How to avoid a tax charge after April's Pension Lifetime Allowance cut

Posted: Jan 06, 2016

The Government has published draft details of the protection regime that will apply after the lifetime allowance (LTA) is cut in April. Chancellor George Osborne announced the cut, which will see the LTA reduce from £1.25 to £1m, in the 2015 Budget. 

The Government's draft finance bill, published in December, provides information on how savers who have already built up pensions worth more than £1m can avoid a tax charge. 

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Estate Planning with your Pension

Posted: Apr 10, 2017

It may sound strange, but your pension could be the last thing you should draw on in retirement.

Over the last five tax years the amount paid in inheritance tax (IHT), nearly all of which is collected on death, has risen by over 70%. However, there is one area where the IHT rules have become noticeably more favourable pensions.

A range of reforms has made defined contribution (money purchase) pensions, such as personal pensions, a valuable tool in estate planning. The broad rules are now:

• Pension death benefits are generally free of IHT. 

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Does pension beat property?

Posted: Jan 09, 2017

Andy Haldane grabbed a few headlines recently when in an interview with the Sunday Times he suggested his favoured investment for retirement savings was residential property. It is a view many people with a less profound understanding of economics would share, as evidenced by the popularity of buy-to-let property as an investment. Mr Haldane’s main justification for choosing property was that in the UK demand has consistently outstripped supply, which to an economist means prices can react only one way – “relentlessly heading north”. 

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Finding income in a tricky savings climate

Posted: Jan 09, 2017

The Bank of England asked two key questions last December – first: how far have ‘real’ interest rates (that’s after allowing for erosion by inflation) fallen globally? Second: how likely are they to stay at their current low levels? The Bank argued that the fall in real interest rates over the last 30 years was driven by a mix of changes including population aging and increased levels of saving especially in emerging markets. They thought these trends would persist and didn’t see interest rates rising much for some time either.

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LISA reappears after a summer redesign

Posted: Jan 09, 2017

In what proved to be his final Budget, George Osborne announced the launch a Lifetime ISA from April 2017. The LISA, as it was labelled, was widely seen as a stalking horse for future pension reforms, which might still emerge. 

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Is your family financially protected?

Posted: Jan 09, 2017

Reviewing life insurance provision is arguably even more important than making sure you are financially prepared for retirement or that your investments are in good order.  The reason is simply that an early death robs a person of the time needed to achieve their financial goals.  It is one thing to plan for retirement in, say 15 years, or build up a capital sum over five to ten years.  It is quite another to make sure your loved ones are provided for in the way you would want knowing that the date of your death could be anytime from today onwards.

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What is a £5,000 a year pension worth?

Posted: Jan 09, 2017

One of the answers to that £5,000 question – and there are many – is “a transfer value of 30 times the pension, in other words - £150,000”.  

If you’re surprised, then you are not alone. Two years ago such a transfer value figure would have been virtually unbelievable. Back in 2014, a multiplier of around 20:1 was common, making £5,000 a final salary pension worth around £100,000 if you were to transfer close to retirement. So why the big increase in values?

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Two wrongs and a right – tax evasion, avoidance and planning

Posted: Jan 09, 2017

As Theresa May announced in her final speech to October’s Conservative Party Conference:

“So it doesn’t matter to me who you are. If you’re a tax-dodger, we’re coming after you. If you’re an accountant, a financial adviser or a middleman who helps people to avoid what they owe to society, we’re coming after you too.

An economy that works for everyone is one where everyone plays by the same rules. So whoever you are you – however rich or powerful – you have a duty to pay your tax. And we’re going to make sure you do.”

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A third quarter investment lesson

Posted: Jan 09, 2017

If you had been asked at the start of 2016 what would happen to UK shares in the July-September quarter if the Referendum vote had favoured Brexit, the chances are you wouldn’t have predicted a 6% rise. And that almost certainly wouldn’t have been your response if you had been asked the same question at the start of the third quarter – just a week after the vote. 

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Time for an ISA review?

Posted: Jan 09, 2017

Investors placed over £73 in the cash component for every £100 they subscribed to ISAs, according to recent HMRC statistics for the tax year 2015/16. Overall, about half of all ISAs by value were held in the cash component. However, near zero interest rates mean the tax savings from cash ISAs are correspondingly small. With the advent of the personal savings allowance in this tax year, you may not even need an ISA to receive tax free interest. The value of tax reliefs depends on your individual circumstances. Tax laws can change.

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