Your Financial Journey with BlueSKY
We work with business owners, executives and professionals, typically aged 45+. As well as offering the full range of financial planning services, we have a specialist expertise in pension sharing arrangements during divorce. Although many of our clients are capable of managing their own affairs they often don’t have the time or inclination to do so. Understanding personal objectives and goals is fundamental to our role.
Holding the status of Chartered Financial Planners means that our advisers have achieved some of the highest qualification levels in our industry and adhere to a strict code of ethics and standards. It is the most widely accepted 'gold standard' qualification available for professional financial planners/financial advisers in the UK.
BlueSKY offer a range of services to assist in the Divorce process. We specialise in the technical work around pension sharing for divorcing couples providing specialist reports, and assisting both solicitors and their clients in a way that is clear and straightforward. This is a vital part of the divorce process, especially when financial assets are significant or of a complex nature.
Many of our clients hold Premium Bonds. Many report winning ‘regularly’. I don’t think we only meet lucky clients, so what really is the deal?
The reality is that as a percentage of all the money held in premium bonds (about £67M) the payouts equate to 1.15% per annum interest. That is under half the current rate of inflation so Premium Bond money is currently losing its buying power. The odds of winning the £1m jackpot per £1 bond are about 1 in 33bn. In my book, that’s not much of a chance!
Many of our clients have held these bonds for many years and although they do offer quick access to the cash if needed and there is no investment risk, one wonders if the money could have been put to better use on the stock market.
Increases in State Pension age….
Millions will now have to work an extra year before getting their State Pension. Increases to age 68 are now applicable to many.
To put this in perspective, when the State Pension was introduced in 1908 the Government would have only expected to pay the State Pension for an average of 9 years. It’s now 20 years that the Government can expect to have to pay the State Pension for!
The cost of the State Pension is massive. The Government has overspent. The housekeeping exercise means that something has to give!
Have you got enough money to retire on if the Government keep changing the goalposts?
Find out your State Pension age at:-
The day you die is important!
For those who celebrate the news that longevity is increasing may wish to pause for thought. According to research from UCL increases in longevity are now slowing. The fear is that we may be following America who now have falling longevity. Of greater concern is that the years that we live in poor health are increasing. That’s not much fun if you are the one in poor health or you are the State who are trying to fund this increasing cost of care.
The day you die is important for many reasons. For the financial planner and their client it is the day when you want to know that there were sufficient funds for you to live on. Although there is always an element of guesswork, Cashflow modelling helps demystify how the future might look.
Transferring your pension – or not?
In recent times the transfer values of some final salary pension schemes have increased significantly. Unsurprisingly, this has triggered lots of enquiries. Whether transferring is a good idea or not is an individual matter and often a complex blend of the maths and your personal circumstances and objectives.
There are no shortcuts to the right advice!
Safe as Houses?
Has property been a good investment in the past and what is the forecast for property growth in the future?
The Sunday Times ‘Money’ commissioned a report that analysed the growth of total household wealth in pensions and property from 2008 to 2016 drawing on data from the Office of National Statistics. Interestingly it found that the growth in pension wealth has outstripped that in property since the 2008 credit crunch in every part of the country, including London!
Data from the Land Registry Office shows house prices have only grown by an average of 3% per annum since 2005. This includes an 18.6% fall in prices between April 07 and May 09.
Unlike many other nations, the British psyche is that home ownership is important. We should remember that property is primarily a place to live and not an investment. Investing into property may be no better (or worse) than alternative investment strategies. This includes Buy-to-let property which, since recent changes in taxation legislation, is one of the least tax efficient ways to invest (as well as having other associated letting issues the owner will need to manage).
Borrowing to make things good..
It’s a concern to read that debt levels are increasing again to levels seen in 2008 when the UK experienced a financial crisis. The FCA estimate that 2 million people are carrying persistent debt which is defined as when an individual pays more in interest and fee payments over 18 months than the amount borrowed in the first place!
The strength of the economy depends on people spending money, but borrowing to facilitate this can have disastrous consequences. We should learn from the past!
The UK stock market fell today amidst concerns that the UK economy might be in for a tough ride. Brexit uncertainty, falling retail sales and the possibility of rising interest rates have all contributed to concerns. Again, this supports our conviction that clients should invest in diversified portfolios that also invest in markets and assets other than UK stocks and shares.
Property or the stock market?
We recently wrote an article on the increase in the UK’s pension wealth being greater than the increase in individual’s property wealth since 2008.
As part of this exercise we looked at the historic growth in property prices compared with the FTSE.
Since January 2005 the average UK property price has increased at 2.9% per annum (source – land registry) while the FTSE grew at 3.2% per annum. Both these figures include their respective ‘crashes’ and thus a reasonable comparison and explanation for the perhaps lower than expected returns.
While one can argue that there is no clear winner here, our belief is that neither is an appropriate investment on their own for the average investor. To have all your eggs in one basket is a risky ride!
Diversification is key. Accessing investments with a broad range of investments means returns are more predictable and less volatile. In the case of buy-to-let property it is certainly less hassle too!
Pensions – Start saving now!
The Sunday Times reveals some interesting figures on the cost of delay when starting saving towards your retirement.
If you want an annual income in retirement of the national average earnings (about £27,000), you might get around £8,300 from a State pension (dependent on your National Insurance record), so will have to save for the difference.
Figures produced by the Prudential estimate that if you are 25 and retire at age 68, you will need to save £262 each month to reach this target.
If you delay starting to age 35 then this figure increases to £437 per month.
If you delay starting to age 45 then it’s £794 per month.
Unless you have other plans for an income in retirement, pensions are one of the most effective way to save due to the tax advantages.
It’s never too late to start, but it will cost you more the longer you leave it!
What is sustainable income?
In an endeavor to simplify a complex area some financial institutions publish what they believe to be the ‘safe’ withdrawal rate that can be made from investments before funds are exhausted. Typically, this is of relevance to retiring individuals who have accumulated savings and need to know how long they will last. Although not an exact science by any imagination many studies in the past have indicated that a return of 4% per annum is sustainable in retirement.
Aegon have recently published a report that has downgraded the 4% to 3.23%. A sign of perhaps a less certain future and increasing longevity.
This does of course depend on many factors and the only way to understand withdrawal rates that are relevant to you as an individual is to seek further advice.
Look no further!
Transferring from your company pension – or not….
Recent changes in the way many final salary pension schemes are valued have led to a significant increase in the resulting values. This has resulted in an increase in inquiries from clients considering transferring out of their pensions. Approach with caution!
While there are some compelling reasons why a transfer out of a final salary pension might be in your interest, the loss of guarantees in particular needs careful consideration.
I’m afraid that the world of pensions is a complex one and although personal pensions are now enjoying greater flexibility, simplicity and lower charges than ever, the same cannot be said for final salary pensions.
Pensions investment policy expert and economist, Ros Altmann has written an article on this subject at:-
State Pension Triple Lock – A guarantee that might not be!
Introduced in 2010 the Triple lock guaranteed to increase the State Pension each year by the higher of:-
It seems now though that this might be unsustainable due to the expense of providing this guarantee. It’s currently a political football.
To our minds it was a pretty generous guarantee in the first place. Better than most final salary schemes. It was perhaps a bit of political positioning during the coalition years.
It does, of course, highlight that nothing is guaranteed. Recently, nothing in the world of pensions has stayed the same for very long, which we find frustrating!
Taking ownership, understanding the issues and planning for the future seems to be the best course of action. You can’t rely on anyone else!