Understanding Active vs Passive Strategies – Windsor

Question markThe debate about whether a passive or an active investment strategy produces a better return for investors is one that has rumbled amongst financial planners for as long as passive strategies have been in existence. For you as a client, the method favoured by your adviser can have a major impact on your investment experience, so understanding  the two different approaches is important.

An active strategy is one in which the investor – possibly a fund manager or other investment professional – will make investment choices on a regular basis, buying or selling holdings when they think it is necessary, often when they believe they can make a peak profit. An active strategy is highly involved and requires constant management.

A passive strategy meanwhile is one which requires hardly any trading whatsoever. Instead, money is invested into funds linked to indexes, such as the FTSE 100, by way of just one of many possible examples. Relying on the market to make your gain, passive investing is typically seen as a longer term strategy and, although it may sound easier than active from a management point of view, there is still a lot to do in terms of selecting the right funds and creating a well-balanced portfolio of asset classes that meet client’s needs.

On the active side, proponents claim that such a strategy is the only way to generate better-than-average returns; the only way to ‘beat the market’. After all, passive strategies, though divested across indexes and asset classes, are by their very design market-linked. If the index your passive strategy invests in goes up, so will your investments, with the negative being true if the index falls. Your investment may never outperform the market but it will also never lose more than the market as a whole.

Passive proponents, meanwhile, point out that active investment strategies typically cost more in fees, with these fees potentially impacting on the ability of the strategy to produce a better return. Those who favour passive investments also point out the increased volatility of active strategies, stemming from the higher frequency of investment movements and the timing of those movements, which also produce the potential for market-beating gains.

Here at Giles Warren Financial we review both of our Active and Passive strategies to ensure our clients are getting a good return on their money.  For more information please contact me directly on 01753 668831, visit our website www.gileswarren.co.uk email info@gileswarren.co.uk or fill in the form below.



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Are you giving the Tax man lots of money?

TAX-200w-roundedAlthough, 38% of the nation thinks they’d be confident in sorting out their tax planning without help of professional advice, unbiased.co.uk’s research shows that three out of four (77%) Brits admit they haven’t done anything in the past 12 months to cut their individual tax waste figure, up from 68% last year. 

UK taxpayers’ tax wastage 2014 – the key stats:

£2.9 billion in pension tax relief waste

  • UK employees on average put away £3,260 annually into their pension, including £652 a year in tax relief from the government
  • 4.4 million UK adults are currently in employment not saving into a pension and not making use of their pension tax allowance from the government resulting in £2.9 billion in tax relief set to remain unused this year
  • Anyone paying towards a pension receives tax relief on their pension savings at 20% and up to 45% according to the rate at which they pay tax.  If you are a higher rate taxpayer the onus is on you to claim back the additional tax relief owed to you

£1.1 billion in ISAs

  • 49 million UK bank account holders are set to waste a combined total of more than £1.1billion by not moving their money into tax-efficient individual savings accounts (ISAs)
  • Of that wastage, £984 million can be attributed to failure to use cash ISAs and a further £160 million in stocks and shares investments not held in ISAs

£530 million in inheritance tax waste

  • £530 million wasted in inheritance tax (IHT) by individuals not placing life protection policies ‘under trust’
  • Not placing it under trust could reduce a £100,000 life insurance payout by as much as £40,000 if an individual’s total estate is worth more than £325,000
  • Only 27% of people would be confident in tackling IHT planning without the help of a professional adviser

£154 million in capital gains tax

  • £154 million in unnecessary capital gains tax (CGT) payments this tax year
  • 2014 unbiased.co.uk Tax Action research shows one of the main areas of CGT waste occurs from people not using ISAs to shelter investments from any tax liabilities
  • Each UK taxpayer has an annual CGT free allowance, which for the current tax year stands at £10,900.  Any gain above the allowance is charged at 18% for lower and 28% for higher rate tax payers

If you would like more information please call me on 01753 626866 or visit our website at www.gileswarren.co.uk



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Married without a Will – Windsor

So you think you’re going to get all of your spouse’s estate if they died without a will?  Think again!  If you have children, then the spouse left would inherit £250,000 and the life interest in the remainder,  and the rest would go to the children.  This can mean that the family house has to be sold, to put the money into Trust for the Children.  At a very stressful time this can be the last issue that any family would need to deal with.

Because of the importance of Wills I  can now take instructions for my clients and arrange your Wills to be written.  We offer a free will diagnosis and can provide you with a report to explain all the options that might be suitable for your situation.

For more information please call me on 01753 626866.


Giles Warren

e: info@gileswarren.co.uk web: www.gileswarren.co.uk

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Accountancy Software

Its that time of year when I have to start thinking about doing the dreaded accounts!  2 Days of copying my bank statements into my accounts software – its normally a real chore.  Not this year though!  I’ve recently signed up to using Freeagent which can import the data straight from my online bank accounts, taking me now only 2 hours to complete them!  You also get a months free trial,  to see if you like the software,  and if you sign up at the following site you also get a 10% discount http://www.freeagent.com/?referrer=432aqfx8 

It has most of the usual features of software accountancy, such as invoicing, profit and loss etc. and is really easy to use.

If you’ve completed your accounts and it looks like you might have a large tax bill, there might be tax planning which we can arrange to help you reduce this bill.  Obviously this will depend upon your personal circumstances and please call me to discuss on 01753 626866 or email me at info@gileswarren.co.uk.


Giles Warren

Web: http://www.gileswarren.co uk

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Auto Enrolment Pensions – Windsor

headache-160wWhat is auto enrolment?  Work place pensions changed in October 2012 for employers because employees now have to be offered contributory Work Place pension scheme – that’s right HAVE to!  It’s no longer any good to have a template Stakeholder that nobody joins or to pay a concessionary £30 a month to a scheme.  The Employer will have to meet strict criteria with regards to auto enroling their employees within a specific date called the Staging Date.  This will vary depending on the size the company.  If they don’t meet these dates,  there are large fines (£5000-£10,000) for those companies who ignore the rules.  I say companies, but really it does not matter as you could be a sole trader with one employee or a partnership with 10 employees,  or a sole trader with 5 contractors working for you.  If the people working for you are considered as “job holders” then you will need a pension scheme in place and you will have to “Automatically Enrol” them at precise times after they become eligible.  Employees will be able to opt out, but again there are very strict guidelines surrounding these rules and the Employer will suffer heavy fines if it can be seen that they encouraged a job holder to opt out for any reason.

You can find more information at The Pensions Regulators (TPR)website www.tpr.gov.uk/7-steps or you can click on the following link on our website http://bit.ly/124leyI.  TPR have just issued their first notice to an Employer who has failed to meet its auto-enrolment duties and here’s the articles on the following link http://news.ifaonline.co.uk/c/16OcIddijREGOBFr7BUh4UyLGd

Some Companies will have qualifying schemes already, so will not be affected as they will meet the basic criteria.  However it is estimated that a million employers will need to put a scheme is place, whether they join NEST, increase their existing scheme or take out a new qualifying pension, there are lots of choices.  With a million schemes and roughly 20,000 IFA’s who may arrange company pensions, that works out to be 50 schemes per firm in the next 3 years or so.  This means there is going to be a bottle neck approaching the smaller company staging dates and my guess is that the IFA’s across the country will not be able to handle the work load or will put their fees up to cope with the extra resources needed.

What can I do now? How can Giles Warren Financial help me?  If you are an employer you can give us your PAYE reference number, and we will create a Report to let you know your Staging Date.  This report will help you plan the time you have left to get your qualifying scheme in place.   We can also chat through your auto enrolment options at a free preliminary meeting.  For most employers I would allow at least a year before your staging date to start the process, so that you can get the right systems in place to help you manage your Auto Enrolment duties and satisfy The Pensions Regulator.

If you are an Employee, Contractor or Temp and do not currently have an Company Scheme and you are thinking of taking out your own pension,  you might want to take some advice.  In your scenario its likely your Employer will be setting up a scheme within 3 years, and it would make sense for you to join it.  Therefore if you were thinking of starting a stand alone pension now, it might be better for you to save the monthly premiums you were going to make to a new pension and then put in a lump sum into the new scheme when its set up?

I hope this has been of help and whether you are an Employer, Employee, Contractor, Part Time or Temp and would like some more advice about any aspect of your Retirement Planning,  please call me on 01753 626866.  You can also visit our website at www.gileswarren.co.uk or why not use our Pension Calculator at http://bit.ly/15Dj4mD to determine how much you’ll need to pay to get the pension in retirement you need.  Please remember that this calculator does not take into consideration the Basic State Pension which is currently £110.15 per week and the details in the article do not constitute advice to individuals without consultation.



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Difference between Flexible and Capped Drawdown Pensions – Windsor

Old Dog in Pasture

At retirement you have the option to move into Income Drawdown, rather than take an annuity.  Drawdown is where your pension fund is still invested, however you are able to take an income from it at the same time.  This way it can still grow (or decrease), but will give you far more flexibility than an Annuity which is a fixed income, agreed at outset and cannot be changed once the terms have been agreed.  With Income Drawdown you can still buy an annuity with the fund value in the future if your circumstances change.

There are  two forms of Income Drawdown – Flexible & Capped.

 Flexible Drawdown will allow you to take an income to suit your needs at the time.  This is especially good for clients in their early retirement because they might have used their Tax Free Cash paying off their mortgage but still want to do a World Cruise or climb a mountain before they get too old.  So if you have a minimum Secured income of over £20,000 per annum you can take a Flexible Drawdown which will mean that you can take what income you like at the time that you need it.  You could take the whole fund in one go – but bear in mind this might not be the best best option for you as you would be taxed on the income in that tax year.

With Capped Income Drawdown you are restricted by the amount of income that you can take in any one year and these restrictions are set by GAD (Government Actuary’s Department).  Please call me on 01753 626866 if you like to know the figures.

Example Client – Malcolm had a fund value of £240,000 aged 64 and needed to have some cash to complete some home improvements.  He moved his pension fund into Income Drawdown so that he could access the 25% cash i.e. £60,000 for the home improvements.  He did not require any additional income at the time as he was still working and earning £45,000 a year which was enough for his needs and if he had taken an income he would have paid 40% tax on it.  A year later he decided to retire aged 65 and his State Pension paid him a combined £14,000 per annum along with an Occupational scheme he had of £7,000 per annum.  This gave him the minimum secured income that he needed be able to move into Flexible Drawdown.  However he wanted to help his daughter buy her first property and she needed to top up her deposit by £18,000 to get the property she wanted.  Based on Capped Drawdown, he would only have been able to take an income of £10,368 from the £180,000 fund.  But as he was eligible for Flexible Drawdown he could take the £30,000 in that year (£30k less 40% tax = £18K).  It did mean he paid some higher rate tax, but it allowed him to help out his daughter.  He then reduced the income he needed per annum down to £3,000 the following year, because his outgoings only amounted to £24,000 per annum.  This £3,000 income that he needed from his Drawdown, divided by his remaining fund value of £150,000 meant that he only needed a 2% return (net of charges) to maintain his fund value for his future retirement.  It also meant that he was able to leave his remaining pension fund to his daughter on death (less a tax charge) as well as his man residence.

This would not have been possible with an annuity and he still has the option to buy an annuity if needed in the future.  Obviously the value of investments can go up as well as down and for small value pension funds we do not normally recommend the Drawdown route.

If you would like some advice please call me on 01753 626866.  You can find a lot more information at our website www.gileswarren.co.uk

Thanks for reading!


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Financial Planning for the end of tax year – Windsor

TAX-200w-roundedThe nights are finally starting to get a little lighter – maybe we can start looking forward to Spring after all. In financial services, Spring means two things; the Budget (on March 20th this year) and the end of the tax year on Friday April 5th.

This article gives some suggestions on financial planning steps to take before the end of the tax year, so that you can make the most of your tax allowances and organise your affairs as tax efficiently as possible. However, the first point to make is a practical one.

Easter is early this year, with Good Friday on March 29th and Easter Monday on April 1st. With holidays bound to impact on administration at some financial institutions, our first suggestion is that if you’re going to act before the end of the financial year, don’t leave it until the last minute. If you want to make sure your transactions are processed in time, look on the week commencing March 25th as the last practical week.

Individual Savings Accounts

The overall personal limit for an Individual Savings Account (ISA) for the current tax year is £11,280 and this will increase to £11,520 for the new tax year commencing on April 6th. It’s important to note that if you are only contributing to a cash ISA then the maximum is exactly half the overall allowance – so £5,640 and £5,760 respectively. The other key point is that if you don’t use your ISA allowances for this tax year then they are lost – they can’t be ‘carried forward’ to the next tax year.

We’d always recommend making use of your ISA allowances if you can – you pay no tax on capital gains which you make within an ISA or income you take from it. For long term investment there is a huge range of funds available within an ISA ‘wrapper’ from the very cautious to the very adventurous: as always, we’d be happy to discuss all the options with you if you’d like some advice.

Capital Gains Tax

Accountants will tell you that CGT is the ‘forgotten’ tax relief – people who religiously use their full ISA allowance completely fail to utilise their CGT allowance. For the current tax year everyone has a CGT allowance of £10,600 – meaning that capital gains made on investments such as shares are free of tax if they are within this limit. Husbands and wives can gift assets to each other without incurring a CGT charge, effectively giving a married couple a limit of £21,200. Like the ISA allowance though, the CGT allowance is an annual one, and cannot be carried forward to a subsequent tax year.

Inheritance Tax

The current individual limit for Inheritance Tax is £325,000 and this will remain the same for the tax year 2013/2014. Remember though, that you can make gifts during a tax year and these will be exempt from IHT if they fall within the Revenue limits: the limit is £3,000 per person, so £6,000 for a married couple. Although these amounts are small they can still help to reduce the value of an estate.

There are, of course, far more complex and sophisticated Inheritance Tax planning measures such as the use of trusts; if you feel that you would like specialist advice in this area then we will be happy to help.


Why have we left pensions to (almost) the end? For a simple reason – because whilst there is enormous scope to make tax efficient investments through your pension (especially for higher-rate taxpayers) the legislation and rules are complex and it is an area where specialist financial planning advice is almost always required.

The top rate of tax is shortly being reduced from 50% to 45%, so many very high earners will be motivated to make pension contributions now, and as usual there is the chance to make use of reliefs and allowances which haven’t been used from previous tax years.

Equally, those people who are self-employed or directors of companies may need to think about making sure their pensions are as tax efficient as possible, and set up to ensure that they receive the maximum benefits from the business they are running. It all adds up to an area where specialist advice is essential and we are always ready to sit down with clients and use our expertise and experience to make sure they have exactly the right pension planning.

Hopefully that’s a useful overview of the planning steps you should take before the year end. There are also other possibilities such as the Enterprise Investment Scheme and Venture Capital Trusts which we haven’t touched on due to their complexity. The key message is simple: “talk to us.” We’re never more than a phone call or an e-mail away and we’re happy to explain any of the subjects above in much greater detail.

*The Financial Services Authority does not regulate taxation advice or trusts.

Sources: http://www.hmrc.gov.uk/

Giles Warren

t: 01753 626866   e: giles@gileswarren.co.uk  w: http://www.gileswarren.co.uk

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