Monthly archive for April, 2014
LV= and Just Retirement have each launched one-year fixed-term annuities in response to the recent post-Budget shakeup to the pensions system. The reforms, which come into force in April 2015, will mean that anyone aged 55 or over will be able to take their entire pension pot as cash if they wish to do so, rather than having to buy an annuity.
Bridging the gap
The new products launched by LV= and Just Retirement consist of one-year fixed-term annuities, and are designed for people at the brink of retirement who want to defer making a long-lasting decision about how they will take their pension income in retirement until new rules come into effect next year.
Although the increases to the ISA allowance are to be received with open arms, there is no getting away from the fact that ISA savers continue to be hammered by low interest rates. At one of the more busy times of the ISA calendar, savers have been dealt a further blow by additional rate cuts, resulting in those who are most organised being hit the hardest. We take a look at recent developments and what the ISA market has to offer, as well as review some of the options being considered in light of the changes announced in the Budget.
Economic latest – interest rates held, inflation down
The Bank of England’s Monetary Policy Committee voted unanimously again this month to keep the Bank’s base rate on hold at 0.5%, which means it has now been at this record low for 62 consecutive months, continuing well into its sixth year.
Better news for savers was that inflation fell to 1.6%, its lowest level since October 2009 and well under the Bank’s 2% target. Inflation has now almost halved from a peak of 2.9% last June.
Another blow to savers as savings rates are cut
However, these two elements of our economy alone do not tell the whole story. The interaction between interest rates, inflation and savings rates is an important one since looking at one without giving consideration to the impact of the other two can be both misleading and costly. Although the reduction to the headline rate of inflation is at first sight great news, this does not necessarily mean savers will automatically benefit.
Much has happened recently in the world of investment funds with some major changes taking effect from 6th April in terms of how investors access funds and how they are charged. With this in mind, we thought you might like a reminder of why many investors have already chosen the Fair Investment Fund Supermarket.
Here’s our Top 10 reasons why…
1. Extensive fund choice and our Select Range
Choose from over 2,100 investment funds from over 95 fund management groups including income funds, low cost trackers and managed funds.
2. Select Range of funds
Our Select Range has been created to help you choose by combining value for money with analysis carried out by leading independent research company Morningstar OBSR.
3. Huge savings on initial charges and free switching
Most of the funds available are offered at 0% initial charge saving you up to 5.5% when you invest, equivalent to £653 on a £11,880 ISA. We also offer low and transparent annual charging and no additional charges for switching.
Regardless of what is happening in the UK economy, one of the most frequent demands put on our capital is to provide us with income. From fully capital protected bank deposits paying a fixed or variable rate of interest, a capital at risk investment paying a variable income and everything in between, the options are vast. With this in mind, we bring you five bond funds paying at least 5% income, all from our Select Range of investment funds and all available at 0% initial charge via the Fair Investment Fund Supermarket.
In putting together our bond fund selections, we used the following criteria:
Paying at least 5% income
All of the funds have a distribution yield* of at least 5%. The lowest income is 5.25% whilst the top paying fund is currently yielding 6.60%.
0% initial charge
All of the funds have a 0% initial charge. The Fair Investment Fund Supermarket also offers investors access to lower cost share classes not available when investing directly resulting in savings of up to 4.5% on standard initial charges or £450 per £10,000 invested.
Payment frequency of at least quarterly
On the basis that receiving income at least quarterly was an important consideration for investors seeking income, three of the funds pay income quarterly whilst the other two pay monthly.
Taken from our Select Range of funds
Our Select Range of funds is based on investment analysis carried out by leading independent research and ratings company Morningstar OBSR (click here to read more about how our Select Range of funds is selected).
Minimum Bronze rating
The top three ratings given by Morningstar OBSR, Gold, Silver and Bronze, indicate that a fund is highly regarded by their team of analysts. The very highest ratings are given to funds which, in the analysts’ opinion, have the strongest ability to outperform their benchmark and peers over time, within the context of the risks taken – the stronger the conviction, the higher the rating. Two of the funds have a Bronze analyst rating, one Silver and two Gold.
For both savers and investors, the start of the new tax year brings with it a new and increased ISA allowance which is available to use now, even if you invested last year’s allowance right at the last minute. The Budget also brought with it an increased allowance available from 1st July but for those investors looking to make the most of the current increased allowance and to start receiving tax free income now, we take a look our most popular income plan during 2013 and the 2014 ISA season and compare it to some high yielding investment funds.
New ISA allowance available now
Further to the Budget, this year sees big changes for ISAs and it is very good news for investors as the full allowance will increase significantly to £15,000 on 1st July. Between now and then we also have a new ISA allowance of £11,880 with the same rules applying as for the last tax year – you can invest the full allowance in a stocks and shares ISA or save up to half (£5,940) in a cash ISA, investing the rest in a stocks and shares ISA. Remember, you are currently able to transfer Cash ISAs into Stocks and Shares ISA but not the other way around.
From 1st July, instead of having separate allowances for cash and investments there will be one new allowance of £15,000 each tax year and it will be up to you how much of this you put into cash and investments. Those who have used the £11,820 already will still be able to invest another £3,120 and transfers between cash and investment ISAs will become fully flexible and you will be able to move between the two unrestricted. By maximising your new ISA allowance as soon as possible you can benefit from tax free income straight away. So why wait?
Pensions are being radically transformed under plans announced in the 2014 Budget. From April 2015, retirees will be given far more freedom over how they use their pension fund. Here we explain how the forthcoming changes could affect you.
How are pensions changing?
The most radical changes will come into force in April 2015. Upon reaching retirement age, savers will have access to all the money in their pension pots and will, after tax, be able to do more or less what they want with it.
Under current rules, savers can take up to 25% of their pension pot as a tax free lump sum upon retirement. If you want to take a larger lump sum, you can, but if you go above certain limits you have to pay a 55% tax.
Under the new rules, this facility will remain but the tax on withdrawing the rest of the cash will also be cut to standard income tax rates, making it easier for people to use their entire fund as they wish.