Five Things you Wanted to Know About Pensions

Five Things you Wanted to Know About Pensions

by | Mar 22, 2022 | Planning, Retirement

FIVE THINGS YOU WANTED TO KNOW ABOUT PENSIONS:

BUT HAVEN’T GOT ROUND TO ASKING

29

MARCH, 2022

Pensions
Lifetime Allowance

The world of pensions is complex and ever-changing. You may have a bunch of questions that you’re saving up to ask your adviser next time you have a catch up.

1. SHOULD I BE CONCERNED ABOUT BREACHING THE PENSIONS LIFETIME ALLOWANCE?

Tax rules state that savings in a pension exceeding the Lifetime Allowance of £1,073,1001 will attract a tax charge of up to 55%.

Having a pension worth over £1million might sound like a pipe dream, but the reality is more and more people are breaching the limit.

In the tax year 2010/11, HM Revenue & Customs (HMRC) collected £32million from people breaching the Lifetime Allowance2. This soared to £342 million in 2019/20.

With the threshold frozen until 2026, this upward trend could continue to climb.

You may be able to use certain protection rules to lift your limit. However, if these are unavailable to you, certain benefits might make footing the tax bill worthwhile. You can talk to your adviser about the right options for you.

2. I’M LUCKY TO HAVE A FINAL SALARY PENSION – SHOULD I BE WORRIED ABOUT THE SECURITY OF MY SCHEME?

When faced with company insolvency, large employers can struggle to fund their final salary pension scheme.

However, there’s a safety net for final salary pension holders as schemes are protected by the Pension Protection Fund (PPF). Its protections meant that if your employer or former employer fails and your scheme can’t afford to pay you what you have been promised, the PPF will compensate you3.

“When it’s time to start drawing on retirement savings it’s vital to ensure your savings last as long as you need them to.”

3. SHOULD I TRANSFER OUT OF MY FINAL SALARY SCHEME?

Transferring your retirement benefits out of a final salary pension scheme means giving up an income for life in return for a cash value. The Financial Conduct Authority and The Pensions Regulator believe that it will be in most people’s best interests to keep their defined benefit pension4.

However, if you do decide that you want to transfer, and your pension is worth more than £30,000, it’s a legal requirement5 for you to seek advice from a financial adviser.

Remember, there are many scams operating in pensions. There could be fraudsters trying to encourage you to transfer your money overseas, for example, into fake investment schemes. Be on your guard.

4. WILL MY PENSION SAVINGS LAST?

When it’s time to start drawing on retirement savings it’s vital to ensure your savings last as long as you need them to.

An adviser can help predict how long your savings are likely to last, though it’s not an exact science because the amount in your pot depends on a number of factors, including how the stock markets perform. An adviser could help set sensible withdrawal levels, with an idea of how long the savings would last.

Professionals have access to sophisticated cash-flow modelling which can help forecast of whether your investments – including your pension – are going to be sufficient to cover future lifetime costs.

5. WHAT HAPPENS TO PENSIONS IN A DIVORCE?

When it comes to splitting pension pots, there are typically three options.

Pension sharing is the most common as it provides a clean break between parties. The Court will issue a pension sharing order (PSO) stating how much of the pension, the ex-spouse or partner is entitled to receive, and each party can decide what to do with their share independently.

There’s also the option to “offset”, where you balance the value of the pension against another asset. For example, your ex might keep all of their pension fund, and as a trade-off you get more of a share, or all of the family home.

The third option is to seek a pension attachment order. Under this order a percentage of your pension that you get, each week or month, is paid to your ex, or a percentage of theirs is paid to you.

Advice is crucial to ensure the right decisions are made for all the family.

PROVIDING NEWS AND VIEWS TO SUIT ALL NEEDS

This Blog is published and provided for informational purposes only. The information in the Blog constitutes the author’s own opinions. None of the information contained in the Blog constitutes a recommendation that any particular investment strategy is suitable for any specific person.

Tavistock Partners Limited is authorised and regulated by the Financial Conduct Authority. Tavistock Partners (UK) Limited is authorised and regulated by the Financial Conduct Authority. Tavistock Private Client Limited is authorised and regulated by the Financial Conduct Authority. The Tavistock Partnership Limited is authorised and regulated by the Financial Conduct Authority. Abacus Associates Financial Services is a trading style of Tavistock Partners (UK) Limited which is authorised and regulated by the Financial Conduct Authority. Duchy Independent Financial Advisers is a trading style of Tavistock Partners Limited which is authorised and regulated by the Financial Conduct Authority, All subsidiaries are wholly owned by Tavistock Investments Plc.

Cost of Living Crisis and the Impact on Savings

Cost of Living Crisis and the Impact on Savings

by | Mar 14, 2022 | General Investing, Planning

COST OF LIVING CRISIS AND THE IMPACT ON SAVINGS

16

MARCH, 2022

Costs
Savings

The rising cost of living is impacting households far and wide, putting pressure on budgets. Prices are rising, most notably, for energy bills, groceries and filling up the car with fuel. One knock-on effect when bills get more expensive is the difficulty for individuals to maintain their current level of monthly savings.

A new study revealed that three in five (62%) already admit they are struggling to maintain savings commitments, with a third (33%) highlighting the increased cost of living was the main obstacle. Other barriers included a lack of income (28%), high outgoings (18%) and prioritising debts (15%).

The report showed that those aged between 35 and 55 were most likely to cite the cost of living as the main hindrance to saving, with 37% of respondents in this category reporting problems compared to just 31% of those aged between 18 and 34 and 55+1.

Continuing to save and invest is important to ensure you strive towards your financial goals.

There are a number of ways to maintain a savings habit when household finances get tighter.

Here are five key pointers:

GET BUDGETING

The key to being able to save is to spend less than you earn. This is harder when monthly outgoings are heading north. But by perhaps limiting spending in other areas, you can continue on your investment journey. Take some time to look through your bills and make sure you’re on the best deals for everything from your mobile phone and broadband to your mortgage and TV subscriptions. Keep going until you have made some savings.

“You can keep hold of a bigger portion of your earnings by claiming all the tax reliefs you’re entitled to.”

REMIND YOURSELF OF YOUR GOALS

Maintaining your savings habit will be made easier if you remind yourself of your long-term goals. It’s easier to resist cutting monthly savings when you know it will delay reaching those goals.

AUTOMATE YOUR SAVINGS

Hang on to or set up a monthly amount on payday that goes to your savings and investments. As a reminder, investing on a regular basis can help you become a more disciplined investor. You’re forced to invest regardless of whether the price is high or low. This takes some of the emotion out of investing and avoids any delays in putting your money to work.

Plus, by drip feeding your money into an investment over time, you invest across a range of prices. So, you effectively pay the average price over a fixed period, which can help smooth out market volatility.

REDUCE YOUR TAX BILL

You can keep hold of a bigger portion of your earnings by claiming all the tax reliefs you’re entitled to. There are lots of ways to reduce your tax bill, whether you’re an employee or self-employed, a landlord, investor or pensioner. A financial adviser can help you take advantage of the many tax relief opportunities available when it comes to your savings and investments. At home you can check you’re on the right tax code and make sure you are utilising tax-efficient perks at work such as a season ticket loan (if you’re back in the office) and for the self-employed to make sure you’re using all the deductibles you’re entitled to.

REVIEW YOUR FINANCES

A review with your adviser might be in order if your finances dramatically change as a result of rising inflation and bills.

However, if money is seriously tight and you are starting to get to the point where you’re borrowing to pay bills, it’s time to talk to a debt adviser. You don’t need to be in serious debt to ask for help – debt charities will guide those with any level of debt that cannot be paid back.

Consider charities such as National Debtline (https://www.nationaldebtline.org 0808 808 4000), StepChange Debt Charity (https://www.stepchange.org 0800 138 1111), or the Debt Advice Foundation (http://www.debtadvicefoundation.org 0800 043 40 50).

PROVIDING NEWS AND VIEWS TO SUIT ALL NEEDS

This Blog is published and provided for informational purposes only. The information in the Blog constitutes the author’s own opinions. None of the information contained in the Blog constitutes a recommendation that any particular investment strategy is suitable for any specific person.

Tavistock Partners Limited is authorised and regulated by the Financial Conduct Authority. Tavistock Partners (UK) Limited is authorised and regulated by the Financial Conduct Authority. Tavistock Private Client Limited is authorised and regulated by the Financial Conduct Authority. The Tavistock Partnership Limited is authorised and regulated by the Financial Conduct Authority. Abacus Associates Financial Services is a trading style of Tavistock Partners (UK) Limited which is authorised and regulated by the Financial Conduct Authority. Duchy Independent Financial Advisers is a trading style of Tavistock Partners Limited which is authorised and regulated by the Financial Conduct Authority, All subsidiaries are wholly owned by Tavistock Investments Plc.

International Women’s Day(new)

International Women’s Day(new)

by | Mar 8, 2022 | General Investing, Planning, Social Media

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08

MARCH, 2022

Investing
IWD

It’s official: women are better investors than men. They just don’t think they are. In fact, a 2017 study from Fidelity Investments1 shows that just 9 per cent of women believed that statement. But that same study also analysed returns on investments by both men and women – and found that the women earned 0.4 per cent higher on their investments than the men. That figure might look small but it represents a whole lot of added value over time.

That study isn’t the only one, either. There’s a whole body of research2 which shows that women tend to make better financial decisions around investing. They’re more objective, they are less impulsive and they hold more diverse portfolios. As Fidelity’s senior vice president of women investors Alexandra Taussig said: “Women need to lean in and own the fact that they’re better investors and celebrate that.”

Bust the myths

So why don’t women celebrate our financial abilities more? Sadly, it’s hardly surprising that womens’ confidence is taking a while to grow. After all, as recently as the 1970s, many were routinely refused3 mortgages, loans, and credit cards.

Consequently, a disempowering myth grew up that women couldn’t manage money. A study by Merrill Lynch and Age Wave4 found that just 52% of women say they feel confident managing their investments, compared to 68% of men. Yet over a third of women in that study said they wished they had invested more of their money.

Be the change you want to see

But there’s good news: it’s the 21st century and the male-dominated world of investing is changing fast – and changing for the better. Last year, for example, saw the biggest-ever rise in the percentage of female fund managers. The number of mixed-gender portfolio management teams has doubled over the last six years – and these teams perform best in all markets on risk return. As the Citywire Alpha Female report5 points out, that shatters the myth that women prefer not to take risks in investing.

Women’s increased visibility in the professional fund management space matters, because it’s helping to boost confidence among women who want to manage their own investments.

And those investments are now more accessible than ever.

There’s still a way to go, but the investment landscape is finally changing to cater more for female investors. Tech is democratising investment strategies, information and processes: the dusty office and disapproving bank manager have long been consigned to history.

“It’s time to take control of your finances and realise just how much power you have in the investment space.”

Make a difference

Financial products are changing too, as the world changes and investor priorities change with it. Evidence shows that women are more likely to seek out sustainable investing. They care more about where their money goes, and they want to see that it’s making a real difference. As a recent RBC Wealth Management6 study of its US clients commented: “Female clients… are more likely to prioritise environmental, social and governance (ESG) impact when considering what companies or funds to invest in, while male clients are much more likely to prioritise financial performance.”

Just do it

And you no longer need hundreds of thousands to make investing worth it. In the 21st century, it’s for everybody, no matter how much money you have. So, if you’ve been considering taking your first steps into investment, it’s a great time to join the millions of women who are already doing it. It’s time to take control of your finances and realise just how much power you have in the investment space. After all, your financial decisions could literally change the world.

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PROVIDING NEWS AND VIEWS TO SUIT ALL NEEDS
This Blog is published and provided for informational purposes only. The information in the Blog constitutes the author’s own opinions. None of the information contained in the Blog constitutes a recommendation that any particular investment strategy is suitable for any specific person.

National Insurance – The Lowdown

National Insurance – The Lowdown

by | Feb 25, 2022 | Economy, Market Updates, Planning, Uncategorized

NATIONAL INSURANCE –

THE LOWDOWN

15

MARCH, 2022

National Insurance
Tax

There’s plenty of column inches in the news dedicated to the cost of living crisis at the moment. As well as having to deal with soaring inflation and sky-high energy bills, it’s important to prepare for the fact that we’re all going to pay more National Insurance from April.

How it will affect your own finances depends on earnings. Essentially, the more you earn, the bigger the impact on take home pay.

National Insurance is a tax on earnings paid by both employees and employers; the self-employed pay it on their profits. It’s used to pay for the NHS, benefits and the state pension. Here we’ve got the low down on the changes.

HOW MUCH IS NATIONAL INSURANCE RISING?

Employees, employers and the self-employed will all pay 1.25p more in the pound for National Insurance from April 2022.

Lower National Insurance thresholds1 included in the Autumn Budget in October would normally mean workers pay less tax. (Thresholds tend to increase each April to account for inflation.)

Yet the increase in National Insurance by 1.25% means that most taxpayers will be subject to higher bills.

WHERE IS THE EXTRA CASH GOING?

The government says the changes are expected to raise over £12 billion a year2. Initially, this will go towards easing pressure on the NHS.

A proportion will then be moved into the social care system. The aim is to make sure people in England pay no more than £86,000 in care costs from October 2023.

Proposals3 state that pensioners will still have to pay up to £86,000 – but then the Government will step in cover the rest of the bill.

Government estimates state that private payers would reach the £86,000 cap after three years in residential care and six years receiving care at home.

There will be other crucial changes. At the moment you have to pay for residential old-age care if you have more than £23,250 in assets if you live in England. The threshold is £50,000 in Wales4 and £28,750 in Scotland5.

The £23,250 limit will rise to £100,000 under the Government’s new plans taking effect in October 2023.

People with assets of between £20,000 and £100,000 would contribute towards the costs of their care on a sliding scale.

Anyone with savings under £20,000 will not pay anything.

“From April there will also be an increase on tax charged on income from dividend payments.”

THE FUTURE OF NATIONAL INSURANCE

Technically, from April 2023, National Insurance will return to its current rate. Yet the extra tax will still be collected, badged as a new Health and Social Care Levy. This levy – unlike National Insurance – will also be paid by state pensioners who are still working.

MORE PAIN FOR TAXPAYERS

The National Insurance increase is not the only thing in the pipeline that will impact our income.

Back in the March budget, income tax thresholds were frozen until 20266, meaning that people on more modest salaries will also be pulled into higher tax brackets and pay higher tax bills.

Frozen thresholds include the personal allowance, which is sticking at £12,570.

From April there will also be an increase7 on tax charged on income from dividend payments. On an amount that exceeds the £2,000 limit per person, basic, higher and additional-rate taxpayers currently pay 7.5%, 32.5% and 38.1% respectively. In the new tax year – from 6 April 2022 – the rates are rising. For basic rate taxpayers it will climb to 8.75% and for higher-rate and additional-rate taxpayers it will rise to 33.75% and 39.35% respectively.

If there’s ever been a time to ensure your money is working as tax efficiently as possible, it’s now.

PROVIDING NEWS AND VIEWS TO SUIT ALL NEEDS

This Blog is published and provided for informational purposes only. The information in the Blog constitutes the author’s own opinions. None of the information contained in the Blog constitutes a recommendation that any particular investment strategy is suitable for any specific person.

Tavistock Partners Limited is authorised and regulated by the Financial Conduct Authority. Tavistock Partners (UK) Limited is authorised and regulated by the Financial Conduct Authority. Tavistock Private Client Limited is authorised and regulated by the Financial Conduct Authority. The Tavistock Partnership Limited is authorised and regulated by the Financial Conduct Authority. Abacus Associates Financial Services is a trading style of Tavistock Partners (UK) Limited which is authorised and regulated by the Financial Conduct Authority. Duchy Independent Financial Advisers is a trading style of Tavistock Partners Limited which is authorised and regulated by the Financial Conduct Authority, All subsidiaries are wholly owned by Tavistock Investments Plc.

End of Year Tax Planning

End of Year Tax Planning

by | Feb 23, 2022 | General Investing, Planning, Uncategorized

END OF YEAR TAX PLANNING

– if you don’t use it

24

FEBRUARY, 2022

TAX PLANNING
ISAs

As the end of the tax year approaches, it’s important to review if you have taken full advantage of the tax breaks and shelters available.

There are plenty to make use of. One of the most popular is the ISA allowance, which is £20,000. This allowance cannot be rolled over into next year. If you don’t use it, you lose it. Be sure to use the maximum of this year’s allowance before the use-by date of April 5, 2022.

WHY MAX OUT AN ISA?

The tax-free allowance renews every April, so you might wonder if you should bother using up the existing years’ allowance.

By taking full advantage of the tax-free allowance you could potentially grow a savings pot worth hundreds of thousands of pounds over time – there’s no limit to how much the value of your investment ISA can grow. In fact there are now 2,000 ISA millionaires in the UK1 according to new data. The top 60 have pots averaging a whopping £6.2 million.

The investors in this sought-after club will have had a combination of maxing out their ISA allowance each year but also some very generous investment returns.

A Junior ISA allowance of £9,000 this year is available for children up to 18 years of age. As with other ISAs, everything you put into a “JISA” is exempt from any further income tax or capital gains tax. The benefit of using a “JISA” is that by gifting money to your children, you’re removing money from your own estate, which could help cut back the amount of Inheritance Tax payable on your estate when you pass away. To ensure you get the most out of the benefits of a “JISA”, you will have to do so before April 5, 2022.

INHERITANCE TAX (IHT) PLANNING

One of the most straightforward ways to support family members is to give away assets while you are still alive. This can be done in a manner to minimise inheritance tax (IHT) for loved ones. For example, using the various exemptions such as the ‘annual exemption’ allows individuals to give financial gifts, tax-free, to the value of £3,000. You can also give £250 to any number of people every year, though you can’t combine it with your annual £3,000 gift.

MAKE SURE TO USE YOUR ALLOWANCE:

– The amount you can give each year is £3,000

– This is per person so you and partner can give a combined total of £6,000

– The allowance can be carried over for one year, so if you haven’t used last year’s, this year you can give a combined total of £12,000

– The gifting allowance deadline for this tax year is 5 April 2022

“Up to £40,000 a year can be put into a pension. If you go over the limit you won’t get tax relief on further pension contributions.”

MAKING THE MOST OF YOUR PENSION

To go right back to basics; a pension isn’t an investment in itself. It is a tax-efficient pension pot where investors can place a portfolio of investments. The beauty of a pension is that money invested inside this so-called tax-wrapper grows free of capital gains tax and income tax.

A Self-Invested Personal Pensions (SIPPs) offers tax relief on contributions. All taxpayers get 20% paid by HMRC to the pension and if you pay income tax at a higher or additional rate you can claim relief from HMRC on your self-assessment tax return.

Up to £40,000 a year can be put into a pension. If you go over the limit you won’t get tax relief on further pension contributions.

CARRY YOUR PENSION ALLOWANCE FORWARD

If you do not use all your allowance in one year, you can defer it for up to three years. The cut-off date effective for the 2018-19 taxation year is April 5, 2022. The cut-off date for your pension annual allowances this tax year is 5 April 2022.

CAPITAL GAINS TAX

Capital gains tax (or CGT) is very complex to understand, so it’s no wonder that people fall into the trap of paying too much or end up being penalised for not paying when they should. You’re liable for CGT when you sell an asset at a profit. This could range from a second home to shares or valuables such as jewellery or antiques. The first £12,300 of capital gains per financial year are tax free. Speak to your financial adviser to find out more about CGT and how you could potentially reduce your bill.

WHAT TO DO NEXT

The deadline for the tax relief and allowances noted above is April 5, 2022. Don’t let them pass, contact your adviser to find out how you can take full advantage of the tax allowances before the end of the tax year.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

PROVIDING NEWS AND VIEWS TO SUIT ALL NEEDS

This Blog is published and provided for informational purposes only. The information in the Blog constitutes the author’s own opinions. None of the information contained in the Blog constitutes a recommendation that any particular investment strategy is suitable for any specific person.

Tavistock Partners Limited is authorised and regulated by the Financial Conduct Authority. Tavistock Partners (UK) Limited is authorised and regulated by the Financial Conduct Authority. Tavistock Private Client Limited is authorised and regulated by the Financial Conduct Authority. The Tavistock Partnership Limited is authorised and regulated by the Financial Conduct Authority. Abacus Associates Financial Services is a trading style of Tavistock Partners (UK) Limited which is authorised and regulated by the Financial Conduct Authority. Duchy Independent Financial Advisers is a trading style of Tavistock Partners Limited which is authorised and regulated by the Financial Conduct Authority, All subsidiaries are wholly owned by Tavistock Investments Plc.

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