News

These are strange times in the investment markets.

Source: Barclays Equity Gilt Study

Whether it’s the Extinction Rebellion protests or Greta Thunberg’s speech to the UN, there has been a renewed focus on climate change in recent months, and what individuals can do about it.

This has led to calls for investors to divest funds away from ‘harmful’ industries and sectors such as oil and gas, mining and airlines, which are some of the biggest producers of carbon and other greenhouse gases. This doesn’t just apply to organisations with millions of pounds at their disposal. Ordinary investors also have opportunities to ‘green’ their ISAs and pensions.

Increasing numbers of people are facing substantial tax penalties on their pensions, sometimes unexpectedly. Are you at risk of an unwelcome surprise?

Tax and national insurance contribution reliefs for pensions cost £53.7bn in 2017/18, according to statistics issued by HMRC in September 2019. It is little wonder therefore that successive Chancellors have attempted to cut back on the government’s generosity.

The most recent attacks on pension reliefs have focused on two key aspects:

Christmas is around the corner and adverts for toys and gadgets are everywhere. But have you thought of making a gift of an investment to your children or grandchildren that has longer-term value?

Instead of something they soon outgrow or forget, you could choose:

●       Junior ISAs (JISAs), which have a maximum overall investment of £4,368 in 2019/20 for each child. JISAs make great gifts because they escape tax on investment income and capital gains, as well as the anti-avoidance rules on parental gifts to minor children.

State pensions are set to rise by 3.9% from next April - the biggest increase since 2012. 

This means that those receiving the old state pension (i.e. those who reached state pension age before 6th April 2016) will see their basic payment increase by £5.05 per week to £134.25, while those receiving the new state pension (those who reached state pension age since 6th April 2016) will see an increase of £6.60 per week to £175.20. 

Annuity rates hit their lowest level since 1994 in September, with implications for those making retirement decisions.

Since the introduction of pensions flexibility in 2015, annuities have become much less popular as a way of converting a pension fund into income. The most recent figures from the Financial Conduct Authority show that over five times as much money is placed in income drawdown now as goes towards annuity purchase.

A recent report looking at who pays the most income tax reveals some interesting findings.

The Institute for Fiscal Studies (IFS) published a briefing note in early August with a detailed answer to the question of what it takes to enter the 1% club. Around 310,000 people make up this cohort, with some predictable and not so predictable traits:

Is a state pension age (SPA) of 75 looking more likely?

There are currently long delays in gaining probate on the estates of the recently deceased.

Late in 2018, the government issued a written statement announcing its intent to go ahead with controversial increases in probate fees for England and Wales. Instead of the current flat fees of £155 for applications through a solicitor and £215 for individual applications, draft legislation was issued with a sliding fee scale that rose to £6,000 for estates valued at over £2m. To many, the measure looked more like a new tax than a fee increase.

Women generally insure themselves for much smaller sums than men, although both buy life insurance and critical illness cover in roughly equal numbers.

The average level of cover for a man’s life insurance policy is around £130,000, but only around £85,000 for women’s policies, according to an analysis of policies by software company IRESS. The gap is even larger with critical illness policies, which pay out if you are diagnosed with one of the listed critical conditions. Here, the average cover taken out by women is around half the average cover for men.