Income Drawdown

Income drawdown is an alternative to annuities for those between 50 and 75. In the same way as a conventional annuity, any tax free cash entitlement must be taken at outset, as it cannot be deferred until a later date.

However, unlike a conventional annuity you are not buying a guaranteed income for life. Instead you can choose an income between 0% and 120% of the equivalent single person’s annuity. In other words if you were able to buy a single life annuity of £10,000 you can choose an income of between £0 and £12,000 per annum.

The monies in your pension fund remain invested and therefore whether income drawdown proves to be a success will largely depend on how these investments perform.

If investment returns are good you are likely to be able to take an increasing income as the pension fund increases in value, but alternatively if investment returns are poor your income will decrease.

As such income drawdown is only likely to be suitable for those who are prepared to take a more optimistic view of potential investment returns.

What Are The Advantages Of Income Drawdown?

  1. Ability to vary income – income between 0% and 120% of the single life annuity can be drawn and can be varied by the pension holder. Therefore income drawdown can be attractive to those who are unsure what their future income needs will be.
  2. Possibility of higher income – the maximum income available under income drawdown is based on the equivalent single life annuity. Many people would need to build in surviving spouse’s benefits etc to a conventional annuity that would reduce the level of pension available. Under income drawdown this is not a problem because should the pension holder die, there are benefits that are not available with conventional annuities (see death benefits below).
  3. Death benefits – with conventional annuities the fund dies with the policyholder (subject to other benefits that can be bought within these plans such as dependent’s pension and guaranteed periods). Under income drawdown there are three options available after death. Firstly the remaining fund can be paid as a lump sum (subject to a 35% tax charge). Secondly the surviving spouse can continue to use income drawdown. Finally the surviving spouse can convert the remaining fund and buy an annuity. As such income drawdown provides significant benefits that are not available under conventional annuities.
  4. Potential for a rising income – if investment returns are kind and the fund increases by more than the amount being withdrawn and other fund charges, then there is the possibility that the maximum income permitted will increase through time to take into account the higher fund value and the typically higher annuity rates that are available as one gets older.
  5. Ability to defer buying an annuity if annuity rates are low – buying an annuity locks one into the annuity rates that are available on the date of purchase. Using income drawdown can defer this decision, and can be particularly beneficial if you believe that annuity rates will rise in the future.
  6. Annuity rates rise the older one is – annuity rates tend to rise based on age. The logic behind this is that the annuity will be paid for less time if the person purchasing the annuity is 75 rather than 65. This is not quite as straightforward as it would seem because of a factor known as “mortality drag”. At birth life expectancy may be say 75 years. However that does not mean that on our 74th birthday we need to put as much as possible into our last 365 days. This is because the figures are an average, and therefore those reaching 74 can be expected to live significantly past age 75 as many people will already have died prior to that age, therefore creating the average for those who live well past it. In other words, whilst annuity rates will usually increase as one gets older, the increase is not proportionate.

    Income Drawdown

Disadvantages Of Income Drawdown

  1. Investment risk – if the investments chosen under perform, then the amount of continuing income under income drawdown and ultimately when an annuity is purchased will fall.
  2. Annuity rates could fall – thereby meaning that future income taken from income drawdown and ultimately from a conventional annuity will fall, even if the underlying investments have performed well.
  3. Charges – under income drawdown your monies remain invested and therefore incur ongoing fund charges that would not apply under a conventional annuity.

Income drawdown can be a valuable retirement planning tool for the right person. Typically it suits those who are not adverse to investment risk, and who have larger pension funds to be able to absorb the ongoing fund charges.

It is even possible to combine income drawdown with annuities by using part of a pension fund for each purpose.

It can also be a useful tax planning tool in terms of protecting the value of one’s estate for surviving spouse and the next generation.

It is important that the correct investment strategy is utilised in accordance with one’s risk profile and income levels. Ideally short term income needs should be set aside in income producing assets such as cash, gilts and corporate bonds, with the longer term monies in assets such as equities that have the potential to yield higher returns over the medium to long term.

It is highly recommended that expert advice be taken, and a financial adviser would be delighted to assist in producing the right balance for you.

Fast Cash Loans Come to the Rescue When It’s Time to Get the Kids Back to School

Look, let’s be honest — it’s a given that kids change everything in your household. Your financial life will be changed too. Suddenly, it doesn’t matter as much to you that you don’t have a new pair of shoes. You really want to make sure that your child doesn’t have to go without the basics that they want and need. Besides, who wouldn’t want to see their child feel special because they got a brand new pair of shoes?

There’s no need to feel embarrassed if money is a little tighter than you would like. It’s all about being able to really protect and encourage your children. New shoes tend to make them feel like winners, whereas an older pair of shoes makes them feel like nobody is really thinking about them. That would be the wrong attitude to set for your children, right? Wouldn’t it make a lot more sense to think about their needs from a different point of view? Instead of worrying how you’re going to get the money, you need to think about everything you’re going to spend with the money.

faxless payday loansAt first glance, you might be confused. We’re basically telling you to act as if you already have the money. How can be we so incredibly bold? How can we make those assumptions? How can we just assume that everything is going to fall into place? The truth is that we have to look at our resources to offer you. We wanted to make you aware of the many fast cash loans available online. You see, you can use these loans for any purpose. You don’t even have to put on your applications that you’re using it in order to buy things for your children. That can just be your concern. Any extra can be used to take your kids out to eat.

Deep down, every child wants to feel protected. When the kids see you stressing about the finances, they start wondering if they’re really safe or not. Why not make sure that they always know that they’re protected, safe, and well by having the money right away?

When you go to apply online, that’s actually the type of satisfaction you can expect to receive. As long as you have steady income and employment coming in, you will not be turned down for a payday loan. All you have to do is make sure that you follow the directions. Sure, it sounds like it’s going to be a lot of work, but is that really the case? Not at all. What you get from the experience is simple: convenience. All you have to do is fill out a short application, and you’ll be given the money that you need. Verification is very fast, and painless. You can even find faxless payday loans for the ultimate in convenience. You could be making your shopping list today and have money in a few short hours.

At the end of the day, we can all agree that there’s virtually nothing that we wouldn’t do for our children. If you are nodding your head vigorously in agreement, then the next step is obvious: turn to fast cash loans to pay for all of those school expenses. Good luck!

Income Protection Insurance Benefits

Income protection insurance benefits come to the rescue of those who have become, through accident or illness, unable to perform their normal work. Naturally, when an individual can no longer attend to regular work responsibilities, there is an associated loss of income, a loss that can be devastating for workers and their families. While there are some state-sponsored safety measures in place for the employee who becomes drastically injured due to the faults or negligent behaviour of others, these measures may not be enough. It can take time to be approved for State benefits; once you have been approved, you may find that these do not satisfactorily meet your needs.

The protection you receive from an income insurance plan will typically provide for your ongoing needs much better than will a State solution. As you learn the income protection insurance basics, you will see that the benefits are intended to answer the broad range of financial responsibilities you face on a monthly basis, allowing you to keep comfortably remitting your payments. In deciding if this type of protection is appropriate for you, you should first find out if your employer offers any group income protection insurance benefits. While some companies include this insurance as part of a benefits package, many others do not. You will also want to carefully consider the many associated benefits and judge for yourself if they align with your needs.

Income Protection Insurance

How This Insurance Helps

The main benefits of this insurance involve the secure, dependable protection of your income. Supposing that you find yourself unable to work owing to a long-term illness, a severe injury, or another cause that leaves you disabled, you may suddenly find yourself panicking about how to meet your monthly monetary commitments. Many who have found themselves in this scenario fear the loss of house, car, important services, and much more. These fears are founded in reality. For the disabled person, even if Statutory Sick Pay (SSP) or Employment and Support Allowance (ESA) is forthcoming, bills that previously presented no obstacles can come to loom frighteningly every month. Benefits such as SSP and ESA generally provide much less than workers are accustomed to making.

By virtue of income protection insurance benefits, you can give yourself greater peace of mind regarding your ability to make necessary expenditures in the future. Viewed by many as a valid way to protect loved ones, income protection insurance benefits start after a certain deferred period (the time between the qualifying incident and the point at which your benefits begin) and can continue providing for your family for quite some time. Many insurance shoppers are impressed with the fact that this protection will go on until the policyholder is able to return to work, retires, or passes away, so long as the policy contract terms has not expired.

The income you can expect to receive from this protection plan will be an established percentage of your working income. Part of the reason that people in the market for income protection insurance benefits are strongly advised to shop around relates to this percentage. Some companies arrange for a higher percent of your take-home pay to be awarded to you after a claim is approved. While normally higher-percentage cover is associated higher premiums, you may find it worthwhile to pay a little extra for the more robust level of protection. Speaking with a cover agent who specialises in income protection insurance benefits will help you determine the specific amount that is best for you.

Monetary Benefits

Among the many income protection insurance benefits is the fact that the payout you receive following an approved claim is not subject to taxation. Because the continuous premiums you pay for the sake of maintaining your insurance policy are paid from taxable money, your payout itself is not. It is made on a regular basis, usually monthly or weekly, thus mimicking a payment pattern that most people are already accustomed to. As the time surrounding a claim can be hectic, transitional, and stressful, the insured will find it helpful that the income paid out by this policy type is steady and reliable.

Another aspect of income protection insurance benefits related to your finances is that of your premiums. While many workers have steered clear of seeking this coverage because they’ve feared outrageous premiums, you may be able to secure the valuable cover for much less than you had imagined. Particularly if you are a young and healthy worker who presents a minimal level of risk factors via your extracurricular activities and lifestyle elements, you make an attractive client to providers. If you already have life cover with one agency, you may consider looking at their other offerings to see if this type of cover is also available. Bundling services in this way can equal savings for you.

Could Emotional Distress Be Keeping You Out of Financial Prosperity

The road to a better financial life takes on a different shape for all of us. Some people want to really shine and have a very high end, luxurious life. Others want to be able to just get by without having to turn to loans and advances. The world that we live in is a very tough, twisted place. You have to be willing to do whatever’s necessary to get the job done. And yet, the littlest things might be keeping you out of financial prosperity altogether. You see, the mindset that you have about money plays a heavy role in what type of financial blueprint you’ll be able to achieve. If you have a deep disgust for the wealthy, there’s no way that you’re actually going to become one of them. You can’t be something that you hate. You can’t embrace a whole lifestyle that’s chock full of things that you dislike. You cannot feel like you’re going to be sick every time you see someone with means walking by you. These attitudes play out in how you save and how you spend. If you believe that you can have a comfortable life and you’re positive towards those that do already, you stand a much better chance to get the job done.

Financial Prosperity

Emotional distress also plays a role in it. It could be keeping you out of the type of life that you want because it messes with your mindset and it definitely messes with your worldview. There’s something special about getting things done financially. You feel good when you can provide for your family, but is that all you think you are? Is that all you think that you can be? Is that everything that you think you can achieve? The truth of the matter is that you have to be ready, willing, and able to fight for what you feel is the right course of action to take. Otherwise, you’ll just end up spinning your wheels, which isn’t a good sign anyway. You get to make so many good chances when you really think about it, that it doesn’t make sense to skip over the heavy lifting.

The bottom line is that if you want to have things be different, you have to start being different. Look at your budget — if you have one at this time. And if you don’t have one, now is the perfect time to think about getting a budget. You don’t want to sit there thinking that the road to being financially stable is paved with terrible things all of the time. Continue reading

Credit Cards & Scoring

Before a Credit Card company accepts or rejects your application for a credit card they will invariably undertake a credit review to establish if you are a good or bad credit risk.  They will do this in two principle ways:  they will conduct a credit check and credit scoring review.

What is a credit check?

A credit check will be made on factual information held about you on a credit register.  The are three main credit reference agencies collecting and holding information on us. These are Equifax, Experian and Callcredit.  The information these agencies hold will allow the lender to check details including your name and address, your credit history with other lenders, as well as any County Court Judgements (CCJ’s) or defaults recorded against your name.  Together this information will form your ‘credit refererence’.  This credit reference therefore will determine your ability to secure a credit card and borrow money at attractive rates of interest.

credit reviewWhat is Credit Scoring?

Credit scoring is a method of rating your credit application by applying a value or ‘score’ to the answers that you provide when completing your credit application.  A lender will hold their scoring system confidential, but it is likely they will award scores based on things like: how long you have been resident at your current address, how long you have held your bank account, your occupation and how long you have been employed in your current job, and your annual household income.

You should, at any rate, regularly check your credit reference files yourself so you can see what the lenders or credit card companies are seeing. Another advantage is that It will also help you know if anyone is fraudulently using your name to open new credit agreements.  The main credit reference agencies are Experian and Equifax and you should check them both if only to confirm that the information they hold on you is correct.  The third agency, Callcredit, is a fairly new company. Continue reading

Consumers Fight Back – Government Comes Down on Some Pension Charges

These days, it feels like just about everyone is interested in taking from your pension in the form of fees. Thankfully, Government is finally saying that enough is enough. New rules are in place now that ban companies from forcing consultant’s charges on their employees who join automatic-enrollment pension plans.

External companies can indeed still give advice to firms about pensions, but the trouble comes in that employers can pass this cost to the staff. Advocates of financial responsibility in the marketplace have indicated that this can definitely eat into first year savings. Consumers are definitely fighting back in a big way.

One of the new changes is that there is a cap being placed on default funds — the funds where your money is invested unless you choose to put it somewhere else. This is can be quite the rip off, considering that you’re already taking a lot of risk on the marketplace. You get to make sure that you finally get to let your pension account grow. Some people feel that their pension would grow better if they had less fees, and they’re absolutely right.

Pension ChargesIf you’re going to take advantage of pension plans in the workplace, you really need to watch the market. Don’t just let them dump your money into a default account. Steven Webb, the pensions minister, is rolling out new proposals to try to protect consumers. The truth is that it really needs to be a hybrid approach. You need to watch out for your own interests, and then you also need to have protection in the marketplace from the obvious rip offs. It’s really a give and take type of thing, when you really think about it.

The pension age is increasing to 67 in a few years, which means that savers really need to be aware of all for the fast-paced changes in the marketplace. Now is definitely the time to get things moving forward, so don’t get behind in the news. Good times are ahead for consumers, slowly but surely.

Habits that keeps You Poor

One of the top things that we like to talk about in the world of personal finance would be to try to get as much money as possible. Even if you don’t want to be Bill Gates or Sir Richard Branson wealthy, chances are good that you still want enough money to provide for your family no matter what happens in the world around you. There’s nothing wrong with that at all. As we looked back on 5 years of providing personal finance information, we found that there are some habits that might be keeping you from having the type of money that really lets you be comfortable. Below are a few of these listed out for you.

First and foremost, it’s the tendency to spend your money when you’re young and you feel like it’s coming in buckets. It’s easy to think that you have plenty of time to save for retirement, but do you really? That can be a hard pill to swallow when you’re 55 and you need to make sure that the money that you’ve scraped together manages to last. What would you really do if you had to come up with money that’s outside your small budget? If you start saving, you won’t have to answer that question at all. You’ll be too busy making sure that your life is filled with incredible experiences. That’s just the way it is.

You get to jump in and save while it’s on your mind. People say that they don’t have money to save, but this is a habit of the eternally broke. Is that harsh, yes, but I’m not trying to be. I’m trying to warn you before you walk down a path that you can’t escape from.

bad habitsThat’s an important point to keep in mind. This isn’t something that will improve itself overnight. In order to really get the benefits that you’re looking for, you have to be able to make better decisions. Yes, there’s going to be pressure to do what your friends are doing. However, if your friends are anything like my friends were, they aren’t going to be thinking about their health or their finances.

I grew up with a circle of friends that had to have all of the latest stuff. As we got jobs and started seeing more money coming in, we thought we’d never have a point where we would be skint. Unfortunately, I got sick and I had to live off of my savings. My friend also got sick, but he didn’t have any savings to live off of. He had to plead with his mum to move back home, which is downright embarrassing when you’re an adult.

If you miss monthly payment son bills, you’re going to be hurting your credit rating big time. This is something that I wish someone had told me when I first started out with credit cards. I was also told that if I could just come up with the minimum payment, everything would be fine and there would be nothing to worry about. Unfortunately, I found myself caught up in a bad situation. I knew that I needed help, but everyone told me to just keep making those monthly minimums. All that really did was take care of the interest. It didn’t make much of a dent in my principal. I was lucky enough to get bailed out by my grandmother, but I learned a very important lesson — just because someone said that you should be paying the minimum doesn’t mean that’s where you have to leave everything. You have to make sure that you’re protecting your own interests at all times. Sure, some people mean well but they might not have much more financial knowledge than what you have. Continue reading

Are Energy Bills Going to Become the New Mortgage?

We hate to get sensational, but there’s a new report out suggesting that in five years, energy bills could actually become more expensive than your average monthly mortgage payment. Now say that three times fast, and you’ll still be confused… and agitated.

We’re not trying to make this into a joke, not at all. The truth is that a lot of people are looking at the way energy bills are going, and they’re dying for some sort of relief. It can be hard to really see the type of relief that you’re looking for, but the reality is that it’s right under your nose.

Energy Bills

Mr. Ian McCaig of First Utility has been waving the warning flag, and he wants people to start changing the way that you’re using their energy currently. He suggests wearing more layers and lowering the temperature in the home so that the house isn’t running as hot. This can be something that cuts down on consumption and therefore on the bill, but is he aiming the finger of blame in the right direction?

Some feel that McCaig’s comments only added fuel to the fire. Energy policies need to be reformed, and there’s just no way around that at all. You have to be able to get things underway on your terms, not anyone else’s. That’s going to be the key to getting everything to fall naturally into place.

You are better off thinking about everything involved in the world of energy as it relates to your home’s consumption and no one else’s consumption.

There have been increased calls for alternative energy, but only time will tell if these calls go answered or not.

We will keep you posted if there are actual changes in the energy policy. Although First Utility is issuing statements about energy savings, they are actually raising the energy tariffs by 18%!

Clearly, you have to take everything you read on the news wire with a grain of salt, but these are going to be some very interesting times indeed.

UK Adults Looking More to Inheritance But Is That The Way to Go

Inheritance. The word makes us immediately think of rich uncles that we never got to meet, but who thought about us. Aww, that’s just precious. The reality is that a lot of Britons are hoping for an inheritance, which we think is definitely terrible financial advice. The reality is that you don’t want to try to go on just an inheritance — it may never come. Even if you know that your aging parents have done “all the right things” and built up quite the savings, there are little things that really can take away from your inheritance chances.

First and foremost, you never know if they would rather leave their assets to charity or not. If they feel that you can manage on your own, they may start thinking about the millions of people suffering all around the world. There are plenty of people far worse off than you, but you probably aren’t thinking about that. You’re hoping that your parents will remember you. They may, but they may feel that you should be grateful for what has already been given. Think about it — aren’t there things that you could be doing with your money, but choose not to?

InheritanceWhat about their home — surely they will leave that to you, right? Don’t be so sure. Many retirement-age Britons are choosing to go with a lifetime mortgage of some type. This means that they are giving the house over to the mortgage company after they pass on or need to move to long term care. This means that it’s no longer about passing property to their heirs — it’s about making sure that they have as comfortable of a retirement as possible. Considering the cost of living has increased dramatically since you were a child, it’s no surprise that your parents are probably trying to do everything they can to have some sort of comfort. When you are ready to reach retirement age, you will certainly appreciate the type of strain that they were really under at the time.

A lifetime mortgage doesn’t wipe out every last bit of the inheritance that you would receive, but if you’re hoping to quit your job and live off your inheritance, it just won’t happen. Worse case is that you’ll receive enough to have a few fancy dinners and that’s about it, or something to put in care of your children’s education later down the road.

Thinking about the future can make you feel tired, and with good reason — things aren’t at their best. Yet that doesn’t mean that the best cannot come eventually. You just need to make sure that you’re focusing on your own financial blueprint more than what your parents are doing. You only have a finite amount of time left with your parents, so it’s time to enjoy them and not worry about what they’re going to leave to you. That’s the real way to go!

Check Into OEIC’s Today for a Hassle Free Way to Grow Wealth

Trying to save money is one thing…but what about growing it? As promised, we are continuing our series on investing your money in the UK for your own benefit. Investing doesn’t have to be something that’s impossible or hard to understand. Simply put, it’s all about making sure that you can truly handle your money needs over time. Inflation erodes your purchasing power, which means that you have to grow your money in order to just keep up with the market. Now imagine if you just buried your money in the backyard — it would be worth a lot less than if you had put your money into the right accounts. But every guide says that, and very few actually tell you where to place your money.

It’s time to take a closer look at the OEIC, otherwise known as the Open Ended Investment Company. This is a form of a shared investment fund, and it’s going to be used to buy directly from the marketplace. It’s like a pool of money. When the pool is big, better investments can be selected. When the pool is small, all of the investors in the group have to take on a lot more risk. Therefore, OEIC’s with big pools of investors have more spending power and a better method of diversification than individuals do.

Open Ended Investment CompanyThe open ended aspect is what investors really like — they can buy or sell shares as they please and they don’t have to tell anyone about it. You will see that the buy and sell price of shares are identical. You can also get back what you originally paid if you’re ready to exit, but you’ll benefit so much more if you leave your money in. The shares that you purchase as entrance into the fund are generated automatically. Your money is pooled with other investors to build a portfolio. Portfolios will have power on their own — this is where the value comes into play. If the value of all of the stocks, bonds, and other assets within the portfolio go up, then your shares grow to represent this principle.

Keep in mind that there are risks involved. You do run the risk of losing more than what you’ve invested, especially if you have an automatically investment plan set up.

You’re not going to be alone within the OEIC. Master level investing professionals manage these funds. They know that if they don’t do a good job, they’ll face a mass exodus of investors leaving the fund, cutting the money supply for everyone else. Remember what we said about big groups? Well, these investors need to make sure that they leave the door open for everyone below them to trust them. Continue reading