Gain the skills to manage your investments: analyse portfolio risk and plan your pension, with this free online course.
ABOUT THE COURSE
Research shows that UK households are poor at investment management with a limited understanding of investment choices, risks and returns. The resultant ‘savings gap’ threatens a scenario where many cannot afford to retire.
Elsewhere households fail to plan properly, to make their investment choices fit with their risk appetites and the time horizons for access to their funds . Managing My Investments aims to give you the tools to avoid these personal finance nightmares.
Understand investment choices, risks and returns
On this free online course, you’ll learn about different investment choices, the returns and risks associated with each, and the evidence about their historical performance. You’ll explore investment strategies, as well as the practicalities about involvement in personal finance markets. And you’ll look at how to avoid the individual and group behavioural traits that can impair effective investment decision making .
Throughout, the course will provide recent and current case studies on investment issues, to demonstrate how the ideas and issues explored in the course are reflected in the arena of personal investments.
The course is up-to-date and covers the current reforms to UK pensions due to be rolled out in 2015 – changes that will radically alter the way many people will use their pension savings as they move into retirement .
Managing My Investments aims to give you the knowledge and confidence to take charge of your investments and your financial future.
You can find out more about what to expect from the course in Martin Upton’s post for the FutureLearn blog: “Understanding the UK pensions revolution.”
This course is presented on FutureLearn with the kind support of True Potential LLP.
Understanding the UK pensions revolution
The Open University Posted by The Open University
13 APR 2015
Martin Upton is Director of the True Potential Centre for the Public Understanding of Finance (True Potential PUFin) at The Open University. Here, he discusses how his free online course, “Managing My Investments,” coincides with the start of a pensions revolution in the UK and offers some advice on what this revolution means for everyone.
“Managing My Investments” is a course that studies investments and pension planning. It coincides with the start of the liberalised era for pensions that has just kicked in at the start of the UK 2015/16 tax year. The course is a timely aid to those either planning for their pension or just simply looking at alternative investments for the short-, medium- and long-term.
Key features of the pensions revolution
These are the key features of the pensions revolution, introduced by the coalition government:
- Greater freedom for those in “defined contribution” schemes to access personal pension funds (or “pots”), to invest in a range of assets (like property), to produce pension income, to pay off a mortgage or other debts, or simply to finance current consumption. Up to 25% of pension pots can be accessed tax-free by those aged over 55 and there is no requirement to use pension funds to purchase an annuity. Sums accessed in excess of 25% are taxable as income and so could attract tax of up to 45% (for taxable income above £150,000) – so be careful and tax efficient in the choices you make.
- As an alternative to buying an annuity, many are expected to leave at least 75% of their pots invested and take income from the fund when needed.
- Those with defined contribution pension pots, who are not yet looking to draw on it for retirement, can use an arrangement called an “uncrystallised fund lump sum payment” (UFLSP). This enables smaller withdrawals to be made on as many occasions as you like. You can even withdraw the whole pot. With these withdrawals, 25% of each sum drawn out is tax free.
- A proposal for freedom, from April 2016, for five million existing defined contribution pensioners to sell their annuities for a lump sum, which can then be accessed in the same way as for those approaching retirement, as set out above.
- Greater flexibility to pass on a pension to dependants after death. For those dying up to the age of 75, the pension pot (or survivor income and lump sums from annuities) can be passed on free of any tax deductions. For those dying after 75, the tax rate applied will now be 45% instead of 55% (reducing to normal tax rates from April 2016) on lump sums and normal tax rates on income.
The risks from these new rules
There are risks arising from these new flexible rules, which you need to be aware of:
- There is the risk of making tax inefficient decisions with chunks of hard-earned pension pots being passed to HMRC rather than used and enjoyed in retirement.
- There is the risk of scams, with fraudsters offering, for example, to transfer pension pots into new unregulated investment schemes with high fees charged and in ways that expose pensioners to high tax bills. There is also the risk that fraudsters simply steal the money, for example, by offering to transfer pension pots into new schemes only for the new “fund” to turn out to be fictitious. So, hard earned pension money is gone, but the victims still have to pay the tax bill. Guidance on these risks is provided in the Pensions Advisory Service booklet Scamproof Your Savings.
- Some may simply spend their pension pots quickly and, as a result, have no non-state pension to live on. Despite media hype – with references to pensioners buying Lamborghinis – this is likely to apply to only a small percentage of people enjoying the new freedoms. Most people who have carefully planned for their pension over their working lives are unlikely to blow their pension pots thoughtlessly. Nevertheless, careful thought needs to go into how to spread the pension pots accrued over the expected life in retirement.
The importance of using these new pension freedoms with care cannot be overemphasised.
The True Potential Centre for the Public Understanding of Finance (True Potential PUFin)
The True Potential Centre for the Public Understanding of Finance (True Potential PUFin) is a pioneering Centre of Excellence for research in the development of personal financial capabilities, based at The Open University Business School. The establishment and activities of True Potential PUFin have been made possible thanks to the generous support of True Potential LLP, which has committed to a five-year programme of financial support for the Centre totalling £1.4 million.
This course is intended for those with an interest in developing their personal financial skills to make good decisions when managing their investments and buying investment products. The course does not require any previous experience of this subject.
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