Financial Planning for Residents of

Cranleigh

Informed Choice

Welcome

As a business based in Cranleigh since 1994, we have written this guide for local residents to

help raise some important financial planning

questions for discussion.

In this guide we have covered seven of the most important areas of financial planning you

should be thinking about.

Here at Informed Choice, we work with individuals, trustees and

business owners to help them to build, manage and protect their wealth. We have been providing independent financial advice to

clients in Cranleigh for sixteen years.

If anything within this guide prompts a question, please do get in

touch and I will be happy to answer any questions you might have.

We offer a first meeting at our expense and with no obligation, to

help you to understand your financial goals and objectives. This first meeting is also a great opportunity for you to ask us lots of

questions about our experience, qualifications and proposition.

You can call me on 01483 274566 or email nick@icl-ifa.co.uk.

Alternatively, you can visit our regularly updated website at www.icl-ifa.co.uk. We look forward to hearing from you soon.

Nick

Nick Bamford APFS AIFP

Chartered Financial Planner

Informed Choice Ltd

Sundial House20 High Street

CranleighSurrey

GU6 8AE

First edition published in Great Britain 2010.

© Informed Choice Ltd 2010

The right of Nick Bamford to be identified as the author of this work

has been asserted by him in accordance with the Copyright, Designs and Patents Act 1988.

All rights reserved. No part of this publication may be reproduced

in any material form (including photocopying or storing in any

medium by electronic means and whether or not transiently or incidentally to some other use of this publication) without the

written permission of the copyright holder except in accordance with the provisions of the Copyright, Designs and Patents Act 1988.

Applications for the copyright holder’s written permission to

reproduce any part of this publication should be addressed to the publishers.

This publication is provided for general consideration only and the

information contained herein is not to be acted upon without

professional independent financial advice. Neither Informed Choice Ltd nor any author can accept responsibility for any loss occasioned

to any person no matter howsoever caused or arising as a result of or in consequence of action taken or refrained from in reliance of

the contents herein.

Informed Choice Ltd is authorised and regulated by the Financial

Services Authority.

Contents

1—Dealing with debt

2—Emergency funds

3—Protecting your family

4—Investing for the future

5—Retirement Planning

6—Estate Planning

7—Long Term Care

8—Your Action Plan

Dealing with debt

Debt can be a drag on your ability to meet other financial objectives. Debt is often very expensive, it diverts financial

resources away from planning for the future.

There is a four step plan for dealing with debt. First, understanding

your current position, secondly stopping making it worse, thirdly drawing up a plan of action and finally implementing that plan.

Whilst it can sometimes be scary to get up to date figures and see the current position of your debts, it is always best to deal with debt

head-on. Hiding those envelopes and not having a plan of action to repay debt is not good for you or your family.

Once you have found out the current level of your debt, your repayments, term of the loan and rate of interest, put these figures

onto a single sheet of paper and work out which of your debts (the one with the highest rate of interest) is best to repay first.

Create a written plan of action and monitor your progress on at least a monthly basis.

Useful links:

Free debt advice from the Consumer Credit Counselling

Service on 0800 138 1111 or at www.cccs.co.uk

Free debt advice from National Debtline on 0808 808 4000 or

at www.nationaldebtline.co.uk.

Confidential and independent advice on debt and money

management from Citizens Advice at www.citizensadvice.org.uk.

Emergency funds

Once you have your debts under control, start building an emergency fund. This is one of the most valuable financial planning

steps you can take.

Most Financial Planners recommend that your emergency fund

should be equivalent to between three and six months typical expenditure. For many people, this is a daunting target, so start

gradually and build up to this level over time.

An emergency fund should be in readily realisable cash assets;

liquid enough for you to access in an emergency (such as a bank or building society account) but not so accessible that you are tempted

to dip in to the cash too frequently. If you need to save for the

short-term, keep that separate from your emergency fund.

Emergency funds are important for dealing with unexpected emergencies without having to rely on expensive debt such as

credit cards or a loan.

One of the most common reasons for a financial emergency is the

unexpected loss of a job, which makes the figure of three or six months expenditure look very sensible.

By being able to draw on this emergency fund you create enough time to find a suitable replacement job without building up

expensive debts.

Useful links:

Compare savings accounts at Moneyfacts at

www.moneyfacts.co.uk.

Protecting your family

Like most people, you probably rely on your income to pay for your lifestyle and support your family. It is essential to carry out a

thorough review of your financial protection requirements.

By considering the various risks to your finances, you can prioritise

any action and put in place relevant financial protection policies.

The most serious risk to family finances is death. When a family

member who is a ‘bread winner’ dies, the seriousness of this tragedy can be compounded by a lack of financial resources to

continue to support the family in the future.

Life assurance can be a relatively low cost way of putting in place

protection should you die. It can provide a lump sum or regular payments to fund your family’s lifestyle after you have gone. It can

also be used to repay debts so your family do not have to continue repaying these.

It is also important to consider financial protection in the event of you becoming ill, disabled, or having an accident or a critical illness.

Income replacement insurance is a valuable type of financial protection that pays a tax-free benefit in the event of you being

unable to work due to sickness or injury.

Critical illness insurance typically pays a lump sum in the event that

you are diagnosed with a specified critical illness during the policy term. These include heart attacks, cancer or a stroke, and many

other conditions.

Always check your employee benefits and through any existing

financial policies you own in case you already have valuable financial protection cover in place and don’t need additional cover.

Investing for the future

When you need to build financial assets to fund a longer-term goal, it is often preferable to invest rather than save. This means

exposing your money to some risk with the aim of getting

returns over and above those available from cash savings.

Investing for the future requires decisions about asset allocation. Investment asset classes are the broad type of investments you

might select. There are four main asset classes—cash, fixed

interest securities, company shares (equities) and property.

Within each of these asset classes, it is possible to drill further down into sub-asset classes, such as UK Corporate Bonds within the fixed

interest securities asset class or European equities within the

equities asset class.

Investing money is a trade off between risk and potential reward. The more risk you are prepared to take, the greater the potential

for rewards.

However, with more risk also comes greater volatility (the ups and

downs in the value of your investments) and a greater potential for loss.

When investing money it is essential to link your investments to your overall financial goals, carry out a detailed assessment of your

attitude towards investment risk and regularly review your investments.

We recommend that investors review their investments at least once a year. During this review, you should rebalance your asset

allocation and replace underperforming or unsuitable investment funds.

Retirement planning

Planning for retirement is regularly in the news these days. We are living longer and we must face up to the challenges posed by these

demographic changes. Increased life expectancy can be translated

quite simply into increased cost of providing pension income.

Over the coming years we expect to see several changes to the

State Pension system, with the minimum retirement age being

increased to 66 for men and women by 2020, and then to 67 and 68 following that.

The relatively low level of the State pension, at a proposed £140 a

week from 2015, means that making personal provision for your

retirement is essential. Pension plans are usually considered to be a tax-efficient way to save for the future.

Once you have accumulated pension plan assets, you need to think

about how these are best invested to meet your financial objectives.

When you reach your selected retirement age, there are important decisions to make about converting your pension fund into an

income for the rest of your life.

Many people choose to buy an annuity with their current pension

plan provider. However, it is essential to shop around to get the best rate and take advice so you choose the right options.

More flexible retirement income options should also be considered.

People with larger pension funds or those with other sources of

income might consider Unsecured Pension where the pension fund remains invested during retirement.

Visit www.direct.gov.uk to request a free State Pension forecast and start planning your retirement today.

Estate planning

Inheritance tax is paid on the value of your estate when you die. With many people in the Cranleigh area owning expensive property,

the potential impact of inheritance tax is becoming an increasing

concern for people who wish to preserve the maximum value for their children or other beneficiaries.

When you die, a nil rate band is applied to the value of your estate

and then inheritance tax is charged at 40% of the value of your

taxable assets over and above this nil-rate band.

For the 2010/11 tax year, the nil-rate band is £325,000. Any unused nil-rate band is transferable between spouses on death, and

assets passed to a UK resident spouse on death are exempt from

inheritance tax.

It is possible to structure your estate ahead of your death to reduce the amount of inheritance tax you pay. For this reason, inheritance

tax is often referred to as a ‘voluntary’ tax, although without proper

estate planning in place it is anything but voluntary!

Inheritance tax planning requires a balance between control over assets and the effectiveness of the strategy you implement. It is

often possible to cancel out an inheritance tax liability entirely, if

you are prepared to give up complete control and ownership of assets.

Estate planning should always start with having a valid will written.

This should be reviewed regularly and kept in a safe place. You

should let people know where a copy of your will can be found, in the event of your death.

Don’t make your own will! Seek advice from a solicitor.

Long term care

The decision to place a parent or close relative in a care home is often emotionally challenging. The financial aspects can be

confusing and create additional stress at a time when your mind is

on other things.

Long term care and the associated financial costs remain a big challenge for UK society. The current system is means and needs

tested, with those who have assets exceeding £23,250 having to

pay their own costs.

Below this level of assets, the local authority will usually take over the payment of part or all of your care fees, but will have discretion

about where care is provided.

Care fees planning requires professional independent financial

advice from a suitably qualified and experienced individual.

In addition to determining the most suitable way to fund care fees,

you need to consider how to structure assets and which benefits you can claim.

Some individuals can benefit from NHS Continuing Care and it is

also possible to claim Attendance Allowance as a contribution

towards care fees.

Visit www.mycarefeesadviser.co.uk for valuable information about all aspects of care fees planning.

Your action plan

The right course of action will vary depending on your personal and financial circumstances, your goals and objectives. The following is

a suggested action plan based on the topics covered in this booklet:

Draw up a schedule of your debts, repayments and interest

rates before working out a plan to repay these over a specific period of time.

Calculate the size of the emergency fund you need to

accumulate and start saving.

Think through some scenarios to work out what financial

protection you should put in place for your family.

Consider investing money for the future, but do this based on

specific financial objectives and after understanding your

attitude towards investment risk, reward and volatility.

Plan for your retirement so you do not have to rely on a State

pension when you are older. Seek professional advice to

understand your retirement income options.

Make a will and calculate the inheritance tax liability your

children would face when you die, before deciding whether

you want to take steps to reduce it.

Seek professional advice if you are faced with funding the cost

of long term care.

Most importantly, arrange a meeting with an independent financial adviser at Informed Choice to discuss the issues most important to

you and create a tailored plan of action.

The next step

We hope that you have found this to be an interesting and informative booklet.

Here at Informed Choice, we work with individuals, trustees and business owners to help them to build, manage and protect their

wealth.

We would welcome a conversation with you about your financial

goals. The first meeting is at our expense and without obligation. Do drop us a line to request a new client welcome pack and book an

appointment.

You can call us on 01483 274566 or email hello@icl-ifa.co.uk. We

look forward to hearing from you soon.

Informed Choice Ltd

Sundial House20 High Street

CranleighSurrey

GU6 8AE

Informed Choice Ltd is authorised and regulated by the Financial Services

Authority.