Contact us: 01799 543222

What is a Trust and Would it be Good for Me?

Archive for June, 2022

What is a Trust and Would it be Good for Me?

Wednesday, June 29th, 2022

If you have assets such as land, property, cars, money and investments, you’ll want to be sure they go to your chosen beneficiaries in the future.

That way you can be sure that your loved ones have financial stability in the future and that you’ve left them a meaningful legacy.

But hang on, doesn’t that sound a bit like taking out a Will?

Well, yes, but there’s a key difference in that a Will only comes into effect after you pass away, whereas a Trust can be implemented from the moment it is set up. That can give you the confidence, certainty and peace of mind you want moving forwards, so you can be sure your family will be provided for further down the line.

At the same time, setting up a Trust can also have many tax benefits, and means your chosen beneficiaries won’t have to go through the Probate process following your death.

So it’s well worth exploring this option, seeking professional financial advice and seeing if this is the way forward for you.

What types of Trusts are there?

There are several different types of Trusts you can look at, depending on your specific wishes and circumstances:

Will Trust

This could be a good option if you’re married or in a civil partnership, as it makes sure your surviving partner can continue living in your property following your death. It can also ensure a share of the property can be included in your inheritance.

Discretionary Trust

This permits trustees to decide how to use the income from the trust and choose how much money beneficiaries will receive. That means it’s a good option for those who want maximum flexibility if their circumstances change.

Bare Trust

This provides or allows for the option of passing assets onto a young person when they reach the age of 18. That means the assets in the Trust will initially be held in the trustee’s name, rather than the beneficiary’s, and the trustee will be responsible for looking after them until the chosen beneficiary hits the age when they are able to access the trust themselves.

Trusts for Vulnerable Beneficiaries

This is a good option if you have a chosen beneficiary who lacks capacity to make decisions for themselves, and will therefore need financial support and help with managing their affairs. This could include a child, an under-18 who has lost a parent, or somebody with a disability.

If you have any questions on setting up a Trust to protect your assets for the future, get in touch and we’ll be happy to help. We have the knowledge and experience to advise you on the different options open to you and help you determine which ones best reflect your specific wishes and circumstances.

Does ‘Optimism’ Really Matter?

Wednesday, June 29th, 2022

If your glass is by nature half-empty, you didn’t need to look far for confirmatory information last month. 

Energy bills were going up – and are set to rise even further in October. Inflation was up again – with grocery inflation hitting its highest level for 13 years, And, of course, the National Insurance rises introduced in April were starting to bite. 

With the war in Ukraine looking set to continue through the year, it was no surprise, therefore, to see plenty of articles reporting that ‘optimism’ was at a new low. 

‘Brits’ optimism tumbles to new depths,’ reported City AM. ‘Below financial crisis and Covid lockdown levels.’ 

According to the article, optimism in the UK had slumped to its lowest level ever. Researcher GfK started tracking ‘optimism’ in 1974 and in May it fell to minus 40 – down two points on the previous month and lower than at the height of the financial crisis in 2008, the high unemployment of the 70s and 80s and the depths of the Covid lockdowns. 

Does this matter? After all, if you look at it objectively, living standards are better now than in the past and employment levels are significantly higher. 

But looking at it objectively is one thing – consumer confidence is entirely another. And yes, it does matter. 

In most countries, consumer spending makes up about two-thirds of all economic activity. So when the economy is expanding – and people feel confident about the future – they are prepared to spend money, especially on the traditional ‘big ticket’ items such as cars and household appliances. This spending drives more economic expansion, creating a virtuous circle. 

At the moment, though, we have the opposite: consumers feel anything but optimistic about the future and are therefore less willing to spend. ‘Brits cut back on fridges and sofas’ as one of last month’s headlines had it. Reduced spending means businesses sell less, which in turn makes them less willing to invest and employ people – ultimately leading to a recession. 

With inflation continuing to increase and everyone well aware that their energy costs will rise again in the autumn, there is going to be a continued reluctance to spend. Worryingly, the OECD recently forecast that the UK would have the lowest growth of all the G20 countries next year, with the exception of Russia. Unsurprisingly, their report called on the Chancellor to quickly implement tax cuts. 

Whether Rishi Sunak is back in his ‘whatever it takes’ mood of lockdown is open to debate. What’s undeniable though is that the rising cost of living is driving the ‘optimism index’ to previously-unseen levels. The Government is likely to see that reflected in the ballot box at the forthcoming by-elections – which could well prompt the Chancellor to act.

Are you leaving your retirement planning too late?

Wednesday, June 1st, 2022

For many of us, old age and retirement can feel a long way off, and with the world seemingly lurching from crisis to crisis, many of us are focused on simply getting through the next few days and weeks, rather than looking too far ahead.

However, that approach could simply store up problems for the future, which is why we’d urge anyone to start planning for their retirement as soon as possible.

According to a new study by Hargreaves Lansdown, one in five people said they would leave planning their retirement until they’re aged 60 or above.

The same survey showed that one in five people would only begin retirement planning at the age of between 30 and 39. Similarly, just one in seven people said they started planning for retirement when they were aged between 18 and 24.

So what does this mean for future retirees? Well, it’s a fact that the sooner you start putting money into your pension, the more time you have to build up a sizeable sum that should see you through your retirement.

Conversely, if you start too late, you’ve got a very short space of time in which to build up a retirement fund, which could hugely affect your ability to lead the lifestyle you want to enjoy after you finish working.

And if you start projecting your likely pension income in retirement, you may find that you don’t have very long in which to make up any shortfall.

Commenting on the figures, Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, acknowledged that it can be “easy to put off planning until the last moment”.

However, she insisted that pensions were a “long-term game”, which means action needs to be taken sooner rather than later.

“It’s worth taking the time earlier in your career to think about what kind of retirement you would like and put a plan in place to help you achieve it,” Ms Morrisey commented.

A lack of financial knowledge and education about pensions and retirement could be one big reason why so many people are kicking in the can down the road.

In fact, according to a YouGov survey, commissioned by Drewberry, 41 per cent of people with a workplace pension don’t actually know what they’re paying in and what they’ll get from it when they retire.

More than half of those polled also said they’d like to know if they’re saving enough for retirement, and significantly, one in three believe their employer should pay for them to discuss retirement planning with a financial adviser to get a better understanding of their finances.

Whether a lack of financial education leads to people ignoring and putting off financial planning is a constant topic of debate in the financial services industry. But it’s clear that more needs to be done to engage with both employers and savers on this issue, so people are properly set up for later life, and the fear factor that surrounds pension planning is taken out of the picture.

Interestingly, 87 per cent of the people polled by YouGov said they pay into a workplace pension, while 56 per cent said the provision of a workplace pension is important to them when they’re looking for a new job.

That suggests that many people do want to lay down the groundwork to secure a happy and prosperous future, but don’t necessarily know how – and that’s where making financial advice available and accessible becomes so important.


Is Inflation Heading Past 10%?

Wednesday, June 1st, 2022

As inflation soars to a 40-year high, many analysts, households and businesses are asking just how much higher could it go?

The rate of Inflation jumped from seven per cent in March to nine per cent in the 12 months to April, and according to the Bank of England, it’s likely to keep going up over the next few months, possibly to as much as ten per cent, but should fall again in 2023.

This, it said, is because the causes of the current high rate of inflation, such as Covid-related lockdowns in China leading to supply chain problems, aren’t likely to last. As a result, the Bank believes inflation should be close to its target of two per cent in about two years’ time.

However, it warned that the prices of some items might stay at a high level, when compared with recent years. That means the cost of living struggles, which so many people are experiencing right now, could persist if wage growth doesn’t match inflation.

“If prices go up but your income stays the same as it was a year ago, you’ll notice it won’t go as far as it did then,” the Bank said.

“You will be able to buy less of some things with the same amount of money than you did before. But how much costs change will vary. The cost of some things will go up more than others.”

The Bank of England is clearly walking a precarious tightrope and needing to balance many complex variables, but since many of these are outside of its control, it’s impossible to say with any certainty just how inflation will rise and how long this problem will last.

Andy Haldane, former chief economist at the Bank of England, recently told LBC: “This won’t be come and gone in a matter of months. I think this could be years rather than months.”

Furthermore, he predicted that there was a “better than evens chance” that the UK could fall into recession in the near future, saying: “We could find ourselves heading south rather than north”.

So what can the Bank of England do? The Bank’s Monetary Policy Committee recently raised interest rates from 0.75 per cent to one per cent – their highest level for 13 years.

However, opinion on what to do next is split, with Michael Saunders, a member of the Monetary Policy Committee, believing the best way to deal with rising inflation is to implement faster interest rate hikes.

Mr Saunders, who was among those who recently voted for a 0.5 per cent increase in interest rates, said: “The strength of external costs is eroding real incomes and is likely to cap real spending.

“But, by creating a long period of above-target inflation, these external cost increases also may exacerbate the rise in inflation expectations and hence, with the tight labour market, could make it harder to ensure domestic inflation pressures return to a target-consistent pace.”

Speaking to the Resolution Foundation, Mr Saunders argued that the Bank should move to “a more neutral monetary policy stance”, adding that its credibility could be harmed if inflation rises out of control.

As calls grow for politicians and fiscal policymakers to do more to address the cost of living crisis, inflation passing the ten per cent mark would be a hugely symbolic moment that could pile on the pressure even further.

We will keep you informed as to what decisions are taken, and in the meantime, if you have any questions or concerns, don’t hesitate to contact us.