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Pensions

How Does Pension Consolidation Work?

In today’s fast-paced world, many individuals have multiple pension plans collected over their working life. Whether through changes in employment or setting up personal pensions as a self-employed professional or contractor, managing these pensions can become challenging. Not only does this involve significant administrative effort, but the financial implications of juggling numerous plans are also considerable. Some pension schemes may suffer from uncompetitive pricing and underperforming investments, eroding retirement savings.

STREAMLINING YOUR FINANCES

One of the primary motivations for consolidating pensions is the simplification of managing your finances. When you have several pensions, keeping tabs on each one’s investment performance, risk profile and asset allocation becomes a complex chore. Add to this the various charges associated with each pension, and the task grows more challenging.

For individuals with limited time or expertise, consolidating pensions into a single, more manageable pot could be a sensible option. Doing so may streamline your financial management and reduce the administrative fees that can reduce returns, especially if your pensions include outdated charging structures.

EVALUATING COSTS AND PERFORMANCE

While consolidating your pensions can potentially save on fees, it’s equally important to consider the investment performance of each fund. Some pensions may be underperforming, and transferring to a scheme with better growth potential could be beneficial. However, comparing charges and performance is not straightforward and requires professional advice to assess the best action.

UNDERSTANDING THE POTENTIAL PITFALLS

Despite the advantages, pension consolidation has its risks. Consolidating could mean forfeiting valuable benefits and guarantees. For example, some pension plans offer an enhanced pension commencement lump sum, allowing more than the standard 25% tax-free withdrawal.

Others might have a protected pension age or guaranteed annual returns, providing a safety net regardless of market conditions. Additionally, older schemes may offer favourable annuity rates or built-in life insurance. These elements are not always easily identifiable, underscoring the importance of a thorough professional financial review to avoid losing valuable benefits.

MAKING INFORMED DECISIONS

Deciding to consolidate your pensions is a significant decision that should not be taken lightly. The funds accumulated over the years could represent a substantial portion of your retirement income. Therefore, understanding all your options and their potential impacts on your savings is crucial for ensuring a financially secure future. With the right decisions, pension consolidation could lead to a more comfortable retirement for you and your family.

The Importance of Financial Protection

Nobody wants to consider what would happen if they became too ill to support their family financially. Financial protection is essential to creating peace of mind for your loved ones, but understanding what cover you may need can be confusing.

FINANCIAL SECURITY
Have you considered the implications financially if someone in your family were unable to earn money, became ill or were to die prematurely? It’s not something we like to think about, but if you have left regular employment and are now either retired or have become self-employed, then any previous protection you received from an employer becomes your responsibility. Think about the regular items you and your family spend money on – holidays, socialising, club memberships, family events. Paying for these could become more difficult without the right protection in place.

COVERING ESSENTIAL COSTS FIRST
Start by covering your debts and other essential costs, such as mortgage payments, council tax, utilities and food costs. You can then consider additional protection for other priorities.

The main types of protection include:

HEALTHCARE INSURANCE
Most UK residents are entitled to free healthcare from the NHS. However, some individuals also opt for private medical insurance. Also known as ‘PMI,’ it pays some or all of your medical bills if you’re treated privately. Basic policies typically cover the costs of most inpatient treatments, and more comprehensive policies extend their coverage to outpatient treatments.

CRITICAL ILLNESS COVER
Critical illness cover pays a tax-free lump sum or regular payments upon diagnosing a specified critical illness. A lump sum could help you to take time off, modify the house, pay for medical treatment, or give you time to recuperate or adjust to your new condition.

You can also build in children’s cover – a lump sum payout if they are diagnosed with a critical illness could allow you to take unpaid leave to care for them.

INCOME PROTECTION
Income protection pays out a regular income to replace income you’ve lost through being unable to work due to sickness or disability. You can choose to take cover for a set period of time – for example, one to three years or until age 65 – and delay the start of payments for a number of months, both of which can help keep premiums down. You can also choose your level of cover – usually somewhere between half and two-thirds of your income.

LIFE INSURANCE
Life insurance pays out on death and can provide a lump sum or regular monthly payments over a specified timeframe – say, until children reach a certain age. The payments can help pay off or cover a mortgage, pay for school fees and cover lost income.

PROTECTING YOUR INHERITANCE
In the event of your death, the size of your estate could determine whether your family or other beneficiaries become liable for Inheritance Tax. This tax can place a significant financial burden on your loved ones if insufficient funds are readily available or if adequate plans are not in place.

IMPORTANCE OF STRATEGIC PLANNING
Without proper planning, your family may be forced to sell valuable assets, such as the family home, to cover the tax bill. Therefore, it is crucial to consider all available options to protect your estate and ensure that your beneficiaries receive their intended inheritance.

One effective strategy is to set up a Trust for your dependants. A Trust offers several advantages that can alleviate the financial strain on your family. It pays out quickly upon death, eliminating the need to wait for probate to access the funds.

SETTING UP A TRUST
A Trust also falls outside of your estate, meaning there is no Inheritance Tax liability as long as it has been in place for seven years before your death, assuming the 14-year rule isn’t invoked. Additionally, some Trusts allow you to decide exactly how much money goes where and when, giving you greater control over the distribution of your assets.

Another critical component of Inheritance Tax (IHT) planning is considering pensions. Pensions generally fall outside your estate, offering a significant advantage in reducing potential IHT liabilities.

COMPLEXITIES OF PENSIONS
However, the rules governing pensions can be complex, necessitating professional advice. It is essential to inform the pension scheme of the right beneficiaries and keep your nomination forms up to date to ensure your family benefits as intended after your death. It is also important to note that a nomination form is not legally binding on the trustees. The pension trustees have discretion in order to ensure the benefits are outside the estate of the individual for IHT purposes.

Properly managed pensions can offer substantial tax advantages and financial security for your loved ones. Regularly reviewing your pension arrangements is vital to maintaining the effectiveness of your inheritance planning strategy.

REGULAR REVIEWS AND UPDATES
Reviewing and updating your financial plans regularly is crucial to protect your inheritance effectively. Life changes such as marriages and births, or changes in tax laws, can significantly impact your current strategy. Staying proactive ensures that your estate remains optimally managed and protected.

Inheritance planning is a complex field requiring careful consideration and expertise. Seeking professional advice can help you navigate the intricacies of Trusts, pensions and tax implications, ensuring your legacy is preserved for your loved ones.

Your Readiness for Retirement

Evaluating your Readiness for Retirement

Are you sure your target retirement age aligns with your financial status?

In today’s fast-paced world, the concept of retirement often takesa back seat. For many, it remains a distant reality, mired by uncertainties and apprehensions. However, planning for retirement is an essential aspect of financial planning, which warrants attention from an early age.

Retirement is a phase many of us eagerly anticipate, dreaming of the day when we can step away from the grind and immerse ourselves in activities that bring us joy. Yet, the reality of retiring often hinges on financial preparedness.

Let’s delve into four critical considerations to help you evaluate your readiness for retirement.

Envisioning Your Ideal Retirement
The first crucial step towards planning for retirement is identifying what you want yourpost-retirement life to look like. Remember, there’s no universal blueprint for retirement – everyone’s aspirations differ. Some might fancy the idea of relocatingabroad, embarking on globetrotting adventures or pursuing new hobbies. Others might prefer spending more time with their loved ones. A growing trend is the ‘phased’ or gradual transition to retirement, which involves reducing work hours or shifting to part-time roles or consultancy.

The Cost of Retiring
Once you have a clear vision of your retirement lifestyle, it’s time to estimate the associated costs. Broadly, your expenses will fall into two categories: essentials and non-essentials.

Essentials encompass mortgage payments, rent, utility bills, insurance, groceries and gifts for occasions like birthdays and Christmas.
Non-essential expenses revolve around entertainment, leisure activities and holidays – the extras that add zest to life.

Financial advice can assist you in calculating these expenses and estimating the retirement income required to cover them. We can also help you understand how your income needs may fluctuate over time, starting high during the early retirement years, gradually decreasing and possibly increasing again later due to care related costs.

Determining Your Pension Size
Once you have a clear understanding of your post-retirement income requirements, the next step is to calculate the size of the pension that can generate that income. This involves considering factors like life expectancy, investment growth, tax and inflation.

We can help you with these calculations and demonstrate the impact of various scenarios or choices, such as adjusting your retirement income, weighing the advantages and pitfalls of taking your tax-free cash lump sum or changing your retirement age.

Evaluating Your Current Savings
Finally, compare your retirement needs with your current savings. If your savings are on track to meet your goals, it’s time to strategise how to access your money during retirement. If there’s a shortfall in your savings, don’t panic. There are several strategies to boost your pension. You could consider increasing your pension contributions, extending your working years or leveraging other savings and investments.

Combining additional pension contributions, tax relief and investment growth can bolster your pension pot significantly. Additionally, don’t overlook other sources of retirement income, such as Individual Savings Accounts (ISAs) and the State Pension. We can provide a comprehensive view of your assets and potential income sources, helping you make informed decisions.

Investment Bonds

How bonds’ structure and tax advantages can help you pass on wealth

Investment bonds offer several benefits that some investors may be missing out on, and have become even more beneficial due to recent changes in tax regulations following the Chancellor’s decision to reduce the Capital Gains Tax (CGT) Allowance from £12,000 to £6,000 this year and to £3,000 in April 2024.

MINIMISE INHERITANCE TAX

These changes will likely appeal to investors who want to minimise Inheritance Tax (IHT) liabilities when passing on wealth. The IHT nil rate threshold has remained at £325,000 since 6 April 2009, with no indications of future increases. As a result, more individuals are considering trusts to keep their money outside their estates.

Investors who have already utilised their ISA allowances and other tax-efficient wrappers, or those who have received substantial windfall payments, such as inheritances, could benefit from using investment bonds. Investment bonds primarily fall into two categories: onshore and offshore. The key difference is their tax treatment, which can significantly impact returns.

ONSHORE BONDS

Onshore bonds are subject to UK Corporation Tax. However, this tax is offset by your provider, which means you, as an investor, do not have to worry about it directly. While this may seem like an advantage, it’s important to note that the tax could lower your return compared to an offshore bond.


OFFSHORE BONDS

On the other hand, offshore bonds are issued from outside the UK. The returns from these bonds roll up gross of tax in the funds, with the exception of Withholding Tax. This can potentially offer higher returns compared to onshore bonds, depending on your personal tax situation.


UNDERSTANDING OF THE TAX RULES

Despite these advantages, the research reveals that only a minority of investors fully understand investment bonds. However, there is potential interest among certain demographics. For example, 18% (9 million) of non-bond investors would consider investing in bonds. This interest is particularly prevalent among mass affluent consumers, those with children aged between 0 to 10, and individuals with a household income of £100,000 and above. It is worth noting that only 10% of UK adults claim to have a clear understanding of the tax rules regarding bonds. This lack of knowledge could hinder investors from fully capitalising on the benefits offered.


NOT SUBJECT TO CAPITAL GAINS TAX

One of the key advantages of investment bonds is that they are not subject to CGT. Onshore bonds are treated as having already paid 20% tax on any gains when calculating a chargeable gain. In reality, the actual tax deducted is likely to be less than this amount. In addition, investment bonds can be beneficial for IHT planning. If held in a trust, they can be exempt from IHT after seven years. However, despite this potential advantage, only a quarter of bondholders have written their bonds in trust, which means the bonds would still be considered part of their estate for IHT purposes.


CHARGEABLE EVENT OCCURRING

Investors can withdraw up to 5% of their initial investment each year without triggering a chargeable event or incurring immediate tax liability. Furthermore, top-slicing relief is available to reduce tax liability when a chargeable event occurs. This relief can eliminate or significantly reduce any tax liability, which can be advantageous for individuals in the accumulation phase and those preparing for retirement. For example, someone may be a higher rate taxpayer while owning the bond but can become a basic rate taxpayer when encashing it.

MAKE INFORMED INVESTMENT DECISIONS

Investment bonds also offer options for assigning them between spouses. From a tax perspective, the assignment is generally treated as if the new owner had always owned the bond. This can be particularly beneficial if one spouse is a basic rate taxpayer, as they may have no tax to pay upon encashment. Overall, investment bonds present numerous advantages, including tax benefits, that investors should consider. However, it is crucial for individuals to fully understand these benefits and the tax rules associated with bonds in order to make informed investment decisions.

Guide to the Principles of Growing your Money

Investing can be an intimidating and complex topic, but it doesn’t have to be with professional financial advice. Understanding the basic truths of investing will help you make better decisions, regardless of how much money you may or may not have.

By understanding these principles, you’ll be one step closer to achieving your long-term goals.

Start investing early
Investing early is one essential way to build wealth. Instead of waiting till you have a large amount of savings or cash flow to invest, the earlier you start investing, the better. This is because of the power of compounding. Compounding is the magical snowball effect that occurs when the pounds you earn through investing generate even more earnings. Essentially, not only does the original amount you invest grow, but also any interest, dividends and capital gains that you accumulate.

And the best part? The longer you are invested, the more time there is for your investment returns to compound. So don’t wait until you have a large sum of money – start investing early and take advantage of the powerful force of compounding. It can help you reach your financial goals more quickly and achieve the financial freedom you’ve been dreaming of.

Investing often is just as important as starting early
Investing regularly is a key strategy that can help you build more wealth over time and achieve this goal. By making investing a priority throughout the year – not just around certain deadlines – you can give yourself the best chance to succeed.

A disciplined approach to investing can help you weather all types of market conditions. Whether the market is rising, falling or staying flat, investing regularly can help you stay on track. With a fixed pound amount invested on a regular basis, you can buy more investment units when prices are low and fewer units when prices are high. This approach can potentially reduce the average cost of your investment over the long term.

Investing small amounts of money on a regular basis can also help you smooth out returns over time and reduce the overall volatility of your portfolio. By avoiding big market swings and focusing on the long term, you can build a sustainable investing plan that supports your financial goals.

So, are you ready to make investing a priority? Start investing regularly today and enjoy the benefits of a more disciplined and fulfilling approach to growing your wealth.


Diversification is a key element of your investment strategy
When it comes to investing, diversification is key to managing risk and generating consistent returns. By spreading your investments across different asset classes, sectors and markets, you reduce the impact of any one investment on your overall portfolio. Historically, diversification has proven to be one of the most effective strategies for reducing volatility and achieving long-term investment success. By constructing a well diversified portfolio that includes stocks, bonds, property and other assets, you can help ensure that your returns are more stable and less subject to market ups and downs.

Even in times of market turmoil, a diversified portfolio can help you weather the storm and stay committed to your longterm investment plan. Rather than reacting emotionally to short-term market fluctuations, a diversified portfolio allows you to stay focused on your goals and the bigger picture.

So if you’re looking for a solid investment strategy that can help you achieve your financial goals, diversification should be at the top of your list. With the help of professional financial advice, you can construct a well diversified portfolio that’s tailored to your unique needs and risk tolerance.


It’s time in the market that matters, not timing the market
When it comes to investing, being patient and consistent is key. The idea of ‘timing the market’ – or trying to predict when prices will go up or down, so you can buy at a low price and sell at a high one – is enticing.

But in reality, this strategy rarely works out successfully for investors and even if you manage to get out of the market at the right time, you are likely to miss out on significant gains when it rebounds.

Missing just a few of the market’s strongest days can have a significant impact on your overall investment returns, so it’s essential to stay invested and ride out the market’s ups and downs. By consistently investing over long periods of time, you are able to benefit from compounding returns and give your investments more chance to grow.

It also makes sense psychologically; since stock markets tend to fluctuate wildly in short periods but trend upwards over longer ones, staying invested for the long run can be less stressful. The longer you stay in the market, the more able you will be to ride out economic downturns without having to make desperate decisions that may not pan out. So, as an investor, it’s essential to remember – time in the market is more important than timing the market.

Markets go through up and down cycles, but they have trended higher over the long term
It’s no secret that markets are subject to cycles of ups and downs. While it can be stressful to see your investments drop in value, it’s essential to keep a long-term perspective.

Even when markets experience significant dips, such as during times of economic uncertainty or global crises, history has shown that markets have always recovered and continued to trend higher over time. Rather than panicking over short-term fluctuations, it’s wise to focus on your longterm investment goals and have confidence that the markets will eventually rebound.

Markets are unpredictable, so focus on what you can control
It’s easy to get caught up in the daily fluctuations of the market and allow fear or greed to influence your investment decisions. However, keeping emotions in check is crucial if you want to achieve long-term investing success. One way to do this is by creating a well-diversified portfolio that aligns with your risk tolerance and financial goals. This can help to mitigate risk and reduce the impact of market volatility on your portfolio.

Staying invested is also important during market downturns. While it may be tempting to sell off your investments and avoid potential losses, timing the market is a difficult game. You may end up missing out on market gains if you try to time the market, and you’ll need to be right twice – when to sell and when to buy back in. By staying invested, you give yourself the opportunity to benefit from the market’s eventual recovery.

Keep your focus on your financial goals, rather than on short-term market movements. This can help you avoid making knee-jerk reactions to market volatility and stay on track with your investing plan. By having a clear understanding of your financial goals and your time horizon, you can make investment decisions that are aligned with your long-term objectives. Remember, investing is a journey, not a destination. Stay focused, stay disciplined, and the results will come over time.

Volatility decreases the longer you’re invested
Investing is a dynamic process, and it’s essential to understand the relationship between risk and return. While all investments carry some degree of risk, if you’re looking to earn a higher return, you must be willing to take on more risk or volatility. On the other hand, if you have a low tolerance for risk, you may have to forego some returns to ensure your investments are more secure.

It’s important to note that the volatility in your portfolio tends to decrease over time, particularly if you’ve invested in a well diversified portfolio. As you remain invested for longer periods, your portfolio becomes less susceptible to market fluctuations, and this reduces the risk of potential losses. Therefore, it’s necessary to be patient and stay invested for the long term, even when things get rough.

Ultimately, understanding the relationship between risk and return is critical to successful investing. While there are no guarantees, the key to success is to embrace the right amount of risk while building a well-diversified portfolio.

The more frequently you check your portfolio, the more volatile it will feel
It’s natural to want to keep an eye on your investments, but checking it too often could lead you to unnecessary stress. As tempting as it may be to obsessively track the dips and spikes, it’s important to remember that investing is a long-term game.

The more often you check, the more you’re exposing yourself to the daily volatility of the market. Even if your investments have the potential to grow, they may experience temporary losses in the short term, causing you to panic and make rash decisions.

Instead, focus on your long-term investing goals and review your portfolio less frequently. This approach can help you stay on track and avoid reactions that could jeopardise your chances of achieving your financial objectives. Remember, investing is a marathon, not a sprint. So set it, and forget it – at least until it’s time for your next portfolio review. Be patient and have faith in your investments. Over time, they have the potential to grow and provide you with the returns you desire.

Headlines often focus on the sensational, short-term and negative – none of which should matter to investors. It’s important to not get caught up in the sensationalism of the news covering economic, financial or political events that can give you a reason to not invest. Instead, focus on your long-term investment goals.

This means ignoring the short-term noise and maintaining a diversified investment strategy that can weather various market conditions. When unforeseen events do occur, it’s important to remember that investing is for the long term. Don’t make any sudden changes to your portfolio or investment strategy based on a single event or headline – this can lead to ultimately harming your investments.

By staying focused on your long-term financial goals and maintaining a disciplined approach to investing, you can navigate markets in good times and bad, and ultimately achieve greater success in your overall financial strategy.

Planning your Retirement, and How to Get There

Retirement planning shouldn’t be something you only consider when you’re older. Starting to plan your retirement early gives you a greater chance to build the funds you need for a comfortable lifestyle when the time comes. Acting now will ensure that your long-term goals become a reality.

At every stage of our life it can be difficult to take time to think about our future when there are so many other things competing for our attention, but it’s important to be prepared and make sure that you’re planning ahead for the retirement you deserve.

By taking a personalised approach, you can develop a retirement plan that will work for you throughout your life.

Planning for retirement in your 20s

It’s never too early to start planning for retirement. Though retirement may seem a long way off, the earlier you start saving and investing, the more time the compounding effect on your money has to work. Putting money away now can make a huge difference to your retirement funds when the time comes.

Here’s why you should start planning for retirement in your 20s:

• It enables you to benefit from the power of compounding: Regularly investing amounts of money can grow into a large sum over time thanks to compounding.

• You can afford higher-risk investments: As retirement may be years away, making higher-risk investments such as stocks and shares in your 20s can help boost returns without putting too much at risk.

• It encourages good financial habits: Taking steps to plan for retirement now will highlight how to manage your finances better and make smart decisions about investments and pensions.

• You could get help from employers: Many workplace pension schemes offer employer contributions, which is free money that goes straight into your pension pot.


Planning for retirement in your 30s

It can be more difficult to save for retirement in your 30s, when you may have greater financial commitments such as a family or a mortgage. But it’s important to stay focused on your retirement goals, because the decisions you make now could have an impact on your later years.

Here are some tips for saving for retirement in your 30s:

• Minimise debt: Pay down any outstanding debts as soon as possible. This will free up more money for retirement savings.

• Optimise asset allocation: As you still have plenty of time until retirement, consider investing in growth assets such as equities.

• Save regularly and often: Try to make regular contributions into a pension account or tax-efficient investment vehicle such as a Stocks & Shares ISA.

• Take advantage of employer contribution schemes: Many employers offer generous contribution schemes which can boost your savings pot significantly over time.


Planning for retirement in your 40s

Your 40s are an ideal time to reassess your retirement plans and make sure that you’re on track.

Here are some tips to help get your retirement plan on track:

• Calculate how much you need to retire comfortably: Seek professional financial advice to determine how much money you need for retirement.

• Consolidate pension accounts: If you have multiple pension accounts across different employers, if appropriate, consolidating them could make it easier to manage them and provide more clarity about your pension savings.

It’s never too early to start planning for retirement. Though retirement may seem a long way off, the earlier you start saving and investing, the more time the compounding effect on your money has to work.

• Increase contributions: Consider increasing your contributions where possible as the higher salary typically seen in the 40s may afford this opportunity.

• Explore other options: Consider other tax-efficient methods of saving, such as transferring part of your salary into an ISA or investing in property, depending on what is available to you.

Planning for retirement in your 50s

Your 50s are a time to increase your pension contributions, review your retirement plans and make sure that you’re on track.

Here are some tips on how to do this:

• Make additional contributions: Consider making additional lump sum pension contributions, remembering to stay within the annual or lifetime allowance limits, with any excess liable for further tax charges.

• Review asset allocation: The closer you get to retirement, the more risk-averse your investment approach should be, so consider reducing exposure to higher risk assets such as equities and seek professional financial advice for tailored advice.

• Take advantage of tax allowances: Familiarise yourself with current pension allowances and explore any carry forward rules available if applicable.

• Speak to a financial professional: Consult a financial professional who can provide you with personalised advice tailored to your individual needs and requirements.


Planning for retirement in your 60s

In your 60s it’s time to prepare for the decumulation phase, an important time when it comes to your retirement planning.

Here are some tips to help get your retirement plan on track:

• Prepare a budget: Calculate your expenditure levels to help plan for the long term.

• Consider pension decumulation options: Explore the various ways you can convert your pension savings into retirement income and seek professional financial advice.

• Review asset allocation: As retirement is approaching, reduce exposure to higher risk assets such as equities.

• Review your plan regularly: Regularly reviewing your progress will help you prepare for retirement and make the necessary adjustments if needed.

Minimising or even Avoiding Capital Gains Tax Liabilities

Getting advice early and planning ahead before you sell an asset.

Capital Gains Tax (CGT) is a form of taxation imposed on profits earned from the sale of certain types of assets. Gains are calculated by subtracting the purchase price and related expenses (such as sales charges) from the selling price. They are generally taxed at a rate higher than income taxes in order to discourage speculation.

If you plan to sell assets that have appreciated in value, such as real estate, stocks or bonds, it is important to be aware of CGT and how it can affect your bottom line. Proper planning can help you minimise or even avoid CGT liabilities. For years, the annual CGT exemption has been a useful way of reducing your liability for CGT on any profits you may make from investments or disposals of assets. But with news in last year’s Autumn Statement that this exemption will be cut to £6,000 in 2023/24 and £3,000 in 2024/25, now is the time to take action if you want to protect your tax-free allowance.

Here are some ways to potentially reduce your CGT liability:

Use your CGT exemption

Have you made full use of the current 2022/23 CGT exemption, taking into account the upcoming reduction of this exemption commencing from the next tax year? The Chancellor, Jeremy Hunt, in his Autumn Statement last November announced that the CGT personal allowance will be more than halved to £6,000 in April 2023, and halved again to £3,000 in April 2024.

It is important to consider making any capital gains before the end of this current 2022/23 tax year, in order to maximise your current £12,300 CGT exemption. This approach will ensure that you are able to take advantage of all available resources and protect yourself from incurring a large liability down the line.


Make use of losses

When reporting capital gains to HM Revenue & Customs (HMRC), you may be able to reduce your tax liability by making use of losses. Losses and gains realised within the same tax year must be offset against each other, which in turn can help lower the overall gain that is taxable. Furthermore, any unused losses from earlier years can be carried forward for use, provided they are reported to HMRC within four years from the end of the corresponding tax year in which the asset was sold. It’s important to keep accurate records of all losses and gains so as professional advice can be sought when necessary. This can help ensure that you make the most out of available reliefs and minimise your CGT liability accordingly. Transfer assets to your spouse or registered civil partner

Couples and registered civil partners can take advantage of their combined annual CGT exemption by transferring assets between them. This is a tax-exempt transfer as long as it is a genuine, outright gift. By taking advantage of this exemption, couples and registered civil partners can benefit from increased capital gains opportunities that wouldn’t otherwise be available on an individual basis. The assets can be any type of property or investments that are liable to CGT, such as stocks and shares, land, buildings, business assets or personal possessions.

It’s important to note that the transferred asset will become part of the receiving partner’s estate for Inheritance Tax purposes in the event of their death. This could potentially result in a larger Inheritance Tax bill, so professional advice should be sought before making any transfers. In addition, if the transfer takes place when the asset has appreciated in value, it’s important to consider whether it would benefit you more to pay CGT on the gain before transferring the asset and using your single annual exemption instead.


Invest in an ISA (Bed and ISA)

Investing in an ISA can be beneficial for higher and additional rate taxpayers due to its exemption from CGT, so it is important to consider this option when making financial decisions. Gains and losses made on investments held within an ISA are exempt from CGT. Utilising the ‘bed and ISA’ tactic can be a professional way to maximise tax savings. ’Bed and ISA’ is a way to invest without being exposed to the tax implications associated with CGT. By selling assets to realise a capital gain and then immediately buying back the same assets inside an ISA, all future gains can be exempted from CGT. This helps investors make the most of their ISA allowance each year as they are able to use up to £20,000 in the 2022/23 tax year for single savers or £40,000 for married couples and registered civil partners. Investors need to understand that they may pay stamp duty and other costs when repurchasing investments in an ISA and there is a risk that time out of the market, however small, will detrimentally impact your investments.


Contribute to a pension

Making regular pension contributions from relevant earnings is a highly effective way to save on CGT. A pension provides an ideal opportunity for those looking to reduce their CGT burden while ensuring their funds remain secure in the long term. Investing in pensions could not only make you more tax-efficient but provide peace of mind that your money will still be available when needed most.

By contributing to your pension, you can effectively increase your upper limit of the Income Tax band. For example, if you make a gross contribution of £10,000 into your pension pot in the 2022/23 tax year, it would move the point at which higher rate tax becomes payable up from £50,270 to £60,270. This means that any capital gain plus other taxable income now falls within this extended basic-rate income tax band and as such CGT is payable at just 10% instead of 20% (18% on residential property gains).


Give shares to charity

One of the most rewarding ways to support a charity is to donate shares. By donating qualifying shares, you may be eligible for Income Tax relief and CGT relief from HMRC. This means that the value of your donation could be worth more than if you had donated money or other assets. It’s important to remember that only certain types of UK shares qualify for CGT relief, so it’s best to consult professional financial advice before making any donations.

Additionally, as with all donations, it’s important to keep records of your gifts in case HMRC needs further information at a later date. Donating shares to charity can be an incredibly meaningful way to show your support whilst also benefiting from generous tax relief.


Invest in an Enterprise

Investment Scheme Enterprise Investment Schemes (EIS) allow investors to benefit from CGT relief on investments. This tax relief applies to qualifying investments in smaller, unquoted trading companies and can significantly reduce the amount of CGT due as well as providing other potential benefits. Any gains made on investments in an EIS are tax-free if held for at least three years from the later of the date of issue or the date the qualifying trade begins. Moreover, it is also possible to defer a capital gain by investing that gain in an EIS qualifying company but only within one year before or up to three years after the gain arose. Once money is taken out of the EIS qualifying company, the deferred capital gain will come back into charge. When investing in an EIS, professional advice should always be sought to ensure that you are making the most suitable decision for your individual circumstances. This scheme is higher risk than more traditional investments, so investors need to make sure that they fully understand the risks associated.


Claim gift hold over relief

Gift hold-over relief is a tax consideration for anyone transferring business assets. If you meet the requirements, then you are eligible for a tax reduction when giving away certain business assets. To be eligible, there must be a genuine gift of the asset and the recipient must not make any payment in return. In addition, both parties must agree to the transfer and it must have been made at least one year before the date of sale by the recipient. If you do qualify for gift hold-over relief, then you won’t have to pay CGT on the gifted assets; however, if they are subsequently sold by the recipient they may incur CGT liabilities . It’s important to note that it must be proven that the asset was given away and not sold in order for the relief to apply. If you’re considering utilising gift hold-over relief, professional advice is advised as there are a number of conditions that must be met before being eligible.


Chattels that escape CGT

Chattels are personal possessions, such as antiques and collectibles, for which CGT does not always apply. Wasting assets – items with a predictable life of 50 years or fewer – may be exempt from CGT altogether provided they were not eligible for business capital allowances.

For non-wasting chattels, the CGT position depends on the sale proceeds, those under £6,000 usually being free of tax. It is important to seek professional advice if you are unsure about any aspect of CGT relating to your chattels so that you can ensure that you comply with the relevant legislation.


Seek professional advice

When it comes to CGT, professional advice is essential. Seeking professional financial advice can help you understand your CGT options, make sure you are taking advantage of all tax reliefs, allowances and exemptions available to you and advise on the best course of action for your individual circumstances.

We provide comprehensive professional advice and can help guide you through the complexities of CGT. Each person’s financial situation is unique, so tailored advice will ensure that you get the most from your investments.

How to Maximise the Value of Pension Savings

Mistakes to avoid when you’re aiming to build your pension pot

Many people are feeling the pressure on their finances at the moment due to the backdrop of rising inflation and the cost of living soaring. In these circumstances, it can be difficult to think about your long-term finances or even contemplate saving for the future. Even in the current climate there are ways to maximise the value of any pension savings you do have. By sidestepping seven common mistakes, you could take your pension planning to another level and reduce the risk of falling short of money later.

Don’t turn down money from your employer

When offered the opportunity to join a workplace pension, it’s nearly always a good idea to do so. For most people, your employer must automatically enrol you in a workplace pension scheme, and you may even be offered a pension plan if you don’t meet the criteria. Workplace pension schemes are made up of your own payments (5% or more of earnings), which are deducted from your salary, in some cases before you pay tax, making it easier to save, and your employer’s contribution, which at the very least, must be equivalent to 3% of your qualifying earnings. Many employers offer more than this or match any extra payments you make, so it’s worth checking if you’re getting the most out of this valuable benefit.

Don’t say ‘no’ to extra money from the government

Anyone who decides against investing in a workplace or personal pension also turns down help from the government. That’s because in order to encourage people to save for retirement, the government provides a top-up called ‘tax relief’ to pension payments. How you receive this tax relief depends on the type of plan you have and the rate of income tax you pay. But as an example, if you’re a basic rate taxpayer saving into a personal pension in the current tax year, you receive 20% tax relief on your payments. So, if you pay £200 a month into your pension plan, the £40 of tax relief you receive on that payment means it will only cost you £160. Higher rate or additional rate taxpayers could claim back even more.

Some workplace pension schemes offer tax relief in a different way, such as through salary sacrifice or exchange schemes, so check with your employer if you’re not sure how this works for you. And in Scotland, the tax relief details differ slightly. But in all these cases, the general point is the same: each time you defer paying into a pension plan, you miss out on an extra boost.

Don’t expect the state pension to cover everything

Another common mistake is to assume that the State Pension will meet your retirement needs. However, it’s important to know that the State Pension won’t be available until your late 60s and may not cover all of your outgoings. Currently, pensioners who are entitled to the full new single-tier State Pension receive £185.15 a week in 2022/23, worth £9,627.80 for the year. But remember that what you get depends on your National Insurance record, so you could get less.

Pensioners that reached State Pension age before April 2016 and receive the basic State Pension get £141.85 a week, or £7,376.20 a year.

Don’t lose track of your pension plans

It has never been more important to keep track of all your old pension plans. You are at most risk of having lost track of a pension if you have changed jobs multiple times, moved home often and not updated your pension providers or opted out of SERPS (the State Earnings-Related Pension Scheme) in 1980s or 1990s.

Don’t assume that the minimum is enough

Auto-enrolment has boosted the pension savings of millions of people but the 8% minimum payment may not get you the retirement lifestyle you want. It’s important to therefore have a retirement lifestyle in mind. We can discuss with you how much money you could have in your pension pot in the future, so you can ensure that you don’t !ind yourself in a situation whereby you have an income shortfall.

Don’t leave your pension pot unloved or neglected

You might not want to talk about your pension plan every day, but dismissing pensions as boring is a mistake, and one that becomes increasingly serious over time. While this might be difficult at the moment, steps such as topping up your payments, especially in your 20s, 30s or early 40s, can make a large difference, thanks to the snowball effect of compounding.

Knowing whether it’s workplace or private, understanding how to get more ‘free’ payments from your employer or the government, or using it to pay less tax (such as through bonus sacrifice) could make a major difference to your long-term finances.

Don’t assume that one pension plan is the same as another

A related mistake is not knowing where your pension pot is invested, whether that matches your life-stage and priorities or how to choose the right investment options. For example, if your retirement is still some years ahead, you could potentially afford to take a little more risk. Conversely, you may want to dial down the risk as you get nearer to retirement..

Family Protection

Three things to put on your family protection ‘to do’ list

There are various complex risks in life that we all face, such as serious illness, an accident or death. What would happen if something were to happen to you? Would your family be able to cope financially with the impact an unexpected event might have?

These are not easy questions to ask but it is important to consider what would happen if an unexpected event or accident took place, and how you could protect your family from the financial effects of serious illness or death.

Big part in our lives

Deciding what your priorities are and understanding what options you have are key parts of the protection planning process. This helps you ensure that you have the financial protection most suitable for your circumstances. Every family is different, but they often play a big part in our lives. It’s important to think about how we can protect them against the unexpected as best we can.

Protection for the unexpected

Life insurance

Death is an unpredictable event, so it’s important to make sure you have the right level of cover in place. The amount of life insurance you need will depend on your individual circumstances. There are many good reasons to take out a policy. For example, if you have dependents who rely on your income, then life insurance can provide financial security for them if you die.

There are different types of life insurance available, so choosing the right policy for your needs is key. Term life insurance provides cover for a set period of time, while whole of life insurance covers you for your entire life. You can also choose between level term insurance, which pays out a fixed amount if you die during the term of the policy, and decreasing term insurance, which pays out less as the policy progresses. There is also a variation on the basic term assurance theme that is often worth considering as it can reduce the cost of cover. Family Income Benefit is a policy with a sum assured that reduces uniformly over time but provides regular payments of capital on the death of the breadwinner (the life assured).

If you have any debt, such as a mortgage, then it’s also important to take out life insurance to make sure that this is paid off if you die. This will give your loved ones peace of mind and prevent them from being burdened with debt.

Income protection insurance

There are a number of reasons why income protection insurance should be a part of your protection planning. Firstly, it can help to protect your income if you are unable to work. This could be due to an illness, injury or disability that means you are unable to work. It can help to cover the costs of your everyday living, such as your mortgage or rent, bills and food. If you do not have sufficient protection in place this may mean you have to rely on your savings, or on the help of family and friends.

Income protection insurance is especially important if you are self-employed or have a family to support. If you are unable to work, your income protection policy will provide you with a replacement income so that you can continue to meet your financial obligations.

There are different types of income protection insurance policies available, so you should obtain professional financial advice to ensure you can compare the different options and fully understand the terms and conditions of the policy.

Critical illness cover

If you become seriously ill or are diagnosed with a specified critical illness, even if you are still able to work, critical illness cover could provide you with a financial safety net. The tax-free money can help to pay for treatment, to make adaptations to your home or lifestyle, provide an income for your family if you are unable to work or other costs associated with your illness. In some cases, it may even pay out a lump sum if you die as a result of your condition.

There is no guarantee that you will not experience a critical illness during your lifetime, so it is important to have this type of cover in place. It will give you the peace of mind of knowing that you and your family are financially protected if the worst were to happen. Critical illness cover is not a substitute for health insurance.

Getting Ready To Retire?

Bolstering your retirement lifestyle as you approach retirement

Have you ever wondered what you need to consider as you approach retirement? Whatever your concept of what is a good pension pot, one certainty is that relying on the State Pension alone will not give you a good enough pension to live on comfortably through your retirement.

‘Will I be able to retire when I want to?’ ‘Will I run out of money?’ ‘How can I guarantee the kind of retirement I want?’ These are hard questions to answer unless you obtain professional financial advice and why you need to start by reviewing your finances sooner rather than later to ensure your future income will allow you to enjoy the lifestyle you want.

After decades of working and saving, you can finally see retirement on the horizon. If you plan to retire within the next five years or so, consider taking these steps today to help ensure that you have what you need to enjoy a comfortable retirement lifestyle. Taking these actions now could help bolster your retirement lifestyle as you approach your planned retirement date.

8 Things to Consider as your Retirement Approaches

1. Track down your pensions
It’s important to track down all the different pension schemes you’ve previously paid into, so you can be sure you’re claiming everything you’re entitled to in retirement. If you’re unsure where to start, the UK government offers a pension tracking service to help you find lost pensions.

2. When can you access your pensions?
Since April 2015, pension freedoms have given savers in defined contribution (DC) schemes greater access to their cash, allowing flexible withdrawals from the age of 55.

3. What is your Pension’s Value?
The easiest way to find out how much your pension is worth is to check your pension statements. Whatever type of pensions you have, you’ll receive an annual pension statement from your provider. In it they’ll tell you how much your pension is currently worth and what it’s expected to pay out at your retirement date.

4. Get a State Pension Forecast
You can call the Future Pension Centre and ask for a State Pension statement. Your statement will tell you how much State Pension you have built up so far based on the National Insurance contributions and credits that are on your National Insurance record at the time your statement is produced. Contact the Future Pension Centre for questions about the State Pension or to ask for a statement. Telephone: 0800 731 0175, or from outside the UK: +44 (0)191 218 3600. Or obtain a forecast online at https://www.gov.uk/ check-state-pension

5. Get Investment Advice
If you are close to, or at retirement, you may want to reevaluate your plans. If you have access to other savings and investments, you might want to consider using these before accessing your pension. If you have other investments or savings, such as Individual Savings Accounts, stocks and shares, bonds, funds, property, etc, it’s worth checking their value as you approach retirement age asthey can support you in addition to your pension.

6. How Will you Access your Pension?
When it comes to deciding how to use your pension pot, there’s no one ‘right answer’. There are more pension options than ever thanks to the pension freedoms that allow savers access to every penny of their retirement savings. Your options may include taking a regular income or lump sums and keep investing the remainder in the stock market, or cashing in the entire amount. You can also choose to swap the money for a guaranteed income via an annuity.

7. How is your Pension Invested?
Pensions may be for the long term, but it’s important regularly to review where your money is being invested. You need to keep a close eye on which funds your retirement savings are in so that you can check you’re comfortable with the risks involved. You should also keep a close eye on how much you’re being charged, as fees can have a big impact on the amount you end up with at retirement.

8. The Benefits of Advice
Pension advice is important because pension products can be complicated, and life can be unpredictable. Professional financial advice will help you make the right decisions about your money and your future. Retirement planning is important because it can help you avoid running out of money in retirement. You need to know how much you’ve got, how to access it and when you can afford toretire comfortably.

The good news is that whatever your situation, and however you want to enjoy retirement, we can help set up bespoke arrangements that are right for your needs.

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