Timing pays off for the early bird ISA investor

Timing pays off for the early bird ISA investor

Early tax year ISA investors could be thousands of pounds better off, according to research* looking at the investing habits of hypothetical ISA investors over the last 10 and 20 years.

The study concludes that if you were an ‘Early Shirley’ and invested your full ISA allowance on 6 April for the past 20 tax years, you would be nearly £12,000 better off now than ‘Last Minute Lara’ – someone who had waited to invest on the last day of each tax year.

With not everyone able to afford the full ISA investment in one lump sum, investing like ‘Monthly Monty’, who drip-feeds money into an ISA with a monthly savings plan, would achieve better returns than investing it all at the last minute. By splitting your annual ISA allowance into 12 monthly investments your investment would have grown to £296,247 – still £7,496 more than if you had waited until the last minute.

Reminder – Temporary LISA Withdrawal Rule Change

Earlier this year the government announced temporary changes to the Lifetime ISA (LISA) withdrawal rules if people want to access their funds earlier due to the pandemic.

The LISA allows holders to save up to £4,000 a year towards their first home or retirement and provides a 25% cash bonus of up to £1,000 a year on top.

Previously, holders were charged 25% of the amount withdrawn if they took cash out before turning 60 or if they were not buying a property. The withdrawal charge has been reduced to 20% between 6 March 2020 and 5 April 2021.

*Fidelity International, April 2020

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

Setting the record straight with protection

Setting the record straight with protection

Financial hardship can strike when we least expect it, showing the importance of having protection cover in place as a safety net.

A recent YouGov* survey about the pandemic revealed that nearly a third (32%) of Britons fear for their future. Payouts from life insurance, critical illness and income protection can help lessen the blow of unexpected events. Data from the Association of British Insurers shows that more than £5.7bn was paid out in protection claims in 2019.

If you are reviewing your finances to try and reduce outgoings, think twice before cancelling any existing protection policies – this could prove to be a false economy. Critical illness and income protection policies can be a lifeline if you were to lose your job or become ill for an extended period, so should certainly not be on the list of expenditure to cut.

For those of you who don’t have anything currently in place, lets set the record straight:

‘It’s too expensive’ 

Putting protection in place is far less expensive than many people imagine. We can help you find a deal that fits your budget and you can always take out additional cover later on.

‘I’m too young to need cover’ 

Protection policies aren’t just for older people. The younger and fitter you are when you take out a plan, the cheaper the premiums will be. Leave it too long and you could find yourself paying a much higher price.

‘I get cover at work so I don’t need more’ 

The amount you’re covered for might not be sufficient for your individual needs, and if you change jobs, that will change too. Plus, with your own policy, the cover can be tailored to your specific needs rather than a one-size fits all approach through your employer.

‘I don’t have kids, so it’s not relevant to me’ 

Whilst it’s true that there’s less need if you don’t have a family, how would your partner or loved ones manage if you weren’t around to contribute to the bills?

‘There’s too much choice’ 

It’s true there are lots of different types of policy, each designed to provide cover for specific risks. That’s where we can help. We can find the right type and level of cover to meet your insurance needs and your budget.

If you have any questions about existing protection policies or you are considering new ones – please get in touch.

*YouGov, 2020

Making sense of pension withdrawals

Making sense of pension withdrawals

Research* has revealed that one in five over-55s with a private pension withdrew a lump sum during 2019, although the study does suggest that, for many, this was probably not a financially sensible course of action.

‘Stash the cash’’
The most popular reason for accessing pension wealth was to put the money into a savings account, with one in four respondents doing so. Around one in five people who withdrew money from their pension, spent the proceeds on home improvements.

Tax implications
At first glance, the research appears to imply a sensible approach to pension withdrawals. However, in reality, shifting a taxed lump sum from a tax-efficient pension simply to place the proceeds on deposit makes little financial sense. This is partly due to potential tax bills, but also relates to inheritance rules which mean most people would be better off leaving money in a pension until they need the cash for income or specific spending requirements.

Seek advice
It’s clearly always essential to take professional advice before making any pension-related decisions, particularly in the current economic climate. So, if you are considering accessing your pension soon, get in touch – we will help you make the best decision for you.

*Canada Life, 2020

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.