During the webcast, Andrew will be discussing Financial Planning for Legal Professionals.

You can watch the webcast live here at 11.30am and a recording of the event will also be available online later today.

The well respected Ernst & Young Item Club has entered the debate with a prediction that the Bank Rate will need to remain at 0.5% until at least 2014.

This prediction follows one from the newly formed Office for Budget Responsibility (OBR), who believe interest rates will need to start going up again next year.

The Item Club have based their prediction on the scale of planned government cuts which are likely to hold back economic growth over the medium term.

At the same time, they say that inflation will remain above the government target of 2% for CPI for the next 18 months, with high energy prices and the VAT increase supporting this.

So, assuming that the 0.5% Bank Rate remains in place for another three years or more, what does this mean for your Financial Planning?

It suggests that the return from cash, particularly in real terms after inflation, is going to be dismal. Some good deals can be had from fixed term cash deposits, but savers are going to need to erode their capital or take greater investment risk to deliver the income levels they were used to only a couple of years ago.

Low interest rates will mean lower expenditure on debts, including mortgage repayments. The next few years will be a great time to reduce outstanding loans.

Another consequence of low interest rates is that the return from other investment asset classes is likely to be more modest. This could result in investors adopting a more global approach to investing their money, as other economies recover at a more exciting pace and create opportunities for greater returns.

A Financial Planner can assist with providing information in divorce in many areas not least being able to review financial information already gathered from your providers to identify errors and omissions (oh yes it happens a lot!) to ensure that your finances are accurately represented and that those of the other side are also fairly represented.

Some assets could have hidden value – for example long standing endowment policies which may be saleable for additional value rather than simply accepting a lower surrender value or perhaps waiting for a particular window to encash an investment to avoid penalties on surrender.

As you would expect, your Financial Planner should be able to advise what borrowing capability might be should loans need to be raised or further advances on mortgages arranged and possibly signpost you to the most appropriate lenders for the purpose.

From a practical point of view there are often many ways of achieving a separation of assets but from a financial and risk point of view, it is worth considering the effect of legally transferring assets using assignments or trusts.

A very important discussion regarding the risks involved in any settlement options in the context of your new situation should you wish to retain or indeed get allocated certain investments is imperative.

This will ensure that going forward you are comfortable with the risks you are taking on in various scenarios.

Finally, a significant area where specialist advice is absolutely essential is pensions. Pensions are often played down in settlements and sometimes ignored completely due to complexity, but nevertheless are generally an asset well worth proper investigation.

Financial planners need to hold specialist qualifications to be able to advise in this area due to it’s risks and knowledge required.

It is fair to say, however, that some products, such as Investment Bonds, are still being designed and marketed on the basis that high levels of initial commission can be taken by the advisory firm.

The cost of this commission (as always!) is being paid for by the client in the form of higher charges and withdrawal penalties.

This continues despite the fact that by 2012 such products will no longer be appropriate, or indeed allowable as a result of regulatory changes to the way in which remuneration is structured in retail financial services.

So, with the caveat that anyone considering an Investment Bond should be wary of high commissions and opaque charging structures, there are some other advantages that could prove attractive.

This is particularly relevant with the recent increase in Capital Gains Tax (CGT) in the Emergency Budget, from 18% to 28% for higher rate taxpayers.

In particular, the ability to withdraw up to 5% of the initial investment in an Investment Bond as a tax-deferred ‘income’ might appeal to someone who could be paying CGT at 28% and/or Income Tax at 50%.

An Investment Bond could also be beneficial to anyone who is utilising their annual CGT allowance elsewhere, such as a stocks and shares portfolio, or via property dealing.

Investment Bonds are also a useful vehicle for Estate Planning, utilising trusts to reduce potential Inheritance Tax (IHT) liabilities.

If you are already a holder of an Investment Bond, it is also worth considering the pros and cons of cashing this in, (which might be appropriate if you are a basic rate taxpayer, and looking to utilise your annual CGT allowance, perhaps in conjunction with ISA investments):

Advantages

(a) If your Investment Bond has increased in value, you can ‘re-base’ the maximum tax-deferred withdrawals to a higher level.

(b) You can utilise CGT and ISA allowances in future tax years, by re-investing the encashment proceeds.

(c) You can use all or some of the proceeds to make a pension contribution, and benefit from the addition of tax relief.

(d) You can gift the proceeds to children/grandchildren, reducing your taxable estate for IHT.

(e) You can buy a nice car (yes – Financial Planning is also about spending, as well as saving and investing!).

Disadvantages

(a) If you cash in within the first five years, there may be encashment penalties.

(b) If your income is close to the higher rate ‘threshhold’ ( currently around £44,000 p.a.), you may incur additional tax liabilities.

(c) The value of your investment may have fallen, due to stockmarket volatility.

(d) If you are over 65, you could lose some of the benefits of the higher personal allowance for Income Tax.

(e) You may have already paid high commission charges, and face the further costs of re-investment.

Whatever your situation, you should always seek independent advice and, if you don’t fully understand the advice being given, get a second opinion!

This will involve detailing their assets, what they are and how much they are worth, as well as their liabilities; what they are and what is owed.

Sounds simple enough.

Practically when one household suddenly splits two are generally created. This can mean that often the same income has to fund both households – especially if there are children involved as the financial needs of the children have to be supported.

This could result in two mortgages or even a sale of the family home if both incomes were necessary to support borrowings and this can no longer be continued.

A Financial Planner can work with a couple to determine their likely budgetary requirements and can use cashflow models to look at how assets and income could be split between the couple to the best effect and over what period of time.

For example, looking at the dependency years of their children and how the higher income needs could be met over a discrete period of time etc. Undergoing this exercise can bring massive value to the mediation process.

Where assets are abundant the outcome might be very obvious and assets can easily be transferred between the parties without detrimental lifestyle effect on either.

In many cases however, finances these days are complex and the Financial Planner can work through the issues looking at how the budgetary requirements could be met by a fair and effective separation of assets or even a compromise.

Besides the emotional issues involved with such action, there is the practical issue of sorting out the “money” side of things.

Although there is no absolute requirement to instruct solicitors in divorce proceedings, it is usually considered prudent to take legal advice before finalising any financial arrangements.

Some couples manage to successfully negotiate their own agreements and only need advice on how to make these legally binding.

For others, some kind of mediation is required.

Disclosure of financial matters to each other is an essential part of the process in dealing with the financial settlement arrangements.

This is a process which can be lengthy, onerous and costly especially if spouses have lost track of pensions, life policies, share certificates and other financial paperwork.

Completion of a “Form E” obtained from the Court, detailing earnings, ownership of assets, insurance policies, pensions and cash as well as capturing information about liabilities, budgets and debts such as mortgages, loans and credit cards is the main document used for voluntary disclosure in divorces.

All information given on Form E should be evidenced in the form of a statement of outstanding liability or current value for each disclosure which can be readily obtained by telephoning your various providers/lenders.

A well organised divorcing couple can save much time and money by presenting their legal advisers with this information rather than expecting their solicitors to undertake this administrative task.

Their Financial Planner should also be able to provide a statement of assets and liabilities captured in a readily understandable format.

You may question the need to review your investment portfolio on a regular basis, particularly when you understand that a review fee will be charged for this service.

Needs and circumstances will change over time and it is vital that your financial planning is reviewed in line with these developments.

Changes such as marriage, birth of a child, divorce, change of employment, moving home, death of a close relative or retirement can all have an impact on existing and future plans.

Alongside these developments, your attitude towards investment risk may also change and will need to be updated.

External changes can also impact decisions that have been made in the past. Important developments can take place in the fiscal, investment and economic environment which need to be considered and discussed at a review meeting.

Review meetings on an advisory basis should probably take place at least once a year but this will depend on the your needs and wishes and the complexity and size of the investment.

If the adviser is providing discretionary portfolio management then reviews and valuations should be provided on a more frequent basis.

The challenge for the adviser is to keep the process fresh and interesting as they meet with the client every year.

The adviser must take time to listen, to discuss the events that have taken place since the last review, and ensure they do not miss important information that could impact your existing and future financial planning.

Informed Choice chartered financial planner Andrew Neligan will be presenting the webcast at 11.30am on Tuesday 27th July 2010, talking about Financial Planning for Legal Professionals.

You can find out more and register for this free webcast at http://www.brighttalk.com/webcast/21907.

Informed Choice financial planner Simon Hewitt will be presenting the webcast at 11.30am on Thursday 2nd September 2010, talking about Making the Most of your Employee Benefits.

You can find out more and register for this free webcast at http://www.brighttalk.com/webcast/21908.

Our personal finance webcasts are free to view and available to watch live or as a recorded version immediately after the event. They are 30 minutes in length and you will have the opportunity to ask questions to the speaker during the webcast.

The main aim of the new rules is to ensure that only those who can truly afford to meet their debt obligations will be able to borrow money.

One proposal to ensure affordability is to assess the ability of the borrower to meet mortgage obligations assuming a repayment mortgage, even when they are borrowing on a cheaper interest-only basis. Most lenders already calculate affordability on this basis, but it would represent a change for some.

The proposals could also signal the end of the ’self certification’ mortgage, with borrowers having to prove their income levels rather than simply tell the lender what they earn.

Research from the FSA found that around half of all mortgages are sold without income being verified.

As the UK economy enters an age of austerity, moves by the FSA to force more responsible mortgage lending could have an impact on the residential property market, particularly if first time buyers have to wait for longer to get onto the property ladder.

The Council of Mortgage Lenders has said it recognises the inevitability of regulatory change, but warned that there may also be unwelcome side effects for borrowers.

They point to a slower and more costly mortgage application process, with the lender having to scrutinise documentary evidence before a home loan can be approved.

These proposals form part of a tougher approach to mortgage regulation being adopted by the FSA.

They also have plans to subject mortgage advisers to the same level of regulatory supervision as investment advisers. This includes applying the ‘fit and proper person’ test to those individuals selling mortgages; something that can only be good news for consumers who can often be exposed to less than professional behaviour when receiving mortgage advice.

Social Trends 40, published by the Office for National Statistics (ONS), highlights the scale of social changes over the past forty years.

This edition of Social Trends looks at thirteen separate topics, including five previously unpublished chapters of analysis covering education, health, social protection, crime and justice, and the environment.

Things have certainly changed over the past forty years.

We now take 45.5 million holidays abroad each year, compared to 6.7 million in 1971.

As a nation, we smoke a lot less than we used to back in 1971. Today, 7% of men and 5% of women are heavy smokers, compared to 26% and 13% back then.

The survey also shows that women are waiting longer before having a baby. In 1971, 47% of babies born in England and Wales had a mother under age 25. In 2008, this proportion had fallen to 25%.

Our largest item of expenditure, as a proportion of earnings, in 1971 was food and non alcoholic drinks. We now spend most of our income on housing, water and fuel.

A lot has changed over the past forty years and our Financial Planning needs to reflect these changes to social trends. Changing social trends means different financial priorities. This survey shows how people prefer to allocate their financial resources, although we recognise that every person has different financial goals, objectives and dreams.