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Actually, “falling” is hardly the right word to describe what is happening to annuity rates at the moment; “plummeting” would probably be closer to the truth. According to one source, a man of 65 can expect to receive an annuity that is 45% smaller than had he reached 65 fifteen years ago. Women are almost as badly off, with a fall of 41% in what their pension fund could buy.

There are two main reasons for this change. First, modern generations are tending to live longer than their forebears, so the money built up for retirement has to last longer. This makes sense, because if an insurance company knows it is likely to have to pay an income for 25 years instead of 20 years, it clearly cannot pay as much each year.

The second issue is that interest rates are now much lower now than at any time in the past. Because annuity rates are based on government bonds (also known as gilts) which depend heavily on interest rates for the level of return they offer, insurance companies are less able to pay out high levels of income to annuitants than was once the case.

Investment performance has also been relatively poor recently, particularly during the early part of this decade and the recent recession. While markets have been picking up lately, they have yet to recover their dizzy heights of December 1999 and October 2007.

This means that pension fund sizes are likely to be smaller than would have been the case without such dramatic (but not unique) reverses.

Together, these influences mean that most of us will need to take positive steps to maximise the value of our retirement planning.

Those who are close to retirement need to seek the best possible return for their pension fund. This can be done by exercising what is known as the ‘open market option’ rules, which allow pension planholders to go to any insurance company – not just the one that built up their fund for them – to purchase their annuity.

For those who have longer to go before retiring, increasing the rate at which they are building up their pension fund could be vital, if they are not to find themselves without an adequate income in retirement. And, of course, it is important also regularly to review the chosen asset allocation strategy, to ensure that it matches changing requirements and risk tolerance.

For more information about home insurance, life assurance, investments and retirement planning please use the links indicated. Capital Reward Plus offers access to no-nonsense protection, investments and retirement planning.

NOTHING CONTAINED IN THIS ARTICLE SHOULD BE SEEN AS GIVING INDIVIDUAL ADVICE

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Each week when we visit the supermarket to do our grocery shopping I am sure that most of us reach the juice section to have a look at what orange, mango and passion fruit summer mix is on offer this week. No?! errr ok, maybe that’s just me! But even if you’re just looking for a nice simple refreshing orange juice many of us will have a quick read of the label to check that it contains one of our ‘5 a day’ before dropping it into the trolley.

The ‘5 a day’ NHS-driven initiative was created to encourage people to eat/drink 5 portions of fruit or veg a day in an effort to improve the health and diet of a nation that was becoming more and more reliant on unhealthy fast food and microwave meals. With the vast majority of us aware of the ‘5 a day’ initiative and becoming more conscious of the benefits of pursuing a balanced diet I think it’s fair to say it’s been somewhat of a success.

So what wonderful new initiatives may be on the way in the not too distant future? Well, hot off the press I can tell you that one idea seemingly gathering a little momentum and support is the aptly named ‘fiver a day’ initiative. With a similar name to its health-focused NHS equivalent the ‘fiver a day’ idea focuses on encouraging individuals to save money so that they have money aside for the future. Breaking down a big savings target into relatively small increments enables us to the £5 savings target to what we might spend that money on in real terms. For example the smokers out there on 20 a day are paying in excess of £5 for the privilege and if they were to save it instead then this would equate to a whopping £1825 at the end of the year! For the non-smokers who prefer a cafe coffee and a bun at lunch could instead put that money away to reach the same eye-opening results.

So what do those ‘in the know’ have to say about the idea? Well the positive comments so far seem to support the idea of encouraging a general switch in mentality of the public from relying on credit cards to purchase items to paying for them with our own cash.

So is there actually any downside to this simple new concept? Unfortunately we are in the discouraging position whereby current inflation rates quite easily exceed the savings interest rates that are available affectively seeing the value of any savings reducing in real terms. Maybe the offer of a wonderful savings product with a high interest rate exceeding inflation could just do the trick to bring viability to an idea that seems to me to have some serious potential…

For more information about home insurance, life assurance, investments and retirement planning please use the links indicated. Capital Reward Plus offers access to no-nonsense protection, investments and retirement planning.

NOTHING CONTAINED IN THIS ARTICLE SHOULD BE SEEN AS GIVING INDIVIDUAL ADVICE.

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"I recently read in the Money Marketing, a financial weekly paper that the Government apparently believes that the current housing prices are too high and that they may even welcome a drop in the value of our homes!  I doubt many will be particularly pleased to hear this claim but apparently there is method in the madness.

Changes to mortgage regulation are afoot concerning assessing a customer's affordability for a mortgage.  Most experts believe this will see Lenders becoming more stringent than ever with their lending criteria which could lead to many customers - who would usually find a mortgage without a problem - struggling to get one. And if things were not already tough enough, particularly for the first-time buyers, the relatively low loans being offered by Lenders in comparison to the value of the property are apparently seeing initial deposits required of £36,500 on average (according to BBC news)!

So would a dip in house prices be enough for them to get onto the property ladder?  I do not know so many young people who have £36,500 in savings!  Any drop in this average deposit requirement would need to see a proportionate drop in house prices and with the most pessimistic estimates suggesting an albeit concerning 25% drop may be on the cards this would still leave our first time buyers needing to fork out £27,375 for a deposit!

This leaves us with 2 solutions.  The easiest for the first time buyer would be for the Lenders to increase their loans in comparison to the value of the house (75% up to 90% for example) which for the right customer would surely not cause too much of a risk to the Lender. However, with this solution not expected on the horizon just yet we have to look at solution number 2, saving.  Now to our parent's generation, this word meant everything. With working-class parents myself I knew that this is what happened to every spare penny my Mother and Father ever earned.  However, in the last decade the word ‘saving' seems to have become a forgotten process which has been replaced by the much less challenging task of obtaining ‘credit' for purchasing items.  The lack of savings-focus in the country has become a well publicised concern for the Government but any solution to this problem will not happen overnight.

It seems fair to say that a combination of these 2 solutions would be the best way forward for prospective buyers and would clearly lead to an upturn in activity on the housing market. As customers we can only control the savings side of this solution and finding a competitive savings product might go some way to encouraging us to save more and help us reach our targets."

For more information about home insurance, life assurance, investments and retirement planning please use the links indicated. Capital Reward Plus offers access to no-nonsense protection, investments and retirement planning.

NOTHING CONTAINED IN THIS ARTICLE SHOULD BE SEEN AS GIVING INDIVIDUAL ADVICE.

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While it appears that the new coalition Government will carry on with its predecessor's plans to introduce new compulsory workplace pensions called NESTs (National Employment Savings Trusts) the precise details may be subject to change and the timetable for their introduction could slip even further.

Those who are a long way off retirement age (which is set to become later, very soon) may think that they have time to make a decision about what they should do, so waiting for the new NESTs could be a good idea.

But this is not actually sensible, in financial terms. The reason is not just that the sooner you start planning, the more money you put away. Pensions grow in a highly tax favoured way; every £800 you put aside for your retirement is actually worth £1,000 immediately, thanks to the tax bonus offered by the Government. And if you are a 40% tax payer, you can get back another £200 off your tax bill (unless your total income exceeds £130,000 a year, in which cases special rules apply).

What is more, the money grows virtually tax free while it is in your pension and you can currently take up to a quarter of the entire fund, at any time after 55, as a tax free lump sum.

What this means is that the longer the money is in your pension pot, the more time it has to roll up faster than money in most other forms of saving. Acting now, rather than waiting a few years, can make a massive difference to you when you retire.

There is no general rule of thumb for how much you should save, but it is interesting to note that most employers are backing off providing guaranteed pensions offering two-thirds of final salary at retirement because the cost is simply too high. So provided you do not put in more than your entire income each year, and earn less than £130,000 a year, you are unlikely ever to be putting in too much!

For more information about home insurance, life assurance, investments and retirement planning please use the links indicated. Capital Reward Plus offers access to no-nonsense protection, investments and retirement planning.

NOTHING IN THIS ARTICLE SHOULD BE SEEN AS GIVING INDIVIDUAL ADVICE.

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Every Budget generates a high level of interest and the Emergency Budget was no different. The usual suspects of alcohol, fuel and tobacco duty have been left alone, plus removing the increased cider duty rates from 30 June 2010 may bring a smile to the faces of consumers, brewers and drivers.

The Good: Personal Allowance up by £1,000 from April 2011, so for those under 65 we can earn up to £7,475 tax free - not quite the £10,000 promised by the Lib Dems...

The Bad: ...higher rate taxpayers will not receive this increase, the 50% rate for highest earners stays and NIC rates will increase by 1% from April 2011.

The VAT (ugly): Unfortunately as widely predicted, the increase in VAT to 20% from 1 January 2011 is not so welcome. Whilst there will be some commentary from certain quarters that you can choose not to purchase items which are impacted by this increase, in reality this is likely to have big impact on most of us in some shape or form.

As of midnight the 22nd June Capital Gains Tax (CGT) is 18% for basic rate taxpayers and 28% for higher earners with no increase in the annual exemption of £10,100. An increase in the entrepreneur’s relief to £5 million of qualifying lifetime gains is the only good news regarding CGT.

Significant changes to the benefits and tax credits system, some headline changes include households with income exceeding £40,000 no longer able to qualify for tax credits and the freezing of the child benefit allowance until April 2014.

Yet more proposed changes to tax relief for pensions! The restriction for tax relief for “high income individuals” for the 2011/12 tax year will be repealed and a possible reduction of the annual allowance to £30,000 to £45,000, plus reducing the lifetime allowance.

As ever, whilst the Chancellor delivers the message, it is the Finance Bill which will deliver the law and for 2010 there will be two Finance Bills – one for the key priorities issued soon and the second issued in July to capture the remaining changes.

This is not intended to cover all the proposed changes announced by the Chancellor, but a summary of some of the issues which may affect an individual. For a comprehensive summary of the Budget download the “Emergency Budget: 22 June 2010 Summary (PDF)” on the Capital Reward Plus homepage.

(The opinions expressed here represent that of the blog writer and not of Capital Reward Plus. For more information about retirement planning, life assurance, investments and home insurance please use the links indicated. Capital Reward Plus offers access to no-nonsense protection, investments and retirement planning.)

NOTHING CONTAINED IN THIS ARTICLE SHOULD BE SEEN AS GIVING INDIVIDUAL ADVICE.

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Capital Gains Tax: The devil will be in the detail...

We will not really know what changes are being made to Capital Gains Tax (CGT) until the 22nd June budget. However, it appears that most of us are likely to be paying more in future.

At the moment, almost any sale of an asset - with the exception of your own principal residence and many forms of personal chattels - can give rise to a taxable gain. For most people, this most commonly applies to the sale of shares and collective investments and commercial or buy-to-let property.

To calculate the amount of tax you will have to pay, simply deduct from the sale price (less directly associated costs) the price you originally paid for it, to identify the gain. During each year you can realise gains of £10,100 before you pay any capital gains tax and it is then levied at a rate of 18%.

A special 10% "entrepreneurs" rate is applicable to the first £2 million of lifetime gains in respect of certain types of business assets.

Early indications are that the rate of capital gains tax will increase, possibly to mirror the individual's income tax rate, which could be 40% or 50% in many cases.

The devil will be in the detail, especially in respect of whether any time-based relief will be applied (as was the case some time ago) and whether any exemption will remain, as currently. It is also to be hoped that the gain, being added to other income, will not actually force the individual into a higher tax bracket; to do so would seem absurd, but the government needs every penny it can raise to reduce the national debt.

How can you protect your assets?
Both Individual Savings Accounts (ISAs) and pension plans are exempt from UK income and capital gains taxes (apart from a 10% tax on dividends from UK companies). This means that investments held within them are totally free of CGT, irrespective of how much profit you make on the assets.

Remember, you can realise gains of £10,100 (net of any realised losses) every year before paying any CGT at all.

The opinions expressed here represent that of the blog writer and not of Capital Reward Plus. For more information about retirement planning, life assurance, investments and home insurance please use the links indicated. Capital Reward Plus offers access to no-nonsense protection, investments and retirement planning.

NOTHING CONTAINED IN THIS ARTICLE SHOULD BE SEEN AS GIVING INDIVIDUAL ADVICE.

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So, what exactly is ‘inflation'? It's a term we have all probably heard regularly on the news as the newsreader vaguely, briefly and uninterestingly explains its derogatory affects on the economic position of the country. But what does it mean to us as individuals?

In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time. This increase in the general level of prices of goods affectively reduces the ‘buying power' of our cash. For example, in January 2009 £10 may buy us 25 lemons at 40p each but in January 2010 the same sort of lemons have risen in price to 50p each therefore meaning we can only get 20 lemons with our same £10. This ‘inflation' in price means simply means we get less for our money. The rate of inflation is typically measured as a percentage of its original price with the above example resulting in an annual inflation rate of 25% which would be rather astronomical. In reality the last few years have seen monthly inflation rates ranging from -1% (technically deflation with prices reducing) to +5% per annum.

So, what does inflation mean to us when it comes to our savings and investments upon which we are relying to grow and provide us with money to meet our plans for the future? Well, if the annual inflation rate was for example 5% then this could have a very negative effect on our savings and investments. At the current time with interest rates on savings so low for the purposes of our example it would be fair to say that the setting up of a Cash ISA may bring with it a savings rate of 2.5%. If you were to hold the Cash ISA for a year you would receive the agreed growth rate of 2.5% tax free. However, during the year the cost of living has increased by 5% through inflation which effectively wipes out the 2.5% growth rate and actually results in a real-time loss of 2.5% to the value of our savings! High inflation and low interest rates are a savers worst nightmare!

So what does this tell us? It tells us we need to take every care to ensure we are getting the best rates around for our savings and the best performance possible for our investments. If we don't then inflation could see the value of our hard earned cash reducing before our eyes! The government seem to be telling us that inflation is not a problem and that it is not rising at a concerning rate. Well I don't know about you but I am pretty sure that the cost of my weekly shopping seems to be going up week by week so I will be continually trying my hardest to get the best deals I can for my groceries in the supermarkets. We should all be using the same principles when considering what to do with our money and ensure we're getting the best deal we can for our savings and investments.

The opinions expressed here represent that of the blog writer and not of Capital Reward Plus. For more information about retirement planning, life assurance, investments and home insurance please use the links indicated. Capital Reward Plus offers access to no-nonsense protection, investments and retirement planning.

NOTHING CONTAINED IN THIS ARTICLE SHOULD BE SEEN AS GIVING INDIVIDUAL ADVICE.

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The 2010 ISA ‘season' has been the most successful since 2002!

According to industry reports almost £1 billion was invested in Individual Savings Accounts during the first three months of this year, if which 75% came in during the last six weeks of the tax year.

Clearly, the focus has moved from borrowing to saving, and this view is reinforced by a gradual reduction in the level of overall indebtedness amongst UK residents.

The reason why there is an ISA ‘season' is more to do with the fact that you must use your ISA allocation by 5th April, each year, or you loose it, than any specific investment strategy. Many people leave decisions to the last moment and are then having to take whatever market conditions apply at the time.

But there are alternative strategies that can make far more sense. By investing throughout the year - and each individual can now invest up to £850 a month into an ISA, up to half of which can be in cash - you tend to benefit from what we call ‘pound cost averaging'. This simply means that the fluctuations in share (or unit trust) values ensure that if you are putting in a fixed regular amount, you get more for your money when the prices fall, than when they rise. When you come to sell, of course, you get the then current price - which is hopefully higher.

Not everyone is necessarily keen to pile all their ISA investments into shares at the moment, but thanks to a change in the rules not long ago, you can now switch money initially invested in cash into equity based assets later on without affecting your annual investment allowance. So if you were to invest £5,100 in cash and a similar amount in equities within an ISA now, you could decide later on to move some of the money from cash to equities - it would not mean that you had to move the money out of the cash ISA and re-invest it (thus breaching the annual investment allowance) as was once the case.

So there is no reason for not getting your money into an ISA as soon as you like - and get ahead of the pack.

The opinions expressed here represent that of the blog writer and not of Capital Reward Plus. For more information about retirement planning, life assurance, investments and home insurance please use the links indicated. Capital Reward Plus offers access to no-nonsense protection, investments and retirement planning.

NOTHING CONTAINED IN THIS ARTICLE SHOULD BE SEEN AS GIVING INDIVIDUAL ADVICE.

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The economic ‘brains' out there tell us in basic terms that there are 4 parts to an economic cycle: the boom, the slowdown, the recession and the recovery. You might liken these to the seasons as the Summer boom, the Autumnal slowdown, the Winter recession and the recovery of Spring. So which season have we reached in the ‘year' considering that each part of the cycle has a different financial impact on our lives?

As I am sure most of you are aware in most recent times the country has been battling along in what is known as a ‘recession'. Often mentioned on the news and in political broadcasts a ‘recession' is defined technically as a reduction in the countries Gross Domestic Product (GDP) for 2 quarters (3 month periods) in a row. Basically business's production levels were reducing and so were their profits. The FTSE 100 dropped dramatically to a low of 3460 points in March 2009 as the markets bottomed out with interest rates and inflation dropping dramatically. Winter truly set in with heavy snow forecast!

Now we're approaching May in 2010 things seem to be ‘looking up' as they say. Today the FTSE topped 5700 points giving the British economy a little more respectability. Most economists still indicate that we are not out of the woods just yet as far the recession goes but the optimists out there will are welcoming the approach of Spring and recovery sooner rather than later. So what does the arrival of ‘Spring' bring with it?

For those keen to explore the world of investments then this could be a good time to benefit from improving markets as businesses begin to grow once again. An increased Individual Savings Account (ISA) allowance this year, now up to a whopping £10,200, means we can invest even more without having to worry about paying tax on any profits take out. ISA's are excellent facilities to invest our money giving us access to hundreds of funds at relatively low cost. Whether you are a cautious, balanced or speculative investor you are sure to find a selection of funds to meet your needs.

The opinions expressed here represent that of the blog writer and not of Capital Reward Plus. For more information about retirement planning, life assurance, investments and home insurance please use the links indicated. Capital Reward Plus offers access to no-nonsense protection, investments and retirement planning. The value of investments is not guaranteed and may fluctuate; you may get back less than you put in.

NOTHING CONTAINED IN THIS ARTICLE SHOULD BE SEEN AS GIVING INDIVIDUAL ADVICE.

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In the run-up to retirement, there are a lot of choices to be made; not least, what sort of income do you want?
Of course, the first thing to remember is that you do not have to take your retirement income from the insurance company that built up your fund for you.

This is called the open market option and, for once within insurance, it does exactly what it says on the tin. You can take your pension fund to just about any insurance company to get the best deal when purchasing an income for life.

One choice is annuities.

An annuity is a promise to pay you an income for life (and a spouse or civil partner, if required). In return for your pension fund, you can have a tax free lump sum of up to a quarter of the fund plus an income based on the remaining 75%.

You will have to decide up front whether you want:

- An income for just you;
- An income for you and your spouse/civil partner when you die;
- A level income;
- An income that rises at a fixed rate or in line with the Retail Price Index (RPI);
- A guarantee that the income will be paid for at least five or ten years, even if you die in the meantime;
- An income linked to the performance of the stock market.

Annuity rates have been in decline for some time now and are considerably less than at almost any point in the last two decades. For example, the annuity rate (amount paid each year based on the pension fund value) for a 65-year-old man in April 1991 was more than 14%; now it is less than 8%. During the same time gilt yields, on which annuity rates are heavily dependent, have fallen from just over 10% to about 4%.

The reason for this is that annuity rates also depend on life expectancy – the longer we live, the more payments the insurance company has to make for a given pension fund value at outset.

Capital Reward Plus is preparing a quote service that will be available for your use in the near future however should you require advice you should contact your usual financial adviser or contact us at info@capitalrewardplus.co.uk confirming your name and address, and we will e-mail you with their contact details.

For more information about retirement planning, life assurance, investments and home insurance please use the links indicated. Capital Reward Plus offers access to no-nonsense protection, investments and retirement planning. The value of investments is not guaranteed and may fluctuate; you may get back less than you put in.

NOTHING CONTAINED IN THIS ARTICLE SHOULD BE SEEN AS GIVING INDIVIDUAL ADVICE.

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