Richard Salter

No Interest is paid on loans of cash. We should all be most familiar with interest.

By contrast Dividends are the business investment trading returns 'divvied' up ('divided up' if you prefer) between shareholders. If the shareholders - who own the business - can afford and desire to do so, they can award themselves a dividend. However if no profit is being made or capital is felt more desired to be reinvested into the business then a reduced dividend, or no dividend at all, will be paid. Interest is typically paid on a regular (often monthly or annual) basis - typically at a defined rate of return for a defined period. The loan of capital on which the interest is being paid is then repaid - or the investor can accept a revised rate of interest return.

Dividends are typically paid twice a year. An interrim amount half way through the year and a final amount designed to more accurately reflect the whole trading year profits. Some businesses will pay more frequesnt dividuends which attract those sekeing more regualr income payments but these are in the minority.

Dividends are often unrelated to the current share price of the underlying company paying them. Thus a company can see its share price fall or rise whilst its dividend is maintianed or even increased! A few compaines have even managed to pay an ever increasing dividend every year for over tweny years. Others have of course come and gone in this time.

It might be argued that dividends are part of the return to investors who have taken the risk of investing in that particular business and as such should pay a risk premium better than interest. However you can make relatively safe loans in return for typiclly low interest payments and you can also make relatively speculative loans in return for higher promised interest payments - but at much greater risk of capital loss.

Shares are, much as the name suggests, part ownership of a company. For safety most investors are advised to only buy shares in trading companies listed on recognised stock exchanges. These range from the top UK 100 companies to younger, typically much smaller, companies listed on AIM or indeed a foreign listed company. Depending on which stock you buy and its trading philosophy - i.e long term growth or shorter term regualr cash generation (which allows for regular dividend payments) you can expect to see at least a dividend return very quickly. If the share price rises overnight it is also entirely possible to make a gain very short time. However, for most, it is much, much better to let a specialist choose a range of stocks to hold for you and a group of similarly minded individuals, and then hold and manage these on your behalf. In this way you 'pool' your risk by having your capital spread across a number of underlying companies and there is also the advantage of the fund manager using his expertise and resources to identify the best stocks to buy and hold in your collective fund.

Such funds are avialbe in every style and market - i.e. 'UK equity growth' or, for those seeking an income, 'UK fixed Interest' for example. These are known as Unit trust funds or OEICs and most can enjoy the added advantage of being sheltered from most UK taxes by being held in an ISA.

Best advice is that investors should always plan to invest for at least five years as stock markets and shares are notorious for constantly rising and falling prices. However, historically there have been more rises than falls such that, over the medium to longer term ( 5 yrs or more) you increae the odds of coming out ahead.

You may be lucky and make money overnight. But this would be high risk. You might also loose equally quickly. This is where a good fund manager should help you avoid the worst excesses. (There are over 2,500 such funds to choose from).

Be warned that if you choose to go it alone collective wisdom is that you need at least ten separate lines of stock, in unrelated industries (do not buy both HSBC and Barclays for example) and that each stock holding should be at least £10,000 to achieve both a well diverisified collection of investments each with sufficient exposure to make any gains worthwhile! Ten per cent profit on £500 being barely worthwhile especsilly after trading costs (the bid offer spread etc) are taken into account

Well really I am afraid there is no substitution for regular substantial payments, however there are a number of things you can do to improve the potential outcome.

You should sit down and think about the following issues;

What do you want from a pension (how much, when)?

How 'active' do you want to be in managing it (there is no substitute for involvement in how your money grows for making all concerned concentrate on the outcome)?

Look hard at the costs - cheapest won't necessarily be best, but make sure that what you are paying offers good value.

Get good advice - and at risk of showing my prejudices I'd suggest an IFA might be a good place to start - they will not be cheapest, but ask them to demonstrate that they can add more value than the differential in cost, a good IFA will be comfortable with that discussion.

If you have surplus capital, or annual bonuses or profits surplus to your immediate needs a lump sum contribution can be a major boost, but you may wish to think about phasing how it is invested, so that you aren't exposed to any sudden market drops just after investment.

Decide how much risk you can take - classic human psychology is to invest at the top of a bubble, and sell at the bottom - the exact opposite of rational behaviour - of course this is only obvious with hindsight, and by ensuring you are not in a market which you will not be able to stand when things go wrong then you can hopefully avoid this dreadful mistake. Getting timing right is very very difficult, getting it wrong is very very simple, so the best option for most people is to ignore timing, and the only way to do that is to be in markets where getting it wrong won't force you to disinvest for emotional reasons.

Oh, finally, and very importantly, if you are employed check whether your employer will contribute on your behalf, either into a scheme they sponsor, or yours - for many people the largest part of their pension contribution comes from their employer - joining an employer funded pension is really like a payrise - it may 'cost' a few pounds from your net salary for your contribution but the benefit is usually comparatively huge.

Best of luck - and remember the worst decision you can make is to do nothing.

seek out an insurance specialist and not someone who just uses quoting software. Make sure they have tried to fully understand your circumstances both now and in the future and recommended the plan (not just the cheapest) for you.

Most life assurance companies ask the question about smoking and to qualify for a non smoker rates you must NOT have smoked for a minimum of 12 months - failure to do this will result in the contract being void for non disclosure and they will not pay out.

Life assurance companies do not set premiums on the amount you smoke only the fact that you smoke.

I hope that helps?

The question you are asking is "Do I have a need for life cover?" To get the answer, ask another question: what would happen to my dependents should I die? Would they have enough to live comfortably from other sources and, of course, how old are they now?

If they are still dependent on you financially, and if there are no other sources (such as wealthy parents, or plenty of your savings) then there is probably a need for some kind of life cover.

How much, and what type of cover, depends upon the duration of the need: for example, you might need maintenance funds until the youngest is, say, 21 and, with the current changes to university fees, you might also want then to be able to complete their studies without them having huge debts at the end.

If you are in an occupational pension scheme then that scheme might provide a high level of dependents' payments - so ask your scheme provider what they offer. Finally, do take into account the other major financial risk of your being unable to work due to a critical illness or long-term sickness - in such cases the family problems can be (financially) just a severe as if you had died. Cover is available for both of those potential problems, and, though rather pricey, suitable insurance is a real financial life-saver if you need to make a claim. This is an area where it is worth taking independent advice.

I think it's worth clarifying here - a renewable premium is one where you initially take out cover for 5 or 10 years (typically) but have guaranteed insurability until a set age, so you can renew the cover at the expiry of the initial term, but it will typically be far more expensive as you will be 5 or 10 years older.

Reviewable cover is where you have cover set and assumed at a given premium for the whole term, however if general claims experience is different than expected the insurer can change the premium at particular dates based on their overall claims experience, but not based on your personal circumstances.

Historically premiums vary up and down, and whilst reviewable life cover is not really available now, when it was customers quite often got a reduction in premium rather than an increase, because life expectancy has generally increased beyond expectations. Health insurances on the other hand have had mixed experience as improved medical diagnosis means conditions get found earlier (so more claims on critical illness), but improved treatment means that they are cured quicker (so income payment plans have improved claims experience).

So to answer the question you have asked, sometimes, but it will depend on future claims experience. To answer the question you may have meant; sometimes, it will depend on whether you 'may' need cover after the initial term, but initially only expect to need it for a shorter period.

For renewable cover, a 10 year renewable policy will typically cost more than a 10 year non renewable policy - generally I find you can get around 15 to 17 years of non renewable cover for the same price as 10 years of renewable cover.

One final point to confuse the issue, you can have guaranteed renewable cover, and reviewable non renewable cover, but generally renewable cover is guaranteed for the initial premium period, so reviewable renewable cover isn't available. Sorry, that probably didn't help...

It would vary from 12-24 months but the 24month option is quite rare and will naturally cost more to buy cover for that period. Many providers insist on you having a mortgage and will determine the amount of cover you can have by a % of your mortgage payment or % of your income.

its also worth noting that not all providers will allow you to take cover when not linked to a new mortgage or will make you wait up to 6 months before you can claim (ie 6 months before you are given warning that you might be at risk of loss) whereas when linked to a new mortgage this can be as little as 2 months.

The percentage of your income that you pay away in tax depends upon your total income - there is no single 'rate' that covers everyone. The method of calculation is, though, reasonably straightforward. Income tax rates change each year, but for this year the calculation is as follows.

Think of your earnings as a tower of children's building blocks. The lowest block is where your earnings start, and is up to £6475 high - and you pay no income tax at all on that figure - if that is all you earn: no tax to pay. The figure of £6475 is this year's 'personal allowance'

The next block is up to £37,400 high. All of your income sitting in that block is taxed at the 'basic rate' of 20%. For example, if your total earnings are £16,475 then you pay no tax on the first £6475 (which sits in the lowest block: your personal allowance). This leaves another £10,000 which sits in the 20% block, leading to a tax charge of £2000.

The next block - the third one up - is the higher rate which goes right up to £150,000, and earnings which sit in that block are taxed at 40%. If any of your income sits in that block you are known as a 'higher rate taxpayer'. If you earn more than this you will pay 50% on the extra.

Your personal allowance is in practise spread throughout the year, and the pay as you earn system (PAYE) is designed to equalise your tax across your weekly or monthly paydays.

Careful! This simple example by no means covers all of the possible options. Your personal allowance may be different if you have a disability, or are over 65 years of age, and it gets more complicated if you have income from investments or savings, for instance. And do not disregard National Insurance contributions, which are really a tax on income.

Follow this link for more information: http://www.direct.gov.uk/en/Nl1/Newsroom/PreBudgetReport2009/DG_183037

And the 'Why?' To run the country: police, prisons, armed forces, education, health services, politicans' expenses....

It appears so. Your code of 647L is the standard code most UK taxpayers are given as it refers directly to the (annual) Personal Allowance which is currently £6,475. This means that the HMRC will regard you as being allowed to have the full £6,475 (the code always drops the last digit for some reason) in the relevant tax year BEFORE income tax is applied to anything else.

The letter L shows that you are getting the Lower rate of tax allowance as this increases to £9,490 for anyone over age 65.

If you have already earned £31,979 by end of Novembers payslip (I assume you have not had your December payslip yet) then in the nine months of the tax year so far you will have earned the equivalent of £3,553 or so gross each month. Over a full tax year you will therefore earn £42,638 or so. As such you are very close to being a higher rate tax payer.

However your pay appears to be being pitched to just avoid this. This is because your annual earnings of £42,638 less the personal allowance of £6,475 means that 'only' £36,163 is liable to basic rate tax - the Higher rate threshold being applied from £37,400 of TAXABLE income. You only have £36,163 or so of TAXABLE income so your code is right and the HMRC can instruct your employer to apply the full 647L code and thus to take only basic rate tax from you.

£533 of tax is just about twenty per cent of your monthly pay so seems pretty reliable. Hope this helps

From a monetary point of view it is almost certainly much cheaper to buy a house than to rent. After all despite taking on a frightening amount of mortgage borrowing you should eventually pay it all off and be left with a real tangible property which you own outright. Historically it should also be worth (far) more than you paid to buy it. By contrast if you choose to rent you will never own your property and thus will have to rent until the day you die! A number of surveys have shown exactly how much more you will pay to rent over your lifetime than to have bought!

Even if your circumstances change and you end up not being able to pay all of your mortgage off you should still, hopefully, find that you have at least some equity built up over time to show for your mortgage payments.

There are of course other factors at play such as job mobility and maintenance costs which favour renting compared to the security of ownership and freedom to decorate as you like which favour buying. In my experience it is also often cheaper to buy via a mortgage than to rent the same property - in other words you may well find you are paying less every month to buy than to rent the same place - certainly as time ticks by this will be the case. Think about it. If you have reduced your mortgage to £50,000 on a £200,000 house the monthly repayments will be far less than renting a similar sized property. Indeed as a professional adviser I have often found that people pay less for their mortgages than they receive back in rent.

Finally not only will you be renting for life but those rents will rise (every) year - perhaps as your ability to meet ever rising rental costs reduces especially once you retire. Meanwhile those who have bought have typically paid off their mortgages by the time that they retire and so face reduced living costs compared to those who must still pay rent.

If this is an investment question then matters may be different. Renting avoids maintenance costs, estate agent and lender fees, letting fees and gas safety inspection costs etc and leaves capital free to invest elsewhere where it might perform better. Certainly, as we should all be very well aware after recent events, property can (and does) fall in value as well as rise. You should therefore not mix up buying as a home to live in with investment. However you may be lucky and enjoy both!

As follows:

2010/11 personal allowance £6,475
2012/12 personal allowance £7,475

2010/11 20% tax rate: £6,475 - £43,875
2011/12 20% tax rate: £7,475 - £42,475

2010/11 + 2012: 40% tax rate: Up to £150k, over that you pay 50%

Please see http://www.hmrc.gov.uk/rates/it.htm

Assuming you've got a plan in place, then it is best to increase the existing plan, but only if the insurer allows it. With many you have to wait for a special event to occur such as a marriage, birth of a child or moving house. So, with this in mind, if your health is still good, it may be best just to cancel the existing plan and start a new plan with the correct sum assured. But take care not to cancel the existing plan until the new is in force.

However, if you have a term assurance plan, this will expire at some point, as they are designed for fixed terms. If you're looking for funeral expenses to be covered, you may want to consider a plan just to cover these costs. Dignity offer a plan where you pay for your funeral expenses over a 2 year period, if memory serves me right, by means of a monthly payment and the funeral expenses are covered, irrespective of inflation

There are three factors involved when comparing renting with purchasing: personal power, potential long-term advantage, and cost.

There is no doubt that a property owner has greater power over what he or she can do in a property than does someone who rents. Although there are are likely to be restrictions on what you can do in an owned flat (because of the management rules of the property) you don't, for example, have to ask permission to paint the walls or hang a picture, or to buy a better cooker; you don't have regular inspections or have paid a deposit that you may not get back.

The potential long-term advantage of owning a property is that you have an asset that we expect to increase in value, eventually owning it outright. It is therefore not only a place to live in now, but is an investment and a place that you will be able to live in 'rent free' in the (distant) future.

The final financial issue is the cost and affordability of purchasing, and here you will need to make your own calculations. But I suspect the overall costs will not differ very much unless, of course, you are living in very cheap rented accommodation.

The last part of your question relates to timing. Nobody can foresee the future and, although another housing crash is currently thought unlikely, in the short term property prices can move in either direction. It seems to be a good time to buy but, at any rate, with house ownership being a very long-term strategy whose main aim is to provide you with somewhere to live and whose secondary aim is as an investment, I see no reason to wait for things to 'improve.'

If you're a first time 10%, minimum, if this is your second house, 5% for a limited amount of companies, but the more you have, the better deal you will obtain

you can ask your tax office to send you a printed copy of your calculations and summary of account but it takes around 3-5 days from when you submit for the data to be officially filed and accepted so if you have only just done your return for last year you will need to wait a bit.

as ever this time of year is one of the busiest for hmrc as many people file at the last moment so you can also expect a delay in response time from hmrc as they will be inundated.

some lenders are more flexible in what evidence they will need, i know of some that will take business bank statements and accountants projections of income - but this varies widely with each lender and generally speaking the higher % you want to borrow, the more evidence a lender will want - nomatter whether you are self employed or PAYE.

the value of property is partly influenced by supply/demand/desire.

some people feel that property is still overvalued and should fall by as much as 30% or more to enable people to purchase based on more traditional lending multiples of 3x single or 2.5x joint income.

although there might be some truth in this, i think the rationale is somewhat flawed.

lenders are lending more cautiously, sometimes overly cautiously, but the sector of the market most impeded is the 75%> ltv as these pose additional risk to lenders and so they want to restrict their lending to what they consider to be deserving cases (sometimes restricted to existing borrowers only and no FTBs).

liquidity in the market is not as good as it was at its peak but its better than when it was at its low.

The BoE cannot force lenders to lend, frivolous lending (and borrowing) is in part to blame for the state we are in now and for as much as people rant about bankers being overpaid, they never moaned about that whilst the times were good, and they also forget that they borrowed the money, spent the money, had no means of repaying the money and never took precautions to safeguard their income in the event of a financial catastrophe.

i'm not defending bankers per se, but we have to remember that the banks didnt spend the money, they lent it, "we" spent it, some wisely but most foolishly.

we also have a glut of new build properties because the last government forced local authorities to build ridiculous numbers of new builds (by granting permission to the developers) the problems here are that the building standards are not the same as they were in the past when to own a new home was like a stamp of approval (how many tv shows now show "homes from hell")

new developments also imposed a % of property to be used for social housing - which was not the case in the past, without being a snob many people now dont wish to spend their hard earned cash buying a nice new home to find out their nextdoor neighbour is a rehoused council home evictee with out of control kids and all the other bad habits.

even setting all this aside, too many flats were built in inappropriate locations, the upshot is that many towns and cities now have vast numbers of vacant flats that no one wants to buy now (and clearly didnt then either) but you can build more high rise flats that you can terraced houses on the same plot and all of today's lifestyle tv seems to centre on kids, gardens, animals etc which dont tend to fall into the flat owning community.

most of this is just my take on things but i am sure that others will have their thoughts and experiences to share too!

You are correct, it doesn't make sense not to set up the policy in trust. It ensures payment is quicker and more efficient. I set up a policy in trust for one client and after she died suddenly, the partner was paid £300k 6 days later. The rest of the estate was settled 10 months later. It not only ensured £120k of IHT savings, but also the solicitor charged 3% for administering the state, hence another £9,000 savings. This is perfect example of why it should be done

Absolutely life cover is what it says, life insurance. The threats to your life are unaffected by whether or not your property is let out.

In short, you shouldnt have a liability upon sale of the properties as long as you are divorced.

a married couple can only have one principle primary residence (PPR) for CGT purposes whereas once divorced you can each nominate your own PPR.

you will need to let your insurer know you have moved in as it should reduce your home insurance moving from BTL to an owner occupied deal.

maintenance isnt tax deductable.

married couples allowance is only paid (once you claim it) to couples where one spouse was born before 6/4/1935 so there are relatively few people still in receipt of it.

guessing that you are not over 75 and still working, you never had it to lose anyway.

In general terms having a succesful buy to let already in existence should NOT hinder your ability to get a personal mortgage. This is for a couple of reasons. If the buy to let is succesful and covering its own costs then it could even add to your total household income and thus improve your spending power and loan affordability. However lenders are very conservative about such income and often require that it be a well established 12 month of proven income - evidenced by rents books, banks receipts and the like. Even then some will only allow half of the rental profits to be regarded as reliable for further laon purposes.

The second aspect is that your credit file will show that you have the buy to let loan - but a well serviced second loan could actually help IMPROVE your credit score. This is because it is real evidence of your being a regular and reliable payer every month for however long with no missed, or late, payments. Lenders clearly value such evidence of being able to regularly service existing debts......

Assuming that the policy was set up as a qualifying policy (virtually all endowments were) and has been running for more than 10 years and nothing has been done to the policy to affect its qualifying policy status, then there will be no tax to pay at all.
Qualifying policy rules are complicated but Aviva will be able to tell you if it is a qualifying policy or not.

Noted Andy. My earlier answer addresses each of these points here - you may find that you are offered better - or worse - interest rates at the time of any second deposit.
However there are often deals around this time of year by banks and other deposit takers to capture more of your cash. They will sometimes say "give us the full £5,340 for this tax year's maximum cash ISA allowance AND up to a further £5,640 for the coming tax year's (increased) maximum cash ISA allowance" - so a total of up to £10,980 now and we will ensure that it is used to open two successive tax years cash ISAs at the same interest rate deal. They do this to capture more of your cash , keep you away from competitors and becasue they can be confident of maintaining the same interest rate and rough fixed rate term (every fixed rate anniversary will be different depending when you placed your first deposit - with a few exceptions) over a matter of a week or more covering the end of tax year on 5th April and start of the new tax year on 6th April.

Fixed rate (cash) ISA deposits are exactly that - fixed rates. This means that you cannot add money to the same account as rates and terms change all the time. At the point of deposit you will be told the interest rate, whether it is fixed or not and any term. Next time you come along with cash to deposit each of these items may have changed - the rate, term and type of account so i would expect that you NOT be able to get the same terms a year on.

However after Bank rate has been so low for so long I would expect that interest rates will actually start to rise from here and if this turns out to be true you may well find that you will be offered higher interest rates at future deposit points.

Yes the interest typically cumulates as per your calculations on your account each year. In other words most such accounts do not pay out the interest earned at the end of each year - only the cumulated amount at the very end of the fixed term period.

Bear in mind that capital deposits are protected up to £85,000 held with any single banking group but with inflation now running at 3.4% a basic rate taxpayer will currently need to earn 4.25% gross interest on a taxed deposit account (3.5% if ISA) if they are to maintain the real purchasing power of their cash by the end of a fixed rate period. Wherever possible therefore do keep any cash deposits you hold in Cash ISA accounts - instant access if you need access at short notice and then longer term fixed rates for any extra cash you feel it appropriate to hold.