trust manager should be selling the bad and buying the good to keep your income at the highest level.
As inflation pushes up prices it pushes up profits, which pushes up dividends and thus your income. If the shares your Unit Trust invest into are producing higher dividends more people want to buy them, so their price goes up giving you capital growth as well as rising income.

You can now have 5,000 p.a. dividend income tax free so if you need more income see your IFA to identify your needs and select the right funds for you; it could really pay dividends!

Call the Independent Financial Centre on 01277 630873 if you need sense made of anything financial in your life. 

Call Georgina on 01277 630873 if you would like more details

Turning the home ownership dream into reality

Owning a home is a dream for many young people but with house prices continuing to rise it can be tough to make that dream come true.

The average  home in Essex is more than 281,000 and even flats in the county fetch over 186,000 on average.  With the best deals on mortgages dependent upon a substantial deposit – typically around 20% - it’s not surprising that people often look at innovative ways to get on to the housing ladder, such as joint ownership.

Owning a property jointly – with parents, a friend or a partner – can work well but remember to check out the legalities to avoid problems in the future, particularly if one of the owners were to die. 

Joint ownership can be arranged as ‘joint tenants’ or ‘tenants in common’.

Joint tenants
Joint tenants have equal rights to the entire property and, in the event one joint owner dies, the property automatically goes to the other.  The person who has died may be removed from the title by applying to the Land Registry.  There is no rush to do this as you will be allowed to hold the property in joint names until it comes to be sold.

Tenants in common
This is where each party owns a defined share, for example 50% each, or 70% and 30%.  Tenants in common can state in their will who is to receive their share in the property when they die, and this may not be the other owner!  The property could be transferred to the beneficiary but it may have to be sold, forcing the remaining joint owner to move.

A word to mum and dad
Around 60% of first time buyers now have financial help from a parent when they buy their first home.  If you are a parent who wants to help your child, bear in mind that giving money, mortgaging your own home or acting as guarantor all have potential drawbacks as well as benefits, and you owe it to yourself to be clear about these.  Before you become involved in financial arrangements or joint ownership it is a good idea to have a chat with a specialist lawyer.  Better a little money spent up front than a legal wrangle further down the line!

For a free 15 minute telephone consultation with one of the property law experts at Birkett Long, contact Sarah Humphryes on 01268 244144 or