mowatt financial Planning

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Mowatt Financial Planning: May 2009

Thursday, 28 May 2009

An interesting income plan....

There are a number of plans on the market which are called structured products. Different versions of these plans offer income or growth.

I've decided to highlight one from a company called Key Data which offers an attractive level of income whilst involving a degree of capital risk. The article which I have just written for the Easingwold Advertiser is below.

Key Data Extra Income Plan

I thought I would feature this product as it is offers an attractive level of income compared with the levels of interest available in deposit accounts. It is not, however, directly comparable as your capital will be at risk.

I was a bit wary about publicising one particular product as my approach is to start with the personal goals and financial plans and then look at what’s needed. However, I think this product is a pretty good deal in the right circumstances and worth highlighting.

The product is available for a limited period only and closes on 3rd July 2009.

First, I’ll explain how this product works; then the risks involved and then I’ll give an overview of the circumstances when this product would be appropriate.

How it works:

The Key Data Extra Income Plan is a 5 year plan which will provide income of 7.8% per annum or 0.65% monthly over the 5 year term. The minimum investment is £3,600.

The return of capital is not guaranteed and depends on the level of the FTSE 100 index at the end of the 5 years. You will get your capital back in full if the FTSE 100 index has not fallen by more than 50% at the end of the 5 years. If the index falls by more than 50% you will lose 1% of your original capital for each 1% fall in the index.

FTSE 100 is a share index of the biggest (measured by capital) companies listed on the London Stock Exchange.

The example below shows how this works.

Total proceeds after 5 years based on an initial investment of £10,000

Final index level compared to the starting level

Total monthly income received over the term

Amount of capital received over the term

Total proceeds received over the term

Up 40%




Up 20%








20% lower




40% lower




60% lower




100% lower




The plan can be used for an ISA, certain pension wrappers or as a direct investment.

The tax position will be dependent on whether the plan is written as an ISA, within a pension or as a direct investment. However, as a direct investment there will be no further tax to pay for a basic rate tax payer and an effective rate of 25% for a higher rate tax payer.

The risks

Clearly to get income of 7.8% there has to be a trade off. The main risks involved in this product are as follows:

On maturity you will not get back your original investment if the closing level of the FTSE 100 index has fallen by 50% or more than the starting level of the index.

The money is invested in securities issued by leading financial institutions, there is a risk that the plan might not be able to meet it’s financial objectives if one of these institutions were to fail to meet their obligations. (An example of this would be the failure of Lehman’s Bank)

If you decide to sell your plan investments early, you might get back less than the amount you originally invested.

When this product would be appropriate

All things considered I think this is an attractive product for someone who has income needs and can afford to take a risk with some of their capital.

In summary this product may be right for you if:

You are prepared to take some capital risk

You can afford to tie up this investment for 5 years

You need a fixed regular income

Please note that this article does not represent personal advice and the investments highlighted are not suitable for everyone. This type of plan is complicated and it is important that you seek professional advice before making any investment.

If you think this plan might be right for you then give me a call and I will be able to give you advice on the suitability of this product for your individual circumstances. Note that your capital is at risk if you invest in this plan.

See advert for contact details.

Will Mowatt

Wednesday, 13 May 2009

Having a plan

I've posted the latest article from the Easingwold Advertsier below.

Having a plan

In the articles I have been writing in the Advertiser, I started by looking at what retirement means today and I then went on and looked at spending and sources of income in retirement. Whether you are already retired or retirement is some way off, I believe it is crucial to have a plan. I'm not just speaking about a financial plan but also knowing your goals and what you want out of life. The financial plan should be to support these goals.

“Failing to plan is planning to fail”

Obvious but true. Everyone’s plan is individual although it is clearly important that your plan is shared with the people who are important in your life.

Looking at the financial side of things; on the spending and income side, I've covered:

Expenditure (I hope some of you have been able to sort out your spending)

State pensions

Private pensions


Putting all these elements together will give you a snapshot of what your finances in retirement will look like. It is possible to build more sophisticated plans that project forwards with what if scenarios but this is more likely the domain of the professional adviser. At a very basic level the outcome can be one of the following:

Not got enough

Got enough

Got more than enough

These outcomes will then determine the actions that need to be taken.

Not got enough

Here the options are more limited but will include:

- Continue working (possibly part-time)

- Make sure that you have all the state benefits that are due to you

- Use any savings or capital you have to support your income needs

- Use your house to downsize or use products such as equity release to access some of the money that is tied up in your home

- Cut down on your spending

Got enough

It’s important that this remains the case. Areas to consider would be:

- Tax efficient use of investments (e.g. Individual Savings Accounts)

- Having assets that will not get eroded by inflation

- How well your finances will cope with changes in circumstances

- Making sure that your investments are regularly reviewed and continue to support your goals

Got more than enough

In this case, it remains important to make the most of your money as above but it is also likely that you will be leaving an inheritance and inheritance tax planning can avoid unnecessary tax on death. The nil rate tax band for inheritance tax is £325,000 and in the case of a couple, each will have a nil rate band of £325,000 in the current tax year. It is for assets above this amount that inheritance tax planning will focus.

In all cases, it’s important to review your plans as your life moves forwards.

Clearly the closer you are to retirement, unless you have already been planning for it, the less opportunity you have to save for your retirement goals. For those who are still some way off retirement, the opportunity is there to set your goals and build a financial plan to support them.

I am able to offer advice on all aspects of financial planning.


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