Planning for Your Future

Financial freedom is one of the greatest gifts you can give to yourself and your family. With a little wise planning now, your financial future can be secured, leaving you to sit back and enjoy your life free from the worry of uncertainty.

You probably already have goals for your future in mind – to be comfortable, perhaps, or to help your children and grandchildren. But in monetary terms, what does comfortable really mean? How much money will you actually need?

We will help you define exactly what you require to make your financial goals a reality and then help you achieve them through careful planning and investment.

Working out what you need is just one step towards your goal. You will also need to decide how you are going to get there, and the huge choice of financial products on the market can seem overwhelming without guidance. Our unbiased financial planners are here to advise and recommend products based on a mutual understanding of your present financial health, your goals, and the level of risk acceptable to you.

The benefits of starting now

According to research by the Institute of Financial Planning, people who save or invest small amounts of money early and often tend to do better than those who wait until later in life. The right advice can help you make the most of your income, savings, or investments, so you can start being better off almost immediately.

Birchwood provides a comprehensive personal financial planning and investment management service. Investment management services can be on either an advisory or a discretionary basis.

Portfolios are arranged on a bespoke basis and can include any of the following products

Savings and Investment -

Cash Deposits
Cash deposits are provided by banks and building societies. Capital should be secure and interest earned on the account. The accounts would normally provide instant access to cash, although some may offer higher interest rates for accounts that require notice of withdrawal or apply penalties when capital is withdrawn.

Current accounts normally pay little or no interest and high street bank or building society branches offer modest rates of interest on deposit accounts. The best rates are offered by accounts that operate either by telephone or on the internet.

National Savings
There are a number of schemes that offer a secure means of saving but returns may be disappointing. For example, the Investment Account operates a one-month notice cash deposit account similar to those provided by banks and building societies. Whilst the interest rate offered is competitive with high street bank or building society accounts it does not compare favourably with rates available on the telephone or internet accounts. Equally, Income Bonds provide a monthly income savings option but impose a 90-notice period for withdrawals and offer an interest rate that is below rates available on instant access telephone or interest accounts offered by the banks or building societies.

Capital secure growth options are available with Savings Certificates or Index Linked Certificates but returns are likely to be modest unless there is a period of high inflation in the economy.

Government Stock
When the government wishes to borrow money it issues stock on which it guarantees to pay a fixed rate of interest and guarantees to repay the face value of the stock at a set maturity date. Gilts, as government stock is commonly known, makes a very secure investment if purchased at issue and retained until maturity but it is also widely traded and can be purchased through the National Savings Register, stockbrokers, or purchased in managed funds.

Gilts can prove an attractive option if purchased at a time when interest rates are likely to fall as they will continue to pay a higher rate of interest than may become available from a variable rate investment, and are likely to increase in value. However, care should be exercised in purchasing gilts if interest rates are at relatively low levels as this could result in a capital loss, even if held to maturity.

Corporate Bonds
Corporate bonds are very similar to gilts but are issued by large companies and, as the company could default on its obligations, carry a higher degree of risk than government stock. In return for the higher level of risk they usually offer a higher level of interest and are classified by the degree of risk as identified by the major credit rating agencies. It can generally be assumed that the greater the interest rate the greater the risk.

Guaranteed Income Bonds
From time to time insurance companies may issue short term policies on which they offer a fixed level of income and guarantee to repay the capital at a set period, varying between one and five years. This is a very secure option and could provide an attractive option for cash that is not required for a longer period, depending upon market conditions at the time the investment is placed.

Unit Trusts
Managers of unit trusts pool money together from a broad range of investors and invest it in a managed portfolio of shares, either on the United Kingdom stock market or any other international market. This makes it possible for the private investor to obtain a globally diversified investment portfolio whilst also reducing risk compared to holding direct investments in a small number of individual companies.

However the investor should always be aware that the value of the units could fall as well as rise in response to stock market movements and, although units can be sold at any time, they may need to retain the investment during periods of depressed market conditions. As the level of risk associated with individual funds can vary substantially it is important to choose funds compatible with an investor’s personal attitude to risk.

Investment Trusts
The managers of investment trusts also manage a diversified portfolio of shares but unlike unit trusts, where the underlying investments are held in trust for the investors and the unit price reflects the value of the portfolio divided by the number of units in issue, the Investment Trust issues a fixed number of shares in the company and those shares are traded on the stock market. The shares can, therefore, trade at either a discount or a premium to the value of the underlying investments. It is also possible for the investment trust to issue different classes of shares so they should be regarded more complex investments that carry a higher degree of risk compared to unit trusts.

Investment Bonds
Insurance companies offer investment bonds that can be linked to funds invested in equities, fixed interest funds, property funds, or with-profit funds. They also offer a high degree of income flexibility in that it is possible to withdraw a monthly income at a level determined by each investor. This can be a very attractive feature provided care is taken to ensure that income withdrawn is no greater than the returns generated by the fund. They can also be useful for tax planning as it is possible for the higher rate taxpayer to withdraw 5% income for up to 20 years with no personal liability.

Individual Savings Accounts
There are two forms of ISA and each adult is allowed to invest up to £7,000 in either a mini ISA or a maxi ISA in each tax year.

The mini ISA permits a maximum of £3,000 in a cash deposit and a maximum of £4,000 in an equity based fund whilst a maxi ISA can invest up to £7,000 in equity based investments. The cash deposit will be offered by a bank or building society and is only different from a normal deposit account in that the interest earned will be tax-free. The equity portion of an ISA can be individual shares, a unit trust or an investment trust. The advantage is that they are exempt from capital gains tax on increased capital values and are exempt from higher rate income tax on dividends, although the 10% standard rate income tax will still be applied.