Sample Page – Tantum

Have you had a retirement conversation?

Many people do not engage in crucial conversations regarding the lifestyle they envision.

As we approach one of life’s most significant transitions – retirement – many people do not engage in crucial conversations about the lifestyle they envision or assess whether they’re on track to achieve it. Recent research highlights that half of those aged 55 and over have not discussed their desired retirement lifestyle with a partner or loved one.

Moreover, 53% of this age group have not considered whether they have the financial means to sustain their retirement dreams. Interestingly, the younger age group of 18-34-year-olds seems more open to discussing retirement, with only 43% having never broached the subject.

BREAKING THE SILENCE ON FINANCIAL MATTERS
Conversations about key financial matters remain taboo among those over 55. Over 40% have never discussed the location of essential documents like bank accounts, insurance policies and Wills with loved ones. This reticence contrasts sharply with the ‘loud budgeting’ trend popular among younger generations, where transparency about financial goals and spending habits is common. Across the UK, many remain silent on financial matters: a third of people have never discussed their household budget and 41% have never discussed their short-term financial objectives.

BENEFITS OF FINANCIAL DIALOGUE
Discussing finances and planning for the future may be uncomfortable, but aligning with loved ones on shared goals is crucial. Engaging in these conversations is particularly beneficial for older generations, strengthening relationships and providing practical advantages. Talking about money can facilitate budget planning or ensure mutual understanding of future wishes, such as health care preferences in case of illness or incapacity.

SHARING FINANCIAL INFORMATION
It’s wise to share key financial details with trusted individuals, like the location of important documents. This proactive approach ensures preparedness for future needs. While initiating these discussions may seem daunting, they are essential for effective short- and longterm planning. Understanding whether you’re on track to meet your goals or need to adjust your plans is vital.

RETIREMENT GOALS AND TIMELINES
It’s essential to discuss when and how you plan to retire, especially with your partner. These discussions should cover whether you aim to retire simultaneously and what activities you wish to pursue. Understanding each other’s expectations regarding daily expenses, travel and hobbies will clarify the savings required for your retirement dreams.

LOCATING PENSION POTS
You and your loved ones have likely accrued multiple pension pots from various employers. Discussing past employment and pension benefits can motivate you to locate and consolidate these pensions. Keeping track of your pensions and savings is fundamental to informed retirement planning.

NOMINATING BENEFICIARIES
Most pensions don’t form part of your estate, meaning your Will doesn’t cover them. Instead, you can nominate beneficiaries through your pension provider. Discussing your nominations with loved ones can prevent future disagreements and clarify your intentions.

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.

Placing Assets into a Trust

Ensuring your legacy is managed according to your wishes long into the future…Trusts are a powerful tool for estate planning, providing flexibility and control over asset distribution. Properly structured, they can address various scenarios and requirements, ensuring that your legacy is managed according to your wishes long into the future.

Trusts separate assets’ legal ownership from their beneficial ownership. The legal owner holds the title and is empowered to deal with and administer Trust assets, while the beneficial owner – as the name suggests – derives the benefit from them. This could be in terms of usage, income from those assets or sale proceeds.

GAINING CONTROL THROUGH TRUSTS
A person known as the ‘settlor’ places assets into a Trust, which may include money, property or other types of assets like life insurance policies and investment portfolios. This may be done during their lifetime (a Lifetime Trust) or can be triggered by death through a valid Will (a Will Trust). By placing the assets into this structure, the original owner may relinquish some of their rights and delegate responsibility to a trustee during their lifetime.

However, they can gain a lot more control in other ways. A settlor can project their wishes years into the future. Provided a Trust is set up correctly, you can determine who gets what and when with a good deal of precision. Trustees can be professionals (who work for a Trust company) or any other competent person prepared to take on these responsibilities.

VERY WIDE-RANGING POWERS AND TASKS
Trustees can have very wide-ranging powers and tasks, including settling tax bills and hiring investment management and legal professionals. If the Trust is discretionary, meaning they have discretion regarding the distribution of assets, they might also have to make certain decisions about how to use the Trust income and/or capital. For these reasons, many prefer to have their Trust administered by professionals, paying them annual fees from the Trust’s assets. However, others looking to structure family wealth may appoint a mixture of professional and family friend trustees to create a balance of objectivity and personal knowledge of the beneficiaries’ situations and needs.

EMOTIONAL ASPECTS OF TRUST MANAGEMENT
Combining professional expertise with personal familiarity can ensure that both the technical and emotional aspects of Trust management are adequately addressed. Professional trustees bring technical know-how and impartiality, while family friends may offer deeper insight into the beneficiaries’ circumstances.

By thoughtfully selecting trustees, you can achieve effective and empathetic management of your Trust, ensuring that your wishes are fulfilled as intended. A blend of professional and personal trustees can provide a balanced approach, safeguarding the beneficiaries’ financial and personal interests.

TYPES OF TRUSTS
Various types of Trust are available, and the settlor needs to decide which type is best suited for the circumstances. A quick summary of the principal types of Trust is as follows:

Bare/Absolute Trusts – Where the settlor transfers the legal ownership of assets to the trustee for the benefit of the beneficiary absolutely.

Interest in Possession Trusts – The beneficiary (or sometimes known as ‘life tenant’) holds a right to the Trust fund’s income or the right to use Trust assets. The remainderman’s (the person who receives the property after the death of the life tenant) entitlement relates to the underlying capital.

Discretionary Trusts – This arrangement gives trustees flexibility and control over how best to use the Trust assets for the benefit of the beneficiaries. This flexibility helps in situations where children or grandchildren may not yet be born at the time the Trust is set up, as they would therefore automatically be included as a beneficiary.

Note that these are just a few examples; many other types of Trust can be used under different circumstances.

TAX PLANNING AND TRUSTS
It’ll be of no surprise that one of the main reasons for using Trusts is for tax planning and mitigation. For example, when an individual dies, their estate (i.e., net assets) is subject to Inheritance Tax (IHT), meaning the beneficiaries may lose up to 40% of their net inheritance. If assets are put into trust during a settlor’s lifetime and they survive seven years, they are not part of the estate on death and may escape IHT at that time subject to the 14- year rule not being invoked. Trusts are used in certain IHT planning arrangements for the settlor’s benefit, such as Gift and Loan plans, Discounted Gift Trusts and Flexible Reversionary Trusts.

TRUSTS IN WILLS
Trusts are frequently created in Wills, particularly where the beneficiaries are minor children who need someone to look after them financially. Any asset left to a minor under a Will is effectively held in trust for the minor by the executors until the minor reaches majority unless the Will allows payment to be made to a parent. Trusts can be explicitly created in Wills to ensure that a beneficiary does not benefit until some other age is attained or a condition is fulfilled. There are many other reasons for setting up Trusts, notable examples being to provide a pension, provide for families, assist a charity, give property to those who legally cannot hold it, and gain protection from creditors and business protection.

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.

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.

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.