Autumn 2010

Your choices at retirementWhen you reach retirement age, with interest rates at historic lows, your most important

choice will probably be between taking an annuity immediately or using an unsecured

pension product to defer that decision. The former will lock in a guaranteed income for

you, whereas the latter option allows you to stay invested, at least partly, for an interim

period whilst you decide whether markets will get better - or worse before you take the

plunge.

An annuity is specifically designed to provide a guaranteed income stream for life. This

provides security and stability but does also mean you give up all right to the original

capital. Without any guarantees in place, if you die earlier than expected, your

descendants could be left with nothing whereas, with an unsecured pension you can

retain entitlement to the capital but still draw an income from it until such time as you

decide annuity rates are acceptable (or until age 75). However, this latter

option might provide less than you would receive from an annuity whilst you wait - and

you also leave your capital value subject to the volatility of markets, meaning its value

could fall.

Such schemes are now extremely flexible and offer access to a wide range of underlying

investment funds, so you can assess the risk you are prepared to take and allocate your

fund accordingly. Or, indeed, you might decide to combine the two, keeping part invested

whilst taking an annuity with the rest. If you are unsure, however, speak to a financial

adviser and make sure you have covered all your options.

Surviving recessionTIP NO 3: ROLL WITH THE PUNCHES

Your attitude during negative periods is as important as your portfolio’s

structure. Economies cannot keep growing indefinitely - recessions are part

of their nature and should be expected by investors at least every few years.

Successful investors therefore tend to be pragmatic. They invest for the long

term and expect that whilst there will be good times, there will also be some

bad ones along the way. A short term downturn should therefore be prepared

for in advance and not be seen as reason to panic.

Welcome to the latest

edition of our

newsletter, our

update on

developments in the

world of financial

services.

If you have any

questions about the

issues raised in this

issue, please do not

hesitate to contact

us.

Contact Us:Jeff Bromley, Atlas Advisors, Rowlandson House, 289/293 Ballards Lane, London, N12 8NP. Tel: 0845 120 8117

Global updateShare prices performed strongly over September as a whole as the MSCI World index rose by 9.1% in US dollar terms over the month, and by 13.2% over the third quarter of 2010. The UK and US both performed strongly although Japan lagged other major markets. Even so, investors remained uncertain, and this cautious mood was well illustrated by the price of gold, which reached record highs during September as investors sought safe havens for their money. Meanwhile, the Organisation for Economic Co-operation & Development downgraded its forecast for economic expansion in the G7 countries – it now expects growth to reach 1.5% during the second half of 2010, compared with its previous forecast of 2.5%. US equities posted robust gains during September. Demand for medium-sized and smaller companies was particularly strong, suggesting investors have become somewhat more sanguine about the prospects for the domestic and global economic recovery. Nevertheless, optimism remains tempered by concerns over a feeble housing market and relentlessly high unemployment. In the UK, gains were also fuelled by a renewed appetite for medium-sized and smaller companies as investors became a little more hopeful about economic prospects. Nevertheless, sentiment remains fragile amid ongoing concerns over Government spending cuts. The Confederation of British Industry believes the UK economy will expand more slowly than expected during 2011 as public spending cuts get underway. Europe continues to look like a region of two halves. Germany in particular looks increasingly robust, underpinned by rising consumer and business confidence and a declining rate of unemployment. At the other end of the spectrum, however, some countries in the region continue to look distinctly shaky. Ireland stole much of the limelight during the month as the government announced its plan to take majority ownership of Allied Irish Banks. Elsewhere, Greece’s economy contracted by 1.8% during the second quarter. Share prices in Japan ended the month in positive territory but could not match returns from many other leading markets. Investors remain concerned about the power of the economic recoverywhile, the yen’s sustained strength continues to preoccupy Japan’s exporters. Looking ahead, the quarterly Tankan survey indicated Japanese companies have become increasingly pessimistic. According to a recent study by the World Economic Forum, Switzerland held its place as the world’s most competitive economy, followed by Sweden and Singapore. The US fell to fourth place, having lost the top spot in 2009, while the UK rose one position to 12th place.

Covering against serious illnessCritical illness cover is a form of insurance protection which pays out a lump sum if you are diagnosed with one of a specific set of serious illnesses. The illnesses covered are the kind which will have a significant impact on your lifestyle or require it to change and, for example, generally include a heart attack, stroke and debilitating forms of cancer. The idea of critical illness is that it takes the financial stress away at a time when you might not be able to work for an extended period – or perhaps have to change job to one which pays less money. The lump sum can be used to reduce existing costs, such as your mortgage, or finance changes which might be required to your home. Alternatively. it might simply fund a much needed, extended holiday to aid your recuperation. As well as the diseases you might expect conditions covered can also include Alzheimer’s, blindness, motor neurone disease and kidney failure. It is important to remember, however, that several conditions can also be specifically excluded from a policy, including drug abuse and some of the less invasive types of cancer. Consequently, cases do still crop up where the policyholder, having been diagnosed with a serious illness, discovers it is not actually covered by their policy. Robust, independent financial advice and a willingness to be open about your medical history are therefore a must when applying for this type of cover.

The burden of IHTDespite the threshold rising to £650,000 for married couples and civil partners,

(£325,000 for individuals, tax year 2010/11) the boost in house prices over recent

years means inheritance tax (IHT) could still be a concern. It is therefore sensible for

investors to consider the potential liability they may be leaving behind.

For most, the key contribution to the value of their estate will be the family home but it

is not the only asset that counts. For example, ISA investments shelter investors from

capital gains and income tax but not from IHT. Property held abroad also counts

towards the total. The problem with IHT is not just that it has to be paid, but that it

generally has to be paid quickly. Therefore, without a little planning, the family home or

precious heirlooms may need to be sold to meet the bill.

However, there are things you can do to offset the impact. For example, you have an

annual gift allowance of £3,000 a year. Certain gifts for weddings, from parents,

grandparents and even friends, are also exempt. Other useful tools, despite recent

changes, include loan trusts and discounted gift schemes - indeed, there are a myriad

of options available, some more complex than others.

Given the changes in legislation which the Government is using to try and close

the potential tax loopholes, it is always worth getting professional advice on the best

way to ease any burden on your estate.

Don't put off your willIt is understandable that so many of us put off the

task of making a will. Afterall, it makes us think

about our mortality and consider things which we

hope will never happen. However, without one,

you might be surprised to find out how easy it is

for your assets to be distributed in an undesirable

way.

The exact rules of  distribution depend where in

the British Isles you live as some details differ

between Scotland, Ireland and England & Wales.

However, if you are not married, for example, the

law is united in saying your partner may get

nothing. Without a marriage certificate, your

children and parents will benefit instead.

Even if you are married, there are many good

reasons for making a will. First and foremost, it

allows you to take postive decisions over who

gets what - including friends, friends' children,

charities and local societies who are entitled to

nothing without your say. You can also decide if

ex-partners - or perhaps more importantly, ex-

partner's children - should be helped out. And, if

your estate is greater than £325,000 (£650,000 for

married couples), a will can help you plan to

reduce your Inheritance Tax liabilities.

In thinking like this, making a will can actually

become a very positive, rather than negative

experience. Considering these things in advance

can actually help your peace of mind and ensure

that all you family and friends will be looked after in

exactly the way you want them to be.

Surviving recessionTIP NO 4: LOOK BEYOND THE DATA Remember that economic data is backward looking. At the start of a slowdown, figures will continue to appear positive, perhaps contradicting our everyday experiences, as old data remains in the calculation. Similarly, once economic growth begins to recover, it will take a while to be fully reflected in the new data. Headlines that scream "worst figures for 30 years" confirm what we have just experienced but do not necessarily reflect the prospects for tomorrow. What they do, however, is fan the flames of investor uncertainty - and sell newspapers!

Inflation remains stubbornly highThe rate of inflation remains a significant problem for policymakers at the Bank of

England (BoE), and their headache is unlikely to abate. Their dilemma centres on the

need to bring inflation under control without derailing Britain’s fragile economic

recovery.

UK Consumer Price Inflation (CPI) remained static at 3.1% year on year during

August, according to the Office for National Statistics (ONS), after falling for the

previous three months. Month-on-month, inflation rose by 0.5% during August,

having fallen by 0.2% during July.

Inflationary pressures have been exacerbated by higher prices for clothing and

footwear, food and, in particular, air travel. Air fares experienced a record rise of

16.1%, underpinned by seasonal demand.  Meanwhile, food prices registered an

increase of 4.1% over the year. The price of wheat has posted a particularly sharp

rise in the wake of fierce drought in Russia and devastating floods in Pakistan 

Elsewhere, retailer Primark recently warned that the clothing industry faces pressure

from the rising costs of raw materials and shipping, and from the scheduled rise in

VAT in January 2011.

While CPI remained at 3.1% in August, growth in average earnings (excluding

bonuses) in the year to August 2010 was 1.5%, indicating that UK wage earners’

ability to spend is not keeping pace with rising prices. Looking ahead, concerns about

public sector cuts, higher taxes and unemployment are likely to increase caution

amongst consumers, and sentiment was not improved by the news that retail sales

posted their first monthly decline since January during August.

UK inflation remains well ahead of the BoE’s government-set target of 2%, and has

stayed above target since December 2009, fuelling speculation that the Monetary

Policy Committee (MPC) will be forced to increase interest rates rather sooner than

expected. Interest rates have remained at their all-time low of 0.5% since March

2009, and an increase in rates would prove controversial amid stringent cuts in public

spending and a fragile economic recovery.

In July’s Quarterly Inflation Report, the BoE warned that inflation is likely to remain

above target until the end of 2011, underpinned by higher VAT, rising energy costs

and the effects of a weak pound.  In the short term, BoE policymakers believe that

the risks to UK inflation lie on the upside. Looking further ahead, the BoE believes

that inflation will eventually subside below 2% during 2012 as spare capacity

continues to affect companies’ costs and prices.

Issued by Atlas Advisors which is authorised and regulated by the Financial Services Authority. The contents of this newsletter do not constitute advice and should not be taken as a recommendation to purchase or invest in any of the products mentioned. Before taking any decisions, we suggest you seek advice from a professional financial adviser.