2021.18 Protect: Beware of Scams

What is a Scam: it is any fraudulent act that results in funds being deceptively taken from someone who ordinarily wouldn’t have parted with their money for the purpose it’s been taken.

It used to be the case that scams occurred via letters claiming you have won some money asking you to take some action which often required you sharing your personal bank details, or someone came to your door purportedly selling something which never gets delivered (after having been paid for it)!

Some of that still exits, but with the advent of electronic payments, more so with the pandemic and having been forced to transact business mostly electronically in response to the need for social distancing; the scams have increased and gotten more sophisticated with most of it now being carried out online.

Some of the common scams are:

  • Calls purporting to be from your bank, HMRC, Pension provider or National Insurance requesting your bank details, PIN, NI number etc. so you can reclaim bank charges, or claiming your NI contributions haven’t been made or your tax has not been paid and as such owe the HMRC, or that there’s been a fraud on your bank accounts, etc.
  • Email from what seems like one of your normal contacts (but is actually masked; and behind the mask is a fake email address) which contains a link you are required to click for a purpose which is meant to be beneficial to you or for verification of your account
  • Text messages about your supposed bank account (held with a bank you don’t have an account with) asking you to verify or report it as not you, by following a link or asking you to make payment for a parcel to be redelivered to you.

As you can see, the scammers are lurking in every corner and all our modes of communication are compromised!  We therefore need to be vigilant and careful in order not to fall victim to the scams.

Some basic things that could reduce the risk of being caught out in a scam:

  • Do not give out your personal details, PIN number, passwords, or passcodes to anyone, even if claiming to be from the bank.
  • Check the real email address a correspondence is from by clicking on the address in the ‘From’ pane – check that the email address is as it should be with no missing and/or additional letters or numbers. Note that is not a fool-proof check but is one check that might help decipher whether the email is genuine or not.
  • Drop the call if you receive suspicious calls purporting to be from your bank, HMRC, pension regulator, etc.
  • Do not click on links within an email, especially if it within a suspicious email.

Moneysaving expert website provides some tips on how to avoid being scammed.

The biggest problem in my opinion, is the scammers keep inventing different methodologies.  This makes it difficult to recommend one solution or the other as the best one to keep one safe.  My suggestion, therefore, is that the greatest protection is for one to be your personal securely and to be mindful of who you are giving/sharing such information with and more importantly, to treat every situation where your details or payment is required, as a potentially fraudulent one.  This forces you to critically assess each situation or transaction before you decide to proceed.  Better safe than sorry! 

These are difficult times and losing one’s hard-earned cash could be a traumatic experience, so stay vigilant and aware and do not get caught out.

Have you had any experience with this or other suggestions on how not to get caught out? If so, share in the comments.

2021.17 Protect: YOU (YOU are worth it)

You’ve got to protect YOU.

  • When you buy a car, you take out car insurance;
  • When you buy a house you take out building insurance and home and contents insurance.
  • When you buy a washing machine and other household equipment, you take out insurance on them

So why are you not protecting YOU.  Are those assets more important than YOU? 

Below is a list of insurance to consider taking out for YOU:

Critical Illness Cover – this pays you a lump sum if diagnosed with a serious illness or sustains a serious injury.  Most will pay out lump sum for you to do whatever you want e.g. it could be used towards your medical care, to cover your expenses, a holiday (after recuperation), investment (got to get that one in there 😊) or whatever you want.  This insurance doesn’t pay out in the event of death. 

Income Protection Cover – this pays you a regular income if you can’t work because of partial or full disability or debilitating illness.

Medical Insurance – In the U.K. people are able to obtain free medical care via the National Health Service (NHS). Having medical insurance however gives you a choice in the level of care you get.  One could argue that this is not a necessity, because the NHS does a good job, so the decision on this cover would be dependent on one’s preference for medical treatment e.g. would you want immediate treatment or be happy to wait till you can access treatment on the NHS, would you prefer a private ward if you had to stay in hospital, if necessary, would you to be able to obtain medication not covered on the NHS at no (or a minimal cost), etc.  These considerations are all things that are accessible without medical insurance, but could be quite expensive without medical cover, but of course if you have a big saving pot or emergency fund, you could draw on that to cover the cost of these preferences.

Life Insurance – this is more for one’s dependents and loved ones than for you.  It is paid out on death.  It however provides you with a level of assurance that loved ones will have some financial security, when you are no longer here.

Until recently, like most people I haven’t prioritised ME.  We tend to think we are strong and can keep going or perhaps adversities happen to others and not us; or maybe, just don’t think about these things while those who are religious, perhaps believe that God is the protector and will keep adversity away (as far as I know, all religious books talk about God testing us to the level we can bear – who knows which test it would be!).  The truth is, irrespective of how healthy or careful one is, adversity can hit at any time.  Without you being on your two feet well and able, all those assets we take insurance out on, will not be!  So to ensure that if taken down by adversity, we can maintain some semblance of normality, it is my opinion that at the very least one should take out Income Protection and Critical Illness insurance.

A combination of these two will put a lump sum in your hand and afford you a regular income for a period (dependent on your cover), which could mean the difference between worry about health and wealth (how to feed, cover expenses, etc.) and planning for a new lifestyle or life after the adversity (depending on its severity).

The level of cover you take out will determine the benefits and the premium paid.  As usual, if this strikes a chord with you  and you decide YOU are worth protecting, then do your own due diligence;  speak to a broker perhaps and clearly define what benefits you would want, to ensure the cover your take out is appropriate for YOU.

Is there any other cover you think is important one takes out?  Share in the comment (including why) below.

2021.16 Plan: All the Powers

Today’s blog talks about what you can do to ensure you remain in control of decisions that are made about you, even if you lose the capacity to make those decisions.

To do this, while you are fit and well, you appoint a trusted person (friend, relative, etc.) who will be able to act on your behalf or make decisions for you, if you were no able to or you no longer want to.  You might wonder why you would want someone else to make decisions for you, some such reasons might be:

  • Temporary Situation: hospitalisation means you need someone to pay your bills, collect your pension, old age might mean one isn’t able to get about easily anymore, etc.
  • Longer term situation: diagnosis with a long term illness that would mean loss of mental capacity, old age and loss of memory, etc.

We all think that won’t be me, I’m fit or some think, those things happen to others and not me, but  the reality is no one knows how the wind will blow and what adversity will hit or when/what we will be or feel like as the years pile on.  With Power of Attorneys, we are able to deal with these situations by appointing a trusted person (with whom we might have discussed what we want to happen in different scenarios) to act on one’s behalf if the need arose.

Below are the types of Power of Attorneys that can be set up:

Ordinary Power of Authority (OPA) – This gives someone you appoint as your Attorney, the right to make financial decisions on your behalf.  It is only valid if you have the mental capacity to make decisions.  This could be limited to specific aspects of your finances e.g. a specific bank account only, paying your bills, etc.  This is handy for temporary situations e.g. when you are away on extended holiday or are in hospital.

Lasting Power of Attorney (LPA) – made up of what I call the ‘Power of Wealth’ and ‘Power of Health’, gives someone you trust and appoint, the legal authority to make decisions on your behalf if you lose the mental capacity to do so in the future, or if you no longer want to make decisions for yourself.

  • LPA for financial decisions (Power of Wealth): this can be used when you have mental capacity (as with an OPA) or its use can be restricted to if one loses of mental capacity.  It can be restricted to specific financial affairs or cover all one’s financial affairs.  The Attorney must keep their finances separate from yours and as a measure of control, one coudl request that details of what has been spent and how much you one has, be sent to a solicitor or family member periodically, for oversight.
  • LPA for health and care decisions (Power of Health) – this covers decisions about your health and care decisions e.g. moving into a care home, life-sustaining treatment, your medical care, who you should have contact with, etc.  It can only be used if one loses mental capacity.

An LPA must be registered with Office of the Public Guardian before it can be used.

Without and LPA in place, if a person loses the ability to make decision for themselves, they will need to apply to the Court of Protection, who will decide whether you are fit to make the decision, can make decisions about your health and care and finances or  appoint a deputy to make decisions on the persons behalf.

IMPORTANT: Married couples and those in a civil partnership should note that decision making does not automatically transfer to your spouse or partner, so best to look into putting an LPA in place if you would prefer for decisions about you be made by them or other trusted person.

More information about LPA can be found here

It is important that we plan as much as we can and then leave the rest to God, the universe or wherever your faith lies.

As usual, this does not constitute financial advise so do your own research to determine whether this is appropriate for you.

Leave a comment below and share.

2021.15 Plan: After All is said and done: Graceful Exit

I want to pick up the thread of preparing for that inevitable and inescapable day! The first post about this was to do with writing a Will and today’s post will focus on what we can do to prepare for the inevitable and in a way, continue to demonstrate our love for those who will be our survivors, and ensure a graceful exit for oneself.

So we’ve attained all the top qualifications and certifications, bought houses in all the best locations, own the most expensive cars, worn the best clothes and accessories, travelled to the most exotic destinations, attended the best parties and ate the most delicious delicacies and meals.  Gratitude for the grace to have been afforded all of it!  But what happens when the end comes? 

Have you thought about how you would like to be buried – the how and the cost? 

Sadly, the pandemic saw a wave of sudden and unexpected deaths, with lots of people and families unprepared for this, families had to mourn the loss of their loved ones while at the same time having to figure out how to fund burying them; with a lot of families having to take to go fund me to raise burial funds. The first time I received an appeal to contribute to a burial, I thought to myself I don’t want that to happen when I die/don’t want my family to be in a position where they would have to do that (I am not in any way berating those who were forced to resort to this, as we all always think, there’s still time when in reality we never know when the time would come, as the pandemic has unfortunately shown us all), yet I knew I didn’t have any funds put aside for my burial or didn’t even know how to do so, except that I had over the years come across several leaflets talking about funeral insurance (which I had discounted of course)!

That therefore got me thinking I am going to get funding sorted for my own funeral, but of course a year on, nothing had been done! As we usually do, I had prioritised other things above this thinking, I’d do it tomorrow and tomorrow had dragged on into a year. I am however grateful that I am afforded the time to finally get to work on this and the next step will be for me to take action, now that I have the information to hand. I however thought I’ll share some of the information I have found.

I found that the most common burial alternatives are the traditional burial in the ground or cremation[1].  Other alternatives I have discovered are mummification, space burial, tree burial, etc. – check out this link which contains details of some mind-boggling and some, intriguing burial alternatives. If any of these are of interest, you need to make sure it is permitted in your country of residence.

 I also found that the most basic of cost of a funeral are:

  • Funeral director fees
  • Coffin/Casket[2]
  • Burial plot
  • Burial service
  • Extras which are dependent on the scale in which you want it to happen are:
    • Funeral flowers
    • Wake
    • Hosting your guests after the burial

The average cost of a funeral in the U.K. in 2021 according to Sunlife (who have been tracking the cost of funerals since 2007) is £4,184 this being a 1.7% increase from 2020 and a 128% increase from 2004, so clearly the cost are rising from year to year.

Possible preparations that could be made while one is still alive, to cover one’s own funeral cost include:

  • Arrange for the cost to be paid out of one’s estate on death – with this option, you have to wait for the probate process to be complete[3] before funds are accessible. 
  • Funeral Insurance – here’s some comparable of what might be paid out based on premium paid
  • Pre- paid funeral plans – with these, you pre-pay for your funeral; here’s some information from the Money saving expert website and here’s some information about a Muslim – specific pre-paid funeral plan.  One advantage of having a funeral plan is that the cost is not included in your estate for the purpose of inheritance tax calculation (as expense has been incurred before death).  Some prepayment plans exclude the cost of the burial plot, so if using this option, it is important to ensure that it includes all elements of the cost of a funeral.
  • A prepayment plan (or any of the other options) may not be required if you have sufficient funds to pay into a joint account held with the survivors who would be responsible for your funeral arrangements,  and even if you don’t, you might decide that periodically paying into a joint account is the best option for you.  The rationale behind a joint bank account is that, as at the time I am writing this, in the U.K. when one of the joint account holders die, ownership of the funds automatically becomes that of the surviving account holder, which then means your survivors would be able to immediately access funds to pay for your funeral.

Islam requires that Muslims be buried as soon as possible, ideally within 24 hours (with few exceptions to this requirement) so Muslims who want to be buried according to Islam should bear the need for immediate access of funds in mind, when making the decision about what preparation to make for their funeral cost.

Also, it is important to bear in mind the increasing cost of funerals, when deciding on the amount to put aside.

Historically, African kids have mostly been responsible for burying their parents. Some of that tradition still exists in Africa, but for those of us in diaspora, a key message I want to leave is don’t assume your kids will foot the bill (like we did or plan to do for our parents). Our kids are of a different generation and culture and in the Western world, nobody is going to offer them the financial support that is often afforded bereaved relatives back home, so do prepare! Consider options that are available and put something in place, so your children don’t have to, in addition to dealing with the loss, also have the burden of trying to raise funds to cover the cost of your burial.

There are possibly other options worth exploring, so do your own research, but don’t do nothing.  Continue to show your love for your children and other survivors, even when you exit.  I wish and pray a graceful exit for all.

[1] Under Islamic law cremation isn’t allowed for Muslims

[2] There are varying views on whether Muslim are allowed to be buried in a coffin or not.

[3] If the deceased left a will, grant of probate shouldn’t take too long, but if not it could take several months to obtain administration rights

2021.14 Time to Reset and Be Accountable

Happy New (financial) Year! 6th of April marks the start of U.K.’s financial year; the point of reset.

I call it “point of reset” because it is the point at which allowances used up is reset ‘NIL’ and you start the countdown again.  I therefore thought it would be useful to remind you of the allowance available (in U.K.) to be utilised during the 2021/22 financial year


  • Personal Savings Allowance: Interest of up to £1,000 tax free
  • ISA (Cash, Innovative Finance ISAs and Stocks and Shares) – £20,000
  • Junior ISA: £9000
  • Lifetime ISA: £4000

Tax Allowances:

  • Standard Personal Allowance = £12,570
  • Dividend: £2000 tax free (unless within an ISA account). 
  • Capital Gains Tax: on profits from sale of assets like shares, paintings and antiques worth more than £6,000, property (second home or buy-to-let): up to £12,300 is tax free (fixed until 2026)

The personal tax allowance is automatically applied through PAYE or you allow for it when completing your annual self-assessment.  All the other allowances are however things you need to consciously consider in order to be tax efficient e.g. better to save/invest in an ISA and have up to £20,000 worth of dividend income, gains on shares sold, interest, etc. tax free, than to save in a standard savings account and have £1,000 interest tax free or a general investment account and have £12,300 capital gains tax allowance

Along with the reset of allowance comes Accountability!  Statutory filing requirements and their deadlines are per below.

  • File first accounts with companies’ house: 21 months after registering your business
  • File subsequent accounts with Companies House: Nine months after the end of your financial year
  • Pay Corporation Tax or tell HMRC your company isn’t liable: Nine months and one day after your corporation tax period ends
  • File Company Tax Returns: 12 months after your corporation tax period ends
  • File annual returns with Charity Commission: 10 months after your financial year end
  • Personal Tax Returns (self – assessment): Paper filing by 31 October and online by 31 January of the following year

Important not to get caught out by missing any of these deadlines; late filings are usually accompanied by a fine (and interest on tax payable, in some cases). Let’s use our money for us and our goals and not for paying fines!

Wishing you new challenges, new opportunities, new prosperities and a thriving new financial year.

2021.13: Plan: Validly Documented Wishes?

Death is not something we like to think about or discuss, but it is an inevitable occurrence that will come to us all at some point!  In reality therefore, once we have a bit of net worth, children or spouses, then we should be thinking about death and what we want to happen after our passing (by writing a Will).

I have struggled with this over the years!  I say to myself I don’t have much, and then say when I finish the purchase of this or that asset, but then never get round to making my will!  More recently, it’s been about how to structure my estate, that’s held me back!  So I recently spoke to a friend (shout out Friend, you know who you are) and in that discussion I realised I was over-complicating things!   First things first, put something in place and bearing in mind that as long as I am alive, I could change it. 

The worst thing though, would be to die without a “valid” will i.e. die ‘Intestate’ as it is described.  The reason for this is that the decision of what happens with your belongings (your money, property, assets, etc. – known as your Estate) would then be dependent on the laws of intestacy!  Someone other than you, decides how your belongings should be distributed – the law!  What the law decides however may not necessarily be how you would have shared your belongings, if you had just taken the time to make a will while alive.

Below is the order in which your belongings will be distributed if you die intestate in U.K. and Wales:

  • The spouse or civil partners – will inherit everything if the person who died had no children; or will inherit the first £270,000 if they had children.
  • Children, if there is a surviving spouse or civil partner – will inherit what remains after the first £270,000 has been passed to the living spouse or civil partner.  If the estate is not worth up to £270,000, the children get nothing!
  • Children, if there is no surviving spouse or civil partner – the entire estate is split equally amongst the children
  • Grandchildren and great grandchildren – will inherit equal shares of what their parent or grandparent would have inherited from the estate of someone who dies intestate if,
    • their parent or grandparent dies before the person who died intestate or;
    • their parent was alive when the person who died intestate died, but died before they attained the age of 18.
  • Other Close Relatives: Parents, brothers, sisters, nieces and nephews would then be next in line, if person who died intestate has none of the aforementioned relations alive
  • Others who may be able to claim (if there are no living relations from the list above) are grandparents, aunties and uncles, cousins, etc.
  • Guess who gets it all if a person who dies intestate has no surviving relations – The Crown!  It passes to the Crown as ownerless property – The TAXMAN, always waiting in line 😊

More importantly though, beyond distribution of your belongings, can you imagine how much easier it would be for your survivors to get on with implementing whatever your wishes are with regards being buried, if you have it spelled out in your will!  They wouldn’t while grieving the loss also have to try and figure out whether what they are doing is what you would have wanted!

So over the last couple of weeks, I have been researching what I need to do to get my will written and found that;

  • One could get a solicitor to write it, or
  • Write it on your own

The disadvantage of writing it oneself though, is that you could potentially write it in an unclear manner that leaves room for the will being disputed (or being deemed invalid – a will that isn’t valid means you die intestate!), which is unlikely to be the case if you paid a solicitor to write it for you.  On the other hand, a solicitor is able to advice on any Inheritance Tax implications.

I also found that Will writing is not a regulated market, so you need to be careful who you get to write your will.  As solicitors are however regulated by the Solicitors Regulation Authority (SRA) getting one’s will written by one will afford some confidence, especially as a will is a legal document and they are legally trained.

In my research, I also found that there’s a free will service during the month of March and October in U.K. where solicitors will write or review a ‘simple’ will for free, for those aged 55 or above, in return for making a bequest to a charity in your will.

Things to note: you don’t have to wait for specific events or activities to happen or be completed (like I’ve been doing) before preparing your will, rather if there a significant change, just have a new will that supersedes any previous ones. 

I know that for Muslims, the Quran spells out how a person’s possession should be shared on their demise.  As a Muslim living in U.K., if you want your estate shared as indicated in the Quran, it is important to check with your Imam whether it is necessary that you also write a will that clearly spells your wish out (I believe that might be the case, otherwise you might be deemed to have died intestate).

If you are young, single and broke then you don’t need a will (yet), other than that you should make a will NOW.

No one is promised tomorrow and it is best to put one’s affairs in order, to ensure that your possessions are dispersed in the manner you want it and your beneficiaries have clarity over what you want done/they don’t end up squabbling and in court over what they think should be done (more so for us African’s where some uncle or aunty or other relative may decide that it is best to take the body to Africa to be buried – not at their cost though, but they’d try to make the decision)!

I am on the case with mine as I suddenly realise I have been lucky so far and need to get my house in order before my time comes! I suggest the same for all.

2021.12 Hidden in Plain Sight! Unknown Facts (Pension)

It is so important to be intentional about our personal finances. Without that, we believe we know what is necessary to know, without actually knowing what we don’t know! A lot of information is available in the public domain, but because we aren’t looking for it, we are blind to it – so this week I bring to the fore, a couple of unknown facts about pension which are actually hidden in plain sight!

Unknown Known Fact I: Deferred Tax on Pension

So did you like me think when you draw down your pension it wouldn’t be taxed 🙈😂 – I told you several times already, being a finance professional doesn’t translate to financial literacy (in so far as personal finances go)!

Do you then wonder why the government is giving you all the freebies (top-ups, tax relief, etc.) mentioned in my previous post?  My guess is that they do this to encourage us to prepare for the future. Remember, the more financially secure a person is in the later years, the less likely the need for the government to be responsible for their wellbeing or for them to have the need to utilise the benefits available.

Fact: Pension drawdown = Income, therefore it is Taxable! 

Can you believe!  Well, remember your pension was tax deductible i.e. the portion of your income that was pension contribution, didn’t get taxed all those years ago (when you were making the contributions)?  Well, now as you attain the age where you can, and you begin to drawdown those funds, it means it’s time to pay up 😊 and guess what, it is taxed at source by your pension provider (PAYE round two).  So rather than it being non-taxable, tax on your pension contributions is deferred. 

Note however that if your tax was at a higher rate during your years of employment[1], when you attain the age when you can drawdown these funds, you probably would have avoided paying tax at the higher rate as you’d would now be in a position to draw down at a lower tax rate (PLUS right!). For those who were on a lower tax rate during years of employment, you get the free contribution made by your employer (PLUS!). So there are still benefits to contributing to a pension plan in spite of tax deferral.

As we all know, taxes are necessary (some will argue not and people have different opinions on who should or shouldn’t be taxed – I would say pension drawdowns shouldn’t 😉) for the government to be able to provide public services like NHS, education, welfare system, etc. and to maintain our roads, etc. The key therefore isn’t to not pay taxes (which is a criminal offence, by the way), as we all benefit from what it’s used for, but to do so efficiently.

More likely than not, by the time you get to the age where you can draw down your pension, even if you are earning income other than your pension[2]  your total income won’t be too much more than your annual basic allowance (i.e. the amount of income you can earn in a year without being taxed) which would mean you pay tax at the lower rate; and if your income is below your annual allowance, you don’t pay any tax. 

I cannot stress enough how important it is to consider tax efficiency when structuring your later year finances.

Unknown Fact II: Lifetime Allowance: This again is something I believe most people aren’t aware of (at least I wasn’t – financial literacy of a finance professional 😊). I only became privy to this information from research done writing the last two posts – this is one of the reasons I enjoy the process of writing these blogs – as much as I am sharing my knowledge, I am also learning along the way!

Enough of my rambling! In the context of pensions, have you ever come across “Lifetime Allowance” (no, not Lifetime ISA)? Well, I discovered that while it is fantastic to put money away into a pension, there is a limit above which your pension savings may be liable to a high tax charge!

Fact: Lifetime Allowance (LTA) = the limit the government has set as the total amount you can hold in all your pension pots.

The reason most people aren’t aware of this is probably because most people won’t be affected as their pension savings won’t reach the threshold affected. If people, as I am encouraging, do commence planning for the future and putting money away early, this increases the possibility of reaching/breaching the LTA threshold, so it is only right that I also bring LTA to people’s attention.

In 2020/21 (and is fixed for the next tax year) the threshold is £1,073,100.  If your total pension savings is more than this amount, then you would have to pay tax on the surplus amount once you start drawing from your pension pot.  See what the government say here https://www.gov.uk/tax-on-your-private-pension/lifetime-allowance

The tax rates could also be quite steep (depending on how you decide to draw the funds down)!

  • 55% if you draw a lump sum or 25% if you draw any other way e.g. as cash or pension payments

Guess what – the lifetime allowance has been reduced over the years; as shown in the chart above, the 2011/12: £1.8m limit was reduced to £1.5m from 2012/13 and to £1,250,000 from 2014/15.  The most recent reduction was in 2016/17 when it was reduced from £1.25m to £1m; which means more people with large amounts in their pension pots, suddenly found themselves in a position where £250,000 (and above, if applicable) of their savings became taxable at the higher rates – depending on how they drew it down!  The £1m limit has been indexed to inflation since 2018 (hence the extra £73,100 in current limits).

Based on the trend therefore, there is no guarantee that the threshold won’t be reduced again sometime in the future if the government needs to raise some money (perhaps to pay for all the covid-19 related initiatives like the furlough scheme, for example) and in fact, the 2021 Finance bill sets to remove the index link so the threshold will remain as it is till 2025/26 if the legislation is passed!

There’s however a way to apply for protection of your lifetime allowance, as shown here https://www.gov.uk/guidance/pension-schemes-protect-your-lifetime-allowance, but of course there are conditions attached – check the details out.

So YES, I advocate for planning for the future very early on, but it’s got to be in a tax efficient manner and that’s why financial planning is absolutely important.  The objective is a financially secure future in the most tax efficient manner. 

I am sure you’d agree that it would be great to have heaps of money to draw on in those later years, but in my opinion it is equally important to ensure those funds are held in a manner that doesn’t entail paying high portions of it out in taxes when the time comes to draw it down (or if that has to happen, at least it’s been built that into the drawdown plan), especially as prior to draw down one’s spent a lifetime paying unavoidable employment tax!

Is any of this news to you as well and is there anything else you know which isn’t commonly known about pension? Share in the comments. Also let me know if this has been of value.

[1] As a high rate tax payer, you should reach out to HMRC to claim the extra tax relief, as your employer only makes allowance for basic rate relief

[2] This is more likely now than in previous years, as people work for longer.  There is no retirement age in U.K so employers can’t force an employee to retire, rather the decision is the individual’s. A lot of people therefore chose to carry on working (albeit part-time, in a lot of cases) for social interaction purposes 

2021.11 Time and it’s Wonders for the Babes

To conclude last week’s post about the wonders of Time (and compound interest), I want to talk about one of my discoveries while I was writing last week’s post.

For a bit of background, I had been researching some sort of saving/investments for my grand-children.
Of course there is the standard savings account, which we all know is not really worth putting money into these days, given the next to nothing interest rates (and in real terms, the value of the savings being eroded away because of inflation)!

Then I discovered the Junior Individual Savings Account (JISA) – particularly the stocks and shares and not the savings one. I got excited about the prospect of being able to invest in ETFs and Funds on their behalf (and allowing time and compound interest to work their wonders)! Also exciting was the fact that only the child could access the funds – we sometimes need a bit of extra funds and dip into accounts we’ve funded with the intent to replace the funds, which never happens (or perhaps not in its entirety); I did that several times when my kids savings accounts when they were much younger!

I was however disappointed when I saw that the child could access the funds at 18! The control of the account reverts to them from 16, but they can access the funds from 18. This gave me reason to pause, as I was trying to find an investment they would have access to at an older age; at which point they’d be able to make mature financial decisions.

Anyway, while writing last week’s blog, I discovered Junior Self-Invested Personal Pension (Junior SIPP). It is exactly the same as the standard SIPP (which I described in last week’s post as a ‘do-it-yourself@ pension). A bit like the Junior Stock and Shares ISA, the child takes control of investment decisions when they are 18, but are unable to access the funds until they are 55! Such a long time, but what a fantastic length of time to allow time and compound interest to work their wonders. Guess what, there’s some freebies with this account as well – tax relief of 20%.

I’d probably end up with a combination of the Junior Stocks and Shares ISA and the Junior SIPP; they access some when they become young adults and some much later in life 😊

For parents and other grand-parents, this is a way to put something away for your babies and grand-babies, and you invest as little and as frequently (or not) as you want, so it is worth looking into these.

Another option which could potentially be used as a later life fund is the Lifetime ISA (LISA), which can be opened by those aged between 18 and 40. With this ISA however, you are able to access the funds early for the purpose of buying your first house, otherwise it becomes accessible once you turn 60 – a bit longer than when some of the standard pension and the SIPP first become accessible. The maximum payable into a LISA is £4,000 per year (this counts as part of the annual ISA limits – £20,000 for 2020/21). With this type of account, the government tops the account up by 25% (up to a maximum of £1,000 per annum). For young adults starting their first jobs, this might be a good option (in addition to your work place pension I’d suggest) to help save towards buying your first home and if not, additional funds for later years.

So as you can see, there are several ways in which we can prepare for the future and the government’s top-ups or bonuses, in my opinion are also incentives to get us prepping NOW! We could also do the same for our children at different stages of their lives and in whatever mix we choose to. The choice and decision is in our hands – don’t leave it late like I’ve done and if you are late to the table, still start; the best time to do anything is always NOW (and remember, it’s never too late to start)!

Some might argue that they could do better by investing directly in the stock market and not in a workplace pension or by investing in property; my opinion is that one should take advantage of any opportunities (like the top-ups and additional contribution by employers) and should diversify their  investments, but ultimately we all have to consider our personal circumstances when making these decisions. The most important thing though, is to make those considerations and start taking action NOW, both for ourselves and for our children (who in addition to benefiting from any investments made on their behalf, also learn from watching their parents’ actions).

Remember, this is not financial advice so do your own research and/or speak to a financial advisor before making any investment decisions.

Also, for those who are unsure about how these sort of investments fit within their religious beliefs, check it out with your imam, rabbi and/or priest, but do begin to prepare for a financially secure future by investing in a manner that meets your religious belief.

I hope my posts serves as a spring board for at least one person to start taking action NOW towards a financially secure future.

Comment below about any alternative/additional investments for the later years that are worth considering. Also like, and share with others who might find the post useful.

2021.10 The Wonders of Time

So last week I took a break! Guess what; I was trying to figure out social media posting (auto-posting from Facebook to Instagram, using mail chimp…); still a work-in-progress, but I’m on it and will get there.

So today I want to share that I have been thinking about TIME! How much more time do I have to do all the things I want to do? Will I be well enough and/or active enough to keep going for as long as I have? Worrying and Scary thoughts, especially for someone like me who started actively making provisions for the later years in my golden age! You might think, what does this have to do with finances (which is the focus of these blogs)?

The point of the question is to share my realisations on how soon or not, one should start planning for the later years and what protection to have in place, in case things don’t pan out the way you hope.

So my reality is that I have been fortunate to have been in continuous employment for more than 20 years. Amidst that time, I had the opportunity to work outside U.K. as an expatriate who was paid a local living allowance and also paid a salary in the U.K.  In spite of that, I only started contributing to a pension scheme about five years ago 🙈! Each time I joined a pension scheme I pulled my contribution out of the scheme, just before the deadline I was able to do so. As my previous blog posts allude to, I also didn’t start investing until less than a year ago! So I lost the opportunity for my employers to pay into a pension scheme on my behalf and I wasn’t investing (or saving) either! In addition, I had all these grand ideas of what I want to do to make an impact, but only just started actively steps towards doing any of them! As a result, I am now constantly plagued with worry about whether I have enough time to provide for a financially secure later year and at the same time deliver on those dreams to serve!

The realisation of where I’m at, has opened my eyes to various avenues one can prepare for a financially secure future, but also the protection one ought to have in place. It has also set me on a path/mission to get the message out there and encourage other older woman in the same position I am in, to make a start NOW (something is better than nothing) and; to educate the younger generation on what they need to be doing to ensure they are preparing for a financially secure future.

I recently spoke to a few young adults in my life and asked if they had opted-out of the pension scheme during their one year of paid internship; one said they did (saw it as a reduction to their disposable income) and the other didn’t even know (they couldn’t remember if they opted out or not)! This discussion affirmed to me that there was work for me to be do here.

So today’s post will focus on Pension (without going into the history – and there is a lot of history and now, projections on what it might look like in the future – state pension particularly)!

What is Pension: Wikipedia describes a pension as “a fund into which a sum of money is added during an employee’s employment years and from which payments are drawn to support the person’s retirement from work in the form of periodic payments.” (source: https://en.wikipedia.org/wiki/Pension) Contributions could be made either by the employee or by both an employer and employee and is invested across various regions (U.K. and Overseas) and asset classes, with a view to growing your money by the time you retire and are ready to draw the funds down.

Types of Pension (U.K)
State pension: this is a benefit paid by the U.K. government and anyone living in the U.K. is eligible, but timing of eligibility is dependent on age (which is dependent on sex). The amount payable is dependent on the number of years one’s been paying national insurance (to qualify for the maximum weekly amount, one needs to have been paying national insurance for 35 years) – more details available at https://www.gov.uk/new-state-pension

Workplace Pension: entitlement to payment from this type of pension is dependent on the contribution you have made into the scheme. When you join an organisation, your employer automatically enrols you into their pension scheme, provided you are eligible. Even if you are eligible to be enrolled, you can choose  to opt-out immediately after your employer has enrolled you into the scheme,  (as was the case in the case of the young adults I referenced above).

The pension regulator sets the minimum contribution rate both you and your employer must make into the pension scheme, but organisations might have a policy to contribute more than the minimum set by the regulator.

The workplace pension is also 100% tax deductible i.e. you your contributions are deducted before tax is calculated and you also benefit from tax relief of up to 20%.

The funds paid into the pension scheme on your behalf (your contribution and your employers’) are invested within a pool of fund

Self-Invested Personal Pension (commonly known as SIPP) – this is similar to other personal pensions, except that with a SIPP one has more flexibility with the investments; you decide which investments to make and manage your investments till retirement (sort of a do-it yourself pension). Anyone can invest in a SIPP, but caution is usually emphasised with this type of pension.

Do you notice the common theme in all the pension types?

Common Theme:
• You get FREE money from the government
• You get FREE money from your employer (in the case of employment pension)
• Your contribution is TAX DEDUCTIBLE
• You benefit from TAX RELIEF

Most important reason why I will advocate for the younger ones to start their investment (yes putting money in a pension scheme is an investment, even though people don’t tend to think of it as such) is “TIME”.

In addition to all the freebies mentioned above, early investment in a pension scheme means you are giving “Time” a chance to work for you, during which period your money benefits from compound interest (which Albert Einstein is credited to have described as the eighth wonder of the world)! Imagine that the money invested makes money which is then reinvested and that also makes money and you keep adding to the pot that keeps making money!  This I describe as allowing both “Time” and “your Money” to work for you! Nothing beats that. I wish knew this or had someone explain to me early on in my career.  This is where I once again ask the question about whether being a finance professional means one is financially literate (at least to the extent of one’s personal finances – I wonder what other finance professionals think?  It is my opinion that actively working towards a specific financial goal breeds awareness of the possibilities, which is why goals are important.

Below is an illustration using a pension calculator I found online, showing contribution required by both a 25 year old and a 50 year old to achieve a target pension pot total – note the difference in monthly contributions and the amount of compound interest earned by each of them! Did you notice the free money – contribution by the government? It really is worth taking advantage of all the freebies!

So yes, I started late but have started and am excited for what the years ahead hold.
So the message to anyone else in a similar position as me: just start! It is never too late; if necessary, speak to a financial advisor who would be able to provide some advice on what the options are for your specific circumstances.

So to the young adults out there; I see you all doing great entrepreneurial things and making huge strides – I am in awe when I hear some of the conversations being had amongst this group! It is however important to start putting things in place NOW! Let TIME work its magic for you, so start NOW. I’d be happy to have discussions with you and give you pointers on where to look.

N.B. For my non-U.K. followers, check out the type of pensions that exists in your country; the same concept applies – take advantage NOW, of any freebies on offer and of Time and compound interest to allow for financial security in the future.

Like, share and comment. Let me know if this is useful.

2021.09 Property 🏠🏠🏠Investment – Multiple Avenues to Achieving the Goal

Hey there! Today, I share a bit about my story in relation to property investment and a couple of lessons I have learnt in the process.

In one of my first few blog posts about financial freedom I told you about how I developed a sudden need to divest myself of all debt, to the extent that I needed to sell my home! The plan was to use the equity from that house to buy another one outright.

As I embarked on the process of acquiring a new property, I quickly realised property prices wouldn’t permit for an outright purchase (at least not in the location I had settled on) and, the thought occurred to me that I could use some of the funds from the sale to invest in another property and let it out. Then I read Robert Kiyosak’s Rich Dad’s Cashflow Quadrant and learnt about good debts (which increases your wealth) and bad debts (which increases your liabilities) and that whole need to divest myself of debt seemed to disappear! Talk about a 360* turnaround!

And so I started what I call my property investment journey. When I started out, I knew I could buy a property and rent it out and then I started interacting with property investors on social media and joining online property networks and very early on, learnt that there were so many other property investment strategies (and not just buy a house and let it out) – and eye opener (and attestation to the saying “you don’t know what you don’t know”!

The strategies shown in the table above is not an exhaustive list, but they are the more common ones.  There however are some more complicated ones and new ones evolving as investors navigate through the pandemic.  Of course, most of the strategies shown require an initial capital outlay that would be deemed substantial for most, but I want to draw attention to the fact that there are also some that require very little initial outlay.  In fact, in the property investment community they reference “no-money down strategies”; I haven’t seen any of such, but I know the R2R strategy requires less of an initial outlay than if you were buying; and property sourcing is probably the one I will accept is a no-money down strategy, as it mostly involves time put into research and negotiating deals. If you are interested in getting into property investment and don’t have a substantial amount of money, these are two strategies you could use as stepping stones to however high you want to go on the rungs of the property investment ladder.

From interactions in property networks, masterminds and trainings attended, I learnt that it was best to focus on a one strategy (and best to choose a strategy that moves you towards achieving your goals) and that it wasn’t as easy as just going out and buying the first property that appealed to you! One phrase that is usually bandied about in the property investor community is “you make your profit when you buy” – meaning that your focus isn’t shouldn’t be on the profit you’d make when you sell from appreciation of value in the long term, but it should be on profit at point of purchase, which is only possible if you manage to find a property being sold below market value or one that you’d refurbish or perhaps one that needs minimal tweaks that will result in increased value. The rationale being that if you buy a house today and have to sell it (for whatever reason) in the short, rather than long term, you’d still be able to make a profit (or at least not make a loss).

This meant I couldn’t operate based on my usual modus operandi of “jump in and learn as I go”! I guess if I did that, any mistakes made here might be costly; so I engaged a property investment coach from whom I learnt a great deal, including how to assess property deals (while continuing to interact with property investors, joined property mastermind groups, etc.). I also spent hours and hours, late into the night, early hours of the morning (after and before I signed off from/in to work) and weekends scouting through Right move, Zoopla and other property sites!

Guess what; after more than five months of scouting through hundreds of properties online; about 60 of them being potentials and only about five of them being worth a viewing (and only one of those warranting a second visit), it was almost time for my busy time at work (end of year audit: during which time I knew wouldn’t be able to give property investment the focus it required) and I hadn’t identified a suitable deal! My coach encouraged me to keep going and they, and other people in the property investment community alluded to the fact that deals had become harder to find with the pandemic and resulting lock down.

Suddenly one of my contacts in the property investment community, mentioned they were looking for an investor in order to be able to complete on a property investment deal. I mulled this over and thought; well, the funds have been sitting in my account for almost a year (yielding interest at less than 1%) and I knew I wouldn’t be using it before the audit at work was over; so why not invest at a fixed rate for a short term. After negotiating an amicable interest rate, the deal was done! The thought that struck me as we were negotiating this deal is “there’s always multiple ways to skin a cat” – while I haven’t actually purchased a property, I have invested in enabling completion of a property deal and it could technically be said that I am a property investor; no? One school of thought advocates for “being stubborn about your goals, but flexible about your methods” and this is a clear articulations of being flexible about how one’s goals are achieved (while being clear on what the goal is).

As I mentioned in last week’s post, the audit is now over (well mostly), so I’m about to get right back on to the wagon of searching for property deals. I am a bit wary given the current economic climate of uncertainties, but am still committed to the goal of building a portfolio of investment properties, so we’d see how this year goes (keeping my fingers crossed)

So today I leave you with the below lessons I have learnt from my property investment journey so far (and hope it is of value to you):
• For young ones (and older ones with minimal capital) interested in property investment: go research property sourcing and R2R as potential starting points
• There’s always multiple avenues to achieving one’s goals, so be flexible about the method and rigid about the goal (though some might argue that even the goal evolves with time, so it’s good to be flexible with that as well)

Have a good weekend and see you next week.

Like, share and let me know in the comment if this is of any value.