DEATH AND INCAPACITY

Death and incapacity are unpleasant subjects but they are a reality of life. You can either ignore these matters until they affect you or your family or you can do some sensible forward planning. Unfortunately we will all die at some time. At that point our possessions will be shared out. If we have made a will, they will go to those people we have chosen. If we have not made a will, they will go to people other than those we wanted them to go to, including even the Tax Man! The simple solution is to make a will. You can do this yourself or take professional advice. We can provide recommendations if needed. With death comes a funeral. You can make it clear in your will how you want your funeral to be. Viking funerals with a burning boat could prove rather costly. However, even a simple funeral can involve considerable expense. If you are not otherwise setting aside money in some way for this, there are pre-paid funeral plans available which, once paid for, guarantee to cover the costs of a traditional cremation without any further costs – regardless of how much prices rise in the future. (Note: Viking burials on burning ships come at a somewhat higher costs!). We can help advise on the pre-paid funeral plans. Going into care is not the sure bet that death is, but it is pretty likely that if you or one of your family beat the grim reaper past the three score and 10 on the score card, that you will have to deal with the problems of care and even mental difficulties. If you or your parents or other relatives are not able to look after their affairs for one reason or another, they will need someone to do it for them. As soon as this begins to become a possibility, we recommend that you find out about and arrange a Lasting Power of Attorney. “Attorney” simply refers to someone with the power to act on the behalf of another. Such an arrangement can either be just for financial matters or for health care decisions, or both. And as the final point of this rather unpleasant section, there is the option of a Living Will. This is simply an advance decision which you document about what medical treatments you do not wish to have in the future, if you are not in a condition to make an informed decision at the time.

TAKING THE RIGHT RISKS

Pension policies and investments do need regular reviews to ensure that the money in the fund is being invested in the way that the person wants. All too often people leave their pension or investment funds unmonitored and that is a bit like the captain of a ship leaving no one at the helm while he goes to play shuffleboard with the passengers. It makes it uncertain as to whether the ship is going to reach its destination undamaged. We would be pleased to assist with a review of how your pensions or other investments are invested without charge.

PENSIONS – RINGING THE CHANGES

While we are still awaiting final approval of the Finance Bill, the writing on the wall looks in pretty permanent ink. 75 will cease to be the age for compulsory annuities. Those reaching 75 years of age will be able to maintain their pension options, including Drawdown. Maximum pension payments will be limited to £50,000 from 6 April next year. However, it will be possible for a person to pay up to a further £50,000 for each of the past three years – if he has not already contributed that much over those three years. Taking into account some of the other fine print, in fact, a person who had made no pension contributions in the previous 3 years could conceivably contribute up to £250,000 early in the next Tax Year.

OFFSET – MAKING YOUR MORTGAGE WORK HARDER

If you have both a mortgage and significant cash savings (£25,000 plus), you may with to consider an offset mortgage. This allows you to have a savings account that is linked to the mortgage account. You only pay interest on the difference between the two. For example, if your mortgage is £100,000 and your savings amount to £25,000, you only pay interest on £75,000. With savings rates being very low, this is a way of getting more out of your savings. With a mortgage rate of, say, 4.0%, it means that you are effectively getting a net 4.0% on your savings without risk.

INTEREST RATE QUESTIONS

While the economy is being sorted out, it is likely that the Bank of England will continue to keep interest rates low. However, at some point rates will inevitably begin to go up. If you do not already have a good mortgage deal and are looking for options, it may well be a good idea to go for a fixed rate for 3 years or longer. This will ensure you are not stung by increasing costs for that period. Those who will not be hurt by an interest rate of 0.5% to 1.0% might wish to continue to bet on the Tracker rates.

MORE FLEXIBILITY

The swing of the pendulum in the last two years was far away from the easy solutions available at that time, including self-certification of income, 95% and 100% borrowing, and great flexibility in dealing with credit problems. But there does seem to be some flexibility coming back into the mortgage market. Self-certification of income is still not available but there are lenders who will consider borrowers who have had historical credit problems. For example, one lender will provide borrowing for up to 80% of value and ignore any County
Court Judgements that are over two years old or that have been settled over a year ago. There has also been some improvement in the calculations for how much can be borrowed.

THE BEST MORTGAGE POSSIBLE

With the Bank of England keeping its interest rate at 0.5%, new mortgage rate offers have improved. There is a warning to sound as well, however. Those who took out mortgages several years ago, often had their ongoing rate (the interest rate that comes into effect after the end of any special fixed rate or discount) linked to the Bank of England Base Rate. Before looking for a new deal, find out what ongoing interest rate you are entitled to. You may find that it is very low and, in that case, you may wish to leave things as they are. If you are not sure, give us a ring on 01342 313302.