Understanding the Gramm-Leach-Bliley Act Is More Important Than You Think – For Your Finance’s Sake!

Privacy is something that we absolutely need to have with our finances, yet there are times where we’re asked to disclose information in order to receive something else. For example, you are going to have to disclose a lot of information to open up a bank account or apply for a loan. In exchange for giving over some of your most sensitive information, you’re going to be able to demand certain privacy considerations as well. However, how do you know what you’re required to do and what they are required to do? As you might imagine, there are laws covering the nature of privacy when it comes to your finances. One such collection of laws can be found in the Gramm-Leach-Bliley Act.

The GLB Act can be divided into two categories — what is going to be required of financial institutions and what projects consumers and customers actually have.

So let’s start with the financial institution side, shall we? Well, the definition of a “financial institution” per the GLB Act is going to be any company that offers financial products or services to individuals, such as loans, financial or investment advice, or even insurance. So yes, your insurance company is considered a financial institution as well, even if they aren’t necessarily giving you money. The FTC is the watchdog of all financial institutions, and they have the authority to enforce the law with financial institutions that aren’t covered by the federal banking outlets, the SEC, the CFTC, or state insurance authorities. Non-bank mortgage lenders, loan brokers, some investment advisers, tax preparers, providers of real estate settlement services, and debt collectors are all included in this “umbrella” of sorts.

They are obligated to keep your information confidential and take steps to protect it at all costs. These steps are often audited in standard security compliance rounds, so you don’t have to worry about a company that claims to protect your information and never does anything to actually live up to their words.

So, what about the other side? Well, according to the GLB Act, a company’s duties are going to depend on whether we’re talking about consumers or customers. They might sound like the same thing, but they do have some differences according to the law.

A consumer is considered to be an individual that acquires or has acquired a financial product or service from a financial institution for “personal, family, or household reasons”. A customer is actually a consumer that has a continuing relationship with the financial institution in question. So it’s one thing to use a company’s financial services for the short term or one time, and it’s a different thing to establish a long term relationship.

Customers are entitled to receive a privacy notice automatically because they have an established relationship. That doesn’t mean that consumers are just out in the cold though. Consumers only receive a privacy notice if the company shares the consumers’ information with companies that are not affiliated with it. The privacy notice cannot just be posted on a wall — it has to be delivered by mail. Of course, there’s no guarantee that individuals will actually read the privacy notice, but that’s not the point of the law. The point of the law is to make sure that you know what the privacy provisions are for that company. They can’t force you to read it, and they can’t demand that you read it. They can simply provide it to you in a reasonable fashion.

For example, if you apply for a loan with an online lender and say that you read the privacy notice but you really didn’t, you can’t go back and say that you didn’t know something was in there. You said on the application that you read it; hence the company is not legally liable for any problems that arise out of the things that you didn’t read.

That’s why it’s so important to stop skipping over the fine print and get back to the things that really matter. Now is definitely the right time to get started with everything else on your financial plate — why not make today the right time after all?


Pension rules and regulations are quite complex. Below we have provided an outline of some of the main rules. However, we recommend that you seek professional advice from a Pensions expert prior to acting on any of the information contained below.


Pensions are the most commonly used method of saving for your retirement. By making regular contributions into a pensions fund from your wages, you can be guaranteed a regular income after your retirement.

Pensions are also a very tax efficient method of saving, since the contributions you make into the fund are not taxable, and the growth of the pensions fund is also tax free, unlike investments in shares, or cash deposits.

Contribution Limits

Individuals without relevant earnings (salary) can pay up to £3,600 per annum into their pensions funds and receive tax relief. Employed and self employed individuals with relevant earnings can pay up to £3,600 or 100% of earnings if greater, subject to the overall annual allowance. Details of what constitutes relevant earnings can be found at www.hmrc.gov.uk

Employers can make unrestricted contributions provided the total of employee and employer contributions do not exceed the annual allowance.

Annual Allowance

The Annual Allowance is an annual limit set by HMRC. Contributions paid in excess of this amount are unlimited but will give rise to a tax charge on the pension scheme member.

The Annual Allowance for the tax year 2013/14 is £50,000, inclusive of your own contribution and any other amounts paid into an approved pension scheme. The Annual Allowance increases each year.

Lifetime Allowance (LTA)

The Lifetime Allowance is the total value of all your pension funds, including personal and work-related pensions, but not including any state pension, which you can build up without paying extra tax. The LTA is not a limit on the value of your pension, it is a limit on the amount of tax-relieved pension saving that you can have. So, while there is no limit to the size of your pension, you may be required to pay extra tax if it is worth more than the Lifetime Allowance.

Most people will not reach the Lifetime Allowance, and will therefore be unaffected by this rule.

The value of the Lifetime Allowance increases each year, for example in 2007-08, the Lifetime Allowance was £1.6m, in 2008-09 it was £1.65m, in 2009-10 it is £1.75m, and in 2010-11 it will be £1.8m.

Tax Free Cash Lump Sum

Many people are aware that they will receive a tax free lump sum when they take their pension. The lump sum is typically 25% of the whole fund value. For example, if their pension fund is worth £200,000, then they could receive a tax free lump sum of £50,000.

Changes to the pension rules in April 2006 make it easier for people to take the lump sum from their pension now, while leaving the rest of the pension in place to take when they retire.

If you are aged between 50 and 75, then you may wish to consider releasing a tax-free lump sum from your pension.  See our Pensions Release section. Please note, your pension is a very valuable asset aimed at providing you with an income when you are no longer working. Once a decision is made to take the benefit from your pension, it is irreversible. We would advise you only to take a lump sum from your pension if it can be used to make a permanent change to your financial circumstances. New cars and holidays may sound attractive, but we would ask you to consider the longer term impact to your lifestyle if you were to use the benefit for such a purchase.

Minimum Retirement Age

The minimum retirement age will be increased from 50 to 55 from 6th April 2010.


If the value of your pension fund is below a certain level, it may be possible to cash in the pension fund, and receive a cash lump sum.  This right was brought in from 6 April 2006.  However, this option is only available where the total of all your pension funds does not exceed 1% of the Lifetime Allowance. For the tax year 2009/10, this will equates to £17,500.

Help & Advice

There are many different options to consider when choosing a personal pension and it makes sense to take advice from a qualified pension specialist who is independent and can offer you products and services from the whole of the market place.

Purchase Life Annuities

It is also possible to purchase an annuity from funds that did not originate from a pension fund. These are known as Purchased Life Annuities, and work in much the same way as an annuity from a pension, but with one notable and extremely beneficial difference.

Under pension rules the annuity you receive from a pension fund is treated as taxable income in the same way as income from normal employment would be. However if you use other monies to buy a Purchased Life Annuity, the tax treatment is different.

Some of the income received is treated as capital which is not taxed, and therefore the tax burden is reduced. The example below (based on a 65 year old male, basic rate tax payer with £100,000) illustrates the point:

  1. Pension Annuity – Gross Income = £7,370, Tax = £1,621, Net Income = £5,749
  2. Purchased Life Annuity – Gross Income = £7,370, Tax = £367, Net Income = £7,003.

The illustration assumes that both annuities have the same gross income payable.

This therefore raises the question of whether you should always exercise your option of taking tax free cash from your pension funds, even if you intend to purchase an annuity?

You should ensure that the equivalent pension annuity and purchased life annuity rates are the same, and if they are then it makes sense to withdraw your tax free cash entitlement and use a purchased life annuity, as in the above example the net benefit is over £100 per month.

Specialist can assist you in making this decision and would be happy to provide comparative illustrations.

A Necessary Step

So you have finally gone for that equity release scheme which has enabled you to buy a second home in France and you have even found the property of your dreams. The buying process is slightly different in France in many aspects, but one interesting point is that many buyers complete the process without a proper structural survey taking place.

A survey is optional and as it is fairly expensive, adding to the overall cost of buying a new property, many people choose to skip it altogether. The important thing to consider is that skipping the survey is something that may be very detrimental to the buying process.

equity release scheme

It happens often enough in the UK that the survey throws up some unexpected problem which makes you think twice about buying or means that you have to go for a reduction in price. with this in mind, buying property ‘blind’ in France seems somewhat foolhardy.

If you cannot speak French there are registered chartered surveyors who are English or who speak very good English available to you. This means that you will really know what you are taking on with the property and should not have any nasty surprises further down the line.

When you compare the cost of a property survey on the new home you are considering buying, it actually works out to be a small fraction of the purchase price. And by ensuring that the property is legal and sound in terms of structure, you could save thousands in unexpected bills.

How to Budget

Budgeting can feel a bit like pulling teeth – painful but necessary. To avoid that slippery slope into debt, it is best to become the master of your own finances. It’s easy to look away – out of sight, out of mind – but take control now, and make room for guilt-free treats!

Step One: Determine Your Income and Expenditure

It’s a simple equation: if your expenditure exceeds your income, you’re in trouble. If you list your expenditures you can compartmentalise them into two categories: necessary and unnecessary. For example, TV license (unnecessary), water bill (necessary). Once you know what you don’t need, you can start making reductions in luxuries.

Step Two: Save

A great idea is to set up an emergency savings fund. Even if you contribute only £10 of your salary a week to this account, the saving will put you in a great position to accommodate surprise expenses that you’d otherwise have to charge to a credit card you can’t afford to pay off. Slowly increase your weekly savings amount, until you have a nice nest egg.


Step Three: Set Financial Goals and Reward Yourself

This may be: ‘I will reach my £1,000 target in my emergency fund account.’ Once you meet these targets, don’t be afraid to reward yourself for your hard work. Hopefully, with enough budget adjustment, you’ll be left with enough spending money to still enjoy nights out or treats.

Step Four: Make Lists

List your outgoings; all the things you need to pay for, however small. Keep a spending journal, and enter your expenditure every day. Use whatever software is available to you to draw up a budget chart. If your computer doesn’t have any, a good old excel sheet works wonders.

Step Five: Forget Windfalls

Windfalls like end-of-year bonuses are not to be relied on. Gamble on windfalls, and you may find that they are nothing but a puff of smoke.

Step Six: Take Out Money

Your budget should tell you how much money you need to take out every week. Keep this safe in your house, and don’t run back to the ATM as soon as you run out. This will help you stay under budget. Continue reading “How to Budget”

Tax Refund Time Is Here Again, and the Financial Advice Is Here, Too!

Tax refund time is a great time to really dig down and look at your finances, but a lot of people don’t do it. We’re not casting blame here, really. In fact, it can be hard to be the voice of financial responsibility when just about every company in business today will be running some type of tax sale that you need to check out. This is when all of the big items go on sale as well. It’s hard to really pass up a cheap flatscreen or the latest and greatest washer and dryer when you know that you have the money. You know that. But if you’re struggling to make ends meet, it can feel like you’re always torn between what you should do and what you know that you must do.

Let’s ease your mind for a minute: there’s no reason that you can’t do both. You might not be able to get every last thing that you want, but you can still go out of your way to really make sure that you can get some things that you wouldn’t normally buy. Even if it’s just one really over the top nice meal at home, that can be rewarding. Remember that it really is your money, to a bonus — this is just money that you gave the IRS for a year and they have to pay it back to you. It’s an overpayment, nothing more than that. There’s no need to feel lucky.

Tax Refund Time

Having a plan before the refund hits can make it harder to blow your refund on frivolous purchases. Think about everything that you want, and then see if you really want it. Yeah, it’s cool to an advertisement for a really good sale, but what about if you could just jumpstart paying off some of those high interest credit cards? That would really be the best feeling of the world to really step back and be able to pay for the real things that matter. It’s tempting to just skip over all of this and plunge into something else, but you don’t want to do that. You don’t want to just seek pleasure when you’re in debt, because debt has a way of growing very, very quickly.

All things considered, now is definitely the right time to start thinking about getting out of debt. We always tell people not to just throw everything into the debt pool because they’re going to feel unsatisfied. And when you feel unsatisfied, you have a tendency to want to spend even more money. So sometimes the best thing that you can do is give in to some of your wants.

When it comes to the needs side, we think that thinking about setting up an emergency fund is a really, really good thing. Now is not the time to think that you can just sit back and wait for an emergency to happen — even if nothing has happened yet, you never know. The future is very uncertain, and it can often take a little emergency to really derail your finances.

The best thing that you can do right here, right now, is to make sure that you focus on the goals that you have for your life. Remember — nobody is going to want your dreams more than you, so keep that in mind and fight well! Good luck out there!

Priced Out of a Roth IRA – Don’t Be So Sure!

The Roth IRA has been cherished for years because it’s a great way to enjoy tax-free growth. The money you put into the Roth is taxed already, so there’s no taxes when you pull the money out. However, one thing that stops people from getting into the Roth IRA situation is that they end up making too much money. In the past, this meant that there was really no way that you could tap into a Roth IRA account. However, now there’s a “backdoor” method to getting it done.

You will need to open a nondeductible traditional IRA and then convert it over to a Roth IRA. You get an extra $5,000 each year that will grow in your Roth IRA income-tax free. You can do that every year and you’ll have a really nice retirement fund in the long run.

This is not going to be something for everyone, but if you find yourself at the crossroads of being priced out of the Roth yet still want to add more to your nest egg, this is a really good way to do just that.

With a Roth, you don’t have to take money out if you don’t want to — compare that when a traditional IRA, where you must take taking required mandatory distributions the year after you turn 70 1/2. Those distributions count as income.

With the Roth, you can take money out when you reach a certain age, but it’s all income-tax-free including the earnings that have been growing in the account.

Trying to think of the future can be tricky, but it is definitely important. For example, if you leave a Roth account to any of your children, there won’t be any income tax hit either. That’s better than with the traditional IRA, where there the distributions count as income.

Ideally, you’re going to need to have a blend of different retirement strategies for a golden retirement that you can count on. But this backdoor strategy really might be just what you’re looking for when it’s time to shield some of your income from taxes. Check it out today!

Tax payment options

In case you haven’t done so already, go ahead and file your income tax return. April 17th is quickly approaching and the IRS will want its money. Even if you don’t have the money to pay your full tax bill, make sure that you file your income tax return, or ask for an extension by April 17th. The absolute worst thing that you can do is to simply neglect paying your taxes. The IRS has stiff penalties for those who simply do not file.

By filing on time, you will avoid the IRS’s 5% monthly “failure-to-file” penalty. For each month that you don’t file, you will be charged 5% of your total tax obligation, up to a staggering 25%. After that, you will face a “failure-to-pay” penalty of 0.5% each month for the remainder of your tax balance.

If you do end up owing Uncle Sam some money, you’re in luck. The IRS offers a number of payment options for those who are unable to pay their entire tax bill at once.

Pay by Credit Card

Believe it or not, you can pay your tax bill with your credit card. The IRS has awarded two companies, Link2Gov Corp. and Official Payments Corp., with contracts to accept credit card payments on their behalf. Thru these two companies, you can pay your tax bill using your Visa, American Express, MasterCard, or Discover credit card. Both companies accept paper and electronic filers via phone or the internet.

Although paying with your credit card might seem ideal, you must be aware. The service does come with a price. Generally, these companies charge 2.49% of your entire tax bill or a minimum of $1, which ever is greater. If your entire tax bill was $3,400, expect to pay an extra $84 in fees.

When paying with your credit card, make sure that you can pay off your credit card bill in a timely matter. The longer you hold on to the balance on your credit card, the more you will end up paying in interest charges.

Start a Payment Plan

If your tax bill is greater than your credit card’s available credit, you can make monthly payments to Uncle Sam. The IRS will give you up to three years to pay off your entire tax bill as long as you don’t have any previous balances. On top of that, they will even allow you to choose your payment day and the payment amount. To enroll in the installment program, attach form 9465, Installment Agreement Request, to the front of your tax return.

Negotiate a Deal

When all else fails; you can’t pay with a credit card, or with a payment plan, it is time to play lets make a deal with Uncle Sam by making an Offer in Compromise or an OIC. An OIC is basically a lump sum payment lower than your original bill. The IRS offers OIC in hopes of getting some type of tax payer money sooner rather than after costly collection attempts.

Remember, negotiating an OIC with the IRS should be your last alternative. If you think that an OIC will simply get your tax bill reduced, think again. Not everyone who applies for an OIC will be approved. To even be considered, you must prove that you have no possible way of paying your entire tax bill. The IRS reviews your financial situation and future potential income to determine whether you have a reasonable payment offer.

If you believe that you may qualify for an OIC, you will need to file two separate forms: Form 433-A, Collection Information Statement and Form 656, Offer in Compromise. Along with these forms, you will also have to submit a $150 application fee along with Form 656-A, Offer in Compromise Application Fee Instruction and Certification.

This fee is waived for people who have little or no income if the claim a poverty exception when filing form 656-A. Make sure that you send in the application fee with your payment, if you don’t the IRS has the right to deny your application. If everything is submitted as required, there is still a possibility that you won’t get accepted for an OIC. If you aren’t accepted, you simply lose your $150 application fee. If you are accepted, the $150 go toward your tax bill.

Owing Uncle Sam a little bit of money once April 17th rolls around isn’t terrible. There are many options available to pay your IRS bill if you ever end up owing. The worst thing that you can do to yourself and Uncle Sam is not pay. By not paying, you will only worry yourself and accumulate more debt.

Are Social Security Concerns Really Exaggerated

Social Security has been a hot button issue since the days of LBJ, and that distinction is not likely to go away anytime soon. You’re going to want to think about Social Security as it applies to you, and that only makes sense. After all, when you look at your paystub and see that Social Security taxes have already been taken out, you might think to yourself you’ll never see Social Security in your lifetime. That means that you will need to really think about the bigger picture, which can be hard to do when it seems that everyone and their cousin has an opinion about Social Security. if you ask most people, they will tell you that there’s no way that Social Security will ever be around for you when you get old, which means that you’re essentially paying your Social Security taxes for no reason other than to support the current wave of retirement candidates. Is that fair? Not really, but that’s the system that we live under.

Of course, there could be a contrary view here, that Social Security concerns are being greatly exaggerated and that means that you’re going to still have hope for keeping your retirement. We think that it’s more or less in the middle between these two views. While Social Security isn’t going to just go quietly into that good night, we also have to remind people that it’s not going to be the way you would expect when you retire.

Yet that’s not a bad thing at all. The assumption that a lot of people make when it comes to Social Security is that it’s something that’s supposed to let you retire, and that’s not the case at all. It’s always been a supplement to retirement, a little boost to help you along. There’s no reason to give up your current annuities or pensions or anything else that you have in the bank designed to make your golden years a little more golden. We have t stop assuming that the government is supposed to take care of our every little need, and that’s the underlying feelings behind the push on Social Security. Don’t get us wrong — Social Security is still a good thing that helps a lot of people. But the cost of that “good thing” is the issue here, and we’re paying a lot higher cost than we should.

If you’re worried at all about Social Security, take that alarm as a great time to start your own investing life. Start reading up on what good investors do and take small steps. There’s nothing wrong with going towards the index funds rather than trying to play hot potato with the stock market, running from hot tip to hot tip. You’re going to need to decide that you don’t have to be financially illiterate anymore – with the rise of the Internet and all of the free information out there to get you started, there’s no reason why you can’t make the best run of this for your own purposes.

Getting everything in line is a smart idea, and getting things organized can take some time but it’s definitely worth it. Why not make sure that you have all of your ducks in a row today? After all — if you already have a great blueprint for retirement, then it doesn’t matter what happens to Social Security, really!