SOCIETY UNDERVALUES RETIRED POPULATION

MGM Advantage – ‘Our Retirement Nation’ report
SOCIETY UNDERVALUES RETIRED POPULATION

A new report reveals that the UK’s ‘Retirement Nation, which includes all retired people, saves the state and society at least £25 billion a year through unpaid care, community and voluntary work. But the report, ‘Our Retirement Nation’, which was commissioned by MGM Advantage, warns that the contribution made by this part of society is not fully recognised and that the government and society as a whole need to do more to understand their emotional, health and financial requirements.

MGM Advantage is calling for fundamental changes to ensure that the Retirement Nation gets the respect and support it deserves from society, the media, the financial services industry and the government. Its recommendations and key findings are:

• Respect – A change in attitude towards the Retirement Nation and greater recognition for retired people and what they contribute to the UK – only 14% of retired people feel valued by society.

• Representation – The Retirement Nation is a big part of the UK society for what they contribute (£25 billion through unpaid care, community and voluntary work), but also the help and support they need. The Retirement Nation needs a voice. MGM Advantage recommends the Government creates a Minister for Retirement.

• Education – More done to help people maximise and make the best use of their financial wealth in retirement. The first step is to help people improve their basic knowledge about retirement and finance – 31% of retired over 55s have not heard of the Open Market Option. The financial services industry, government, and media all have a role to play in achieving this.

• Simple products – Financial services and government need to continue to work together to innovate and design new retirement products that meet the needs of the Retirement Nation and are easy to understand, accessible, and offer good value – only 29% of over 55s know exactly what an annuity is.

• Ownership – People need to take ownership of their retirement planning – from building up a pension pot in their 20s and 30s to making the best retirement income decision when they retire – 54% of non-retired UK adults are not at all prepared for retirement3.

The report highlights how the UK’s Retirement Nation is collectively saving the government and society £15.4 billion a year by taking on the unpaid care of grandchildren, parents and other family members. In addition to this, retired people are undertaking voluntary work worth at least £5.6 billion a year and charitable work worth at least £3.7 billion a year.

MGM Advantage, which is a retirement income specialist, warns that the role played by this major part of society is not fully recognised. Almost a third (30%) of retired people think they are undervalued and not respected by society, while just 14% feel valued, while the balance (55%) say that they are sometimes treated badly.

Craig Fazzini-Jones, Executive Director, MGM Advantage said: “This report paints a wonderfully colourful picture of the rich diversity of the 11 million people who make up our Retirement Nation and why they deserve our respect and attention for the contribution they make to the society. However, it also portrays a worrying picture about how these people prepare for and fund their retirement and sends a clear message about our responsibility to do more to support our Retirement nation.”

With the number of retired people in the UK growing significantly, MGM Advantage says that greater consideration has to be paid to their contribution as well as demands placed on society. It also believes there should be a fundamental change to the way that retired people are treated and that more should be done to challenge the pre-conceived notion of retirement.

21 Ways to Cut Expenses for the Isle of Man consumer

1. Use the public library to check out movies or books for free (if Isle of Man Government hasn’t already closed yours!).
2. Consider dropping your land line phone at home. Your mobile phone may be all you need and some come with free long-distance services but bear in mind internet requirements.
3. Send free e-cards and save on postage.
4. Stop buying clothes that are “dry clean only.” Learn to iron!
5. Don’t renew subscriptions to publications you don’t have time to read.
6. Only use ATMs where you won’t be charged service fees.
7. Pay with cash when possible—psychologically it’s harder to spend cash than using credit cards, and you’ll save on interest charges.
8. Pay off short-term debt such as payday loans, overdrafts and storecards as the annualised interest rate charges are typically very high.
9. Check your credit history. Go to http://www.checkmyfile.com and make sure everything is accurate. Good credit may mean lower interest charges.
10. Pay attention to the total expense ratios on investment and pension funds you buy. And don’t buy any when you can’t find them out!
11. Cook in bulk and freeze.
12. Purchase a programmable thermostat for your home.
13. Only do full loads of laundry and fill the dishwasher before running it.
14. Bring your lunch to work (eg homemade soup) or scout out the inexpensive places to buy lunch.
15. Be a smart grocery shopper—cut coupons, shop at discount stores, and stock up on sale items only if you need them.
16. Fill prescriptions with the generic form of the drug.
17. Keep up maintenance on cars. It may prevent costly future problems.
18. Get free annual medical check-ups (Well woman or Well man checks) to prevent costly future problems, such as being off work long-term due to an avoidable health problem.
19. Wash your car at home and skip the car wash.
20. If you see something in a catalog that you want to buy, wait a week before ordering to see if you still really want it.
21. Pay bills online. Save postage.
Source; American Family Insurance, amended for the Isle of Man consumer

Dealing with the prospect of Redundancy?

The prospect of redundancy is becoming very real for more and more people, in light of worsening economic conditions and cutbacks in government and company spending.

Redundancy may occur for a number of reasons and with every redundancy comes a whole series of important decisions to make about your life, and how you (and maybe your family) will cope with losing your income.

Every redundancy is different because every person who experiences redundancy will have very different circumstances, goals and objectives. However, there are some common areas of concern that may need to be addressed.

Legal advice can ensure that you maximise the benefit of your redundancy package. Financial advice ensures that you structure your finances in the most effective way.

Proactive steps

The best planning for redundancy takes place long before the subject is even raised by your employer.

The two most valuable things you can do in anticipation of redundancy are to cut down on your expenditure and create an emergency savings fund.

Emergency fund

This will give you sufficient breathing space to assess all of your options and, if necessary, find new employment. We would recommend an emergency fund equivalent to three to six months’ typical expenditure. This money needs to remain accessible in the event of a real financial emergency but not too easy to access, in case you are tempted to dip into the fund. A high interest bank account is often a sensible home for your emergency fund.

Unemployment cover

Before you all rush off to seek such a policy, it is usually only available when attached to another plan as a ‘bolt on’ such as mortgage protection life cover and usually at outset of the policy. This needs to be done before impending redundancy or you won’t be able to make a successful claim. Such plans typically cover the monthly repayment of your mortgage and only normally last for 12 months because the insurer usually expects the claimant to have secured replacement employment during this time. Involuntary redundancy is not covered, nor is being fired. Often there is a 30 or 60 days ‘wait-period’ before paying a claim.

Redundancy payments

Assuming you have worked continuously for your employer for at least two years, you should be entitled to a redundancy payment. Statutory redundancy payment is not subject to income tax or National Insurance contributions. The amount of redundancy pay you receive will be covered in your contract of employment.

The first 30,000 of any payment on termination of a contract is tax-free as long as it is not in lieu of actual pay; eg for gardening leave.

Statutory redundancy pay

The total amount of redundancy pay you receive will depend on a number of factors, including how long you have been continuously employed, your age and your weekly pay.

In the Isle of Man the amount of a redundancy payment is one week’s gross pay for each complete year for which the employee has been continuously employed. A week’s pay is capped at a maximum of £480 a week. Refer to Isle of Man Employment Rights: a Summary which can be downloaded; http://www.gov.im/ded/employmentrights/rights.xml

Help from the state

Depending on your financial circumstances, you might qualify for help from the state when you are out of work. Your first port of call should be Job Centre, which will be able to tell you about your entitlement to payments or benefits. If you or your family/partner has over £13,000 you will not be entitled to receive the income-based component of jobseeker’s allowance.

However, you could still qualify for the contribution-based jobseeker’s allowance, assuming you have paid or been credited with class 1 national insurance contributions in the relevant tax years. This can provide up to £67.50 per week if you are aged 25 or over. It is £53.45 per week for under 25’s.

Loss of protection benefits

Redundancy often results in the loss of valuable employee benefits previously provided by your employer as part of your remuneration package. These employee benefits might include death in service and private medical insurance.

Redundancy (like any life event) should serve as a prompt to evaluate your protection requirements, identify any shortfall in cover and put in place a suitable protection arrangement.

Make sure you shop around to identify the most competitive provider as the costs vary between the most and least expensive provider of these financial products. Also make sure the cover is eligible for Isle of Man residents.

As it can take a number of weeks to underwrite some forms of financial protection, particularly if you require substantial amounts of cover or have a complicated medical history, it is worth starting this process early when the topic of redundancy is first raised by your employer. This will put you in the position where you can put the new cover on risk as soon as existing benefits come to an end, therefore preventing any time gaps in your cover.

Pensions

Depending on your age at the time redundancy occurs, retirement is likely to be a serious consideration. As this is likely to be early retirement (or at least earlier than originally planned) you will need to look carefully at affordability. After all, you are younger so your pension benefits will have had less time to accumulate and will need to last for longer.

Early retirement prompted by redundancy is a good opportunity to re-evaluate your lifestyle and the associated living costs. Your pension might produce lower benefits than originally predicted, but this is all relative. Lower pension benefits are manageable when combined with a lower cost of living.

Dealing with debt

Debt is a drag on your ability to meet your other financial objectives. The global ‘credit crunch’ has highlighted some of the risks of funding your lifestyle with unsecured debt. What starts off as cheap and easily accessible can quickly become expensive and in short supply.

There are two main types of debt – unsecured and secured.

Unsecured debt typically includes items such as credit cards, store cards, personal loans and overdrafts, is usually short-term and more expensive than secured debt.

Secured debt usually refers to your mortgage. It is secured because there is an asset (e.g. your house) guaranteeing the value of the debt.

Time for advice

As a result of the complex interplay between the different areas of your personal financial planning, it is important to seek professional independent financial advice to ensure you have considered all of your options and made the most suitable decision based on your personal circumstances.

It makes sense to seek advice at an early stage of the process as otherwise you could be in a panic to make important decisions ahead of tight deadlines that have been imposed. It can take time to request detailed information and conduct analysis ahead of providing advice to a client who is being made redundant.

Finding an adviser

The best way to find a good adviser is usually to ask your friends, family or colleagues for a recommendation or search for a local adviser online using one of the many internet search engines; e.g. www.unbiased.co.uk or www.findanadviser.org

The author, Sharon Sutton was made redundant once……….11 years ago

sources; www.gov.im, Informed Choice Ltd – Martin Bamford’s Guide to Redundancy 2009

MNA Fraser Simpson (International)

We understand that MNA Fraser Simpson (International) Limited has recently written to its clients around the world to advise that they are closing to new business on 30.06.2011 and are taking steps to surrender their Isle of Man investment license. Upon receiving this news one of their clients contacted us to request we take over as their offshore independent financial adviser. The IOMFSC website does not yet confirm this news and they were unable to comment when we rang them today (06.07.2011).

Thornton Associates Ltd are the first firm of Chartered Financial Planners in the Isle of Man with years of experience in looking after and advising British Expatriate clients from an offshore base.

If you are a client of MNAFS and require a relationship with a strong, well established and quality firm of licensed Independent Financial Advisers (IFA’s) with a demonstrable commitment to providing a reliable and ongoing service from a well regulated base such as the Isle of Man, we would be pleased to assist with your financial planning, now and in the future.

To find out more about Thornton Associates Ltd (TAL) and how we work visit our website on www.thorntonfs.com

Inflation in the Isle of Man; Up, up, up, down and up again!

The Island’s inflation rate fell for the first time in almost a year last month, but as expected the relief was short-lived with an increase again in June.

The annual rate of inflation given by the Retail Price Index fell from 6.7 per cent in April to 6.3 per cent in May but went back up again in June to 6.4%.

According to figures from the Treasury, the rate has been steadily rising since late 2010.

And the data shows air travellers are facing huge hikes – fares have risen on average by almost 22 per cent, whilst sea travel has risen by just over seven per cent.

Inflation rates in Britain (our main trading partner) are at their highest among developed countries and rising, and pressure is again on the Bank of England to raise the Base Rate of interest from its current 0.5% although the decision last month was to leave it unchanged. Can the Base Rate remain at the historic low of 0.5% much longer?

The main problem with inflation in the Isle of Man is that most of ours is imported. We have to bring in all the fuel to power our cars, heat houses and run our power stations to say nothing of clothing, food; in fact we are net importers of just about everything.

Savers continue to have difficult choices to make about exposing some of their money to investment risk or accepting an erosion in purchasing power.

Cash is most widely known for being subject to inflation risk where over time, its purchasing power is typically eroded by the rising cost of goods and services.

Keeping your money in cash can also result in ‘shortfall risk’, which is the risk of failing to achieve your financial objectives. Over time, cash typically produces the lowest returns of any major asset class. This is the result of the relative security of cash compared to, say, company shares.

Don’t forget ‘Corporate risk’ which is the danger that the bank or building society looking after your cash savings will get into financial difficulties and be unable to meet their obligations. In the IOM, individual savers are protected by the Depositors Compensation Scheme (DCS) which mitigates this risk, up to a maximum limit of £50,000 per saver per institution – but not necessarily within an immediate time-frame.

“The Island’s inflation rate has fallen for the first time in almost a year.

The annual rate of inflation given by the Retail Price Index fell from 6.7 per cent in April to 6.3 per cent in May.

According to figures from the Treasury, the rate has been steadily rising since late 2010.

And the data shows air travellers are facing huge hikes – fares have risen on average by almost 22 per cent, whilst sea travel has risen by just over seven per cent.”

However don’t get too excited. Inflation rates in Britain are at their highest among developed countries and rising, and pressure is again on the Bank of England to raise the Base Rate of interest from its current 0.5% although the decision last month was to leave it unchanged. Can the Base Rate remain at the historic low of 0.5% much longer?

Savers continue to have difficult choices to make about exposing some of their money to investment risk or accepting an erosion in purchasing power.

Cash is most widely known for being subject to inflation risk where over time, its purchasing power is typically eroded by the rising cost of goods and services.

Inheritance Tax in the Isle of Man? What next?

Inheritance Tax in the Isle of Man? What next? I thought that would get your attention. Being asked to write an article about such a riveting subject as inheritance tax (IHT), when most people in the Isle of Man believe it has nothing to do with them, is a challenge. This is even more true if you consider that more than half of our population do not even have a Will with the most common justification being ‘I haven’t got around to it yet’.

Both these matters are beyond most people’s time horizon and put as far out of their minds as possible since none of us like the idea of dying – at all. Unfortunately at some time we all have to face the idea that no-one gets out alive.

Isle of Man residency has the advantage of excellent tax rates and for the most part that includes no IHT. However, there are traps to be aware of, but with the correct professional advice, these can be planned for and possibly even avoided.

UK ‘Situs’ Assets. It is quite usual for people living permanently in the Isle of Man to hold UK assets, particularly property and investments. If these assets are in your personal name and valued at over £10,000, your executors (or estate administrators if you haven’t made a Will) are going to need to obtain a UK grant of Probate/Letters of Administration to distribute the assets. IHT can arise even if you are born and bred in the Isle of Man if your UK assets are over the current IHT threshold. Therefore without the correct planning your estate is liable to get an IHT bill to pay before the assets are released. With proper advice the IHT exposure mentioned above can be completely avoided.

The various options available usually include the use of an Isle of Man company or an offshore Life Assurance Bond. The former option means ownership of the asset is transferred to the company: this means the individual then owns shares in an Isle of Man company rather than a UK asset. The method of transfer of the asset from the individual to company merits careful consideration to avoid unnecessary tax liabilities: in some cases the use of a trust may also be contemplated. Not only can correct tax planning ensure that IHT is avoided it can also avoid the necessity for UK probate.

A really important note is that where UK equities, for example, are held by a stockbroker/investment manager in their nominee name, they may not be protected from taxation. Use of the broker’s nominee name does not avoid exposure to IHT and anybody who is holding UK assets under the misapprehension that the nominee name will protect them from IHT should obtain professional tax advice immediately.

The Deemed Domicile Rule. An issue which we come across on a regular basis is where an individual has moved from the UK to the Isle of Man within the last three tax years. Even though this person or family has made the Isle of Man their permanent home and intends to stay here, their estate and any gifts they make are still within the scope of IHT for at least that period. Beyond this IHT can still be an issue; for example if the individual is seriously ill and has to attend the UK for treatment, or has to go to the UK to care for elderly and sick relatives. You may need to consider planning carefully to ensure potential IHT liabilities are mitigated or avoided altogether.

Isle of Man Domicile? Someone living in the Isle of Man having made the Island their permanent home or perhaps was born in the Isle of Man but is currently living elsewhere on a temporary basis may be in the advantageous position of having an Isle of Man domicile. The big advantage of Isle of Man domicile is that their estate, for the most part will not be subject to any Isle of Man estate taxation. But, if the individual holds UK assets, for example, UK property, a portfolio of UK investments or a beneficial interest in a trust with UK assets then IHT may apply. This is because any UK assets held by a non-UK domiciled individual are potentially exposed to IHT rates at 40%. This exposure can be relevant in two circumstances: firstly, if any of these UK assets are gifted, perhaps to an individual or a trust and secondly if the individual dies holding UK assets. We often find that people delay getting proper financial, taxation and Will planning advice due to a lack of understanding of their current and future financial positions.

What can you do? By spending some time with a Financial Planner with an up to date knowledge of both the UK and IOM tax regimes, it is possible to then meet with an advocate and/or tax adviser fully armed with a statement of of assets and liabilities, along with a better understanding of your estate planning wishes which I’m sure do not include gifting assets to HMRC in the form of 40% tax!

Sources; Chartered Insurance Institute AF1 syllabus, PKF (IOM) LLC

Long Term Care; Don’t run out of money before you run out of life

We pride ourselves as being members of a caring society and many of us are now turning our thoughts as to how best to fund care for close family members in old age.

The majority of us are keen to put off such thoughts however it becomes even more of a challenge when the day is upon us and we have not thought about the expense involved. Many elderly people face selling their house because they don’t have the money to get the care they need. This article talks about how you begin to think about such an expense and the options available to you.

At Thornton Associates we often work closely with individuals to help them to manage and protect their wealth in later life and a study by Sun Life Financial of Canada’s Sense Check at 60 study suggest that very few people (around 1 in 4) are putting these plans in place for later life. This study looked at people with between £100,000 and £500,000 in pensions and savings; the sort of people we typically work with here at Thornton Associates.

Whilst we can make a big difference to the financial position of elderly clients by assisting with proper budgeting and clear succession planning, the biggest impact a financial planner can make to their client is earlier in life, with proper planning for later life and the peace of mind that can bring.

This is against a backdrop of a more complex environment for retirement planning with increased regulation, innumerable changes in legislation, to say nothing of rising inflation (6% IOM RPI as we go to press) and continuingly low interest rates for savers.

Clearly, proper planning for later life is more important today than ever before. We can see that as the increasing numbers of baby boomers retire, contrasting markedly with a decreasing working population with little job security, our society will come under increasing pressures as a result of an ageing population since we know that a large amount of government budget pays for the associated social care costs of looking after the aged. Also consider the impact of the recent global financial crisis on investment values to say nothing of the indebtedness of our governments, not only in paying back the debt, but actually meeting the interest payments of those debts.

The Daily Mail reported in early November that more than 20,000 pensioners in the UK were forced to sell their homes last year to pay for care fees and estimate that over the past five years, the cost of care fees have escalated by more than 20%.

The Association of British Insurers (ABI) states in a recent report “The costs involved can be daunting. The average cost of care in a residential home in the UK is approaching £25,000 a year. In a nursing home, if nursing care is also required, this cost rises to nearly £39,000 a year. Even receiving long term care in your own home can be expensive. Every week around 300,000 households receive nearly four million hours of home help, and people in England spend an estimated £420 million a year on privately paid home care services.”

Seeking professional independent financial advice from a suitably qualified and experienced financial planner before you retire can put you in a much stronger financial position ahead of later life but if you’re already there, all is not lost and you should still seek advice from an adviser with a relevant Later Life qualifications who can provide specialist advice on areas such asImpaired life annuities, equity releases and immediate care plans.

The Sense Check at 60 concludes ‘To successfully manage funds in retirement people need to deal with 5 key risks: the risk of living too long; the corrosive impact of inflation; the need to maintain exposure to higher risk investments; the risk of withdrawing too much income and the prospect of requiring long term care later in life. The ‘baby boomer’ generation is reaching retirement. Millions of Britons will retire over the next 10 years. It is important they make informed decisions and plan their retirement well if they are to enjoy the benefits of the

longest retirement of any generation.’

A private consultation to discuss any issues arising from the above or matters of other financial concern may be arranged by contacting Sharon Sutton, Chartered Financial Planner, Thornton Associates Ltd; www.thorntonfs.com

Thornton Associates Limited is licensed by the Isle of Man Financial Supervision Commission.

Dispelling 5 Myths About Financial Planners

You can tough it out alone; Some people have the time, ability and drive to manage all their finances, others don’t. Either way, professional advisers can provide great insight and judgment in countless instances, and not necessarily at exorbitant cost. But common misconceptions about financial planners prevent many from seeking their counsel. This article is to help you avoid these traps so you get the most value from your adviser.

Myth 1 – Having a financial planner means I don’t need to learn anything about investing.
If you take nothing else away from this article, understand that whether or not you have an adviser, the most important thing you can do is educate yourself. Having a basic understanding of investing will ensure you understand what your adviser is doing with your money, and allow you to ask the tough questions.

Imagine this scenario: you sit down for a review of your personal finances and your new adviser starts with a lecture about asset allocation and diversification and how they are recommending a certain hot new investment. If you understand the terminology you can ask questions like:

Why are you recommending this?
How am I more diversified when I already own similar funds?
What is the TER (total expense ratio) of this new fund?
What commission do you receive if you sell me this?

By asking the right questions you’ll understand your portfolio better and also protect yourself from agreeing to something you don’t need or is inappropriate.

Myth 2 – A planner or adviser only gives me advice on investing.
Picking the right investments is certainly an important aspect of your personal finances, but it’s not the only part. Financial planning takes into account all the varied financial aspects of a person’s life: taxes, insurance, retirement, budgeting, estate planning, liquidity requirements and other life goals. It considers the various and sometimes conflicting financial aspects of our lives and develops strategies and objectives to make everything work together. For example, what good is it to pick all the right investments but then see most of the return swallowed up in taxes? It’s a full-time job just to keep up with all the laws relating to investment income and taxation. With the aid of a financial planner who considers your individual situation, you’ll be able to minimize the amount of taxes you pay (legally of course) and have a stronger bottom line in the end.

Myth 3 - By law all financial planners are required to be registered with a government agency.
Actually, financial planners are not required to be individually registered, whereas financial advisers firms are. Before deciding on an adviser, you can always look up the person’s details with their registered professional body such as www.findanadviser.org or the licensed company on www.fsc.gov.im . Check to see if there are any complaints or if disciplinary action has been taken against them. You should also find out how long the person has been in the profession.

Myth 4 – Certification letters after the person’s name mean nothing.
If you are looking for an adviser, give extra credit to those who have designations such as the Chartered Financial Planner APFS or FPFS or Certified Financial Planner (CFP) or Chartered MCSI or FCSI. To attain these levels, an adviser must put in hundreds of hours of studying in order to pass grueling exams. Furthermore, members are required to undergo background checks, agree to a code of ethics and do continuing education to keep the certification. Qualifications are no guarantee of performance but it’s a good indication of commitment to the profession. The new minimum ‘level 4’ qualification post 2013 which advisers should be aiming for is Dip PFS. For your information Cert PFS or FPC is the ‘old’ level 3 benchmark; least said, soonest mended. To learn more see http://www.which.co.uk/money/tax/guides/choosing-a-financial-adviser/ifa-qualifications/

Myth 5 – Only wealthy people need a financial planner.
Last but not least, this myth is extraordinarily widespread. Financial planning is about helping people of all income levels achieve short, medium and long-term financial goals. Many assume you need to be wealthy to get professional help. For as little as a few hundred pounds you can have a portfolio assessment done by a fee-based financial planner. This breed of planner only takes compensation from the client and receives no compensation in the form of commissions (which can run into thousands) from selling certain products unless agreed by way of ‘offset’.

Conclusion
Some people are confident enough to make these vital decisions on their own. Others need a helping hand. If you do choose to deal with a planner, keep on educating yourself, understand there is more to managing your portfolio than just picking hot stocks, do the homework in terms of both background checks and certifications and don’t think that you can’t afford advice just because your portfolio isn’t seven figures. Financial planners aren’t a guarantee or magic solution but they can be of help in many circumstances.

Sources; www.investopedia.com

Sharon Sutton is MD and Chartered Financial Planner at Thornton Associates Ltd who are licensed by the Financial Supervision Commission of the Isle of Man and Registered with the Insurance and Pensions Authority in respect of General Business

See www.thorntonfs.com or follow Sharon on twitter @sharonsutton99

Charitable Philanthropy; did red nose day make you want to give?

Charitable Philanthropy: Planning for what you give

It was Comic Relief’s ‘Red Nose Day’ yesterday and we financial planners find clients are now coming to expect their advisors to help them with their philanthropy. David Cameron’s recent reference to ‘building the big society’ also has us thinking about a whole new range of projects in need of funding in an effort to work towards this common goal.

A report by think tank Policy Exchange highlights how advisers can play a role in facilitating philanthropy by setting up ‘giving circles’ which provide networks of charity contacts.

30 donors interviewed for the study said the process of identifying a charitable cause at grassroots level was one of the hardest parts of giving.

Stephen Hammersely, chief executive of the UK-wide Community Network Foundation, said high-net-worth clients were responsive to giving in times of economic turbulence.

‘In times of uncertainty people are open to conversations about things that would normally not be talked about. There may be factories closing down, people being made redundant and people may feel more aware of the issues on their doorstep and their relative affluence and position compared to others,’ he said.

He added that the downturn could actually catalyse more action than in comparatively well-off times.

‘In times of difficulty people are possibly more prepared to think about giving and engaging in philanthropy than when times are really good and people get caught up in the froth of making money,’ he added.

Hammersely said advisers were making increasing contact with community foundations and his organisation had seen the number of donors doubling over the past four years.

Mark Estcourt, managing director of London-based Cavendish Young, encourages philanthropy in his clients and uses it for tax planning.

‘It is just another form of insuring that their assets are dealt with in a logical and tax-efficient way.’

It is possible to use financial planning to help clients use their wealth to change their lives, after all ‘you can’t take it with you’.

‘As financial planners we have the ability to transform people’s lives,’ he said. ‘Good financial planning can help people achieve their goals of a dream holiday or have a more permanent impact. I don’t think that any other profession does that.’

Cash flow modelling is critical to the basis of any financial plan but it could also include philanthropy and charitable giving with a significant level of information about clients’ wealth and ambitions. Financial planning isn’t about products; it’s about budgeting, goal setting and eliminating debt – surely a message that is relevant to everybody.

In 2009 it was expected that UK charities missed out on £1.2 billion in donations because of tax-inefficient giving by donors.

New research from Unbiased.co.uk, the professional advice website, found that some simple changes to giving practices could help charities net over £1 billion a year in money that is currently being claimed by the taxman.

UK adults gave a total of £9.9 billion to charity in 2007/08. According to this research, these gifts could be boosted by nearly 12.5% if donors had made full use of the tax allowances available to them via Gift Aid which allows the charities to reclaim basic rate income tax relief on the money. It is a shame that such methodology is inaccessible here in the Isle of Man. However, here is a summary of those ‘charitable’ tax reliefs which are available;

RELIEF FOR CHARITABLE DONATIONS DEED OF COVENANT (not to be confused with the Educational Deed of Covenant)

Charitable donations made under a deed of covenant will be allowed as a deduction from total income in the tax year in which they are paid, provided the deed of covenant is:

• Irrevocable

• Not for consideration in money or money’s worth

• For longer than three years

There are currently no minimum or maximum limits for the amounts allowable. A copy of the deed of covenant should be submitted to the Income Tax Division.

OTHER DONATIONS

Smaller or informal donations to a charity are allowable as a deduction from total income. The practice note sets out ways of getting tax relief for straight forward “annual” donations. Evidence of payments made must be provided.

Relief is restricted on charitable donations to those in excess of £100 and below £7,000

Charitable trusts can be set up and these should get favourable tax treatment if set up properly and all investment income of the charitable trust will be tax free.

Isle of Man trading companies can now get £15000 relief or if greater 1% of taxable income before loss relief and capital allowances.

Further details may be obtained on the Isle of Man Government Treasury Website, Practice Note 83/00 (http: //www.gov.im/treasury/incometax/technical/practice/PN83-00.xml); the rest of the practice note still stands including no relief for investment companies.

We are seeing a burgeoning market for philanthropy advice and there is a pent up demand for people to give more effectively. At the moment, the philanthropy advisor market is unregulated, and anyone can call themselves a ‘philanthropy advisor’ without any formal training or experience. We would therefore advocate taking professional advice from qualified Isle of Man professionals.

Sources; IOM Government Income Tax Division, PKF (IOM), Citywire.co.uk

See www.thorntonfs.com or follow Sharon on twitter @sharonsutton99

More free financial planning talks planned for March and April

TLC Business Solutions and Thornton Associates, with the support of the Isle of Man Government, have arranged a series of free talks on financial planning for ordinary people. The new series leads on from the success of their first talk on the same topic, held in November last year.

TLC is a leading Manx corporate training company and Thornton Associates is the Island’s only firm of Chartered Financial Planners. The Managing Directors of the two companies, Sue Gee (TLC) and Sharon Sutton (Thornton Associates) first teamed up to provide a government backed seminar last year, which was met with overwhelmingly positive feedback. Over one hundred people attended the talk, designed to encourage people on average incomes to think about the details of financial planning, and 99% of attendees who left feedback said that they had gained something useful from it and would recommend it to a friend. One audience member said, “It was fantastic; the message was received and uncovered the steps to plan for my future – it was a great use of an hour!”

There will be a series of four talks spread throughout March and April on different subject matters, all of which will be hosted at the Claremont Hotel. They will open for coffee and registration at 5.15pm, with the seminars starting at 5.45pm and lasting one hour. They are supported by the Department of Economic Development and are open to anyone over the age of 18.

The first talk is on the 9^th of March and will feature Sue and Sharon, covering similar ground to their previous event. Sue commented on the talk: “It is a myth that only affluent, high net worth or rich people need to plan financially for the future; it is actually more important for those of us who have less disposal income because we need to make the money work harder for us. If you didn’t hear about the last talk in time or couldn’t make it along, I would really encourage you to try it out – it’s free, after all.”

Feedback from the last talk suggested that there were three areas in particular that attendees wanted to hear more about: debt management, wills and pensions. Sue and Sharon have addressed this by arranging three additional talks in this series. The second talk is on the 16^th of March and will cover the subject of wills. Sally Bolton, Principal of Corlett Bolton and Co legal practice, will lead the seminar, which will cover areas such as what your assets are and how to manage distribution via a will. Andrea Tabb will present the third seminar on the 22^nd of March. Andrea is the Advice Centre Manager at the Isle of Man Office of Fair Trading and will outline how to use credit while avoiding debt problems. Finally, Sharon Sutton will provide the last talk of this series on the 6^th of April, on the subject of pensions and how to get the most out of them.

Sharon commented on the new series of talks: “We were very pleased by the success of the last seminar and it is good to see the Isle of Man Government supporting further talks. The feedback from the last event has given us the opportunity to understand more precisely the subjects that people struggle with and we have been able to tailor this series to address some common concerns in greater depth.”

To register for any of the free financial planning talks, call Janet on 664 789.

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