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6 Proven Ways to Avoid UK Pension Mistakes

admin — Tue, 06 Jan 2009 20:57:48 +0000

“To err is human.” As humans, we sometimes make mistakes. These mistakes can be as minor as zipping off an e-mail to the wrong address. They can be as major as setting the wrong coordinates for a bomb. Perhaps the best way to gauge mistakes is by the consequences that they create. The errors that we make can result in insignificant consequences that affect us minimally; or with drastic or devastating results.

Securing a pension remains one of the most significant actions that we can take. For most Britons, a pension functions as their primary method in preparing for their retirement. With the cost of living skyrocketing and the recent downturn in the housing industry, there is little room for error. Thus, it is vital that we minimize how many errors we make, in securing and maintaining our pensions. Here are some ways to avoid making pension slip-ups:

1. Never shop for a pension without an IFA’s help
You probably would personally add a new storey to your home, or replace the engine in your vehicle, right? Likewise, you should seek the professional guidance of an Independent Financial Adviser (IFA), when choosing the best pension. You could certainly choose a different source for your pension. However, it would be wisest to secure your pension through an IFA.

What is so special about an IFA? They have the knowledge, experience, and tools to help you select pensions that perform well and suit your particular pension needs. Furthermore, by law they must give you the optimum advice they can. In addition, the “independent” in IFA ensures that the adviser will scour the entire pension sector of the market, to locate your pension.

Could something go wrong after choosing an IFA? That case is possible (though less likely) with an IFA. Still, by selecting an IFA, there is also a greater likelihood that you will receive compensation if you receive unscrupulous advice. In a nutshell, an IFA will put your interests ahead of pension companies’, insurance companies’, or even themselves (“compensation” is thy name).

2. Never hire an IFA without doing your homework
While hiring an IFA is an excellent choice when selecting a pension scheme, it is important that you choose the right one. However, you should still perform some checks, to avoid any potential pitfalls.

How can you sort out the alphabet-soup of qualifications behind an IFA’s name, when you find a pensions adviser? An IFA should certainly have obtained a Financial Planning Certificate (FPC). This is the standard for sales of financial products. By law, an IFA cannot sell pensions without having obtained a FPC first. Also, a fully-certified IFA must have completed all three parts of the FPC. Other significant qualifications for IFAs include:

    AFPC: Advanced Financial Planning Certificate
    AIFA: Associate of the Institute or Faculty of Actuaries
    AIFP: Associate of the Institute of Financial Planning
    ALIA: Associate of the Life Insurance Association
    CTP: Certificate of Financial Planning
    FIFA: Fellow of the Institute or Faculty of Actuaries
    FILA: Fellow of the Life Insurance Association
    MLIA: Member of the Life Insurance Association

Keep in mind that having certification in addition to the FPC does not qualify a person as an outstanding IFA. However, it does indicate that he or she has long-term plans in the field.

3. Never fail to look for maximum flexibility
Finding pensions with maximum flexibility is as vital as finding the best rates for annuities uk. In particular, the Stakeholder Pensions provide a significant amount of flexibility for their policyholders. In fact, this has made the overall flexibility of Personal Pensions, much greater. Such pensions provide the following benefits:

    Let you choose to retire when you want to, without being penalized
    Let you transfer your pension within the same pension provider’s range of pensions, without penalty.
    Let your transfer funds to a different pension provider. This could or could not include a penalty.
    Let you transfer a Stakeholder Pension within one pension provider, or between pension providers.
    Let you lower your payments or contributions, without penalty (i.e. take a vacation from your career).

4. Never fail to look for minimum charges
Pension provides charge pension holders, for managing their pension funds. Two basic types of charges exist. You pay “initial charges” when you take out your pension. Meanwhile, you must pay “ongoing charges” for the management of your pension fund. Common charges include:

    The pension provider’s management setup charges (these can vary significantly)
    Annual management charges
    The IFA’s commission or fees (these can be continuous after the fund’s setup)
    Stakeholder Pensions’ maximum charge of 1% annually

To find the best pension, use a pensions calculator and be aware of how significantly charges can affect how profitable your pension is. In particular, be wary of “front-end loaded charging.” This involves pension providers requiring you to make the majority of your charges within the first year or two that you have the pension. You can typically locate such charges in the documents that list the key features of various pension plans.

Furthermore, be wary of one particular argument that pension providers may make. They might argue that a pension scheme that forms outstandingly will compensate for high pension charges. While this is true, there is no guarantee that your pension account will perform at a particular level. Because there are no guarantees in the world of pensions, it is advisable for you to minimize the charges for your pension.

5. Never hunt for a pension without a plan of attack
When choosing and purchasing a pension, you should follow a basic plan. First, locate a qualified and reliable IFA. Then review your pension “shopping list” with the IFA. Afterwards, have the IFA create a letter of recommendation about which pension you should select. Review this recommendation and then sign on the dotted line or look elsewhere.

6. Never forget to address any major questions, concerns, or problems to the pension service.

8 Great Reasons to Get a UK ISA

admin — Wed, 05 Nov 2008 20:54:10 +0000

When creating a formal argument, you have a burden: the burden of proof. Talking in circles, making baseless assertions, or providing “fluff” in your arguments, is ineffective. Instead, you must use solid evidence to support any assertions that you make. In a civil court of law, the prosecutor has the burden of proof to establish that the defendant is guilty. Meanwhile, in a military court of law, the defendant has the burden of proof to show that he is innocent.

Likewise, when choosing UK financial products, it may seem extremely challenging to decipher one product from another product. Sly advertising and a market that is constantly shifting can make this task quite challenging. However, we should certainly consider the option of an Independent savings Account (ISA). This type of UK financial product can help to maximize the income from our various types of savings and investment products. Here are some of the most cogent reasons for securing ISAs:

1. ISAs are an excellent tool for your long-term saving and investing
Some products for saving and investment are strictly ideal for the short-term, or are not particularly beneficial in the long-term. On the other hand, you can easily use ISAs as part of your long-term fiscal outlook, such as via an isa saving account. This can provide tax-free benefits to your long-term fiscal game plan. For instance, you could open an ISA account and then later transfer the funds into a pension account.

2. You can transfer Cash ISA funds to an Equity ISA
You can now transfer funds from your Cash ISA, to an Equity ISA. However, you cannot make a converse transfer.

3. You may select from two primary types of ISAs
We as humans generally like choices, and ISAs deliver. Based on your personal financial situation, you can choose from two primary types of ISAs:

A. Cash ISAs:
Think of Cash ISAs as savings accounts with non-taxable profits. You also have a choice about from where to secure Cash ISAs. The majority of UK banks and building societies offer these types of ISA products.

However, it is important to do your homework and find out the disparities between various institutions and between various products. The terns and conditions of different cash isa products can vary marginally or significantly. For instance, variances can exist regarding minimum deposits, notice periods before your ISA provider permits withdrawals, and whether accounts are accessed offline; online; or offline and online. Cash ISA tables can help you determine which ISA providers are currently offering the best interest rates for a cash isa.

B. Equity ISAs:
Again, you have options about where to secure this type of ISA. Various types of authorised financial institutions, such as banks, provide Equity ISAs. You can also get them from fund managers, Independent Financial Advisers (IFAS), stockbrokers, etc. While Equity ISAs can include a plethora of investment types, Open Ended Investment Companies (OEICs) are the most common one.

4. Self-Select ISAs are perfect for fans of Do-It-Yourself (DIY) fans
If you want to have more control of your ISA account, then you should certainly consider a Self-Select ISA. Typically, you can secure them from stockbrokers. A Self-Select ISA allows you to decide which blend of funds you place into your ISA “wrapper.” Think of it as a make-your-own taco or shawarma. With these flexible ISAs, you can add various types of investments, including:

    bonds
    gilts
    individual equities
    investment trusts
    OEICs
    unit trusts

5. You can purchase ISAs through various sources
If you want to secure Cash ISAs or Equity ISAs after you compare isas, you can get them through various sources. In the case of Cash ISAs, you can open them via a bank, building society, Internet, phone, or post.

On the other hand, you can also secure Equity ISAs, through multiple means. You can buy Equity ISAs directly from fund managers. These are companies that operate various types of collective investment funds (i.e. OEICs, investment trusts, and unit trusts). The Fund managers will choose which shares and stocks to purchase for you.

Next, you could purchase an Equity ISA through intermediaries. Types of intermediaries include brokers, building societies, stockbrokers, banks, etc.) This option itself provides more choices, as you can select from more fund managers and funds.

Finally, a Self-Select ISA allows you to choose investments from an array of managed funds. This gives you more control over the management of your ISA account

6. ISAs provide tax relief for UK financial products
Taxes can take a huge chunk out of our profits from UK products for saving and investments. However, ISAs can help to safeguard our savings and investments, from income tax or capital gains tax. While it is advisable to invest in ISAs, ISAs themselves are not investments per se. Instead, they function as a type of fiscal “wrapper” to protect investments and savings from the taxman.

A note of caution is that the tax benefits that ISAs provide are related to the profits that savings and investment products earn, rather than to the initial investments. For instance, if you secure an Equity ISA, the profit that you earn from selling certain stocks and shares, is tax-free. However, the UK government classifies the initial investment in the stocks and shares of an Equity ISA, as taxable income.

7. You can mix and match Cash ISAs and Equity ISAs
How much money can you put into a Cash ISA or an Equity ISA? Though some restrictions exist, you have more options than with other types of financial products. Here is how it works. Each tax year, you can invest a maximum of 7,200 in your ISA. However, you should note that while no limit exists on how much you can invest in an Equity ISA, the maximum you can yearly save in your Cash ISA, is 3,600. In theory, you could place your entire annual ISA credit into an Equity ISA!

8. The UK’s official regulator is the Financial Services Authority

9 Awesome Ways to Avoid Mistakes When Securing a UK ISA

admin — Wed, 05 Nov 2008 04:00:45 +0000

Ironically, sometimes in life a safeguard can become unsafe. An airbag can make driving treacherous if it inflates at the wrong time. A PC’s outdated anti-virus software can allow an army of electronic critters to attack our computers. A depleted ozone layer can actually trap the sun’s harmful rays within the earth’s atmosphere. In a nutshell, for a safeguard to be effective, it must function properly.

In the world of UK finance, an Individual Savings Account (ISA) functions as a type of safeguard. An ISA is not technically a way to save or invest, per se. Instead, an ISA functions as a “wrapper” to safeguard your savings and investments. It prevents the profits from your savings and investments, from being subject to income tax or capital gains tax. Here are some ways to avoid mistakes, in order to ensure that your ISA functions properly in protecting certain savings and investments, from the taxman.

1. Never forget to consider both cash isas and Equity ISAs
Which is more appropriate for you: a Cash ISA or an Equity ISA? When searching for the best isas, it depends on whether you are making short-term or long-term investments; and how much risk you are willing to take.

If you want to make a long-term investment that could earn a higher rate of return in terms of capital and income, then you should consider Equity ISAs. However, as is usually the case in the financial world, higher risks go hand-in-hand with higher rewards. On the other hand, because Equity ISAs involve investments in investment and unit trusts, they can significantly increase the amount of risk involved.

Meanwhile, if you intend to make a short-term investment with little risk, then you should consider a Cash ISA. You can access your funds quickly, and can avoid the unpredictability of the stock market.

2. Never invest without knowing your limits
ISAs were “born” in 1999. Then in April of 2008, the UK government revamped its ISA system. Beforehand, mini ISAs and maxi ISAs were the two types of ISAs available to Britons. To simplify the system, the government changed the two primary categories of ISAs to Cash ISAs and Equity ISAs. Furthermore, Personal Equity Plans (PEPS), the predecessors of ISAs, received their walking papers.

With the new system of Cash ISAs and Equity ISAs, the maximum amount of capital you can place into an ISA in an isa investment, is 7,200. While there is no limit to how much capital you can put into an Equity ISA, the ceiling for Cash ISAs is 3,600. Thus, you could theoretically place all 7,200 of your ISA credit, into an Equity ISA.

3. Never neglect to consider an ISA as a long-term investment
You could certainly use an ISA wrapper for short-term investment. However, you could also consider it as part of your long-term investing strategy. For instance, consider saving your ISA for a rainy day, by later placing it into a pension.

4. Never fail to review Cash ISA Tables constantly

The name of the game when securing a Cash ISA, is to find one with the highest rate. However, it is important to review the tables continually, as the best rates can theoretically change on a daily basis. Also, keep in mind that limit-period bonuses have inflated some Cash ISA interest rates.

5. Never buy ISAs without considering all of the sources
When choosing an ISA, such as cash isas, you have three choices. Each source has its pros and cons, so you should consider which one would best suit your individual financial needs:

Direct ISAs:
Like buying clothing or an appliance, you can buy Equity ISAs directvia fund managers. What are fund managers? They are the companies that mange a variety of collective investment funds. These include Open-Ended Investment Companies (OEICs), investment trusts, and unit trusts. The fund managers will determine which shares and stocks to purchase for your ISA.

Intermediaries:
The main benefit of purchasing an ISA through an intermediary, is that you may select from various fund managers and funds. An intermediary can include:

    bank
    broker
    building society
    independent financial adviser
    investment manager
    stockbroker

Self-Select ISAs:
Are you a fan of Do-It-Yourself (DOY) projects? If you want a more hands-on type of ISA, then you should certainly consider a Self-Select ISA. Think of this type of ISA as a make-your-own financial wrap, taco, or shawarma. Typically, you buy Self-Select ISAs from stockbrokers. You fill your ISA wrapper with a hodgepodge of funds or shares. Managed funds provide an array of investments to choose from, including:

    bonds
    gilts
    individual equities
    investment trusts
    OEICs
    unit trusts

6. Never assume that an ISA protects initial investments
An ISA functions in protecting your cash or equity investment, from becoming taxable income. However, it only protects any profits that you earn on the investment (i.e. saving), rather than the initial investment that you make. This includes both cash and equity that you invest.

7. Never purchase a Cash ISA without knowing the terms and conditions
The vast majority of banks and building societies in the UK provide various types of Cash ISAs. Nevertheless, get out your spectacles, in order to read the terms and conditions. They can differ from institution to institution, and from product to product. For instance, particular accounts could require making a minimum deposit when opening a new account, or waiting for a notice period prior to withdrawing the funds.

8. Never disregard moving Cash ISAs into Equity ISAs
Starting on April 6, 2008, UK investors have had the ability to transfer funds from Cash ISAS, into equity ISAs. This provides you with an opportunity to increase your investment income exponentially, via the stock market. However, you should cautiously take this action, as you cannot transfer the funds from an Equity ISA, back into your Cash ISA.

9. Never discount UK government advice on ISAs
They can help to address your questions, concerns and problems.

Rewards Credit Cards Reviewed

admin — Tue, 22 Jul 2008 20:53:59 +0000

There are a lot of rewards credit cards that one can actually choose from, not to mention the other types of cards that do not necessarily serve the same exact purpose. These products are specifically designed to provide incentives to users who frequently use their credit cards to make purchases. But that is not only the catch. Users also have the option to choose the best one that will suit their needs.

Cash back rewards

Getting the best cash reward credit card that is used frequently can provide users with a significant amount over a certain period of time. Such product allows cardholders to earn cash rewards for every purchase that is made. The amount of the cash back varies, but typically comes in percentage of a dollar spent. Some products allow higher percentage rates for higher purchases, which is oftentimes signaled by a certain level of amount.

Reward points

These are the most common forms of rewards. Each user is given a point for every amount of money that is charged using the card. When these points accumulate and reach a certain level, they can be used to redeem some items. These items may include gift certificates, electronics and gadgets, hotel stays, plane tickets, jewelries, office supplies, clothes, and a lot more. However, points do not apply on finance and interest charges. Reward programs and offers sometimes vary, so you have to check with your issuer before having your points redeemed. These issuers also provide updates on their promotional offers to users.

Hotel/Travel rewards

Compared to a cash back reward credit card, these types of incentives are used for hotel or travel purposes. There are credit cards that are offered by issuers in collaboration with certain hotels or companies that enable users to gain bonus points for using their services and amenities. In addition to that, these points can be used to earn free nights and upgrades, or the use of other services offered in a certain hotel, such as spa and facial care. These points can also be redeemed in exchange of travel tickets, use of cars for rent and even cruises. But there are no standards for these. The features may greatly vary depending on the product and the issuer. If you often go to a particular hotel, it is best that you apply for a credit card that is co-branded with it so you can heap huge rewards.

Retail rewards

Cash rebate credit cards, like any other rewards cards, can be used for retail purchases. Points or cash rebates are earned for all purchases made but with bonus points for specific good and services that are charged in your credit account. These are typically co-branded with a certain company that offers goods and services that you must avail in order to earn additional points. Points can oftentimes be redeemed through the same specific retail store. If you have preference for a certain brand, you can obtain significant benefits by participating in such promotions. Rebates, on the other hand, may be redeemed in the form of gift certificates, which you can also use to purchase another item in the store or serve as a gift to someone special.

Automobile rewards

These are featured on credit cards that are made for users that are forward-looking to having a new or a used car. These may also be used to redeem auto-related expenditures, merchandise and other services. Users also have the option to have their rewards through cash back method or the point system.

These may be through points or rebates that are earned for your gas purchases. Compared to cash reward credit cards, gas cards provide additional points or elaborate rebates on purchases made on gas. Such products may apply to any company or may be company-specific. This directly depends on the issuer of the product, whether they are offering a generic card or a retailer-specific. Most issuers provide company-specific cards, but these do not entirely mean that they are blocked from being used to another gas company.

Home improvement rewards

Points are given for any purchase that is made, however, bonus points or higher rebates are offered for home-related purchases. There are also products that allow points to be credited for mortgage payments, or can otherwise be redeemed for cash back, gift checks, or merchandise.

Frequent flier rewards

As the name implies, these are incentives offered for people who frequently travel trough air. Points through miles are typically earned either for money spend or for miles used in a certain travel period. Some products also allow points for all purchases and bonus points for airfares that are charged on these credit cards. Cash rebates may also be an option for some. But typically, accumulated points or miles are redeemed for airline travel.