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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financial management and reduce the administrative fees that can reduce returns, especially if your pensions include outdated charging structures.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.

Pension Scams on the Rise

Protect your savings! 7.3 Million UK Adults encountered an attempted Scam in the past year.

Around 7.3 million UK adults, or one in seven, encountered an attempted pension scam in the past year. Alarmingly, 14% were targeted through unsolicited calls, texts or emails, according to recent research, illustrating the aggressive tactics employed by scammers. This concerning trend has prompted a closer examination of the vulnerabilities within the pension system, especially as scammers become increasingly sophisticated in their approaches.

This study also highlighted that six million individuals with multiple pension pots may be at greater risk, as half of the respondents believe scams are becoming increasingly difficult to identify.
The complexity of managing several pension accounts can leave individuals more susceptible to fraudulent schemes, as it becomes challenging to keep track of all the details.
Scammers take advantage of this confusion, making it harder for people to discern legitimate communications from deceitful ones. This growing difficulty in identifying scams calls for heightened awareness and stronger protective measures to safeguard pension savings.

RISING THREAT OF PENSION SCAMS
However, the awareness of reporting a scam is worryingly low, with only 32% of people knowing the proper channels. However, this figure improves significantly to 55% among those who consult financial advisers. This discrepancy underscores the importance of professional financial advice in mitigating the
risk of scams. The research further uncovered a high prevalence of various consumer scams. A
significant 42% of respondents reported phishing attempts, 36% encountered scams imitating reputable brands and 24% experienced refund scams.

YOUNGER PEOPLE AT HIGHER RISK
Interestingly, younger individuals between the ages of 18 and 34 are more susceptible to
scams than the general population. The study found that 13% of this age group had been targeted, in contrast to 7% of the wider public. The evolving tactics of scammers make it increasingly challenging for consumers to avoid falling prey. With the growing number of people managing multiple pension pots, keeping track of their finances has become more difficult.

PROTECTING YOUR PENSION
To safeguard against pension scams, hanging up on unsolicited cold calls is crucial. Recognising unexpected contact as a potential red flag can also help avoid hasty and ill-informed decisions.
Additionally, verifying firms on the Financial Conduct Authority (FCA) registry provides an extra layer of security. Remaining vigilant and informed is essential in this climate of sophisticated scams. Consumers must take proactive steps to protect their hard-earned savings.

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.

Guide to Individual Savings Accounts

This guide explains the changes to Individual Savings Accounts (ISAs) for the 2024/25 tax year. ISAs offer a versatile and tax-efficient way to save for the future, whether for yourself, your children, or your grandchildren. Now that we have entered the new financial year, significant changes have been introduced to ISAs.

Since 6 April, savers and investors have had a more flexible approach to using their ISA allowance. For the first time, individuals can open multiple accounts of the same type of ISA within a single tax year, from 6 April one year to 5 April the next, provided they do not exceed the annual ISA limit. This marks a departure from previous rules, which annually restricted savers to one account per ISA type.

Partial transfers and the British ISA
In addition to this newfound flexibility, the rules now permit partial transfers of funds from current tax year ISAs into different types of ISAs, enhancing the ability to tailor savings strategies to personal needs. Furthermore, the government has proposed a new ‘British ISA’ featuring a separate £5,000 allowance aimed at investments in UK-based companies on the UK stock market.

The Chancellor’s announcement of the British ISA during this year’s Spring Budget seeks to complement the existing £20,000 annual ISA allowance. This initiative is still under consultation, with a deadline set for 6 June, signalling a potential boost for domestic investment.

Diverse spectrum of ISAs
The ISA regime offers a variety of options to cater to different financial goals and risk appetites. Whether prioritising safety, growth or a mix of both, there’s an ISA type to match most requirements. From Cash ISAs, known for their simplicity and tax efficiency, to Stocks & Shares ISAs, which offer the potential for higher returns albeit with increased risk, choosing the right ISA depends heavily on individual circumstances.

Cash ISAs
Cash ISAs serve as a cornerstone for riskaverse savers, providing a straightforward, tax-efficient haven for cash savings. Cash ISA products can be easy access accounts that allow immediate withdrawals or fixed rate accounts that reward savers for committing their funds for a predefined period. Although these accounts can offer both higher and lower interest rates typically offer lower interest rates than standard savings accounts, they present a valuable tax shield, especially for those who have maximised their savings allowance or anticipate doing so.

The allure of Cash ISAs lies in their tax advantages. Interest earned within these accounts does not contribute to the saver’s personal savings allowance, thereby offering a tax-efficient growth environment for savings. This feature is particularly beneficial for higher rate taxpayers and those with substantial savings, making Cash ISAs an option despite potentially lower interest rates compared to non-ISA savings accounts.

Stocks & Shares ISAs
Stocks & Shares ISAs, sometimes referred to as ‘investment ISAs’, present an opportunity for individuals to diversify their investment portfolio across a broad spectrum, including collective investment funds, Exchange Traded Funds (ETFs), investment trusts, gilts, bonds, and stocks and shares. This form of investment carries an inherent risk since the value can fluctuate significantly; however, historically, the stock market has offered returns that surpass those of traditional savings accounts over extended periods.

Investors can choose investment funds within a Stocks & Shares ISA, where funds are amalgamated with those of other investors and managed by a professional fund manager, diluting the risk associated with individual investments failing.

Proceeds from Stocks & Shares ISAs are tax efficient. This encompasses both capital gains and dividends derived from the investments within the ISA. The convenience of not having to report these investments on a tax return simplifies the investment process, making Stocks & Shares ISAs an appealing starting point for newcomers to the investment world.

Lifetime ISAs
The Lifetime Individual Savings Account (ISA) presents a unique opportunity for individuals aged between 18 and 40, potentially benefiting your children or grandchildren. For each pound deposited into the account, the government offers an additional 25p, tax-free. With an annual contribution limit of £4,000, savers can receive a maximum bonus of £1,000 per year. This fund can be used to purchase a first home worth up to £450,000 or for retirement savings, functioning similarly to a pension scheme. It is important to note that funds can be freely accessed after the age of 60 to supplement retirement income.

However, early withdrawals for other purposes incur a 25% penalty. The Lifetime ISA is available in two forms: Cash ISA and Stocks & Shares ISA. The Chancellor’s announcement of the British ISA during this year’s Spring Budget seeks to complement the existing £20,000 annual ISA allowance.

The market for Cash ISAs within this category is limited, with only a handful of providers. The £4,000 contribution towards a Lifetime ISA is counted within the broader £20,000 annual ISA allowance.

Junior ISAs
Turning our attention to Junior ISAs (JISA), these are designed for individuals under the age of 18. This financial year allows for an investment of up to £9,000 in either cash or stocks and shares. Access to the funds is restricted until the beneficiary turns 18, at which point full control over the account is granted. From the age of 16, they can manage the account, making it an ideal option for those looking to foster financial independence in their youth. From the start of the 2024/25 tax year, the minimum age to open a Cash ISA increased to 18.

ISA transfers
The flexibility to transfer across different ISA providers and types (from cash to stocks and shares or vice versa) enhances the appeal of ISAs. However, verifying transfer policies with your chosen providers is critical, as not all permit transfers. Direct withdrawals and transfers should be avoided to maintain the funds’ tax-efficient status. Instead, the recommended approach involves initiating the transfer through the receiving provider, who will manage the process on your behalf through a straightforward form.

ISAs and spousal inheritance
When it comes to managing the financial aftermath of a loved one’s passing, understanding the nuances of how Individual Savings Accounts (ISAs) can be inherited is key. An ISA can be transferred to a surviving spouse while retaining its coveted tax-free status, offering a silver lining during such difficult times.

However, it’s important to note that no further contributions can be made to the ISA once the original owner has passed away. Nevertheless, any increase in account value during the probate period remains exempt from tax. For the surviving spouse, this transfer includes an additional ISA allowance, which is calculated based on the higher of two values: the cash or investments inherited or the market value of the ISA at the time of the original holder’s death.

Non-spousal beneficiaries
The situation becomes markedly different when ISAs are bequeathed to beneficiaries other than the spouse. In these instances, the value of the ISA may fall within the scope of Inheritance Tax (IHT), which is levied at a rate of 40% on portions of the estate exceeding the current £325,000 (2024/25) IHT threshold.

This significant tax implication underscores the importance of proactive estate planning to effectively navigate the potential fiscal impact.

Preserving Wealth for Future Generations

Starting estate planning early and Implementing it in stages is desirable.

The UK Treasury has been receiving record-breaking Inheritance Tax (IHT) receipts. IHT receipts amounted to approximately £7.09 billion British pounds in 2022/23, compared with £6.05 billion in the previous financial year[1]. For individuals and families who have to pay it, IHT can be emotionally challenging, often requiring the sale of cherished family assets to settle the tax bill. That’s why starting estate planning early and implementing it in stages is essential. Also, having an open conversation about estate planning with family members is very beneficial but depends on family dynamics and wealth levels.

MINIMISE TAX LIABILITIES
However, families should take proactive measures to minimise the possibility of facing a substantial IHT bill. By planning ahead and seeking professional advice, individuals can ensure their assets are managed to minimise tax liabilities. Creating a comprehensive wealth strategy involves considering various factors.

Here are some key points to keep in mind:

LIFETIME CASH FLOW
We can help you assess your assets and income to ensure we support your desired lifestyle throughout your lifetime. By understanding your cash flow needs, we can assist in structuring investments and creating a sustainable financial plan.

LIFETIME GIFTING
Gifting can be a valuable tool in wealth planning, allowing you to reduce a potential IHT tax burden. We can guide you on the various gifting allowances and exemptions available, such as the annual gifting allowance, wedding gifts and gifts from normal expenditure out of income.

TRUSTS
Most trusts offer flexibility and control over how your assets are distributed. They can also help reduce taxes on inheritance. This excludes Absolute Trusts, where control over assets is discretionary. Working closely with us, you can explore different trust options and understand how they can be incorporated into your wealth planning strategy.

PENSIONS
Pensions are important in wealth planning, offering tax advantages and the potential for long-term financial security. We can help you navigate the complexities of pensions, including risk assessment, accessing pension funds and maximising tax benefits.

PROTECTION COVER
Protecting your loved ones in the event of death or illness is crucial. We can advise on selecting the right protection products to provide liquidity for IHT and other associated costs.

BUSINESS RELIEF
Incorporating business relief into your wealth planning strategy can be advantageous if you own a business or have qualifying assets. We’ll help you understand the eligibility criteria and how to leverage this relief effectively.

FINANCIAL CONTROL AND ESTATE PLANNING
Creating a Will ensures that your assets are distributed according to your wishes. Additionally, appointing a Lasting Power of Attorney provides someone with financial control over your assets and peace of mind if you cannot manage your affairs.

Estate planning is not a one-size-fits-all approach. Although there is no requirement to address IHT, proactive planning can minimise the tax burden on families. Seeking professional advice and taking steps early can help reduce the risk of leaving loved ones with a larger tax bill than necessary.

Source data:

[1] https://www.statista.com/statistics/284325/unitedkingdom-hmrc-tax-receipts-inheritance-tax/

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.

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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