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The next budget is less than a month away and there is speculation that the Chancellor may be looking at tax relief on pensions (again).  Various scenarios being banded about range from a flat rate relief, to age-related tax relief, to removing tax relief altogether. Anything age-related would be highly contentious and maybe some of these headlines are ‘leaked’ to soften us up for less radical changes. Whatever we do get, there will probably be more focus than ever on any changes and how these may reflect on Brexit negotiations.  We could be in for an interesting budget.

In this newsletter we discuss the rising popularity of peer to peer lending as an alternative option for investors, the pros and cons of transferring out of a final salary pension, a reminder of why you need to keep an eye on your pension arrangements and finally a round-up of our own JJFS news and what our daredevil team have been up to lately.

We hope you enjoy the articles and find them useful.

In this issue:-

• The Rise and Rise of Peer to Peer Lending
• Transferring out of your final salary pension – is it all it’s cracked up to be?
• Is Your Pension Still Fit for Purpose?
• What have JJFS been up to lately…

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The Rise and Rise of Peer to Peer Lending

The alternative finance market has been in existence for over 10 years and is fast becoming mainstream with 12% of all SME (Small to Medium Enterprise) finance now provided by Peer to Peer lending (P2P).

P2P lending takes many forms but is essentially lending directly to borrowers, providing access to finance for those who might struggle to obtain it via more traditional routes.  Generally, P2P lending companies operate online with lower overheads offering the lender potentially higher returns.

However it is no longer just a method of financing for borrowers that the banks won’t touch.  It is now a diverse market offering loan-based and investment-based crowd funding opportunities ranging from higher risk equity crowdfunding on unlisted equities through to lower risk secured lending via platform-type ‘funds’ that spread the risk across a variety of investments and industries. Nearly £5bn has been lent through P2P platforms to date and the industry boasts year on year growth of 84%. The market has been regulated by the FCA since 2014 and in 2016 the government launched the Innovative Finance ISA to encourage competition in the banking industry which brings P2P lending in line for tax relief.

Concerns have been raised however, that the fast growth and increasing complexity of the market has outpaced the ‘light touch’ regulatory structure originally put in place and a review by the FCA has confirmed the need for tighter restrictions and regulation. That said, as with any investment, it is important to understand all the potential risks and benefits of investing and for anyone looking for something different the alternative finance market may well be worth a look.

Please note:  The information provided in this article is for information purposes only and is not intended to provide financial advice and should not be considered or relied upon as financial advice. We strongly recommend consulting a professional adviser before making any investment decision in order to determine what may be best for your needs. 

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Transferring out of your final salary pension – is it all it’s cracked up to be?

Over the last 12 months we have received numerous enquiries from individuals considering a transfer out of their final salary pension. Transfer values appear to be at a particularly high level at the moment which is tempting many people to consider this option.

On the face of it, the transfer value may be substantial, but it is important to remember that once the fund has been accessed, your investment is completely reliant on the vagaries of the financial markets which can leave you vulnerable in your retirement particularly during times of volatility.

Remaining in a final salary scheme however, will guarantee a fixed income for the rest of your life, regardless of investment returns. The fund trustees take all of the investment risk on your behalf and in some cases the income is inflation-linked so it is likely to increase over time too.

There may be circumstances where transferring out is a viable option, for example a partial transfer where some of the funds are accessed leaving the rest intact to provide a guaranteed (albeit lower) income for life, and it is worth asking your provider if they offer partial transfers. The funding status of the scheme can also be a factor when considering a transfer. Overall, we remain wary of this trend and strongly recommend taking professional financial advice to explore the implications fully in relation to your own circumstances before making a decision.

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Is your Pension still fit for purpose?

How often do you re-visit your pension arrangements to ensure they still reflect your current circumstances? For some people, it is easy to set up regular contributions and then sit back and forget about it.

However, your pension needs to remain current and reflect your personal circumstances otherwise you or your dependents could be losing out on valuable benefits.  For example, have you moved recently?  Have you married, divorced or started a family?  These are all significant matters that could impact on your pension arrangements and it’s really important to keep these up to date.

Our Annual Pension Reminder is a handy one page aide memoire and we encourage you to take a couple of minutes to download and read it, especially if you don’t usually take much notice of your pension.

If you have any queries regarding your current pension arrangements please get in touch with your usual JJFS contact or call us on 01789 263257 or email justask@jjfsltd.com

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What have JJFS been up to lately?

The sporting prowess of our team shows no sign of abating if their activities over the last few months are anything to go by.

Simon and Jane – the JJFS Joggers

In June, Simon Jackson and Jane Wakeling took part in the Two Castles 10K, starting at Warwick Castle and finishing at Kenilworth Castle. Both Jane and Simon have run 10K races in the past and there was a distinct competitiveness between them in the lead up to the event, so when Simon was suddenly hospitalised a week prior to the event, we suspected foul play. Thankfully Simon recovered sufficiently to enter and finish the race, with Jane in hot pursuit, and between them they raised a grand total of £425 for our local Shakespeare Hospice. Well done both.

Simon Goes Extreme Cycling

Simon continues to defy the aging process and subsequently entered the Cornwall Coast and Clay Sportive, selecting the 100 mile option.  This was a tortuous route along the winding, narrow and extremely hilly lanes of Cornwall with a total of 7,300 feet of hill climbs. The conditions were wet and drizzly at times and after a long and exhausting 6 hours in the saddle, Simon decided that 77 miles was quite far enough thank you. Nonetheless, 77 miles is a real achievement and we are suitably impressed that a man of his age can cycle that far.

Michelle Jumps out of a Plane

Not to be outdone, Michelle Cook from our admin team took part in a charity sky dive with her brother to raise funds for the Shakespeare Hospice. The jump was in memory of her grandfather who passed away earlier this year and they wanted to thank the hospice for enabling him to spend his last week at home. This was a classic case of a great idea conceived over several glasses of wine but as the event drew near Michelle was clearly regretting it. However she overcame her nerves, bravely jumped out of the plane and the total they have raised to date is £850 and still rising. Congratulations Michelle and Alex, we are impressed.

Please click on the images to view.