Financial services play a critical role in our lives, helping us secure our future, protect our assets, and grow wealth. However, without the right advice things can take a nightmarish turn, leaving individuals and businesses in financial turmoil. In this article, we delve into some harrowing pension, investment, mortgage, and personal and business protection insurance scenarios.
Pension Purgatory
Pension Scams: The alarming surge in pension scams tells a tale of deception and despair. Crafty fraudsters prey on retirees, luring them into fraudulent schemes that promise extravagant returns but end up annihilating their hard-earned savings. An independent financial advisor (IFA) serves as your guardian, offering guidance tailored to your specific needs. Further advice on pension scams can be found on the Financial Conduct Authority website.
Early Pension Access: Without expert guidance, clients can inadvertently access their pension prematurely, significantly impacting their ability to contribute more to their pension fund in the future.
Ghoulish Case Study! Example of how accessing a pension can become a nightmare without the proper advice
Jack’s car dealership was suffering temporarily because of a component crisis which was affecting deliveries. He knew it would be over sooner or later but had a cash flow crisis to contend with. He emptied his pension (£200k) to survive six months and stay in business and it was worth it because business was great. Emptying his pension meant that he received £50,000 tax-free but was taxed at his marginal rate on the remaining £150,000. An expensive mistake which was made worse by the fact that Jack thought he could put the money back into the pension but to his horror found that the £60,000 annual contribution allowance had been cut to £10,000. With only 10 years to his intended retirement age (65), he found that his future pension contributions and the tax relief available were severely limited.
Rotten Returns Case Study! Example of how not seeking financial advice could limit your investment return
Jim inherits his father’s remaining pension pot of £100,000 at age 25. His dad had been a cautious investor investing in cash and bonds mainly. Jim didn’t think about the pension and left the investments untouched. He retired 40 years later age 65 and hadn’t bothered saving anything else knowing he had a pension to fall back on. Jim thought he’d done well picking up £326,000 (3% p.a. return) but of course, inflation meant that a pint of beer was around £18 so maybe wasn’t quite so good. Jim’s mate Dave was a financial planner and calculated what he could have had in his pension pot with better investment. A fairly modest 6% p.a. return would have been possible with a more balanced portfolio using equities (shares), meaning that £100k would have turned into £1,028,000. Jim’s complacency had got the better of him.
Inheritance Tax Insanity Case Study! Example of how not seeking financial advice could cost your loved ones
Fred and Anne were a smart pair or so they thought. They had built up £2 million in assets and now aged 75 thought they’d give away £325,000 to each of their children - James, Susan and Simon. Over the course of a week, they gave away the money by making bank transfers and signing a letter to each child to confirm the gift. James received his share on Monday, Susan on Tuesday and Simon on Thursday. After making the gifts, they were left with approximately £1million worth of assets. However, for this plan to be fully effective, the pair need to survive seven years after making the gifts.
Unfortunately, this mitigation strategy didn’t work as the couple passed away soon after making the gifts, which made the gifts taxable. To make matters worse, James and Susan's gifts fall into the combined inheritance tax allowances of £650,000 but Simon’s does not as there were no allowances remaining at the time he received his gift. He therefore has to pay 40% of £325,000 leaving him worse off than his siblings.
Needless to say, if they had seen a Financial Planning by TaxAssist Planner, this would not have happened as a robust financial plan would have been in place. Speak with our team of experts on 0330 441 2244 or email [email protected].
Mortgage misery
The dream of homeownership can become a financial nightmare when mortgage-related problems arise such as reaching the end of your interest-only mortgage and not having the money to repay the mortgage. This is every investor's worst nightmare but it is far more common than you would imagine and there are solutions such as equity release that can help you retain ownership of the property.
Our Equity Release Team are here to help you turn your mortgage misery into merriment. Speak with the team on 0330 441 2244 or email [email protected].
Insidious Insurance
Insurance is designed to be a source of comfort and security, but sometimes people don’t take out the right policies or not enough.
Underinsurance: Being underinsured can lead to financial catastrophe in the event of a major disaster. People often find themselves facing substantial out-of-pocket expenses when their coverage falls short.
Spooky Case Study! Example of how not seeking financial advice on protection insurance could cost your dearly
Mary and Bill buy their dream family house stretching themselves to the limit. It has all the things a young family need for Charlie and Millie, a big garden, a tree house, a space for swings and slides. They quickly skip over the life insurance section to pay off the mortgage if one of them dies and even quicker to skim over the critical illness policy to pay it off if one of them suffers a serious illness. Three months later whilst out riding with some friends in Snowdonia, Bill falls off his bike and down a steep embankment bashing. He survives but suffers an injury to his spine and is paralysed from the neck down. Bill’s employer terminates his employment as he will never work again in his former job. After months of begging and borrowing options run out and they sell the house before it is repossessed but with limited income, they struggle to get back into the housing market.
Speak with our protection team on 0330 441 2244 to avoid any insurance horror stories.
How to shield yourself from financial nightmares
Financial services are a vital part of our lives, providing us with opportunities to secure our future, protect our assets, and grow our wealth. However, the dark side of the industry reveals stories of lost pensions, investment frauds, mortgage nightmares, and insurance failures. These financial horror stories serve as stark reminders that consumers must exercise caution, perform due diligence, and seek professional guidance to avoid becoming victims in the world of finance. It is crucial to remember that while these stories are unsettling, they are the exception rather than the rule, and many individuals successfully navigate the financial services landscape with prudent decision-making and wise financial planning.
These serve as stark reminders that consumers must exercise caution, conduct thorough research, and seek professional guidance to shield themselves from a potential financial horror story. It is essential to remember that prudent decision-making based on sound financial planning advice guide many individuals safely through the financial services landscape. To prevent financial nightmares, think FIRE…Financial planning, Independent, Retirement planning and Expert Advice.
Financial Planning: A robust financial plan tailored to a client's specific needs and goals can help safeguard their financial future. Financial Planning by TaxAssist can assist clients in creating a comprehensive financial plan, which includes budgeting, investment strategies, and retirement planning.
Independent Advice: Financial Planning by TaxAssist acts as an independent advisor, meaning they prioritize their clients' best interests. They are not influenced by commissions or incentives from specific financial products, ensuring unbiased advice.
Retirement Planning: TaxAssist can guide clients in making informed decisions about their retirement savings, including pension contributions and investment choices. This ensures clients are well-prepared for their post-working years.
Expert Advice: TaxAssist can educate clients about potential financial pitfalls and provide guidance to help them make informed decisions, reducing the likelihood of falling into financial nightmares.
Speak with our team of experts on 0330 441 2244 or email [email protected] to prevent harrowing and horrifying tales.