Some 19% of people with savings and investments worth more than £250,000 are considering a new life overseas, which is up from 17% six months ago and 14 per cent a year ago.

The figures suggest that at least 500,000 people with that level of personal wealth may leave the UK in the next two years.

Investing in improving the infrastructure, such as roads, railways and communications networks, is seen as the most important way to make the UK a more attractive place to live, with 61 per cent of wealthy people choosing this option.

But cutting regulatory red tape for businesses, lowering taxes and improving public services such as healthcare, education and the police were all high on the agenda.

Nicholas Boys-Smith, director at Lloyds TSB International Wealth, which carried out the survey, said: ‘While the figures strongly suggest we won’t see a mass exodus, it is clear that a significant and growing minority see opportunity and a better quality of life overseas.’

Crime and anti-social behaviour is the most popular reason for people to contemplate leaving the UK, chosen by 56 per cent.

While the figures do reveal that a minority of wealthy people are discontent about life in the UK, a majority of 62% said they are currently happy with the UK as a place to live.

Some 42% of wealthy Britons think the UK offers a worse quality of life than other developed countries, while 41% think life in Britain is generally more stressful than life overseas.

Source – DM

If you are a higher rate taxpayer that currently receives child benefit payments you could lose thousands of pounds a year when changes to child benefit come in to effect in April 2013.

Depending on how much you earn it may be possible to reduce your taxable income below the 40% higher rate tax threshold so you still keep these payments.

Here are your options:

Invest in a pension

The quickest and probably the easiest way to keep your child benefit is to increase, or begin making contributions to a pension.

This should be done by salary sacrifice and can be paid into an occupational pension run by your employer or to an independent personal pension.

Doing this will reduce your taxable pay and, depending on your contribution, could bring you beneath the higher tax rate threshold so you get to keep your child benefit payments.

If you have a family to clothe and feed, you may feel that paying into a pension is lower down your list of priorities, however putting more into your pension could leave you better off come April 2013.

For a family with 3 children, child benefit is currently worth £2,449.20 a year, so paying an extra £1,000 or £2,000 in pension contributions would not only boost your retirement savings but is likely to leave you better off overall as well.

There are two main was to set this up, either by simply increasing the amount of your salary that is paid into your pension, or by sacrificing a part of your salary (perhaps a pending pay rise) in exchange for greater pension contributions from your employer.

Throw into the mix the tax relief that you get when you pay into a personal pension and opting to keep under the higher tax threshold this way can be very tax effective.

Childcare vouchers

Purchasing childcare vouchers from your pre-tax pay is another way to reduce your taxable income and could help you keep your child benefit.

Childcare vouchers can be used to pay for registered childcare at a nursery, playschool, childminder or after-school club.

Basic rate tax payers purchasing childcare vouchers for the first time can buy up to £55 of vouchers a week. So if your current salary is just over the higher rate threshold it’s worth investigating this option.

Buying the full £55 a week of childcare vouchers could reduce your taxable income by £2,916 a year, which may be a sufficient amount for you to be classed as a basic rate tax payer.

This is because tax-exempt benefits like childcare vouchers are excluded from the tax rate assessment. So, for the purpose of childcare vouchers, you can earn up to £45,391 a year before being classed as a higher rate tax payer.

Even if your child is too young to be left in child care, you can still purchase vouchers and use them at a later date. Although each voucher will have an expiry date they tend to last a long time.

Register as a company

Reducing your pre-tax salary by purchasing childcare vouchers or investing in a pension will be the two options open to most people worried about losing their child benefit payments.

However, depending on your circumstances and terms of your employment you may be able to keep you child benefit by setting up a company.

Essentially this involves setting up your own private limited company, paying yourself a minimal salary and declaring the rest of the money you earn as dividends from your company.

However, this option is best suited to the self-employed as well as freelancers and consultants not directly employed by a business and simply isn’t an option if you are a full time employee earning an annual salary.

This option could also make your personal finances considerably more complicated so you may need to seek advice from an accountant to ensure you are paying the correct levels of tax on all areas.

Change your working patterns

If you or your partner are a higher rate tax payer but the other perhaps works part time or stays at home, it may be worth considering changing your working patterns so you remain eligible for child benefit payments.

The higher earner could take advantage of flexible working arrangements or switch to lighter working hours to drop below the income threshold, while the lower earner could look at increasing their hours if they work part time, or finding some other means of making up the difference.

While this may not be a feasible option for some couples, balancing your salaries a little more evenly could mean you get to keep the child benefit payments and leave you better off overall.

Salary sacrifice?

You may think that you can sign up for a host of different salary sacrifice schemes in order to reduce your income.However company cars, phones and other benefits are considered to be benefits-in-kind and part of your salary.

This means that you don’t get the same perceived salary deduction as with paying into a pension or purchasing child care vouchers.

Take a pay cut?
Taking a pay cut to reduce your income below the higher rate tax threshold so that you can keep your child benefit may seem like the easiest option.

However, while doing this could mean you lose less than doing nothing at all, paying the money you would have scarified into a pension would essentially have the same effect.

Regardless of your attitude to pensions, investing in your future in this way will leave you better off rather than just sacrificing the money so it’s very much worth considering.

Before you take any action to reduce your taxable income it’s important to research the full implications so that you make the right decision for your household finances.

Source

Understanding how any change to the base rate might affect homeowners in the UK requires an understanding of the base rate itself, which has remained at 0.5 per cent since March 2009.

The base rate, or bank rate, is the amount or rate of interest set by the Bank of England (or any central bank). The bank rate affects financial dealings with a number of intermediaries, but most notably governs the amount of interest charged to commercial banks.

The bank rate is capable, albeit indirectly, of determining the cost of borrowing set by commercial lenders. A low base rate, for example, enables commercial banks and lenders to offer lower rates on loans, mortgages and other forms of credit.

Unfortunately, a high base rate usually has the reverse effect, with lenders keen to preserve their profit margins by passing some or most of the cost on to consumers.

In the UK, the base rate has been held steady at 0.5 per cent by the Bank of England’s Monetary Policy Committee (MPC) for the past couple of years or so.

At the beginning of 2011, senior economists suggested it was inevitable that the bank rate would rise sooner or later, with many investors expecting multiple incremental increases from the middle of the year.

Defying all expectations, by the third quarter of 2011, the MPC had resisted the temptation to increase the base rate, citing economic instability as the main reason why no change was necessary.

The base rate is a useful control on inflation, however and inflation is currently increasing at a rapid rate, from 4 per cent in January to 5.2 per cent in September. Expectations of a base rate rise have never been stronger.

If the MPC does choose to increase the base rate to control inflation, as it will have to do at some point, the consequences for homeowners could be extremely serious.

Although homeowners with fixed rate mortgages ought to be insulated from increasing base rates for a time, homeowners with variable mortgages or tracker deals could suffer badly.

Tracker deals and variable rate mortgages are at the mercy of changes to the base rate, which, as mentioned above, has been unchanged since March 2009.

The low base rate has given rise to some truly exceptional mortgage deals, with one UK couple in particular being asked to pay just 1p each month on a two-year, interest-only tracker, which offered 1.01 per cent less than the base rate.

Whilst most deals that seemed too good to be true have been taken off the market, tracker and variable rate mortgages have continued to enjoy huge benefits from the low base rate.

If, or when, the bank rate increases, however, commercial banks will be quick to increase mortgage rates. Homeowners with variable rate mortgages could find themselves unable to afford repayments in a matter of months from the first base rate rise.

As house prices in the UK continue to fall, rising mortgage rates stimulated by increasing base rates would almost certainly steer hundreds if not thousands of homeowners towards negative equity.

There are some ideas that never vary. When discussing financial planning, the objective is to maximize wealth. Maximizing wealth does not mean a person has to become rich first. It also can be achieved by getting a better return on any savings or investments a person may own.

This is done by making the most of any investment dollar, by comparing interest rates on savings accounts and by paying down debt. The less money used to reduce debt is more money that can earn interest.

Another objective of financial planning is to manage spending. Most people spend most of their income every month, leaving very little for savings. So it is important spending is done wisely with the intent there is some long-term gain for every dollar lost.

Even when buying groceries, buy those items that contribute to the long-term health of the family and avoid a lot of empty calories. Make every dollar count.

Impulse buying rarely has any long-term gain and thwarts the family budget. If a person can reduce spending by as little as 5 percent or 10 percent, that’s like getting a 5- to 10-percent raise.

In trying to develop a sound financial plan, it is best to start with a budget. Although there are many computer programs that can make this easy, budgeting has been done long before computers were invented and it is not a hard thing to do with just pencil and paper.

List the income received and determine where that income will be spent. That is all a budget is. If an expenditure is desired but does not fit within the budget, it should not be bought.

If an expenditure is required but does not fit within the budget, then the expense must be offset by reduced spending somewhere else. Control over money is a big part of financial planning.

Not making an effective financial plan can lead to consequences that could be felt for many years to come. Mounting debts, poor health due to increased stress and a poorer standard of living are just some of the results of poor financial planning.

Creditors must be paid, collection agencies could come knocking on the front door and personal property could be seized to repay unpaid debt. In addition, a person’s credit score can be severely impacted.

Interest charged on car loans or home loans are based on a person’s credit score. By having a high credit score, lending becomes easier and the interest rate charged might be lower than that charged to other people. An excellent credit score is above 800. A score above 750 is good.

Knowing the credit score in advance of taking out a loan can reduce the surprise of having a loan rejected. If the score is too low, then it is important to pay off debt, develop a savings program and manage money effectively to raise the score.

Source

The housing economy is going through difficult times and has been for the past few years. Previously, property sales were booming and prices constantly rising. Since then, a sharp market correction has taken place, along with a recession.

The impact of the recession, the banks going bust and the subsequent low growth periods, is that house prices are depressed, along with the sales market.

Many people are also in negative equity- having purchased houses at prices greater than they are worth today. This causes problems in two cases – when the owner wishes to sell, or when they wish to remortgage.

Choosing the best mortgage requires a careful assessment of your current situation. If you are a first time buyer, you will need a deposit of at least 10%, but ideally more – around 20 or 30%.

If you are remortgaging, you will need the equivalent amount of equity within your home, or a cash amount to put towards the new mortgage.

Simply put, the lower the percentage of mortgage to home value, the better interest rates you will be offered, reflecting the level of risk the bank takes on by lending to you.

Lower lending mortgages also tend to have lower fees. Bigger ones will attract expensive higher lending fees, which should be taken into consideration when weighing up different mortgages.

A mortgage calculator is a useful tool when searching for and assessing the best mortgage. You can find a mortgage calculator on most online mortgage price comparison sites and other financial websites.

Simply input details of your preferred mortgages into the mortgage calculator, with information such as the amount you wish to borrow, the lending period and the interest rate and the mortgage calculator will tell you what the monthly payment would be.

The mortgage calculator is also useful for working out the impact of interest rate changes on monthly payments, if you are looking at getting a variable rate mortgage.

Variable rate mortgages track the BoE base rate, which is at an historic low. However, it will rise again at some point and this will increase payments. Fixed rate mortgages can be better options for those on tight budgets, as they offer certainty of payments over the mortgage period.

Additionally, most online price comparison sites will allow you to start an application online and also check your eligibility online in terms of lending criteria (which include information such as outstanding debts and income).

It can also be valuable to get advice from a professional mortgage advisor, but choose an independent one who will charge you a fee for market-wide, objective advice. A tied advisor will be paid by commission and therefore tempted to offer products that offer the greatest commission, rather than those that are most suited for your circumstances. Research and do your sums before entering into the biggest debt contract you are likely to ever hold!

Finally, remember that mortgages are best reviewed every few years, particularly when a promotional period has ended and the SVR applies (unless the SVR is very low, as it is now). Banks rely on customer apathy to make their money, so keep scouting around for new deals when your current favourable mortgage terms elapse and you’ll likely shave off thousands of pounds in interest over the life of your mortgage.

After the festivities are over, and with the dawn of a new month, a new realization comes home. For the fortunate few, it is the reminder to fund your bank account, as the loan EMI is due after a week. For others the money simply flew out of the bank account.

It is time for us to act like the fund manager of a mutual fund or investment fund. Taking informed decisions to manage the asset that we call home and the liability that we call housing loan. By being prudent, you can get high “returns” in the form of saving on interest outflow.

Fund Management When Carrying a Home Loan

As a fund manager of the house, one has to find ways to maximize the benefits of the cash flows. Make a list of all the loans and savings/investments that you have made. Do you find places where the savings/investment is giving lesser returns than the loan rates?

This can typically be seen with your endowment insurance plans, your EPF and PPF, the postal deposits, sometimes-even ULIPs. Why should you be invested in something when you are paying higher interest to somebody else?

It is better to close all or most of these lesser returns savings/investments and divert the funds to close the home loan.

Care should however be taken to replace an endowment insurance plan with a term plan of higher cover. Your employer and your EPF officer will allow withdrawal of funds from the EPF account for buying and closing the loan of a house.

The PPF is not so flexible with letting go of your money. ULIPs and the postal deposits can be closed only after the stipulated 3 years of lock-in.

Ways to repay your debt quickly:

There are ways to come out of the EMIs and make your loan tenure shorter:
1. Partial pre-payment
2. Switching to a lower rate
3. Increasing the EMI

Now let us look at the options in more detail. The best part is that, the options do not in any way add to your existing budget.

Partial Pre-Payment

This is the easiest way to close a housing loan faster. The method is to make use of any one-time income like a bonus, salary arrears, gifts from friends/relatives, any wind fall gains from shares, property sold, deposits closed, tax saving investments maturing, closure of savings that are giving you lesser returns than the housing loan, etc to partially close the housing loan.

The effect is that the one-time payments help to reduce the principal balance in the loan. And when the EMIs continue, they have lesser of the principal to cover.

So the same EMIs need a lesser time to close the loan. More earlier and more frequently the partial pre-payments happen the faster the loans close.

Banks generally allow partial pre-payment starting from Rs.10,000. There are no charges for partial pre-payment of housing loans.

Switching To a Lower Rate

The interest rates current are in a rising trend. There are times when the interest rates start going down too. Based on the interest rate reset period, different banks will reduce their rates at different times.

If the reset interest band of your lender is a wider band, you may be at a higher interest rate for a long time after other banks have started to reduce their rates.

Switching to a lower interest rate will shave off a few years from your housing loan. Care however has to be taken about not jumping too many times or with low interest rate differences.

This is because there is a charge for switching loans, i.e. prepayment penalty, which the RBI has been stressing, should be removed from the system. While some banks have already done away with it, some still charge if you do not pay from your own sources.

However, it could just be a matter of time till it is totally removed from the system easing the cost burden for the loan borrower further!

Do remember that property verification and other legal paperwork will have to be done afresh in the case of a loan transfer. Also, for a loan transfer to be effective you should have a clear track of having cleared all the EMIs on time, every time.

Increasing the EMI

This is another option to close the loan faster. If you can spare a portion of an increment to increase the EMI, considerable saving could be made.

For example a Rs.30,00,000/- loan for 20 years will need an EMI of Rs.28,950/-. If you can spare an additional Rs.2,300/- per month, the loan can be closed in 15 years itself.

The EMI can also be increased by making use of money that was going into an endowment insurance plan or a recurring deposit in a post office.

Increasing the EMI can be done at any point during the tenure of the loan. There are generally no charges for
increasing the EMI.

Summary

Only after closing the home loan does one really become the owner of the house. Closing the loan as soon as possible not only relieves the mental strain of carrying a debt but also releases more money into the family budget.

Source

The average British consumer spends up to £3,804 per year – or £317 every month – on repaying their credit cards, according to a new study published by Standard Life entitled ‘Your Commitments, Your Future’.

This means that Brits would spend over £152,160 on credit card payments alone over a 40 year period during their lifetime.

Unfortunately, British people don’t appear to be willing to put the same effort into their savings. People making monthly savings put £1,680 each year -only £140 every month- into savings and ISAs.

However, savings averages are higher – £154 a month- among people aged 45 to 54, with men among this age bracket saving up to £177 a month compared to the average £128 per month saved by women.

Overall, making monthly credit card payments is the most common action with 51% doing it every month. 44% of UK adults make monthly payments into savings and ISAs, and one in five is currently paying off a loan (21%).

‘Your Commitments, Your Future’

Considering these trends, Standard Life has launched the site knowyourcommitments.co.uk to help people understand their different commitments and enable them to plan ahead.

According to the site, Brits reach their financial commitment peak aged between 35-44 years old, spending £1,160 a month on 11 financial commitments.

Figures also show that people in that age bracket spend about 45 minutes every day thinking about their finances. While those making credit card payments spend over an hour per week thinking about it.

Spending time to find a good credit card and carry out a bank account comparison will help British consumers to save considerable money on their monthly expenses.

Source

“Too often, people put all of their efforts into their investments when they should be spending more time on other parts of their financial picture,” he says.

Smart Business spoke with Boone about how financial planning goes far beyond investments, what you need to be thinking about in your approach and how an experienced adviser can help you meet your goals.

How does retirement planning factor in to the big picture of financial planning?

The biggest question many people have is whether they have enough money to retire, and, if not, what sum do they need and what steps can they take to get there.

To help answer those questions, your adviser should collect your balance sheet information (which is a list of everything you own and everything you owe) and your personal income statement (how much you make and where it comes from, your taxes, the payments to your retirement and savings accounts, your regular payments and everything else you spend money on).

You’ll also need to inform your adviser about any expectations you have for inheritances or future income sources as well as changes you expect in the future in your income or expenses. Your adviser needs to know as much about your money as possible.

To assess how much money is enough to support your lifestyle for your remaining years, a good adviser will then make an attempt to project your cash inflows and outflows for every year for as long as you might live. T

his projection will tell you if your plans will work (i.e., you won’t run out of money before you die). If not, you should test various assumptions to determine what you need to do differently in order to get it to work: stay employed longer, save more money, spend less in retirement, or get more aggressive with your investments to help boost returns.

Knowledge is empowering. With your financial projections and knowing what you need to do to make things work, you can confidently modify how you do things so that you can achieve your retirement goal.

How important is estate and philanthropic planning?

You don’t have to be rich to need an estate plan. Documenting your wishes can be one of the most loving acts you can do, because, without guidance, your loved ones will have to pick up the pieces, which very often leads to arguments, hurt feelings and worse.

Whatever level of your wealth, having a will or trust will provide important guidance that your family members want from you about your assets. You also will need powers of attorney for health care and for financial matters, so that if you are incapacitated, people you trust can make decisions within the parameters you set.

For most parents, the first criterion after providing for the spouse is deciding how much is enough for the kids upon your death. Beyond that, it is possible for many of us to do important good for our communities and the causes we believe in, both by giving while we are alive and by leaving a portion of our estate to charity after death.

There are planned giving techniques that have specific tax aspects that bring benefits to the donor, to the charity and often to the family.

What is the role of savings, budgeting, cash flow management and debt management in financial planning?

Usually, the biggest factor under your control as to whether or not your retirement plans will work is your level of spending. You can’t control the markets and most people don’t have much control over their income. But, you are fully in charge of how you spend your money.

On the surface, how much you save is determined by how much of your income you spend. Instead of waiting to find out how much is left, good savers decide up front how much they want to save and automatically put it away before they start spending.

With debt management, the more debt you take on, the less flexibility you will have to make choices in the future. Under the right circumstances, using debt can be very beneficial, but borrowing too much or borrowing in the wrong way or for the wrong purpose can ruin a person’s life.

An adviser can help you think through these issues, based on what you want in the future, and help you implement good practices so you can be more in control of your finances, and your life.

What should people look for in a financial adviser?

When you are seeking a new adviser or have an existing one, you have a right to know about things that affect you — for example how much he or she will be paid if you buy a product that is being recommended.

I believe clients are best served by advisers who are independent and thus avoid the conflicts of interest inherent when they have products to sell while at the same time offering advice.

Do not hesitate to ask hard questions for your own information, but also as a test to assess whether the kinds of answers you get are ones with which you feel comfortable. The openness with which questions are answered can be key to ongoing trust.

You want an adviser experienced in your kinds of financial challenges and opportunities. Just because they’ve been around for a while doesn’t make them good at what you need. Relevant experience, education and training are critical.

Finally, and perhaps most importantly, you want an adviser who listens well. You are going to be talking about some very personal issues; you want them to pay attention, absorb it and learn from what you are telling them.

They have to understand you before they can determine what the best advice is for you.

Source

There are a wide range of payment types available for travellers and each have their own benefits and disadvantages, including different costs.

Firstly, of course, there’s cold, hard cash. It’s easily accessible and accepted everywhere, although you’ll probably need to change it into a local currency before you travel abroad.

The exception lies with certain countries that accept major currencies such as American dollars or British pounds locally, as alternatives to the native currency.

Carrying around cash as a visible tourist however, isn’t the safest of approaches. Firstly, unfamiliarity with local notes and coins increases your likelihood of delaying and stumbling with payments, thus demonstrating to all and sundry your wad of holiday money.

Secondly, even if your cash stash doesn’t become prey to local pickpockets or thieves, there’s a strong chance you may lose it. Once it’s gone, it’s gone and you won’t be covered on your insurance unless you can prove a loss.

If you don’t have the spending money available to you may consider taking out a loan to cover your spending money. As with any financial product it is wise to shop around and fine the best product available and you can find a variety of loans at moneysupermarket and other such comparison sites.

Travellers cheques can be very useful. You buy them at your local travel agent or postal office before setting off and they can be exchanged for purchases and services once abroad. They’re risk free as they’re made out to you and can’t be used by anyone else.

There are however, fees attached for commissions when purchasing travellers’ cheques, as with straight currency exchange.

Regular credit cards can be used abroad and offer the usual protection against loss or theft of items, or fraudulent use. They prevent you from needing to carry cash, or convert large sums of money when you’re unsure how much you’ll spend.

However, you’ll pay an exchange fee when purchasing in foreign currency abroad and don’t ever use them to withdraw money from a cash point, unless you wish to pay punitive charges. A regular debit or bank card is better for this.

Credit cards are also subject to the same ‘self control’ risks as they are at home – the temptation to spend on them may be elevated when abroad and having a marvellous time shopping for souvenirs!

Prepaid credit cards can be a better solution. You top up the card with a spending sum before you leave, which can be spent abroad with you maintaining control of your spending overall and with the peace of mind that a card offers.

Each card will have different fees attached and you can use an online price comparison site to find the best product for your circumstances.

Along with your holiday money, don’t forget to sort adequate travel insurance before you pack up and fly. Once the admin’s out the way, you’ll be free to relax and enjoy your break to the full.

Credit scoring dictates what financial products you can receive, and how good the terms of the deal will be. Even if you get the loan, you’ll find that ‘low credit score‘in fact equals ‘higher interest rate’.

“There’s nothing I can do about my credit score”

It all seems so complicated and remote from everyday life, that many people think there is nothing they can do but live with their credit score, and suffer the consequences. But, in truth, there are no fixed or universal credit ratings, and nor are there any credit blacklists. Your credit score changes in line with the events of your life, and the way you have handled loans or credit in the past.

The most important thing you can do is to ensure that the information your credit score is based on, is actually accurate. You need to see a copy of your credit report – from one of the leading UK credit reference agencies – and check what it shows. Of key concern will be your loan and repayment history as lenders place great emphasis on your past behaviour and performance when considering your current application.

“The banks already know everything about my credit score”

Credit reference agencies do hold a tremendous amount of personal information about us, but they are only looking at the credit side of the financial equation – the credit we now want, the credit we already have, and the credit we have managed in the past.

Your credit report does not contain any of the following information, so, when reading your credit report, bear in mind that these will not be the reasons for any poor credit score you may have been awarded:

• Parking or driving fines: even if issued by a court, these are not listed.

• Race, religion, and colour: information not recorded or held.

• Salary: not recorded on your file, though you will be asked on any loan application.

• Savings and investments: as these are not ‘credit’ products, they do not contribute to your credit rating.

• Medical history: information not listed.

• Criminal record: information not listed.

• Family and friends: only those with whom you hold joint financial products, say a mortgage, are listed.

• Historic defaults: your credit record focuses on your financial activity over the past six years.