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Pensions

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.

Minimising or even Avoiding Capital Gains Tax Liabilities

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

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

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

Here are some ways to potentially reduce your CGT liability:

Use your CGT exemption

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

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


Make use of losses

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

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

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


Invest in an ISA (Bed and ISA)

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


Contribute to a pension

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

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


Give shares to charity

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

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


Invest in an Enterprise

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


Claim gift hold over relief

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


Chattels that escape CGT

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

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


Seek professional advice

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

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

How to Maximise the Value of Pension Savings

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

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

Don’t turn down money from your employer

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

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

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

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

Don’t expect the state pension to cover everything

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

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

Don’t lose track of your pension plans

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

Don’t assume that the minimum is enough

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

Don’t leave your pension pot unloved or neglected

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

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

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

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

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.

Turn your Pension Savings into an Income for Life

There are many things to consider as you approach retirement. It’s good to start by reviewing your finances to ensure your future income will allow you to enjoy the lifestyle you want. The earlier you start thinking about what you’ll need for a comfortable retirement and where your money is going to come from, the more control you can have over that period of your life. 

The changes in the retirement landscape mean some people are adjusting their expectations for retirement. With life expectancy still on the increase, the need to save and plan for retirement is becoming ever more critical.

The concept of ‘retirement’, as viewed through the opinions of those currently saving towards it, may have a broad range of meanings. But the reality is that traditional ‘retirement’ is changing, with few now seeing it as a singular event. The future of retirement is likely instead to see a fundamental change in people’s lifestyles, with a growing aspiration to combine work and leisure to help manage the costs of a longer life expectancy.

It’s also important to remember that any investment comes with risk. All investments can go down as well as up, and you may get back less than you invest. A pension is a long-term investment not normally accessible until age 55 (57 from April 2028). Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change in the future. You should seek advice to understand your options at retirement.

What can you do with your pension?
Deciding how you want to start taking money. Due to the changes introduced by the government in April 2015, when you reach the age of 55 (subject to change) you now have more flexibility than ever when it comes to taking money from your pension pot.

But before you do anything with your hard-earned cash, it’s important to take the time to understand your options, as the decisions you make will affect your income in retirement. Before you take money from your pension plan, it’s important to ask yourself if you really need it right away. When and how you take your money can make a big difference to how much tax you might pay and how long your money will last. Most pensions will set an age from which you can start taking money from your pension. They will also have rules for when you can take your pension earlier than normal, for example, if you become seriously ill or unable to work.

When the time comes to start taking money from your pension, you’ll need to decide how you want to do this. If you’ve got a personal pension or a defined contribution pension, you can take up to 25% of its value as a tax-free lump sum. The remainder of your pension fund will be taxable and may either be taken as cash, used to buy an annuity (a guaranteed income for a specific period or for the rest of your life), or you may leave the money invested and take withdrawals on a regular basis or as and when you need.

With a defined benefits pension, you may be able to take some of its value as a tax-free lump sum, but this will depend on the rules of your scheme. The rest of the money will be paid to you as a guaranteed income for the rest of your life.

Different levels of risk and security and potentially different tax implications
The different ways of taking your money have different levels of risk and security, and potentially different tax implications too. As with all retirement decisions, it’s important to take professional financial advice on what’s best for you. Everybody’s situation is different, so how you combine the options is up to you.

Annuities – guaranteed income for life
Annuities enable you to exchange your pension pot for a guaranteed income for life. They were once the most common pension option to fund retirement. But changes to the pension freedom rules have given savers increased flexibility. The amount you will receive depends on a number of factors, for example, how long the insurance company expects you to live and other benefits the annuity provides, such as a guaranteed payment period or payments to a spouse or dependent. Annuities can also be for a specific period, not just for life. This can be useful if someone wants a guaranteed income for part of their retirement, say say before the State Pension is payable.

Flexible retirement income – pension drawdown
When it comes to assessing pension options, flexibility is the main attraction offered by income drawdown, which allow you to access your money while leaving it invested, meaning your funds can continue to grow. Pension drawdown normally allows you to draw 25% of your pension fund as a tax-free lump-sum, or series of smaller sums.

This ‘tax-free cash’ is known as the PensionCommencement Lump Sum, or PCLS.
The rest of the fund remains invested and is used to provide you with a taxable income, via withdrawals on a regular basis or as and when you need. You set the income you want, though this might be adjusted periodically depending on the performance of your investments. You need to manage your investments carefully because, unlike a lifetime annuity, your income isn’t guaranteed for life.

Uncrystallised Funds Pension Lump Sum (UFPLS)
You do not have to draw your pensions commencement lump sum at the outset. Instead you may use your pension fund to take cash as and when you need it and leave the rest untouched where it can continue to grow tax-free.For each withdrawal, the first 25% (quarter) is tax-free and the rest counts as taxable income. There might be charges each time you make a cash withdrawal and/or limits on how many withdrawals you can make each year.

Combination – mix and match
It may suit you better to use a combination of the options outlined above. You might want to use some of your savings to buy an annuity to cover the essentials (rent, mortgage or household bills), with the rest placed in an income drawdown scheme that allows you to decide how much you wish, and can afford, to withdraw and when.

Alternatively, you might want more flexibility in the early years of retirement, and more security in the later years. If that is the case, this may be a good reason to delay buying an annuity until later.

Find out more about your options for taking an income in retirement and what you need to consider. If you’re unsure about the best approach for you, please get in touch with us for further information.

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