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Will your pension be good enough?

Written by John J Bloomfield

Retirement PlanIt's a perfectly reasonable question but not one that is not always very easy to answer, retirement planning is a very long term scenario and what that deserves regular monitoring.

When you first start your pension through any adviser or company you will most likely have received an 'illustration' sometimes mistakenly referred to as a 'quote'.

The pension illustration is essentially a best guess at the time based on several assumptions including;

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Do you buy free range eggs?

Written by John J Bloomfield

A bowl of eggsIf you do you are part of a growing number of people who exercise ethical choices when spending their money. As we live in a capitalist society using your spending power to change the world is a pretty good long term strategy, so good on you.

But I have to ask do you also make ethical choices with your investments and your pension? Often it's something people don't give a second thought, but the investments you make can have a significant ethical undercurrent if you so desire.

When I run through a client's information with them as part of my advice process, I always ask 'Do you have any religious or ethical requirements of your investment?' the vast majority of people reply no. I'm quite interested in ethical investing on a personal level but it is certainly not for me to push my beliefs on to a client - but I think it is fair enough to talk about them in a blog post!

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ISA allowance updates.

Written by John J Bloomfield

The end of the financial year is rapidly approaching, if you haven't already done so you have until the 5th April to use this year's adult ISA allowance of £11,520, which can all go into an 'investment' or 'stocks and shares' ISA or up to £5,760 into cash and the balance of your allowance available for investment ISAs. The Junior ISA allowance is currently £3,720 per year.

From the 6th April, the adult ISA allowance rises to £11,880 with the maximum cash ISA investment allowance being £5,940. The Junior ISA allowance is rising to £3,840.

If you want to know more about ISAs why not download my PDF guide 

Cash ISAs Vs Equity ISAs

Written by John J Bloomfield

An ISA should be the very first point of call for anyone when starting to save or invest, but one of the first things you need to think about is do I want a Cash/Savings ISA or is an Equity/Investment ISA the most suitable for me.

The answer isn't as technically complicated as you might at first think you just need to ask yourself a couple of questions;

  1. Why are you putting money away?
  2. When do you think you will need to access the money?

Why are you putting the money away?

If you're trying to build up a pot of money so that you can meet the expenses of an unexpected bill or other financial hiccups then a Cash ISA is the first type of account you should consider. It's stable, easily accessible and always there when you need it.

If however, you're wanting to build up a fund to use in the future either to provide you with an income later in life, to meet a specific financial goal such as covering the kids or grandkids university costs then an Equity or Investment ISA is likely to be much more appropriate. The return is likely to be a little more volatile but over time should be greater so you have to put less in to get more out.

When do you think you will need to access the money?

If you believe that you might need access to your money in less than 5 years then a Cash ISA will most certainly be the best option for you.

However, if your target is way off in the future then an Investment ISA is likely to be a far better option. The longer you are willing to hold an investment for the poorer value it makes cash ISA look in comparison to an Investment ISA.

The real return on cash savings can be quite poor in times of high inflation (such as now) and low-interest rates (such as now). Real return refers to the rate you are receiving on your savings or Cash ISA minus the current rises in the cost of living (inflation). Currently (December 2013) the Retail Prices Index (A traditional measure of inflation) is running at 2.7% per year and the top-rated instant access cash ISA is 1.51% per year. So in real terms, the value of the money invested in that account is being reduced by 1.09% per year due to inflationary erosion. So even though the saver has achieved one of the best rates on the high street the value of their money is still falling. Now if this is short term savings for an emergency etc. then that is something you just have to accept, but if this is money that won't be needed for many years perhaps you should consider if an equity/investment ISA would be more prudent. You should take advice from an adviser, such as myself, before entering into any form of long term investment.

Below you will see an interesting graph, it shows the change in the value of £100 invested in either UK Equity or saved in cash since 1958.


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Under-performing ISA?

Written by John J Bloomfield

Chalk Board gradePotential clients often approach me about their existing ISA investments with comments along the lines of; "My ISA portfolio is underperforming I would like to transfer it to another one" it's a loaded question and one that I'm sure I could acquire loads of new clients from if I just replied "OK"

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