Wealth Management Update – August 2017

Email Wills – the way forward?

There has been speculation that in the future, it will be possible to write a Will in an email or text. Hopefully, this is far, far, far in the future.

There is a strong argument for bringing Wills up to date and more in line with modern society. This is clear to see from the archaic language used in all professionally written Wills, which dates back to long before our time and is a result of the Wills Act 1837 that has never been brought up to date!

The headlines don’t quite explain the crux of the proposal, which is that digital Wills would only be considered in very extreme circumstances, where someone were to die unexpectedly and leave clear intentions via digital means about how they wanted their estate to pass. The proposal doesn’t suggest that you can text your Will to your solicitor to be drawn up, or that you could create an email to use as your Will in normal circumstances.

Whilst this could potentially bring clarity and direction to the intentions of those who die suddenly, it also creates a number of other issues which we believe outweigh the benefits. It would create an opportunity for hackers and scammers to try to make a ‘quick buck’ from the Wills and estates of others. Not just that, but also estranged family members may have more of a case for contesting a Will based on casual conversations that may have been had in the past. The potential problems and downfalls are massive, and we cannot see how they can all be addressed to make full implementation of a digital Will a viable option.

If in doubt, steer clear of any suggestions of text or email Wills and approach a professional to draw up a valid and effective Will. If you are one of the 40% of people in the UK who don’t have a Will, now is the perfect time to rectify that before the digital age takes over.

Can you and should you help with student debt?

This is a common question amongst those with children or grandchildren who are reaching university age. Should you help them with their student loans?

The answer depends on your circumstances, so you should seek advice to help you make your final informed decision. However, here are some general pros and cons.

Pros:

• Helping with student debt transfers your children’s inheritance to them before you are even gone. Seven years after gifting them the money to pay their fees, the gift is outside of your estate for IHT, effectively reducing your IHT bill.
• Your child or grandchild will start their working life without having to make repayments for their student loan, potentially meaning they are better off in their pay packet each month.
• If you intend to pay off your student’s debt no matter what, paying up front could avoid the interest that will be added, which has gone up to a whopping 6.1% recently.

Cons:

• Does paying off a debt that your children or grandchildren have willingly entered into diminish their sense of responsibility? Potentially …
• This could compromise your own financial wellbeing; make sure you can definitely afford to do this before committing to the payment so that it doesn’t affect your own lifestyle. Remember you worked hard for the money you have.
• You could get caught out, so don’t be too hasty. You start paying off a student loan only if you earn over £21,000 and it is written off after 30 years. It may be better to invest the money in an ISA so that it is available and accessible when and if needed, and see what happens with your child.

This is a very basic look at a handful of the pros and cons of paying off student debt. The decision will be a very personal one and all financial (and other) factors should be taken into consideration. There is no wrong or right answer, but make sure you seek advice before you act.

China growth above forecasts

Most analysts expected China’s economy to slow down as the country introduced tougher policies on the property sector and lenders in an attempt to rein in debt amid a housing bubble. However, latest data reports show that growth is up at 6.9% and is way above Beijing’s 6.5% growth target. While the new restrictions may dampen growth slightly, they will not have such a large effect as first thought and may not curb growth to the extent originally suggested.

Strong growth in China is good news for the global economy and will mean that trade will continue uninterrupted.

In the past, the reliability of China’s growth figures has been questioned so we must take them at face value. But if they are accurate, then this is good news for China and also for those countries that trade with them – a considerable amount of transactions worldwide.

Is ‘Pretirement’ the new reality?

If you haven’t heard the term before, Pretirement is the gradual scaling back of work or a change in jobs, as an alternative to stopping working altogether and it could be the new retirement reality.

Many people are now considering working past their state pension age in an attempt to create a more comfortable retirement pot to live from. But it’s not just money that is making people want to keep working; many potential retirees do not feel ready to retire or don’t like the thought of staying at home for 20+ years.

If this sounds like you then it is likely your retirement plan will look quite different to that of someone who wants to stop work completely at 65. So, if we manage your money and you have recently made this decision, or are considering making such a decision, be sure to let us know.

State pension age … rising sooner than expected

In an attempt to save £74 billion, the government has made plans to increase the state pension age from 67 to 68 in 2037, seven years earlier than originally planned. This move is also an attempt to address the longevity issue the country currently faces, with insufficient resources to support our retiring population.

It is still not known if parliament will pass these proposals, but if they are approved, they will likely affect those who are currently in their mid 40s to early 50s. This group is also probably the worst off in regard to pension savings, having limited time to build up their pot as they near retirement and having missed out on many of the benefits of the old Defined Benefit pension policies. This means that they are unlikely to be able to afford early retirement if they so wished.

The decision to increase the retirement age is thought to be heavily influenced by the government’s recent deal with the DUP, in which they agreed to maintain the triple lock pension. Having been coerced into this decision in order to form a majority government, it would seem they are trying to release some of the pressure on the state pension by increasing the percentage of working population.

Award-winning investments

Schroder High Yield Opportunities fund, have recently won the accolade of Fund Manager of the Year in their respective sector at this year’s 22nd Annual IW Fund Manager of the Year Awards, held at The Royal Albert Hall.

We think this highlights the hard work and in-depth research that we undertake each month when reviewing our fund choices. We strive for the best at each opportunity and are pleased to see that the high performance fund managers are being recognised.

Notes on Brexit

Despite it being a hot topic for all in the press – with comments on the “Exit Fee”, warnings on economic impacts and even the mention that we may reverse the Brexit decision entirely – what we are hearing are little more than observations, speculation, opinions and political one-upmanship. With both sides of the table continually making declarations about what must and must not happen, it would do all involved well to remember that one of the most fatal mistakes to make is becoming so wrapped up in just one possible outcome that you leave yourself with nowhere to go. Why limit yourself to such a narrow definition of success? In the words of JFK: “Let us never negotiate out of fear. But, let us never fear to negotiate”.

So, here’s what we know right now …

Whilst a formal opening offer has been made regarding rights after Brexit for EU citizens in the UK and vice versa, this is very much still a point of negotiation and far from being the done deal that some are suggesting. One of the main sticking points here seems to be that the EU wants to limit UK citizens’ rights to their country of residence only; and the UK wants to carry out criminal record checks for “Settled Status” applicants. As you can imagine, both of these points are emotive and are causing friction.

The European Union (Notification of Withdrawal) Act 2017, designed to move EU legislation into UK law and allow parliament to amend where necessary without full parliamentary scrutiny, received Royal Assent on 16 March and has now entered into statute law.

The only piece of conclusive information that we have been able to identify so far, is that the Spanish/Gibraltar position has been clarified by President Juncker. Spain has absolutely no right of veto on any matter concerning negotiations with the European Union which include Gibraltar before Britain – and therefore Gibraltar – leaves the Union. He confirmed, however, that following Brexit it is EU policy that any future arrangements between the UK and the EU that include Gibraltar must be agreed by Spain, giving that government an effective right of veto.

Book of the month

This month’s book will take some reading, but it is worth every single minute spent on it. Sapiens: A Brief History of Humankind by Yuval Noah Harari, should be required reading in every school in the country and by everyone who would like to know how we got here. The book is a stunning work and will lead you on a journey through history that is both more interesting but also more relevant than almost any history book you may have read. Buy this book now and read it!

Best Savings Selections

Top Three No Notice Accounts without Bonus

Top Three Monthly Interest Accounts

Top Three Cash ISA’s

Please check with the terms and conditions before opening any account. If in doubt consult with your financial adviser directly as the above are for information only.

Source: Moneyfacts Magazine August 2017 Edition