Do I need a no-nup? [GUEST BLOG]

More and more couples are choosing not to marry. Instead, many opt for cohabitation. This can be for many reasons and choosing to cohabit is typically a life choice. However, it also has legal implications, especially when buying property together or having children. The laws for non-married cohabiting partners are not the same as those for married couples. Litigation upon separation can be costly, time-consuming and emotionally draining. No-Nups can be a way in which to minimise disputes between couples upon separation.

So what are No-Nups?

A No-Nup is more traditionally known as a Cohabitation Agreement. In short, these agreements set out who owns what and in what proportion. It lets you document how you will provide for your children and how you will split your property, its contents, personal belongings and other assets should the relationship break down.
The agreement can also be used to clarify how cohabiting couples will manage their day-to-day finances.

When should non-married couples consider a No-Nup?

If you are buying property together or live in a property owned by one of you...
The family home is often the main and most valuable asset of the relationship. A couple should give careful consideration to whether they wish to purchase the home as “joint tenants”, as “tenants in common” or in one party’s sole name.

As “joint tenants”, upon separation, each person takes half of the equity in the home and if one of them dies, the survivor inherits the whole property. This is the preferred route where equal contributions are being made to the purchase and any mortgage repayments.

As “tenants in common”, the property is held jointly but as separate shares so that if one party passes away, their share will pass according to their Will and will not automatically be inherited by the other person. This would be the typical route where one party makes a greater contribution to the property. Where there are unequal contributions, it is also prudent to set out the division of the equity in a ‘declaration of trust’ agreement.

Where ownership of family property is in the sole name of one spouse, it is usually a sensible precaution to enter a written agreement to define and secure the financial interest of the non-owner who otherwise could be entitled to nothing.

If you have children…

Depending on the circumstances, one parent may be able to claim maintenance, a lump sum or property rights against the other, on behalf of a child.

The parent who is not living with the child (the non-resident parent) may be required to pay child support via the Child Maintenance Service unless maintenance can be agreed. A No-Nup can be utilised to record the parties’ financial obligations and intentions towards children of the relationship upon breakdown.

If you hold pensions…

Occupational pension schemes often do not recognise partners who live together and may only allow a survivor’s pension to be paid to a surviving unmarried partner if the survivor was financially dependent on the pension scheme member.

Cohabiting partners have no rights under the state pension system. A specific nomination of the other party may be required to benefit from the private/ occupational policy.

In the absence of a No-Nup, litigation to resolve these issues can cost upwards of £10,000. No-Nups typically cost considerably less and litigation can be avoided.


Blaser Mills’ Family & Divorce team are highly experienced solicitors who can advise you on your respective rights and obligations. Should you require further information on this matter, or any other advice concerning family or divorce matters, we are happy to discuss your options with you over the telephone at no charge.

Please call 020 3814 2020 or alternatively, email us on family@blasermills.co.uk to arrange
a conversation.

Why Do I Need a Financial Adviser?

Today, you will have access to more investment information than ever before. Not necessarily jargon free, might I add. I guess it can never be jargon free, as we as a specie create words to deal with different complexities. Of course there are some useless words, which I won’t mention here, but essentially we do need to upskill the public in understanding more of the financial and investment vocabulary.

I do however, like the consumer directed Money Advice Service website which can be accessed here (https://www.moneyadviceservice.org.uk/en) which provides a basic level of information and guidance to the public.

These days, technology has allowed the investor to enjoy great perks, such as being able to buy or sell securities at low cost, diversify on mutual funds and exchange-traded funds in a variety of markets, and take advantage of more online tools and articles than you will likely need. I do strongly think DIY investing without a strategy is nothing other than gambling!

Anyway, you still may think due to the plethora of information out there you wouldn’t need a financial adviser, but I think the world has become a lot more complicated and so here are 4 reasons why you should have an adviser by your side in the area of your wealth management:

ü  They can help you determine if you are saving enough money.

By the time you hit the better part of 55, retirement will become your main focus as you realise that you only have a few years before you stop working. This will obviously have an impact on your expected standard of living. You are unlikely to have much information on your expected retirement income and how long it's likely to last you as we live longer due to better diet and medical care.

A financial adviser can be crucial in determining how much you need to put away each month to reach your retirement income goals and particularly when advising you on the best way to extract those funds tax efficiently.

ü  They can help you know how much exactly you should pay for your investments.

The cost of your investment is crucial. It can be more important than the investment returns itself as it needn’t matter what the investment returns are if a significant chunk of it is being wiped out in fees. There are lots of costly old investment and pension policies that need to be reviewed. You may have one of them. You also need to factor in the service you get with your annual overall management costs, sometimes a higher fee is definitely worth it, but too many a time…it isn’t! As a rule if you are paying more than 2.2% per annum in costs, get a review.

  

ü  They can help you identify ways to become more tax efficient

This applies to individual investors and particularly businesses with surplus cash holdings. A financial adviser can provide regulated advice which will allow those interested in investing in quality smaller companies to invest directly in order to achieve potentially higher levels of growth that small companies may enjoy. This would most certainly be classed as a higher risk investment but potential losses mitigated by benefiting from things like immediate tax relief of upto 50% on an investment of £100,000 which in turn has only really costed £50,000, whilst also benefiting from tax free growth and tax free dividends.

They can also advise you on how to mitigate the effects of inheritance tax using similar investments for tax planning.

  

ü  They can create a good strategy for down markets.

Do you remember the tech and the housing bubbles of 2000 and 2008? You only really lost if your entire investment stock was obliterated due to all the 'companies it owned' essentially going bankrupt, defaulted or you as the investor panicked and divested.

If you do not need the money in poor market conditions, provided the fund or funds you are in is open for business i.e. allowing investors to continue to invest, and the fund management team is credible in identifying new investment opportunities HOLD FIRE, the market will pick up!

While we have learnt more about diversification, small time or part investors who prefer to go it alone carry the greatest risk as they do not have access to the research resources of professional managers, and typically they only look at past performance to build an investment portfolio. This is wrong, plain wrong, just wrong, wrong, wrong!

Why? To give one example asset classes can correlate one another, so DIY investors could be investing, paying higher fees for one stock unnecessarily, as having invested in another cheaper stock which would have moved in the same direction as the more expensive one. 

A good adviser should ascertain your attitude to risk, look at your capacity to take risk, your need for that level risk before advising on how and where to invest. As an investor you benefit from lower management fees due to the fact that you are sharing your costs with many other investors.

You adviser should have an ongoing relationship with you where they advise you throughout your life as you enter into different income zones thus having evolving needs from saving for a house deposit, investing for school fees, that expensive holiday, structuring your business, extracting profits and putting money aside for retirement. 

With more specialist advisers they can protect your wealth post-death by keeping it within your bloodline, or even from having it whittled away by unruly children! 

If you'd like to have a friendly conversation about your affairs - no time limit and no charge, send a request through via the 'Post Me Your Problem' enquiry box above and a regulated, friendly financial adviser will get in touch usually within 24-48 hours.

Do I need to go to court regarding the arrangements for my children? [GUEST BLOG]

When a relationship breaks down, typically the parties’ main concern will be the arrangements for their children. Questions such as “How will the Court decide who the children will live with?” and “What are the children and I entitled to financially?” commonly arise.

It is important to note that the same issues and potential areas for dispute arise whether parents are married or unmarried. Parents are encouraged to mediate in order to resolve issues and court action should only be considered if no agreement can be reached.

On separation, typical disputes relating to children tend to focus on who the children will live with and how much time they will spend with the other parent. Terminology such as ‘custody’ and ‘access’, or ‘residence’ and ‘contact’ have been phased out in favour of labels which suggest that there is no controlling parent and that there is no ‘winner’or ‘loser’.

Instead, the law now makes provision for Child Arrangements Orders and there is a new presumption which states that both parents should be spending time with their children. The presumption does not say how much time or in what form but it is as close to suggesting a presumption of a shared care regime as children law has ever come.

What rights do I have in respect of my children?

Parental Responsibility (“PR”) was introduced by the Children Act 1989 and provided a deliberate shift towards the idea that parents have responsibilities to their children. In summary, PR gives you the right to make decisions regarding all of the important aspects of your child’s life such as medical, education and religious matters.

Mothers automatically acquire PR for their children as do Fathers who are married to their children’s mother. Unmarried fathers do not automatically acquire PR for their children. However, from 1.12.03 onwards, if the unmarried father is named on his child’s birth certificate, he automatically acquires PR. There are also other ways in which an unmarried father can obtain PR.

What types of Orders can the Court make?

The Court has the power to make various orders in relation to a child which will last until the child is 16 years old (18 in exceptional circumstances):

Child Arrangement Orders – setting out who the child will live and the frequency of time spent with each parent.

Prohibited Steps Orders – which prevent a person from acting in a certain way, such as removing the child from the jurisdiction of England and Wales.

Specific Issue Orders –giving decisions on specific issues relating to any aspect of parental responsibility for a child, such as where they will be educated.

What is the Court required to consider when making Orders?

The welfare of the child is of utmost importance to the court. Any questions the court has surrounding a child and their upbringing must adhere to the Welfare Checklist as follows:

• The wishes and feelings of the child concerned (considered in light of their age and understanding)
• The child’s physical, emotional and/or educational needs
• The likely effect of any change in circumstances on the child
• The child’s age, sex, background and any characteristics that the court considers relevant
• Any harm which the child has suffered or is at risk of suffering
• How capable each parent and any other person in relation to who the court considers to be relevant,
is of meeting the child’s needs
• The range of powers available to the court.

Blaser Mills’ Family & Divorce team are highly experienced solicitors who can advise you on your respective rights and obligations. Should you require further information on this matter, or any other advice concerning family or divorce matters, we are happy to discuss your options with you over the telephone at no charge.

Please call 020 3814 2020 or alternatively, email us on family@blasermills.co.uk to arrange a conversation.

Do I need legal advice on the financial aspect of my relationship breakdown? [GUEST BLOG]

A relationship breakdown is rarely straightforward.

Not only will you have to deal with the emotional side of the breakdown, you will also have to address the financial issues. With the benefit of expert and impartial advice on approaching this difficult period in your life, you can ensure that your wealth and assets are preserved and protected as best they can.

In the process of a divorce or dissolution, the Court will consider all assets available to you and the other party. This involves a full and frank financial disclosure of both parties’ current financial positions. The Court will then seek to redistribute the assets, taking into consideration the parties’ needs and resources, and the reasonable needs of you and the other party, while prioritising the needs of any children.

Typical factors considered include:
• The standard of living enjoyed by both parties
whilst you were together
• The parties’ ages
• The length of the marriage
• Any disabilities
• Contributions to the family
• Any financial misconduct or conduct it would be
inequitable to disregard
• Any potential future financial loss.

When making their decision, the Court has the power to make a range of orders that can have severe consequences on your wealth and assets.

These include:
• Property adjustment Orders (such as Orders for sale
or an Order for transfer of a property from one party
to the other)
• A lump sum payment
• Pension adjustment
• Spousal maintenance (money to be paid from one
spouse to the other on set terms).

A divorce or dissolution is therefore more complex than it might seem particularly when there is considerable wealth, assets and/or children involved.

Do I need to go to Court to achieve a financial settlement?

Going to Court is an option available to both parties if an agreement cannot be reached. However, the parties will be encouraged to take steps to Mediate and negotiate their terms of financial settlement in order to avoid Court proceedings. Court proceedings may be required if, for example, one party is failing to co-operate with the negotiation process or has been unwilling to make full and frank financial disclosure.

Will the home where we have been living have to be sold?

Whether a sale or transfer of the home will form part of a settlement is usually assessed once the parties have achieved full and frank disclosure. The terms of the financial settlement have to ensure that the parties can leave the relationship with separate and suitable accommodation.

What will become of my existing pension should I separate from or divorce my partner?

It is likely that your pension will be a relevant part of the matrimonial finances to be settled. The Court has wide powers upon divorce /dissolution to make financial adjustment orders including power to apportion a pension between the parties.

What happens if I inherit or I am likely to inherit a property or other assets?

This has been the subject of much review by the
Court and the ultimate position will depend on many factors. In some situations upon divorce, the Court may ring-fence the inheritance away from the overall asset base which is being divided between the parties. This is not a clear-cut process and the parties’ needs and resources will affect the Court’s decision.

There are many factors to consider when advising clients on divorce and associated financial matters.


Blaser Mills’ Family & Divorce team are highly experienced solicitors who can advise you on your respective rights and obligations. Should you require further information on this matter, or any other advice concerning family or divorce matters, we are happy to discuss your options with you over the telephone at no charge.

Please call 020 3814 2020 or alternatively, email us on: family@blasermills.co.uk to arrange an initial conversation.

Case Study 3: Should I move my pension? (In a nutshell response)

I had this query the other day and I thought I’d share my somewhat long verbal response which went something like this.

In terms of investment management performance it’s likely to be similar across the board for most people provided you are invested in line with your attitude to risk. However, most certainly different investment managers tailor their approach to mitigate volatility to try and achieve a smooth level of return.

But the fact is the market goes up and down and that for the large part is outside of the fund manager's control, but how much it goes up and down and how frequently is something that your fund management strategy can dictate to a degree. The argument then goes into whether one should have a passive fund management style where your investments simply mirror an index such as the FTSE 100 let’s say.

On the other hand, you may believe that an active manager who is actively involved in the day to day running of your investments can somehow ‘beat the market’. Well placed academic research states that this cannot be done consistently. However, what is important is not having a single management style be it within a passive approach or an active approach. I personally advocate a blend of active approaches because generally speaking active managers can respond quicker to market down turns.

Also, know that most fund performance is largely determined by the allocation of assets within the fund i.e. what proportion of commercial property, cash, equities, commodities, government and corporate bonds are within your fund and less so about any one stock.

Now, most fund managers, have the capacity to do the necessary level of research relevant for most of the public and it’s never wise to transfer based merely on past performance, as there is no guarantee for the future. So what you need to ask yourself is the following:

1. Is your provider reviewing your financial context and ambitions at least annually? Don’t underestimate this, having a good adviser on hand, when you want to do something as simple as save for your children’s school fees or if you wanted to start a new business, invest in buy-to-let properties, or even split from the dear or not so dear wife/husband (hope that never happens obviously), a financial adviser will be crucial to plan everything tax efficiently and you’ll have far less heartache in the long run.

Oh yes, one more thing, if you are approaching retirement and you are looking to withdraw monies from your pension. Get advice! I cannot stress this enough as due to changes in pension legislation you need to be able to maximise your gains tax efficiently.

2. What fees are they charging for those reviews and for investment management? To be honest anything more than 2% should warrant a review of your investment and your relationship with your current adviser. Also bear in mind this fee may include an on-going service charge, but if the provider has not provided that service, you could claim this portion back!

3. What technology is in place to support your investment goals and your overall financial well-being? Most people start to put money aside and completely forget about it. This is wrong. You should be involved and aware of how achievable your goals are and be able to be act quickly if you are short of your goals or want to achieve your goals a little quicker. Usually providers do not have the infrastructure or reliable technology to do this properly, but there are a few decent providers out there.

It is good that we consider the cost of our investments when we do, but we should also consider the cost of not being able to do something too, which is essentially the missed opportunity cost. So we don’t say….’if only I was I able to invest quickly when the markets were down'...'if only I could have invested this extra £10 I had this month without needing to hassle my adviser or stay on hold for 10 mins trying to get through to my provider'. 

Hope that helps!

The EU. In or Out? More than an economic argument

The British public have been promised a referendum by Prime Minister David Cameron to be held sometime between now and the end of 2017. I have come to find that this is the most important issue facing the UK and international relations probably since the turn of the 20^th century and far more important than the debate on Trident.

However, the quantified arguments for and against staying in the EU appear to be based on short sighted emotive topics without any serious reflection over long term consequences. Consequences of which could ultimately shake the foundations of our national identity, our security, and global development.

This short piece tries to simplify the facts and reflect upon the consequences. It’s only having sat down, and patiently reflected over the existing relationship with the EU, the alternatives and the globally multi-polar world have I come to a conclusion.

Trade

The EU in 2014 accounted for 44.6% of UK exports of goods and services and 53.2% of UK imports of goods and services. Just based on these figures the EU is the major trading partner for the UK. The more we export, the more new money enters the UK. Exporting is important because it opens up new markets to British businesses.

But let’s dig a little deeper, our trade with the EU is dominated in goods rather than services and we buy more from the EU than the EU buys from us. Since 1999 and 2014, our imports have grown on average 4.9% per year, compared to our exports which have grown 2.5% per year, which has left a trade in goods deficit at £77 billion.

Now, the UK also sells its services to the EU, and we are very strong in this regard with a surplus of £15.4 billion in 2014. Nonetheless, despite our strong position in the trade of our services, it is overshadowed by the overall deficit in trade due to the fact that we have been unable to compete stronger in the trade of our goods.

Our export to non-EU countries has however grown faster than it has with the EU; at a rate of 6.5% p.a. in contrast to 3.6% with the EU.

Direct Foreign Investment into UK

Of the UK’s ownership of foreign assets, 43.2% is invested in the EU, similarly the EU’s ownership of foreign assets consist of 46.4% which is directly invested into the UK.  Interestingly, the value of assets held in the UK by non-EU countries has resulted in their value exceeding the EU stock in 2010.

In terms of individual countries investing in the UK, India remains the third largest investor only after the USA, and France.

It is foreign investment that contributes to significant job creation and in 2014 investment into the UK came from more than 70 countries, including emerging markets. Of the top 20 countries investing in the UK, contributing to UK jobs and economic growth, 11 were either part of the EU or within the EEA.

The Alliance

So, why can’t we merely retain a trading alliance as it is beneficial to us all? We essentially could. But let’s take a step back. You see, in most trades between people there is some form of contract and an understanding of terms and even an understood unspoken culture in a familiar environment. We often take this as granted between respectable parties to a trade. Now, as commerce moves into unfamiliar territories involving different currencies, languages, cultures, negotiated trade borders, the impact of the trade in local jobs and labour conditions, we have always needed a governing legal framework.

As transportation and communication improved considerably since the turn of the 20^th century it brought nation states a lot closer together and we formulated the WTO (World Trade Organisation) which is supposed to deal with the global rules of trade.

Essentially, there will always be some form of governing framework, and because of the proximity of the EU member states and our collective history of violence and warfare, Europe was able to formulate a governing set of rules and a representative government with the aim of ending neighbourly feuds and maximising economic cooperation.

The Fears

So, we cannot escape some form of governance between nations, and so far what has been unnegotiable for the EU has been:

1.      The ‘Free’ Market

2.      The Free movement of people

3.      Implementing social reform

There is certainly merit for having all the above to ensure maximisation of equity and fairness amongst member states. For instance, the ‘free’ market is not really free if you don’t have the free movement of people which contribute the most to labour cost. Furthermore, without the free movement of people into new communities, the free market could ultimately have severe consequences for the local economy in terms of job creation, welfare, and entrepreneurial success.

The fears of a stronger EU are not unfounded; in fact the fears are natural because logic would indicate that a stronger EU would mean more laws imposed on us when negotiations have not gone entirely in our favour. However, exactly the same thing happens when our local government tries to negotiate for more money for services from central government. Then again cooperation is always about compromise for the benefit of the collective whole.

But what do we mean by a loss of our sovereignty? Ultimately it means loss of power over our courts, our borders, our economy, and even our foreign policy and defence at the extreme. Well, the latter is not as extreme in thought any longer as the EU already has a Foreign Minister, an office which is held by the Italian Federica Mogherini and proposals for an EU army have already been tabled.

Just think about it, the continents national budgets are strained, we are unable to spend on every necessary area for the welfare of our citizens be it health care, education, defence or retirement. Having a closer alliance with the EU could allow us to become far more efficient in the allocation of resources. Hence an EU army may not be ideal but an economic necessity. Similarly, private healthcare to deal with the burgeoning cost of the NHS operating under EU governance as opposed to US corporate practices may offer a solution.

What’s more if the UK decides to join the EU, I expect it will be a matter of only some brief time that we also adopt the single currency.

The Alternative

I still wonder whether the referendum will even happen. I expect that it will. If however, we voted to leave the EU, it has been mooted that we could develop our alliance with the Commonwealth. But the Commonwealth is nowhere near as developed as an economy and infrastructure as the EU.  Also bear in mind our preferential access so far to the non-EU market is made preferential only due to our membership of the EU. Globally we account for around 4% of exports of goods and services, a figure that is falling as emerging markets become more integrated into the global economy thus having greater access to more providers of services and goods. Even if we are to consider imports most crucially energy, as emerging markets increase their demand our bargaining power will be considerably weaker without the EU, and having chosen to ally with the Commonwealth we would not be able to command the same level of purchasing power nor political clout.

Furthermore, if we were to consider an alliance with the Commonwealth, are we not merely replacing one trade and political alliance with another? Albeit the EU is one made up of 'grown-up professionals' which we cannot necessarily command and must respect on an equal footing, whereas the Commonwealth could be one that we could ‘command’ and give us a sense of nostalgic imperialism.

There are other alternatives such as negotiating something similar to the Swiss, a free-trade agreement, or even operating under the WTO, but all of these options reduce our ability to trade on our own terms and we would still have to abide by EU expectations on consumer protection, product standards and technical specification. Crucially, the UK would also not be able to push changes in policy that could be more amenable to its offering.

The Opportunity

We now live in multi-polar world with rising economies and stronger foreign military prowess from the likes of Russia, China and India among others. The 20^th century and the early part of the 21^st have seen too many a conflict on the back of technological advancement and the advancement of popular culture that for the large part has promoted respect and tolerance.

The cost of leaving the EU could severely compromise the efficiency in which the continent can respond to shared threats and market opportunities.

We must put aside our fears of ‘losing’ our national identities as identity is something that is always in flux and evolving from one generation to another. The preservation of our identities at some level means we are not willing to adapt when we find something better or more relevant to us and our place in the world. We will never lose our sovereignty, we actually never really had it in the first place, but whatever we did have will only evolve and we must be the architects for the evolution to take place in accordance to our stimulus.

Should we leave the EU, the EU will become weaker as we will too and if we cannot compete on the world stage our international gravitas would have serious challenges as we compete against emerging economies on the international scene. In a time when the geopolitics is anything but stable a strong degree of unity is overwhelmingly needed to counter the threats against division. Only 50 years ago this would not have been a problem but today international trade and international polity is crucial to global stability.

Although the UK has been an EU powerhouse we’ve also been on the side-lines in nurturing European political development, it is time the UK becomes fully invested in the EU, accepting that there is no real alternative.

If you haven’t guessed, I will be voting to stay in the EU and eventually lead it!

Source:

http://www.ons.gov.uk/ons/rel/international-transactions/outward-foreign-affiliates-statistics/how-important-is-the-european-union-to-uk-trade-and-investment-/sty-eu.html

https://www.gov.uk/government/world-location-news/uk-is-top-investment-destination-in-europe

https://www.gov.uk/government/publications/ukti-inward-investment-report-2014-to-2015/ukti-inward-investment-report-2014-to-2015-online-viewing

Case Study 2: James wants to achieve a retirement income of £26,000 p.a.

Scenario: James is 55 years old, divorced father of two. He is in good health and is looking to retire in line with his state pension age which would be 66. He is aiming for a retirement income of £26,000 per annum. The current source for his retirement income is his pension fund which has a fund value of £114,500. He will also qualify for the full state pension. He has a disposable income of approximately £750 per month after essential and social expenses.

Thoughts:  James has 11 years to retirement. When he retires he will qualify for the new state pension of £7,865 per annum or £151.25 per week. This will leave his pension fund to make up the shortfall of £18,135 per annum. Based on current best buy annuity rates of 5.8%, James will require a fund value of £312,672 in order to purchase a secure retirement income of £18,135 to supplement his state pension.

If James wants a secure income which can only be achieved by way of purchasing an annuity, then he would have to start making some serious pension contributions. This would need to be in the region of £700 per month, provided the fund achieves a consistent growth rate of 7% per annum. James could also make a one-off contribution of £70,500 now in order to improve his chances in closing the fund gap.

But how realistic would it be to achieve 7% growth per year consistently for the next 11 years. Bear in mind this would also have to be net of fees and if the total cost of your investment is 1.5% per year you will need your fund manager to return at least 8.5% to cover their fees too.

This rate of return means James would need to be invested in a higher risk category to maximise his possibility of reaching his target growth fund of £312,672. But realistically, how many of us out there can really afford to save £700 per month? As for James, despite the fact his disposable income is stated to be £750 per month, slightly above the amount he needs to save, this is very tight. I have yet to see accurate and reliable expenditure details. Life is simply not consistent. Furthermore, he probably only disclosed his standard social expenses forgetting that amount we tend to spend on impulse.

It would be great if we could make more impulse decisions to save rather than spend. Investors and savers need to become more literate on a whole host of things that can affect their lifestyle in retirement. James’s situation could have been far better if he saved even a small amount per month consistently from the age of 20, reinvesting all of his dividend income and benefitting from compound growth.

Putting money aside just feels like another ‘expense’ and also another ‘task’ and in that sense providers can assist with technological and software developments. This can facilitate a more collaborative relationship with the investor by bringing their investments to their fingertips by making use of mobile and portable devices. This way savings and investments needn’t feel like they are in a distant place removed from the investor. By working with the investor to recognise and achieve a particular financial objective it could give UK investors a solid opportunity to build their savings and investments portfolio not simply by way of a regular direct debit but also by way of impulse especially at times when markets are low and when investors have that extra little amount to put away.

Anyway, back to the topic at hand, we have established James needs to start investing in a high risk fund but by no means is this performance target guaranteed and it is this that James must consider carefully. If he has a Financial Advisor, among many other things, he or she would be exploring his tolerance, and capacity to take investment risk whilst also exploring potential catastrophic life events.

Tolerance largely relates to James’s psychological and emotional profile which is usually assessed by way of a psychometric and scenario based questionnaire. Capacity is about the portion of your overall wealth that you are effectively investing and/or the effect a loss in your investment value will have on your lifestyle. Be careful here though as you may be ok with a loss in your investment in the second year of your investment but what if it dropped by 50% just before you intended to withdraw from the market?

Then there’s the case of thinking about how to mitigate catastrophic life events that could lead to a loss of income and/or an increase in expenditure due to paying for healthcare or home support.

All of these things will temper James’ exposure to risk which could mean he has to compromise on meeting his retirement goals. Compromising may mean reducing the level of secure income he takes and keeping the remainder of his monies invested in order to allow for growth or simply taking no secure income thus drawing on his investments directly. Bear in mind during retirement, James is unlikely to be invested in a high risk fund in case he were to suffer a very poor year and would need to divest more of his capital in order to meet his income needs, thus overly risking his entire retirement income. This in turn means, his potential rewards would also be significantly lower.

Consider that average life expectancy is approximately 82 years. This would mean James would need a retirement income for 16 years.

James could transfer his current pension into the high risk fund in accordance to his risk profile without any plans to make any further contributions. If this fund grew at the targeted growth rate of 7% per annum, he could have a pension fund of £246,740 in 11 years’ time.

Provided he didn’t take his 25% tax free lump sum, he could withdraw £1511.25 per month or £18,135 per year assuming a growth rate of 4% net of charges which should see him through his retirement.

James has an opportunity to realise his goals however, it will require a strong need for planning from now and ongoing reviews of his entire estate, income and ambitions to ensure his retirement goals are on target. Who knows, he could have forgotten the fact that he may want to fund his daughter’s wedding sometime in the future.

In any case, the lesson is, invest now. Think about what goals you could potentially have when you get married, when you have children, when you could want to take a gap year and then do what you can even if it be by making bitesize contributions now.