Posts tagged: finance

How Does Income Drawdown Work?

Income relatedIncome drawdown can provide a great way to keep you financially comfortable in later life. Here’s a look at how it works.

A Quick Look at Annuities

Income drawdown isn’t complicated, but it can be a little confusing if you’re only familiar with the annuity model of pensions. Annuities work like this: you make regular payments into your pension throughout your working life, and when you retire you use that money to purchase an annuity. An annuity is a financial product that guarantees you a fixed income until the day you die.

The problem with this model is that it may not provide for your needs. Annuity rates are dependent on market conditions, so when you go to retire, there is a chance that you may receive a poor rate. Although the payment is fixed, inflation means that it will decrease each year in real terms.

How Income Drawdown is Different

Instead of cashing in your pension on retirement day, income drawdown allows you to make regular cash withdrawals from your pension, within certain limits. You can vary the payments you receive according to your needs, and the money that you’ve invested will continue to grow.

To avail of income drawdown, you’ll need to choose a financial product such as a SIPP (Self-Invested Personal Pension) with drawdown functionality. SIPPs also offer a huge range of investment choices, giving you the opportunity to grow your fund even further.

What Kind of Payments Can I Get?

There are two types of payment available in an income drawdown pension:

  • Tax-free cash: 25% of your fund is available tax-free and can be withdrawn in instalments or taken as a one-off lump sum.
  • Income: Of the remaining 75%, you can withdraw money as and when you choose. These payments are subject to income tax, and their is a limit to how much you can withdraw each year. This limit is often referred to as the GAD Max, and you can withdraw up to your GAD Max each year. Whether you take this as a monthly payment or an annual lump sum is up to you.

How is My GAD Max Calculated

There are three factors in deciding your GAD limits. Your age and the value of the pension are both taken into consideration, with the intention that your income payments should be balanced in order to ensure a regular pension for the rest of your life. Gilt Yields, a figure issued each month by the Treasury, are also taken into account.

Your GAD Max is recalculated every three years, although in some circumstances you will be able to request a recalculation before then.

When Can I Start Taking Income Drawdown Payments?

You can begin drawing down form your pension at any time after the age of 55. You don’t need to have actually retired, although if you are still in employment then you’ll be liable to pay the same amount of income tax that you would pay on your normal salary.

Income drawdown payments can be reduced, increased (within GAD limits), stopped and restarted as you see fit.

Will I One Day Have to Purchase an Annuity?

No, you can continue to receive income payments for as long as you like. If you would like to purchase an annuity later on, you can do so with your remaining pension fund.

Are There Any Disadvantages to Income Drawdown?

Your pension payments are not guaranteed as they would be under an annuity arrangement. In order to keep receiving payments, you will need to have money in your pension and a bad investment choice may see your pension lose its value. This is why many income drawdown products are sold on an advice-only basis; it is recommend that you speak to a financial adviser before investing in such a product.

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4 Great Ways To Cut Down Your Household Spending

Cost cuttingAs you’ve probably heard, the economic climate is harsh at present. Due to the rising prices of many goods, lots of families are feeling the squeeze and putting a lid on their spending. With all this going on, the last thing you might be thinking about right now as a young family is putting money aside for your children’s future – but there’s no guarantee that things will be any easier by the time your child leaves home to go to university, or search for work. No matter how bad things may seem, it’s always a good idea to at least consider putting money into a Children’s ISA.

But with an already squeezed budget, you might be asking yourself: How can it be done? How can I trim our household outgoings any more than I already have?

Here are some ways you can free up money if you’re finding it a struggle to put funds aside:

Cut Down on Unused Luxuries

We all have them: gym memberships we never use; digital channel packages we don’t watch; subscriptions to cookery or gardening magazines we never read but which seemed like a good idea at the time; the list of extraneous luxuries goes on. So, before you make a purchase or a commitment to something which requires a monthly payment plan, stop and think: Do I really need this? Can I live without it? There’s nothing the matter with indulging yourself every now and again, but if you’re going to spend money on a hobby, make sure it’s worthwhile. Remember that this is money you could be putting to better use elsewhere. 

Be Thrifty With Your Utilities 

You might think that switching off the lights in the rooms you’re not in, and not leaving the TV on standby overnight might not make much of a difference – but it all adds up. Being clever with your energy use will not only help to reduce your carbon footprint but will also reap you rewards when you receive your next utility bill – and in turn free up more money to put into your savings.

Eat In More

We all deserve a nice meal out every now and then, especially after a tough week. But it can be easy to cave in to temptation and let this become a regular fixture. Having a meal in a restaurant can seem like such an appetising prospect that we’re often blinded to the cost of it – which doesn’t hit us until we’ve got the check after a round of desserts. If you find yourself eating out regularly, this is a cost you can easily cut out. Treat yourself to a nice meal by all means – but remember that taking out and eating at home, or even cooking a special meal yourself instead of eating out regularly will almost always be cheaper. 

Take Advantage of Deals

In your household, a holiday might be a non-negotiable fixture of your year – and understandably so. We all need to take time out from our busy lifestyles every now and then. But if you’re looking to save money, it pays to seek out deals and offers and get in there early. If you’re booking a summer holiday, try and plan it in January or even before if you can, and the chances are there’ll be a host of early bird price deals on offer.

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3 Tips To Protect Your Identity

Online securityNow that we have entered the information age, our data is regularly being logged into many different websites through many different devices, all of which is putting our identity at risk. Along with that, with so many more things that can be done online, from loan and mortgage applications, purchasing of items big and small and even booking holidays: the level of risk associated with identity theft and the ease of using another persons details to make purchases makes protecting your identity all the more important. Today we are going to go through three tips to protect your online identity:

1.)  Use strong passwords

If you are logging in to various services with passwords, make those passwords as strong as possible by using capital letters, numbers and symbols to make your password less easy to guess. Identity thieves use programs that can enter a whole dictionary of words into a password box within minutes – which means that any password that is based on a standard word such as “cheese” is a weak password that practically invites people to steal your identity. If you have a poor memory, there are ways to strengthen and secure passwords without making them difficult to remember – and you can do this by pretending your password is a car number plate and adding your favourite symbol at the end, so “cheese” can become “Ch33se?”, “blue” can become “blu3!” and so on and so forth…you get the drift!

2.)  Delete your browsing history and cookies when you have finished

If you are using a smart device or a shared computer then always make sure you delete the stored information in the browsers keychain when you are done. If you are not very web savvy and that all sounds like gobbledygook to you, don’t worry! When you have your browser open, select “history” and find the “delete browsing history” option – remembering to delete cookies and other saved information. The reason for this is that your browser will remember your passwords and automatically log in the next person who visits a website which requires your login information. Once someone has logged into one of your accounts, they not only have access to your credit card details, but also your mothers maiden name, your secret password, your address, paypal details – the whole hog! Better to not give anyone such access by deleting the information stored in the browser you are using.  If you are accessing information via your phone, rather than go through the process of deleting every thing each time you have used it, you can choose to go incognito which means that none of your browsing history is stored: ever. This is easily done through the settings on your phone.

3.)  Do not respond to emails asking you for information

One easy way to steal people’s data, is to redirect them to a fake website that looks and feels like a genuine website: and then making them enter their details for your own person use. This is called “phishing” and will most often come in the form of Facebook or bank information that requires your instant response. Rather than respond to such emails by clicking on the links they provide, visit the website directly to make sure the email is genuine, and without risking a visit to a fake website that is trying to steal your details.

Brendon is an image rights writer based in Guernsey. He loves to help people protect themselves from identity theft.

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Finding the right credit card for you – it’s easier than you think

Choosing right credit cardWhen you begin the search for a good UK credit card, you are likely to encounter a vast amount of information. A lot of this information can be conflicting, as well as confusing, and you might feel that you will never be able to root out the best credit card deal to suit your circumstances.

The way to find the best credit card for you is to cut through all the waffle and jargon and simply focus on what you need from a credit card. Once you know this, you can narrow down your options so that there are only a small number of deals to compare and to choose from.

What type of credit card is best for you?

To get the best credit card deal, you need to understand your spending patterns and to have a good grip on your finances. This will help you find a card that you can afford and that suits your needs. Here are a few examples of credit card types along with who they are best suited to:

  • Credit cards with low interest rates (low APRs) – these may attract your attention, but they are not for everyone. These are best if you want a card to use only occasionally and that you can afford to pay off in full each month. If you want a credit card for a specific purpose, this is not the option for you.
  • 0% balance transfer credit cards – these cards, which give you 0% for a limited period (i.e. 12 months) are designed for people who already have debt and who will be able to pay off that debt by the expiry of the 0% period. They allow you to transfer the balance (debt) to the 0% card so that you get a better deal and can more easily manage your debts.
  • Cash back credit cards offer you money back on everyday purchases on everyday purchases, which is very beneficial but only worth it if you can your balance off in full (or very nearly) every month.
  • Low-rate life of balance credit cards – similarly to balance transfer offers, these cards allow you to switch existing debt over to a new card. The difference is that these cards give you a guarantee that the interest rate on the debt won’t increase as long as you can make minimum payments each month. These cards are best for people who can’t afford to completely clear their debts before 0% offer periods run out (usually within 12-18 months).
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Is Bordeaux 2010 A Good Choice For Those Wishing To Invest In Wine?

Invest in WineOn January 28, Bloomberg published an article focusing on the Bordeaux 2010 vintage which will soon start hitting the retail shelves and which, being recommended by winemakers, is bound to attract the attention of people who invest in wine.

The 2010 Vintage

The author of the piece, Elin McCoy, attended a wine-tasting at which110 top Bordeaux producers presented their reds and whites from the 2010 vintage. Ms McCoy noted that while the quality of the 2010 vintage was exceptional formany chateaux, the futures prices were so high that therewas likely to be stock languishing in warehouses, especially given that a lot of Bordeaux lovers filled up their cellars with the 2009 vintage.

As noted in an article by the wine magazine Decanter, entitled “Bordeaux 2010 report: Fatigue, readjustment, and a missed opportunity”, the2010 vintage has been hailed as the second-most successful vintage of all time, 2009 being the record-breaking best, 2005 in third place.

Winemakers’ Choice

Yet Ms McCoy noted that,while the winemakers she interviewed insisted that both 2009 and 2010 were great vintages, they preferred their 2010 wines. “The 2010s are more electric, more detailed, like high-pixel images,” according toAlexander Van Beek, general manager at the commune of Margaux, as quoted in the Bloomberg piece.

Decanter consultant editor Steven Spurrier also enthusedthat the 2010 vintage “is looking like THE greatest Bordeaux vintage, so far, and, contrary to expectations, not tiring to taste.”

High Prices

With all the positive reviews, 2010 is plainly a vintage to consider. Yet the high prices could potentially discourage manywilling to invest in wine. Ms McCoy quoted Olivier Bernard of Domaine de Chevalier as blaming wine investment funds for the high prices. “Wine should be drunk with a smile,” Mr Bernard points out. “If wine lovers pay too much, they don’t smile. They may buy once without a smile, but they won’t do it a second time.”

In a phone interview, Gary Boom, managing director of the UK’s Bordeaux Index,pointed outthat massive amounts of 2009 futures were sold even at high prices, “but only half of that with the 2010s” since “people had already spent their money.”

So wine investors who didn’t spend their money on the 2009 vintage and are thinking whether to invest in wine could potentially consider the 2010 vintage as an wine investment option.

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