Tailored investment solutions

Expert, flexible approach to accumulating and managing wealth

We provide clients with an expert, flexible approach to accumulating and managing their ealth. Understanding your financial circumstances is crucial in making sure we tailor the right investment solutions for you. Regardless of what stage of life you’re in, we can help you to protect and grow your wealth.

The starting point and usual way to protect your portfolio is to spread your risk across several different types of investments. There are many different assets in which you can invest, each with different risk characteristics. The main assets available are shares, corporate bonds (also referred to as ’fixed interest’), cash and property.
While individual assets have a bearing on the overall level of risk you are exposed to, the correlation between the assets has an even greater bearing. The aim is to select assets that behave in different ways so, in theory, when one is underperforming, the other is ‘outperforming’. Fixed interest investments and property, for example, usually behave differently to share-based investments, as they tend to offer lower, more consistent returns. This provides a ‘safety net’ by diversifying away from many of the risks associated with reliance upon one particular asset, as potentially whilst one asset class is showing poor returns, other asset classes may be countering this with more positive returns.

Simpler solution
Rather than track lots of individual assets, which can be a daunting task, a simpler solution is to invest into collective funds containing those assets and leave the diversification worries to professional management. If appropriate to your particular situation, you could spread your investments into different shares or bonds to ensure that your portfolio is exposed to a plethora of different types of investments rather than, for example, having shares in just a few large companies. In this way, share-specific risk can be reduced should one of those companies experience difficulties.

It is just as important to spread your investments across different sectors (a sector being an area of the economy where businesses share the same or a related product or service, for example, pharmaceuticals, telecommunications or retail. Companies are classified by the sector in which they reside, which is dependent on the goods or services they sell or provide. For many reasons, companies within different sectors perform in very different ways. By diversifying across sectors, you can access shares with high growth expectations, without over-exposing your portfolio as a whole to undue risk.

Sensible option 
It’s natural to feel more comfortable investing a portfolio in your home market, but this is not necessarily the most sensible option. Because investments in different geographical economies generally operate in different economic cycles, they have less-than-perfect correlation. That’s why greater geographical diversification can help to offset losses in a portfolio and potentially help to achieve better returns over time.

This is another important aspect to consider when building an investment portfolio. Some investment funds use a ’passive’ strategy. This means they simply track the performance of a chosen index, for example, FTSE 100. Other funds use an ‘active’ approach and aim to beat the index by using their own research and analysis to select shares they believe will achieve greater returns. There are many reasons for using both types of strategy, and we will be able to recommend an approach suited to your needs.

By investing in collective investment funds, this also potentially has the effect of reducing the overall risk taken, as you are spreading the risk with numerous other investors. As there are more investors, this usually means there is more capital for the fund managers to invest and, therefore, potentially allows the manager to invest in a wider range of investments and asset classes.

The value of investments and income from them may go down. You may not get back the original amount invested. This information sets out the basics of portfolio diversification. It is not designed to be investment advice and should not be interpreted as such. Other factors will need to be taken into account before making an investment decision.

Time to review your retirement provision?

Keeping track of your pension portfolio pays dividends

If you’ve accumulated numerous workplace pensions over the years from different employers, it can be difficult to keep track of how they are performing. There is a danger that long-forgotten plans may end up festering in expensive, poorly performing funds, and the paperwork alone can be enough to put you off becoming more proactive.

Best course of action 
Whether you have one or a number of pension funds, it may be appropriate to have these reviewed. The best course of action will depend on what type of pensions you have and how long you have until retirement.

Making the most of your pensions now could have a significant impact on your financial well-being in retirement, and getting it right could mean a higher income, or even an earlier retirement date. By reviewing your pension now, you can check the charges you are paying along with the investment return. Lower charges don’t always mean higher returns but it’s
worth checking, as you may be able to increase your retirement income.

Investment performance
If you’re in a final salary scheme, it will almost always make sense to stay where you are, but if you have any other type of pension, where success or failure depends on the performance of your investments, reviewing them now is worth considering.

Consolidating personal pensions into alternatives, such as a self-invested personal pension (SIPP), can provide a wider amount of investment choice with a potentially lower cost, but this is a very complex area and you should always obtain professional financial advice.
A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation.

Income drawdown

Keeping your pension funds invested beyond your normal retirement date

Income drawdown or ‘Unsecured Pensions’, became available in 1995. It allows people to take an income from their pension savings while still remaining invested and is an alternative to purchasing an annuity. You decide how much of your pension fund you want to move into drawdown and then you can normally take a 25 per cent tax-free lump sum and draw an income from the rest.

Pensioners funding their retirement through income drawdown are permitted to keep their pension funds invested beyond their normal retirement date. They continue to manage and control their pension fund and make the investment decisions. There is also the opportunity to increase or decrease the income taken as they get older. However, the fund may be depleted by excessive income withdrawals or poor investment performance.

From 6 April 2010 you are now able to choose to take an income from your pension fund from age 55. Tax rules allow you to withdraw anything from 0 per cent to 120 per cent (2010/11) of the relevant annuity you could have bought at outset. These limits are calculated by the Government Actuaries Department (GAD). These GAD rates are reviewed every 5 years.There’s no set minimum, which means that you could actually delay taking an income if you want to and simply take your tax-free cash lump sum. The amount of yearly income you take must be reviewed at least every five years.

From age 75, income drawdown is subject to different government limits and become known as Alternatively Secured Pensions (ASPs). If you’re already receiving income from an income drawdown plan, currently when you reach the age of 75 it will become an ASP. But you will still be able to receive a regular income while the rest of your fund remains invested. The minimum amount you can withdraw is 55 per cent (2010/11) of an amount calculated by applying the funds available to the GAD table, while the maximum is 90 per cent (2010/11). These limits must be reviewed and recalculated at the start of each pension year.

The government is currently consulting on changes to the rules on having to take a pension income by age 75 and, following a review conducted in June 2010, plans to abolish ASPs. Instead, income drawdown would continue for the whole of your retirement. The withdrawal limits are significantly less for ASPs, and the vast majority of people will be better off purchasing an annuity.

The new rules are likely to take effect from April 2011. If you reach 75 before April 2011 there are interim measures in place. Under the proposals, there will no longer be a requirement to take pension benefits by a specific age. Tax-free cash will still normally be available only when the pension fund is made available to provide an income, either by entering income drawdown or by setting up an annuity. Pension benefits are likely to be tested against the Lifetime Allowance at age 75.

Currently, on death in drawdown before age 75, there is a 35 per cent tax charge if benefits are paid out as a lump sum. On death in ASP, a lump sum payment is potentially subject to combined tax charges of up to 82 per cent. It is proposed that these tax charges will be replaced with a single tax charge of around 55 per cent for those in drawdown or those over 75 who have not taken their benefits.

If you die under the age of 75 before taking benefits, your pension can normally be paid to your beneficiaries as a lump sum, free of tax. This applies currently and under the new proposals.

For pensioners using drawdown as their main source of retirement income, the proposed rules would remain similar to those in existence now with a restricted maximum income. However, for pensioners who can prove they have a certain (currently unknown) level of secure pension income from other sources, there will potentially be a more flexible form of drawdown available that allows the investor to take unlimited withdrawals from the fund subject to income tax.

As a general rule, you should try to keep your withdrawals within the natural yields on your investments. This way you will not be eating into your capital.

Since 6 April 1996 it’s been possible for protected rights money to be included in an income drawdown plan, but before A-Day protected rights couldn’t be included in a phased income drawdown plan.

For investors who reached age 75 after 22 June 2010 but before the full changes are implemented, interim measures are in place that, broadly speaking, apply drawdown rules and not ASP rules after age 75. These interim measures are expected to cease when the full changes are implemented. Any tax-free cash must still normally be taken before age 75, although there will be no requirement to draw an income. In the event of death any remaining pension pot can be passed to a nominated beneficiary as a lump sum subject to a 35 per cent tax charge.

As with any investment you need to be mindful of the fact that, when utilising income drawdown, your fund could be significantly, if not completely, eroded in adverse market conditions or if you make poor investment decisions. In the worst case scenario, this could leave you with no income during your retirement.

You also need to consider the implications of withdrawals, charges and inflation on your overall fund. Investors considering income drawdown should have a significantly more adventurous attitude to investment risk than someone buying a lifetime annuity.

In addition there is longevity to consider. No-one likes to give serious thought to the prospect of dying, but pensioners with a significant chance of passing away during the early years of their retirement may well fare better with an income drawdown plan, because it allows the pension assets to be passed on to dependants.

A spouse has a number of options when it comes to the remaining invested fund. The spouse can continue within income drawdown until they are 75 or until the time that their deceased spouse would have reached 75, whichever is the sooner. Any income received from this arrangement would be subject to income tax. By taking the fund as a lump sum, the spouse must pay a 35 per cent tax charge. In general, the residual fund is paid free of inheritance tax, although HM Revenue & Customs may apply this tax.