Plan now to avoid a big tax bill on your pension savings.

Are you building a fund for your retirement in a company pension scheme? If so, forthcoming changes to the taxation of pension savings could cost you dearly – unless you act swiftly.

From April, the maximum pensions saving that anyone is allowed to build, before it becomes subject to punitive taxation, reduces from £1.5m to £1.25m. This cap is called the Lifetime Allowance (LTA) and applies to an individual’s entire pension savings (apart from the state pension).

The figure may sound high but many thousands of people fall into the category – especially those in final-salary schemes who have built their entitlement through many years’ work.

But don’t despair, if you are affected, there are actions you can take before April to mitigate the potential tax charge down the line.

Saving into a pension scheme has for years attracted tax relief. However it was felt that wealthy people were getting too much tax relief and building up enormous pension pots and the LTA was introduced at £1.8m in 2012 reducing to £1.5 in 2013 and now to £1.25m in April this year.

It would be a brave man that did not anticipate further reductions in years to come.

When first introduced, the LTA used to apply only to a few thousand high earners in the UK who could afford to grow seven-figure pension pots. But the reduction in the limit, coupled with the increased costs of funding retirement promises for those who retire on final-salary-type pensions, has now pushed hundreds of thousands of people into the net.

There is some key information you need to know or find out quickly!

You need to find out what the total value of your pension savings will be, as at April 2014. This should include any legacy pension schemes with previous employers. If the total is already over £1.25m, or likely to grow beyond that sum before retirement, you can take action to retain the £1.5m LTA, subject to certain conditions.

If you are in a final salary scheme and expect to receive a pension in excess of £56,000 on retirement, this could take you over the LTA and should prompt you to take action now.

As ever HMRC have produced detailed guidance on the changes and impacts (see link below) but if you need assistance to understand the impact on you then please get in touch.



World Market Capitalisation

Viewing the world map by relative market capitalisation illustrates the importance of building a globally diversified portfolio and avoiding a home market bias.

This cartogram, produced by Dimensional Fund Advisors, depicts the world not according to land mass, but by the size of each country’s stock market relative to the world’s total market value (free-float adjusted).

Population, gross domestic product, exports, and other economic measures may influence where people invest. But the map offers a different way to view the universe of equity investment opportunities. If markets are efficient, global capital will migrate to destinations offering the most attractive risk-adjusted expected returns. Therefore, the relative size and growth of markets may help in assessing the political, economic, and financial forces at work in countries.

The cartogram brings into sharp relief the investible opportunity of each country relative to the world. It avoids distortions that may be created or implied by attention to economic or fundamental statistics, such as population, consumption, trade balances or GDP.

By focusing on an investment metric rather than on economic reports, the chart further reinforces the need for a disciplined, strategic approach to global asset allocation. Of course, the investment world is in motion, and these proportions will change over time as capital flows to markets offering the most attractive returns.



What would you do with £381m?

The news over the past day has informed us of the largest ever undivided lottery win the United States of $590m (£381m), going to an 84-year old widow.dollars

Talk of the lottery is nearly always accompanied by a discussion of what you would do with the winnings…

But after you have stopped considering how to furnish the gatehouse, it is worth remembering that it doesn’t have to be a massive lottery win for your money to require due consideration.

Using our cash flow modelling tool, Voyant, we can create a wide variety of what if scenarios that project forward how different choices today can affect your financial outlook tomorrow.

Assets detailed for websiteWe can enter in information such as your incomes, expenses, assets and liabilities and model forward projections, such as those seen on the right.

Being at the age Gloria, the 84 year old jackpot winner, is she chose to take her winnings as a lump sum rather than 30 annual payments of £12m. Taking it in this manner reduced the sum to £240million.

This type of situation is similar to those faced by retirees and those made redundant every day as they must decide how best to take their benefits. This is exactly the situation where cash flow modelling can shine.

lotterywinCombining this with expert advice that guides you through an all encompassing view of your current circumstances, maybe you can generate some of your own luck.

Of course, if you are feeling lucky, we can even model a scenario where you win big…



How we can change your life this week

Much of human understanding of the world is built on models that attempt to recreate complex systems in a simpler form. This ranges from the reactions of the economy to a reduction in government expenditure to the effect of CO2 on climate change.

No model will ever be perfect as there are too many intricate relationships at play, but I am sure that most would agree that we are better to have some understanding of how these systems work than nothing at all.

Now let’s consider financial planning. It is one of those disciplines that, whether you are interested or not, it still applies to you. Every single person reading this blog will, in the simplest sense, have things they want to do, a number of years ahead of them, and an exhaustible amount of money flowing in and out.

timelineThere are different attitudes to this problem. Apathy is one. Some may not want to think about it because it will stop all of today’s fun.  Some may have a vague idea it will all work out. Some people may have fashioned a rudimentary spreadsheet in Excel to try and boil the situation down into hard numbers, but once the projections involve discounted values of future contributions and the timescale stretches out, things can get complicated very quickly.

At OAM, equipped with the market leading cash flow modelling software, Voyant, we can produce charts, projections, balance sheets and inheritance tax ledgers. We can put in key events such as weddings and the sale of a business. We can even kill you off next year, just to see what happens. We can tweak every assumption that lies behind the model to make it as realistic to your circumstances, and the wider economy, as is possible.

The level of detail is quite astonishing. Every change from HMRC on future tax rates are factored into models automatically, within days of announcement.

This week we made a big difference to a couple’s life, confirming that which they suspected: they don’t actually need to work anymore. They have accumulated more than enough to last comfortably until their assumed mortality age (itself selected by the client on the grounds of family history and the Office of National Statistics).

assetsIn the past we have helped clients assess their inheritance tax liability, choose between different redundancy options, set the amount of savings contributions required to pay for their children’s education and more.

As stated above, every model has its limitations, but it is worth coming to see us to gain some understanding of how your future looks rather than earning and spending money in the dark. And as we see confirmed every day when small tweaks are made to client’s plans, a change today can make life quite different in 20 years.

Malcolm Stewart


Changing the Weather

That’s it.

I’ve had about as much as I can stand of the Scottish Spring weather. Grey, overcast, wet, windy, freezing, sunny, & generally miserable.

With damp patches.

No amount of positive mental attitude will change the weather but a wee bit of planning might change where the weather I’m exposed to comes from…

It’s been very noticeable of late that the new enquires we have been getting are less concerned with the true nitty-gritty of what my pension/ISA/savings actually are but much more around the use of lifetime cash flow modelling to show me what’s going to happen.

The term peace of mind is often used in conversations with new clients and it’s very interesting that successful, well paid business men & women drive on without a real understanding of what their numbers actually might mean for them.

In other words, they have no peace of mind but rather a nagging doubt that it might not just be enough.

Using a complex powerful cash flow modelling tool like Voyant provides the framework to allow a little dreaming to take place and it’s a tremendous feeling to see people starting believe they might just be there financially or with a bit of further guidance they can get the life they want.

clear skiesOur job is then to become custodian of the wealth, provide sensible investment strategies and use the tax advantages of various “wrappers” to keep the clients in the style to which they’d like to become accustomed!

Malcolm Stewart will be expanding on the details on how, what and why lifetime cash flow modelling is so powerful in his next blog.

In the meantime, as I write the temperature in Sacramento, California is a sunny 33c.

Call me to arrange your retirement in a country and climate of your choosing.

Roland Oliver


Know your customer

Rewarding your customer for long and valued custom must make sense.

An acknowledgement that you have appreciated them sticking with you and by way of thanks, a gift or reward that is appropriate and makes the customer feel good about dealing with your business would be a good thing to do.

I will, however, briefly tell a short story to demonstrate that while the principle might be strong, if the delivery is wrong it will seem like big business going through the motions.

My client, a vibrant, cheerful and energetic 84 year old widow told me today that her 59 years gold cardmembership with a certain motoring organisation had been rewarded recently by the offer of a Gold Membership.

She was naturally delighted and was soon checking through the many new benefits she was entitled to as a result of her loyalty…

She could now drive abroad and it would be covered. She could nominate a 17 year old relative to drive her car. And so on.

And the good news was that her renewal premium this year would only be £198.

It was £178 last year but look at all the benefits you can enjoy.

She may be 84 but daft she isn’t and could spot the flaws in her prestigious Gold Membership reward.

In fairness, one short, sharp phone call later, she was still a Gold Member but for £100 – I still think after all this time they could have called time on the fee – but a gesture never the less I suppose.

Rewarding clients is the right and proper thing to do, but best to check its something relevant and will be appreciated by them.

Roland Oliver


Protection – can I really afford it?

Following on from my last blog I wanted to pick up on the cost of protecting yourself and your loved ones. It’s the age old objection to having the proper cover in place – “I can’t afford it, it’s more expensive than I thought it would be!”

The cost of cover depends on many factors, age, health, occupation, sum assured, term required,  and yes it can be expensive depending on the requirement but we appreciate that budget has to be a factor in considering what can be put in place.

All too often people discount having cover in place as they feel the cost will be prohibitive and they don’t seek advice on what they could actually achieve within their budget. Then there are those that don’t feel there is any spare budget available to put towards protecting themselves and their family.  I think if we all took a serious hard look at our weekly spends we might we might be surprised at what budget could be made available with a little careful planning.

In the average week we all like our little treats, a nice frothy coffee, a take-away, glass of wine or pint of beer, the odd magazine or newspaper, premade sandwich, or jumping in a taxi at the end of the night to make it home quicker.

Buy a smaller one?

Based on average current costs* if in a given week I had 3 coffees, bought a magazine, a couple of premade sandwiches , a takeaway, a couple of glasses of wine and a taxi ride home after my takeaway that could equate to weekly spend of £46.00 or £199.33 per month. It all adds up.

If we all took a serious look at the monthly spends on little luxuries we could make an immediate saving which could be put towards getting the right cover in place.

If I cut back a coffee a week and drop the take-away meals to once a month I make an immediate saving of £35 on average. What would £35 buy in terms of cover?

A single 28 year old male could have life cover of £120,000 for 30 years for as little as £30.44, a couple both aged 38 could have £220,138 of life cover for 20 years starting from £35.00 per month.

Still think it’s too expensive?

Get in touch with us today for your own personal calculation to see how your monthly luxuries add up and what cover you could buy with a little clever reallocation of your financial resources.

It only takes a few minutes to give you peace of mind for the rest of your life, can you really afford not to do anything?

Dr Claire Armstrong

*Based on Bright Grey’s online Lifestyle Calculator as of April 2013.


Mail Madness! Simple customer service that’s easy to forget

I can’t remember the exact date that I got my very first e-mail, envelopebut since that fateful moment I’ve been under its spell.

I will not be alone in thinking that e-mail has controlled me and been the thief of time over the last 15+ years or so.

I also have tried on many occasions to change my relationship with the electronic menace and to better disciplined (like my colleagues!) and have better “systems” for dealing with my inbox.

Whether its just a symptom of my personality or just plain stupidity, nothing has really worked until now…

I have now discovered a fantastic system that sorts out my emails into the really important ones and the ones that can be read later and puts them into my inbox or not.

It does a whole lot more besides and I’m not doing it justice here but that is only a small part of the point I wanted to make.

The reason I so happy with my new email system is not just that it works and does what I need it to do, but it was the experience from a customer perspective that rang my bell most.

The trialing and buying of the system was all done remotely and was just fine, but there is always that slight feeling of “what have I done” after handing over money when I’d had no contact with anyone at the company.

One personal email thanking me for purchasing from the system’s owner and creator (correctly allowed into my inbox!), and I felt vindicated, valued and happy.

I did actually email him back to say how I felt and the real point is saying thanks to your clients and customers is key to ensuring that they or their business don’t feel taken for granted.

It’s such a simple thing to do that we simply don’t do enough.

Thanks to Stuart for reminding me to thank my customers better and more often.

Back to my emails I think…

Roland Oliver

PS – please get in touch if you want to know more about the system.


The Price of Advice

In the build-up to – and in the aftermath of – the Retail Distribution Review advisers up and down the country have been scrambling to find a charging mechanism that works.

For many the end of commission has been a death knell; bond pushers that used to take up to 7% initial and advisers that offer no ongoing service have found themselves suddenly having to become transparent and losing client interest as a result.

There is no doubting that this is a very positive thing; for a long time the smoke and mirrors in financial services have served to cloud the clear picture to consumers.

In terms of pure economics, the worst thing about lack of transparency in a marketplace is the fact that the market cannot operate efficiently and competition is hindered. And the moment competition is hindered consumers get a bad deal.

For a charging structure to ‘work’ it must be fair, not daunting, actually cover the work being done and cover costs the clients don’t see – regulation, compliance, software etc.

The charging structure must also be manageable. We have seen difficulties with some investment platforms as to the logistics of how the product fees to the adviser are actually generated. Some say nothing has changed, some require a wet signature on a fee statement for each and every piece of business, and some require us to manage a time consuming and complex method of moving money around within a client’s investment to cover charges.

As a business trying to do the best by our clients and get paid properly for the valuable work we do, without any hidden agenda, it can be

We have discussed every way we can structure our fees so that they are attractive, fair, workable, easy to implement and simple.

Each time we reach this undeniable fact: a simple initial and ongoing fee, not linked to the value of the assets managed and paid externally from any platform, is the only way forward.

It will take time to implement fully, but we shall be extracting ourselves from any overly complicated or confusing charging and shouting the virtues of this from the ramparts of Edinburgh Castle.


It’s financial planning, stupid!

As I write there have been a few tweets this morning about managers of active funds using index or passive structures for their own investments.

Not earth-shattering news probably, but does make you really question the real worth of active management at those prices if those who do it, won’t pay!

The thread of the tweets led on to question further where the current CEO’s of investment platforms invest their own money.

Do they put their own money where their mouths are?

We await the answer to that particularly thorny question…

All this idle speculation did lead me to consider whether or not these CEO’s (or fund managers for that matter) had actually submitted themselves for some financial planning in the first place.

One question begets another as they say. What would these CEO’s or fund managers actually consider as financial planning?

Would they approach their local bank manager, accountant, solicitor or would they seek out advice from within their own industry?

Would a plain ordinary IFA be the port of call or do they require something a bit more in keeping with their status?

Wealth Management (our current transatlantic term of choice) sounds so much more sexy and enticing than plain-jane Financial Planning and might be sufficiently high brow enough to attract the CEO, but what is it?

Well…its Financial Planning I think.

Which is what we do here. I had a discussion with Malcolm our Client Project Manager today about what Wealth Management actually means and we’ve agreed it’s Financial Planning.

It’s the heart of providing elegant, efficient solutions to making sure you get the best from your money, making sure it goes to the right people when you’ve gone, and that your family won’t be compromised if you die early.

Tax efficiency and legal structures that avoid challenge are provided too.

In other words, a Financial Planning service that takes care of all your current needs and will adapt as your circumstances change in time.

We won’t be getting to carried away with changing our terminology on the website but for all you CEO’s and fund managers out there, before you get concerned about active v passive or if you should put your own money onto your own platform, please see us for some Wealth Management or our particular version which we like to call Financial Planning.

Oliver Asset Management. We do Financial Planning.

Roland Oliver