Q: Is buy to let a good alternative to investment?

A: The answer to this question depends on your Strategy. Do you want anther job? What I mean is do you have the time, resources and desire to service your tenants? Property is an asset class. All asset classes have good periods and poor periods in relation to returns. With the exceptional growth UK property experienced over the last decade one could conclude from history that this cannot continue. But the fact is we cannot predict the future.

Factors against the continued growth of the property market are rising interest rates and the continued building of new properties to meet government targets. However we have a net inflow of immigrants needing housing with an ability to raise finance to purchase property. Investors who do not want another job as a landlord and the hassles that this brings can look to property funds as an option. These funds offer a great asset class to diversify away from equities, especially if the right funds are chosen. Please contact us for further details on how we can help.

Q: What impact will interest rates have on my portfolio?

A: A low interest rate environment boosts the economy by allowing investors to borrow money at a lower rate than the investment returns and therefore investments can be leveraged at a lower risk, due to the higher differential between rate of return and the rate of borrowing. A simple example is when interest rates are low, your mortgage payments are lower, and you have more disposable income to spend, thereby boosting the economy.

Also, if you were to buy a leveraged investment (one in which borrowing is involved such as a mortgaged Property) the rent received X, is likely to be higher than the interest paid Y. You will effectively be able to borrow more funds allowing more or larger properties to be bought. When interest rates rise, this differential narrows and the risk increases.

This highlights the need for an internationally diversified portfolio, of different asset classes. When interest rates rise in one country/economy, they may rise in others, but not necessarily at the same rate or amount. Therefore Emerging Markets, with a strong and growing economy may perform at a higher rate, than more established economies.

Q: Can I transfer my existing pension and funds?

A: This is an easy question to answer.  Yes.  However whether you should do so is a far more important question.  There are many benefits for keeping your existing arrangements in place and not moving them away from the existing providers. 

The most common reasons for not moving a pension are the inbuilt options to occupational pensions such as indexation, spouses death benefits and other perks of being a member of the occupational pPension scheme or for personal arrangements the exit penalties applied to the fund if you move the funds away.

However, there may be circumstance where, it is in your best interests to move the funds to an alternative arrangement.  These may be exceptionally high charges of your existing provider, the lack of fund choice to suit your risk profile or the poor death benefits due to the regulations of that type of scheme, to name a few.

If you do move your funds to an alternative provider, you want to ensure it is likely that they will meet your requirements now, and in the future.  One type of Pension that may do this is a Wrap Platform (Please refer to FAQ: How does a Wrap Work).

A Wrap gives you access to a large range of funds, therefore more likely able to suit your risk profile and the charges and fees, for many Wrap, are explicit and shown quite clearly.

Q: How does a WRAP work?

A Wrap Platform or a Platform as it is also referred to is an administration service for your investments, which allows the investor access to many, if not the whole market, of Investment Funds, Investment Trusts and Direct Equities (if regulations allow).

A Wrap Platform should allow you access to most, if not all of the following; a General Account, ISAs, PEPs, Pensions, Onshore Investment Bonds & Off-Shore Investment Bonds.

This means, that it is possible to have all of your investments in one place and administer them online, selecting funds from all (or at least many) of those available to the UK investor.
There are a number of providers of Wraps in the UK.