The focus on pensions for the self-employed with the tax deadline has passed for another year. But that doesn’t mean that the conversation around pensions should stop. Many companies offer occupational pension schemes with regular contributions. But the majority of people do not benefit from the savings they can make by maximum funding their pension.
An occupational pension scheme is one of the most tax efficient ways of providing pension benefits for company directors and employees.
Employers get tax relief on any contributions they make to a pension arrangement. Employer contributions to pension arrangements are fully deductible for corporation tax purposes up to certain limits. The treatment of employer contributions for tax purposes depends on the type of arrangement you may have.
Any contributions paid by employers to occupational pension schemes are not treated as a benefit-in-kind. These can be paid in addition to the contribution limits for employee contributions.
Getting to know your allowable maximum annual contribution will help you with retirement planning as well as saving you money.
It’s important for everyone to have a plan in place so that their standard of living doesn’t fall when they retire. A pension is the best way to do this. How you approach your pension planning can depend on many factors.
While women generally live longer than men, they are less likely to have adequate income in retirement. Did you know that women generally end up with smaller pensions than men?
One of the reasons for this is because women often face challenges during their working lives not experienced by men. Their career paths are more likely to alter course to allow for temporary or permanent leave to mind children, take care of loved ones or even take a career break. And while this pattern is changing with more men taking on the role of carer, the vast majority of women still undertake this role.
If you take time away from work, this can have a significant impact on your pension savings and ultimately on the type of lifestyle you will be able to afford in retirement.
Find out what type of things you need to consider and the various options open to you in this easy to follow guide.
For help on planning your financial future just get in touch.
There’s a huge amount of talk about the environment. This is in every aspect of our lives from how we heat our homes to the food we eat and the packaging it comes in. We are increasingly conscious of how the decisions we make and the actions we take impact the world around us. An environmental focus has long been considered by investors. However, the now widely known ESG investing goes far beyond being purely about “Green” funds. Here is our 1,2,3 of ESG or the What you need to know guide!
1. What is ESG?
The world of investments and investment terms can be confusing. A term that we should all know and understand is ESG. ESG investing or Environmental, Social and Governance investing, put simply, is a type of investment approach that uses these 3 criteria to assess potential companies that they may wish to invest in. As a philosophy, it has become increasingly popular over the past couple of years. This is largely down to the fact that people are increasingly looking to invest in options that are akin to where their values lie.
ESG investing is also referred to as sustainable or socially responsible investing. It is broader than the existing ethical investment approach as it doesn’t just take into account environmental factors. It’s about aligning people, politics and the planet with profit. . It underpins a responsible investment approach, and allows investors to better manage risk and generate sustainable, long-term returns. This short video explains it in simple terms.
2. Why consider ESG?
Demand for ESG investments has gained significant momentum. Recent research has pointed to over two-thirds of consumers surveyed believing that it is important to consider ESG factors before investing. This rises to over 70% for those with a pension with many of these people stating the reasons are to do with aligning their actions with their beliefs. Many companies that adhere to ESG criteria have been shown to provide better long-term returns to investors.
This simply means that on an individual basis we can do good through our investment choices. The Covid-19 pandemic has accelerated this thinking. Very few companies have benefited from the crisis however the way they reacted to it and emerge from it could largely dictate their future. Transparency is a crucial part of this. How a company responds in a crisis tells you a lot about its motivation and whether it has a moral compass that guides its purpose.
As an emerging model there has been some critique, saying ESG investments are too passive and not delivering on returns. So far research has shown positive and consistent returns when ESG is part of a multi-asset portfolio. With investing a basic tip is never to put all your eggs in one basket – diversify.
Like many of our peers we’ve highlighted the impact of negative interest rates on client returns. We recently looked at some solutions to the problems faced by investors. It’s interesting to see that there have been opportunities that have been created in this negative space. But how can we best engage with you in an understanding and taking advantage of these? This question prompted us to look at the factors driving an individual’s decision-making process. specially at the current time as well as how financial decisions are made.
The decision-making process
Decision-making process, customer journey, sales funnels, these are all variations on the same theme. The decision-making process is a psychological one. We assume from a behaviour or action taken that a decision has been made. It shows a commitment to an action. What is often referred to as the customer buying process, is itself a decision-making process. This is where we see the journey a customer goes through before purchasing a product. The easiest way to look at it is using the AIDA structure.
Awareness: Recognition of a need or problem
Interest: Seeking information on the various options available to solve the problem
Desire: Evaluation of options and a preference develops
Action: Reaching of a decision and the purchase is completed
We are all consumers and are more informed than ever before. That is why our job as financial advisers is not to sell a product to you. It is to understand the process you go through to reach a decision. It is also to recognise the need you are trying to fulfil, whether this is protecting your family or planning for your retirement. We must work with you through this process to assist you in defining the need and to provide the best advice on the solutions available.
The role of behavioural finance
So, what does behavioural finance have to do with anything? We should recognise that not everyone is approaching a financial purchase from the same starting point. Traditional theories were very functional. They assume financial decisions were made against a rational background – both for internal and external factors.
Behavioural finance goes against this by asserting that financial decisions are often based on emotional responses. For example, you purchase protection on your own life to protect your loved ones. This holds true also for investments where investors may hold losing positions rather than feel the pain of taking a loss or the emotional instinct to move with the herd may explain why investors buy in bull markets and sell in bear markets.
Understanding how this impacts financial decisions around things like investments, risk, protection, and personal debt is critical to being able to provide a better service to our clients. Human emotion plays an incredibly influential role in these decisions. We have come through a time of crisis and while there is still much uncertainty there are opportunities.
What is the opportunity?
It is a time of negative interest rates. The Covid-19 pandemic shocked the world and is continuing to do so. We will be dealing with the fall-out for many years to come. Following our lives being put on hold, there is a huge amount of money on deposit earning no return but there are opportunities for those to make their money work harder. This is true too for those who wish to continue the savings habit they have now started. By combining an understanding of buying processes with the concept that financial decisions are emotionally based allows us to work with our clients in helping them make more rational decision in their financial matters. This is particularly relevant at the current time.
With negative interest rates, investors are faced with a choice. This choice is between a sure loss or exposure to a possible greater loss by choosing stocks. What is the best course of action? By following a well- thought-out strategy for gradually drip feeding into the markets to benefit from potentially greater returns can be an excellent route to follow. This type of unit cost averaging may dampen volatility and is applicable regardless of overall risk attitude.
The easiest form of protection to understand is mortgage protection. It is simply a product that makes sure your mortgage is paid off in the event of your untimely death. It’s compulsory, so that your mortgage provider is not left out of pocket if you are no longer here to pay the mortgage.
We know what it does when a particular event happens.
But how many people extend this view beyond just mortgage protection to life protection, serious illness cover or income protection?
The result may be slightly different – a lump sum v a regular payment but the reason that we need it is the same. The occurrence of an unforeseen event. This is not always an early death. It can also be an illness, injury or accident which leaves you in a financially challenging situation.
There are two things here that people should understand to fully appreciate the value of protection. These give meaning to what the product provides and why you may need it.
Likelihood of an event happening
It’ll never happen to me is not a good starting point. The risk of a serious illness is with us all. The impact of it stopping us in our tracks is one that we should plan for. The incidence of serious illness and injury has risen hugely over the past number of years. For example, in Ireland and in Europe about 1 in 3 people will develop cancer at some stage in their life. The great news is that due to better treatments and picking up cancer earlier, more and more people are surviving cancer. Therefore, a serious illness can still have a dramatic impact on your lifestyle and financial situation. That’s why looking at how you would manage is vital before such a situation would occur.
This handy tool will help you better understand the risk of an unforeseen event happening to you.
Changing patterns of claims
It’s often only when we need to make a claim, the reality of what we can claim for comes to light. But before you take out any product you should look closely at the claim’s details. This is really the product you are buying. That safety and security that you can claim to help assist you and your family financially.
From reviewing the various life company* claims data for 2020, there is a consistency in many regards. The leading causes of claims continue to be cancer, cardiac and respiratory issues. There is a difference in the types of cancers between women and men, but the average age of claim is around 50 years.
A big shift in 2020 was in income protection claims. For many years, orthopaedic reasons were stated as the main reason for income protection. But this year, this has dramatically shifted to psychological reasons. This has been attributed to the impact of Covid-19 and this fallout will be felt for many years to come.
Protection cover can vary – from protecting your income, your home, your family and/or your business. But with the right cover in place, you’ll always have peace of mind.
At Quintas Wealth Management we can assist you in assessing your needs. We’ll help you understand what the best options and product mix for you are to ensure that you’re preparing for whatever the future may hold. Just get in touch!
*Source: Irish Life, Aviva, Zurich 2019/2020 claims data published online.
There were many miles clocked up in their walking shoes during lockdown. So as restrictions started to lift a team from Quintas Wealth Management challenged themselves to continue the habit. And even better, to do this for the benefit of others as well as themselves by taking on a walking challenge in aid of LauraLynn.
Anne, Lynda and Shirley agreed to support each other in completing the “100k in May” challenge. This challenge was part of a national fundraising drive by LauraLynn, the children’s hospice. Not only was it fun and motivating but it was a great way to raise funds for this amazing organisation.
LauraLynn is a hospice for children with life-limiting conditions and provides residential care for children and young adults with disabilities. The team selected the charity as it is close to their hearts knowing families who have received invaluable care and assistance from them.
“We were delighted to continue our walking habit and to be able to do this to support LauraLynn. They are financed largely through the generosity of public donations for their children’s hospice and palliative care service and as with many charities found fundraising more challenging during 2020.” commented Anne O’Doherty, Head of Life & Pensions with Quintas Wealth Management.
This was the first time the team had supported LauraLynn with a fundraiser. And the team smashed their target in monies raised and steps walked. Huge congratulations to them and thank you to everyone who supported them!