- Ask an IFA for a review of your with profit bond. In particular a good IFA should be able to advise you if it is worthwhile keeping your bond, or selling it, taking into account how the bond is actually invested, and any penalties applying to it.
- Don’t use a managed fund. History shows they struggle to add value and are expensive. Instead, ask an IFA to build a portfolio that suits you, using all the best funds for each geographical area as opposed to one company believing they are best in all areas. This should reduce your risk as well as giving you the potential for better growth.
- Arrange for your adviser to send regular reports on your investments, and have a full review at least every 12 months to agree your own attitude to risks and your evolving expectations.
- If either a husband or wife is a non-tax or basic rate taxpayer, and the other is a higher rate taxpayer – consider how bank, building society and dividend yielding investments are held for tax purposes and assign to the non tax payer to achieve a tax free income.
- Consider transferring your funds onto a platform that allows you to hold all your funds in one place. This will also give you the opportunity to value all of your investments in one second as well as the ability to purchase the assets you wish quickly and online. Moreover the days of endless paperwork will disappear as all valuations can be viewed in one place online.
- Time is also a great healer. An investment held for 10 years will ride out many storms whereas a shorter term investor may not have time to recover from any falls particularly if you have bought at a peak in the market.
- Use unit trusts and ISAs before using offshore investment bonds for their tax-efficiency. You can use your capital gains allowance each year to provide a tax- free distribution. As an example an investor with £88,000 could take 10% per year from their investment tax-free, by using their capital gains tax allowance – a point missed by most investors lumbered with onshore bonds such as With Profits.
- The day of the Wrap platform is here. Consider using a Wrap to let you hold not only your ISAs and unit trusts in one place, but also your pensions, bank accounts and most other savings. In one second you will be able to see all your assets and have them valued in real time.
- Think holistically. It only makes sense to have savings and debts at the same time if your savings are earning a better after-tax return than the debts are costing you.
- Transferring a portion of your current assets to your children or grandchildren could reduce your current tax and Inheritance Tax. You can transfer an amount that produces up to £100 per year in interest.
- Use your ISA allowance every tax year.
- Ensure your adviser has put together a model portfolio spread across all sectors. A good analogy to explain diversification is to buy wellington boot companies as well as ice cream companies.
- If your investments haven’t really performed and you haven’t been having reviews, be disciplined and realign your portfolio. Don’t be afraid to take some of the gains on your capital that has done well.
- Don’t hold on to investments just because they have gone down. Apply zero-based thinking to them – would you buy them today? If not, consider offloading them. Don’t hang on to the losers in the hope they will go up.
- If you have any losses on investments consider offloading them against gains on second properties you have sold.
- Bonds are sold as having a 5% tax free income. It is not tax-free. Moreover it is comfortably the most tax inefficient way to invest, yet it appears to be the destination for most investors money. You can take 5% per year for 20 years (your money back!) and then the 5% per year you are taking is added to your income for the year. If you are over 65, the whole gain, when you encash, is added to your income to assess any loss of age allowance (more tax). A point many investors are unaware of is the fact that all withdrawals and income are added back in to any gains you have made when you eventually encash the plan to ascertain if you will pay high rate tax. So what tax advantage do they really have?
- Investments into offshore bonds achieve tax-free growth (apart from a small element of withholding tax) and tax-free distribution if the gain is within your personal allowance which is very useful for education planning.
- An IFA can stagger your investment to avoid purchasing with all your capital at the wrong time.
- Only invest the capital you can allow to leave for over 5 years.
- Don’t take excessive risks – Speak to an IFA who can show you exactly how much risk you are taking. Top IFAs have all the technology to show you what to expect and understand what fluctuations you may encounter.
- Ask your adviser how they select what investments they use. Don’t buy investments where the IFA uses either cumulative performance as a measure for choosing the best funds or discreet annual analysis either. Ensure they are using discreet monthly analysis over 5 years as a measure for the above as well as the measure for risk. Your IFA should explain this. Ensure fund managers have also been visited to get a true feel for the approach used to attain the returns achieved.
Find out why so many people choose Worldwide Financial Planning as their Investment adviser by calling 0800 0112825 or complete the enquiry form in confidence.
