Your Finances (Retirement Essentials)

130 Pages·2009·1.162 MB·English

by  Frances Kay

your finances aw:Layout 1 26/5/09 11:08 Page 1
non-retirement guides
Money is the main concern for most people approaching or already
experiencing retirement, as their income is likely to have to last for a
long time and keep up with inflation. Some people have a good
your
pension as well as assets and investments; others don’t have enough
resources to fund the lifestyle they had hoped for. finances
Whatever your circumstances, Your Financesreminds you of the
basics, drawing your attention to some of the provisions that could
Y
have a bearing on your immediate or long-term plans. It covers:
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(cid:129) income tax; (cid:129) equities;
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(cid:129) personal allowances; (cid:129) IFAs;
(cid:129) property investments; (cid:129) wills.
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By taking you through the financial maze step-by-step, and spelling out
the facts in clear, accessible language, this essential guide will help you A
to make your money work for you. N A practical
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Frances Kayconsults and advises on all aspects of business, career and E
guide to tax,
personal development. An experienced researcher, editor and author, S
she has written a number of successful business books including
investments,
Understanding NLPand is the editor of The Good Non Retirement
Guide(also published by Kogan Page).
IFAs and wills
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s Edited by

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a Frances Kay
£5.99 y
ISBN: 978-0-7494-5584-2
Kogan Page
120 Pentonville Road
London N1 9JN
9 780749 455842
United Kingdom
www.koganpage.com Retirement
your
finances

Publisher’s note
Every possible effort has been made to ensure that the information contained
in this book is accurate at the time of going to press, and the publishers and
the author cannot accept responsibility for any errors or omissions, however
caused. No responsibility for loss or damage occasioned to any person acting,
or refraining from action, as a result of the material in this publication can be
accepted by the editor, the publisher or the author.
First published in Great Britain in 2009 by Kogan Page Limited
Apart from any fair dealing for the purposes of research or private study, or
criticism or review, as permitted under the Copyright, Designs and Patents
Act 1988, this publication may only be reproduced, stored or transmitted, in
any form or by any means, with the prior permission in writing of the
publishers, or in the case of reprographic reproduction in accordance with
the terms and licences issued by the CLA. Enquiries concerning reproduction
outside these terms should be sent to the publishers at the undermentioned
address:
Kogan Page Limited
120 Pentonville Road
London N1 9JN
United Kingdom
www.koganpage.com
© Kogan Page, 2009
The right of Kogan Page to be identified as the author of this work has been
asserted by them in accordance with the Copyright, Designs and Patents Act
1988.
British Library Cataloguing in Publication Data
A CIP record for this book is available from the British Library.
ISBN 978 0 7494 5584 2
Typeset by Jean Cussons Typesetting, Diss, Norfolk
Printed and bound in Great Britain by MPG Books Ltd, Bodmin, Cornwall
Contents
Introduction 1
1 Tax 3
Income tax 4
Tax allowances 6
Tax relief 10
Pension Credit 14
Tax-free income 15
Other tax-free money 17
Income tax on savings 18
Income tax on other investments 18
Mistakes by HM Revenue and Customs 21
(HMRC)
Tax rebates 23
Post-war credits 24
Capital gains tax (CGT) 24
Inheritance tax 29
Independent taxation 32
Self-assessment 33
Retiring abroad 36
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vi Contents
2 Investments 43
Sources of investable funds 44
General investment strategy 45
Annuities 46
National Savings and Investments (NS&I) 47
Variable-interest accounts 50
Fixed-interest securities 57
Equities 60
Individual Savings Account (ISA) 66
Child Trust Funds 67
Long-term lock-ups 68
Life assurance policies 68
Bonds 74
Investor protection 78
3 Independent financial advisors: IFAs 83
Choosing an adviser 84
Accountants 84
Banks 85
Independent financial advisors (IFAs) 88
Insurance brokers 90
Other pension advisers 91
Solicitors 93
Stockbrokers 96
4 Wills 101
Laws of intestacy 102
Making a will 103
Executors 106
Other points 106
Stop press 109
VAT 109
Personal tax 110
Summary 111
Introduction
While you’re working you don’t have much time to think
about retirement. But planning ahead is common sense. In
retirement your money should be made to go as far as
possible because living on a fixed (or as is sometimes the
case a shrinking) income requires forethought. Making the
most of what you’ve got is sensible and advisable; this is
what will be dealt with in the following pages. Working out
how much tax you will pay, or can save, is the first thing.
Assessing your likely savings, including lump sums from
your pension or any insurance policies you may have can
give you a much clearer idea of the future. From this you can
draw up a plan as to how to maximise their value. The
advice is offered as a prompt because each person’s situation
is unique. You may need to consider whether you should
invest your money in a building society, ISA, unit trust,
stocks and shares or government securities. Would it make
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2 Your finances
sense to buy an annuity? What tax planning should you
consider in your position? It is always wise to consult a good
accountant, stockbroker or other professional adviser. If you
do not have one there is advice on how to find the right
person. With a bit of time spent wisely now, you should reap
the benefits for many years to come.
1
Tax
As everyone knows, there are two certainties – death and
taxes. So a book that gives information on taxes, as well as
how to invest what money you have, is appropriate.
Although over the years you may have been contributing
many thousands of pounds to the Inland Revenue (now
called HM Revenue & Customs or HMRC, for short), in
practice you may have had very little direct contact with the
tax system. The accounts department will have automati-
cally deducted – and accounted for –the PAYE on your earn-
ings as a salaried employee. If you were self-employed or
had other money unconnected with your job, you may have
had more dealings with your tax office.
Come retirement, even though for most people the issues are
not particularly complex, a little basic knowledge can be
invaluable. First, it will help you to calculate how much