Month: May 2018

Imagine a world…

The future of money is upon us and it’s exciting. We’re expecting to see 2018 as the year that cash is overtaken as the major form of payment in the UK. Whether it’s through cards, apps or even the swipe of a hand, the time of contactless payments has arrived.

Right at the forefront and keen to embrace these technological advancements is the travel industry. Welcoming tech, such as virtual reality, with open arms means that travellers may soon see their shopping experience streamlined. Imagine placing your mobile phone into an in-flight virtual reality headset – you look through the headset and see menu options for you to build your perfect meal and duty free items such as aftershave and alcohol to stock up on before you land. Part of the beauty of it all is that it would know which seat you were in for easy delivery and your payment details would be loaded onto your phone, making checkout seamless.

You could even be offered personalised experiences, depending on which flight you were taking. Flying to Venice? Why not book your gondola while you’re in the air? Spending the weekend in New York? Get those Broadway tickets sorted en route.

Contactless is coming; in fact in Sweden, for example, there are stores that are already refusing to accept notes and coins. Balance to balance transfers through mobile phones are also gradually being adopted in developing countries. From the government’s standpoint, the anonymity that physical cash provides is a drawback, as it can unfortunately be used as a cover for tax evasion and crime, so we can expect regulated contactless technology to be encouraged at all levels.

Of course there are people who hold concerns about the direction things are heading in. Mattias Skarec, a Swedish Digital Security Consultant, points out that no technology-based system is invulnerable to glitches and fraud. “We are naive to think we can abandon cash completely and rely on technology instead.” Speaking of problems with card payments that two Swedish banks have experienced during the last year, he states, “We are lucky that the people who know how to hack into them are on the good side, for now.” However, “we don’t know how things will progress. It’s not that easy to attack devices today, but maybe it will become easier in the future.”

As with any new development, it’s a case of balancing any disadvantages with the potential it offers. Meanwhile, dream of what a brave new world could bring you…

Three important ways to use equity release…

Equity release plans, also known as lifetime mortgages, allow those over the age of 55 to borrow against their home. Thanks to decades of rising house prices, for some older homeowners this can mean there is plenty available to borrow. The number of people opting for these plans saw a 40 per cent increase year-on-year in 2017, with a record breaking £3bn being borrowed. It seems using your house to fund your lifestyle is becoming increasingly popular.

The positives are clear; there are no monthly repayments, with interest rolling up on a compound basis. The loan is repaid when the borrower dies or sells the house, and the total debt cannot exceed the value of the home. The comparatively high interest rates, however, mean that a lifetime mortgage comes with a risk to any nest egg you may have planned for your children to inherit; it could be consumed by repayments. Fortunately, if you do feel that equity release is right for you, with some careful planning you can alleviate the risk and be safe in the knowledge that you have something left to pass on.

1. Renovate to boost your home’s value

Around 60 per cent of people using lifetime mortgages put the money towards home renovations, to increase the value of the estate. Legal and General even offer a trial ‘property refurbishment’ equity release plan, that has just been extended from the capital to several towns and cities around the UK. This plan determines the amount you can borrow by the projected value of the home once the renovations are complete, and is particularly useful for those living in homes in need of repair who are considered ‘equity rich’.

2. Picking a protective plan

Plans are available which shield a portion of your home’s value from your equity release lender. This means you can guarantee that if that portion remains untouched, it can be passed on to your descendants. Plans with ‘inheritance protection’ are widely available; where a typical plan would allow a maximum of a 35 per cent equity release, these would allow you to release half of that amount.

3. Release ‘gifts’ to mitigate IHT

Any financial gift that is given to your descendants will be exempt from tax if you live for seven years. If you’re in good health, you can use equity release to reduce your ‘death tax’ or even bring you below the taxable threshold if you are near the IHT margin. For example, you could support a relative who needs help with their housing deposit, or clear their mortgage now to avoid inheritance tax later. Of course, this comes with its risks as dying within the seven year time limit will bring about an unexpected tax bill for the recipient and in those seven years the interest accrued could wipe out the IHT saving.

Equity release is not right for everyone – if you have any questions around this topic, please feel free to get in touch directly.

Why it pays to retire early…

Sound financial planning is not only good for your bank account – it could actually improve your life expectancy. If you’re reading this then you probably don’t need to be convinced of the benefits of looking after your money, but here’s another reason to add to the list.

The idea of retiring early can be most appealing. For some, it will already be a reality, while wise saving and investment may mean it’s perfectly achievable for those at the consideration stage. Research now suggests that an early retirement can actually also lengthen your life. Economists from the University of Amsterdam published a 2017 study in the Journal of Health and Economics which confirmed that male Dutch civil servants over the age of 54 who retired early were 42% less likely to die over the subsequent five years, compared to those who continued working.

Researchers put this life-extending phenomenon down to two main factors. First, when you retire you have more time to invest in your health. Whether that means you find more time to sleep, more time to exercise or simply more time to visit a doctor when an issue arises, you’ll see the benefit.

Secondly, work can be a great contributor to stress, creating hypertension which is in turn a huge risk factor for potentially fatal conditions. In the study, retirees were shown to be significantly less likely to fall victim to cardiovascular diseases or strokes.

Of course, there can be benefits to staying in work too. Participating in a work environment is a good way of keeping your mind and body active. On top of that, being part of a team helps develop and maintain a sense of purpose and belonging that is essential to cognitive health and development.

That’s not to say that all these benefits can’t be achieved outside of work; the key is to find a hobby, interest or cause to involve yourself in. As is so often the case, there’s no single solution. It’s important to find the best path for you, whether that’s staying in work, retiring early or going part-time. Whatever you choose, spend your time wisely as it could have a major impact on how long your retirement turns out to be.