Plans for a new National Care Service (NCS) could put two-thirds of UK pensioners under pressure to sell their homes, and the proposals highlight again an urgent need for renewed attention to pensions savings.

The NCS would offer comprehensive care in their own home to elderly people, modelled on the NHS, and residental stays where required.

Other payment options currently being discussed to enable pensioners to avail of the NCS include regular savings plans, and restrospective payment through an inheritance tax of a possible 10% on their estate.

Another proposal would see workers extending their working life beyond the state retirement age (now 65, rising to 68 by 2044), with the state pension payments they would have received feeding into the NCS, to fund their participation in the scheme.

The Conservative Party’s model for funding a new National Care Service would involve pensioners making a payment of £8,000 for residential care in the home, payable on a voluntary basis to join the scheme. 

Pensioners on low incomes and with no savings, however, would receive their healthcare for free.

Research shows that 64% of male pensioner households and 71% of female pensioner households do not have assets totalling £8,000, with the exception of their home. For pensioner couple households, who would be required to raise £16,000 to join the scheme, 63% do not have combined non-housing assets to foot the bill.

Equity release plans could be a solution for pensioners to raise money for the National Care Service. These enable homeowners to access the cash value of their home, while continuing to live there.

However, many pensioners may not have equity in their homes and for them, an investment such as a bond has been suggested as a viable alternative.

The launch of an NCS-style scheme would extend the need for financial planning for retirement, and add considerably to the already-pressing need for pensions advice and savings.

Enquire online now to discuss retirement planning or call 0800 678 5929

This is an increase of 12% in overspending since 2008, when 4.8m adults were living beyond their means in the same survey.

A further 13m UK adults only break even at the end of the month, leaving them with no disposable income or possibility of saving, while 26m adults have less than £100 left over, after paying their bills.

Half of those needing extra cash to make ends meet used a bank overdraft, while a third used credit card borrowings.

With wage increases currently averaging just 1.9%, and inflation at 3.5%, the real value of the average household’s wage packet is in decline, making the situation worse, rather than better. Petrol prices, now reaching an all-time high of £1.20 per litre, will further reduce the spending power of the average household.

As a result, survey organiser uSwitch concluded that “despite reports that the economy is on the mend, 15m believe that they will be worse off this year than last.”

Separate data relating to pensioners revealed this week that, of those pensioners who released equity from their home during 2009, one in five had credit card owings averaging £9,000.

This included ‘plastic’ debts of £8,881 for the age bracket 65 to 69, rising to £9,048 for those over 70. The information was gathered from an analysis of 3,501 equity release plans taken out in 2009, according to the equity release company Key Retirement Solutions.

*Survey price comparison website uSwitch

New research this week from Lloyds TSB shows that less than a tenth (9%) of people know the new allowances for Individual Savings Accounts (ISAs), for the coming tax year. 

In the 18-24 age group, a quarter (25%) of people do not know what an ISA is, and 6% believe an ISA is an application for their iPhone, rather than a tax-efficient savings account, according to Lloyds. 

Only 11% of people know the current ISA allowances, one-fifth of people think that ISA stands for Instant Savings Account, and 10% of people think an ISA is an Investment Standards Agreement. 

What are the ISA facts?

 There are two kinds of ISAs, the cash ISA and the stocks and shares ISA.

ISA allowances are about to rise from their current level of £7,200, and as of 6^th April 2010, anyone over 16 may invest up to £10,200 in ISAs in the next tax year. 

This can be split, with half (£5,100) invested in a cash ISA and half in a stocks and shares ISA.

If you have no cash ISA, you can invest your whole ISA allowance of £10,200 in the stocks and shares ISA. However, the reverse is not true. You may not invest more than £5,100 in a cash ISA.

If you do not use up your ISA allowance, it cannot be carried forward into the following year. 

This means that this year’s ISA savers, or those thinking of setting up an ISA account, have now just three weeks to avail of this year’s allowances, before they expire on April 6^th. 

Contact us now to make a financial enquiry  about saving in ISAs or ring 0800 678 5929 now

Inheritance Tax or IHT is a 40% tax that can be applied to portions of your wealth, when you move to transfer it to your children as an inheritance.

HMRC’s total gains from IHT are expected to total around £2.3bn this tax year (2009/10).

Much of this tax could have been avoided, as IHT is known as the most avoidable tax of all.

Checking your current liability for IHT is a simple calculation based on the total assets in your ‘estate’, less your debts and liabilities.

You can check your IHT liability right now, using our new Inheritance Tax calculator.

The tax allowances for IHT are currently £325,000 for a single and £650,000 for a couple.

This may sound generous, but bear in mind that they apply to your total wealth, as contained in your ‘estate’.

Your estate consists of the value of your home/other properties, cars, valuables, savings, investments, and insurances, minus the value of your outstanding mortgage, loans and other debts.

However, good independent financial advice and a little IHT planning can reduce or eliminate altogether your IHT liability, in just a few steps.

For instance, an insurance policy giving £250,000 of cover could be written ‘in trust’, reducing the value of your estate by that amount, right away. That single step could well be enough to bring your estate’s total worth back within your IHT allowances, so that you avoid tax.

Our advisers are experts in using IHT exemptions and Potentially Exempt Transfers (PETs) to further cut your possible exposure to IHT.

You can check your IHT liability with our IHT calculator, or find out more with an online advice enquiry, or call us now on 0800 678 5929.

Saving or investing for your own and your family’s future is not a complex matter, when you are working with a good financial adviser. We like to make it easy!

Here is our jargon-free round-up of the basic savings and  investment types, to show you the advantages and risks of each. These are just some of the options that we, as chartered financial planners, might suggest you consider as part of your financial plan.

Cash investments in a bank or building society account are seen as the lowest-risk investments, but tend to provide lowest returns, especially now that interest rates are low. In the current climate, cash savings may actually fail to keep up with inflation.

Bonds are a way of ‘lending’ your cash to government or a company, over a set period and for an agreed rate of interest. The interest agreement may be fixed, or linked to an index such as the Retail Price Index, and the bond issuer undertakes to repay the original loan plus interest at the end of the loan term. While returns on bonds can be higher than from a bank or building society account, risk is also slightly higher, as the bond issuer may fail to make the interest rate payments.

Property You can invest in property to live in, to let, or to develop and sell. You can derive an income from a property you rent to tenants, at the same time regarding the property as part of your retirement planning, for example. However, if the property market declines, you could have to sell your property for less than you paid. The 1980s were good years for property values, but many investors were lulled into a false sense of security and discovered in the last decade that property values can also nosedive. When buying and selling property, timing is essential.

Equities are stocks and shares in companies. If you own them, you are entitled to a share of the profits – these are known as dividends. Values of equities can fluctuate in the short term, but tend to do better than cash over longer periods of ten years or more. As such, they are a long-term investment.

You can invest in all of the above asset classes directly, or through investment funds. Investment funds and unit trusts pool the cash of many investors, and buy cash, bonds, property and stocks and shares in many companies, to diversify and spread risk. These days, there are also ethical funds available, which aim to invest only in ‘green’ companies, or avoid certain industries known to pollute the environment.

Deciding how to save for your future is much less daunting, with just a little knowledge of the products on offer – and, of course, with good financial advice.

Interested in learning more? You can drop us a line right now by making a free financial advice enquiry here, or call 0800 6785929

The challenge continues for managers of ethical funds, in their quest to verify which companies really meet their ethical investment criteria.

Ethical watchdog EIRIS claims that almost half of manufacturing companies fail to monitor the record of the companies in their supply chain, with regard to workers’ rights and labour standards*.

EIRIS found that 45% of companies analysed had no ethical policy or management systems in place to protect labour standards among their suppliers, and therefore fail to report on the issue.

Focusing on developed world large and mid-cap companies, EIRIS found that 13% were high or medium risk for supply chain labour standards.

The consumer industry was by far the largest offender, accounting for 66% of these companies.

Products with the greatest likelihood of poor labour standards in manufacture are clothing, footwear, toys, consumer electronics, and agricultural items.

Interest in ethical funds investments is growing extremely rapidly in the UK. EIRiS reveals there is currently £7bn invested in ethical funds in Britain, compared to £1.5bn ten years ago.

Seventy per cent of people in Great Britain consider their outlook and lifestyle to be green and ethical, and 49% of people with savings and investments would like to make a difference with their money, EIRIS adds.

However, investors remain sceptical of how ethical so-called ethical investments really are, and 44% claim that clearer evidence is needed of the ‘green’ impact of ethical investments.

*Source: ‘A Risky Business’, EIRIS Convention Watch research