Category: Uncategorised

Categories

Does an increase to capital gains tax look likely?

While Rishi Sunak’s spring budget introduced a variety of new initiatives and updates to multiple taxes, one suspected change was missing from the big red book. Analysts had posited that a capital gains tax hike would be a likely inclusion in Sunak’s budget, expecting it to be brought more in line with income tax and sitting at around 25%.

While, for now, capital gains tax remains at its pre-covid rate of 20%, we cannot assume that’s where it will remain. Government debt is at an all-time high, and there is speculation that an increase to CGT is one technique that may be used to address this debt. In 2020 the government’s tax adviser recommended that CGT be overhauled. This proposal suggested that a significantly higher number of people would be liable to pay the duty than currently do.

Capital gains tax is a tax on the profit made when an asset is sold or ‘disposed of’ after increasing in value. Disposing of an asset includes sale, gift giving or a transfer to somebody else, swapping it or receiving compensation for it – an insurance payout for a lost or destroyed asset for example. The tax is on the gain received, not the total value received. For example, a painting purchased for £5,000 and sold for £25,000 demonstrates a gain of £20,000. It is on that £20,000 that the tax would be payable. You do, however, only have to pay CGT on overall gains above the tax-free allowance which currently sits at £12,300 or £6,150 for trusts.

In February of 2021, HMRC’s published tax receipts data showed that CGT receipts were the highest they had ever been at £10.4bn, which may be an indicator that people were attempting to solidify their capital gains ahead of a predicted CGT increase. Whether that increase is to be expected in the near future is uncertain; we may find out at the chancellor’s next budget.

If you’re interested in how a change to the capital gains tax rate could affect you and your assets, it’s advisable to seek professional advice. If you have any questions surrounding the potential impact on your personal finances or the topic in general, don’t hesitate to get in touch. 

Sources
https://www.ftadviser.com/investments/2021/03/03/capital-gains-tax-out-of-firing-line-in-budget/

https://propertyindustryeye.com/the-big-overhaul-for-capital-gains-tac-is-yet-to-come

What is the state of the mortgage market after a year of Covid?

Like all markets, the mortgage market has not avoided the impact of coronavirus. A year after the start of the pandemic let’s take a look at what we can learn from the last twelve months and what can be expected as we move forward.

The availability and variety of mortgage products saw a fairly dramatic decrease throughout 2020. Many lenders withdrew deals from the market when the first impacts of the pandemic were felt in the UK, and the hardest hit were high LTV (loan-to-value) mortgages. This is because deals that require a 5% or 10% deposit, known as 95% LTV or 90% LTV are considered higher risk for lenders. This left first time buyers with little choice, if any (depending on the size of their deposit) and those with plans to remortgage using a small deposit also found themselves with fewer options.

For existing homeowners on their lender’s standard variable rate, mortgage repayments may well have fallen over the last year. The average SVR on the 1st of March 2020 was 4.90%.  One year later on the 1st March 2021 the average SVR sits at 4.41%. Borrowers may seek to reduce these monthly repayments further by switching to a fixed rate deal, however it is entirely possible that remortgaging in this way could be out of reach for some consumers depending on how their circumstances have been impacted by Covid. 

In the last few months, we have seen an increase in available mortgage products. As of February 2021 there were 3,215 mortgage deals available. In comparison to March of 2020 when 5,222 deals were on the market, it may seem relatively low, however, it is the highest number since and indicates a trend of expanding options. This is particularly good news for first time buyers, as the largest rise in deals of late is on mortgages with a 90% LTV ratio. This display of willingness to lend out higher risk offerings despite the wider economic uncertainty can be viewed as an indication of confidence in the mortgage sector. With Sunak’s budget outlining a government guarantee scheme for lenders as well as extending stamp duty holidays, this too should lead to an increase in the availability of high LTV ratio mortgages.

The mortgage market, as ever, boasts fluidity. If you are in the process of a new deal, are seeking one, are looking to become a homeowner, or just generally interested further in the options available to you, then it is recommended you seek professional advice relating to your personal situation.

Sources
https://www.mortgageintroducer.com/how-mortgage-market-fared-one-year-on-start-pandemic/

https://moneyfacts.co.uk/news/money/how-has-the-pandemic-impacted-savings-mortgages-and-credit-card-borrowing/

Pensions as a force for good

Many in the financial services industry will remember the first advice we were taught to give clients: ‘Save first, and then spend what’s left. Don’t do it the other way round.’ 

Or words to that effect…

The problem was, of course, that many people were not good savers, especially when it came to saving for retirement. After all, it was a long way off, and there was this year’s holiday in Spain to pay for…

Could it be, though, that a relatively recent development is about to change that? 

Money is flowing into ‘green,’ ‘responsible’ or ‘ethical’ investment funds. Fund managers talk of SRI – socially responsible investing. Companies have ESG – ethical, social and good corporate governance – right at the top of their to-do list. 

Could savings – and in particular saving for a pension – become a force for good? And could that in turn lead to more young people seeing saving not as something they reluctantly do, but as a driver of social change? 

In both cases the answer appears to be ‘yes.’ 

Governments around the world are increasingly committed to green initiatives: as many people will know, the UK government has banned the sale of new petrol and diesel cars and vans from 2030. The Biden administration in the US will unquestionably adopt similar policies, following on from the decision to re-join the Paris Climate Accord. 

In their early years, ethical investment funds – largely avoiding tobacco, gambling and the arms industry – had something of a mixed track record. That is now changing, with ESG funds more than holding their own amid last year’s difficult trading conditions. 

Factor in the increasing dominance of Millennials and Generation Z – demographic cohorts who want to work for, and invest in, companies that share their ethical values – and the shift towards green investing can only gather pace. 

The more these ‘new’ investors say, ‘I want my pension to be invested in funds that care about the environment’, the more fund managers will be forced to respond. And the more ESG investment funds that become available, the more young people will be willing to save. It is easy to see a virtuous circle emerging – more saving driving more ESG funds which in turn drives yet more saving. 

A lot of people used to see saving for a pension as something distant and hard to understand: if the accelerating trend to ESG funds changes that, then it can only be a good thing, for both the industry and the savers.

Sources
https://www.thisismoney.co.uk/money/diyinvesting/article-8820103/How-make-pension-investments-green.html

Love yourself,love your finances

We’ll be the first to admit that your personal finances aren’t the easiest thing to fall in love with. It can be easy to bury your head in the sand when it comes to both your regular expenditure and investments.

There are several reasons for this. First of all, money can be a source of stress. We’re sure you’re well aware of how crunching big numbers in your head can keep you awake into the small hours of the morning. Or how not knowing whether you can afford something you really want can fill your life with uncertainty.

Secondly, some aspects of finance can seem rather boring. To the untrained eye, the daily performance of the FTSE, foreign currency exchange and bond markets can look intimidating. We actually find them incredibly exciting, but we understand that this isn’t for everyone.

We think the best way to fall in love with your finances is to get a bit creative. It helps to really understand the relationship you already have with money so you know what you’re dealing with. As with a partner, you have to really get to know them before you fall in love. Here are some questions you can ask yourself to ‘break the ice’ with your finances:

What’s the most fun, frivolous thing you’ve ever bought?

Answering this should help you get a handle on whether you’re someone who likes to splash out from time to time, or if you prefer to sacrifice a bit of enjoyment for personal security. If you have made any such purchases, do you consider them to have been worth it, or do you find yourself regretting that you hadn’t spent the money a little more practically? The answer to this could provide some guidance if you have the opportunity to make similar purchases in the future.

Do you take pride in knowing your net worth?

If you take pride in your net worth, it suggests that a large part of your happiness hinges on the money you have accumulated over your life. You’re likely to be someone for whom a high salary forms a large part of what they enjoy about their career, rather than someone who’d be content working in a job with lower pay.

What’s your dream retirement scenario?

Looking at what you want in retirement will let you know how much you need to prioritise saving for retirement. If you plan on living adventurously you’ll need to save considerably more than if you think you’ll be happy having a quiet retirement. Trips of a lifetime don’t come cheap, so the sooner you start saving and investing, the more you’ll be able to do.

Like all long-term relationships, your relationship with your finances won’t always be easy. Good relationships take work, but the rewards are more

Sources
https://money.usnews.com/money/blogs/my-money/2015/02/13/to-fall-in-love-with-your-finances-do-this

Planning a ski trip? Try somewhere a little unusual

With so many different resorts out there, it’s easy to be so spoilt for choice that you just can’t decide where to go. But what if you want to try somewhere a little off the beaten track? Many skiers and snowboarders often opt for the most popular resorts, leading to inflated prices driven by demand. If you’re looking for a more unusual experience, keep reading… 

Mauna Kea: Hawaii 

With the snow season taking place between December and February each year, Mauna Kea offers a unique chance to glide along the slopes of Hawaii. The area is devoid of ski lifts, marked runs or ski-carved moguls. It’s an area for experts, as you’ll have to take an off-road vehicle on the roads between observatories on the 4,270 metre tall mountain. Although lacking in resort facilities, it’s a great example of how such comforts aren’t a necessity when it comes to alpine enjoyment! 

Ski Dubai: Dubai 

Moving on from a tropical island to the desert, Ski Dubai offers an all year round skiing experience at one of the world’s largest indoor ski areas. Ski Dubai houses five full ski runs, including the world’s first indoor black run and a freestyle zone. It’s the perfect opportunity for those who like to experience both climates while taking a holiday. 

Ben Lomond: Tasmania 

Ben Lomond allows skiers to experience snow in an area better known for its surfing and sandy beaches. Being located in the Southern Hemisphere, it means that it has a ski season between July and September, making it a great opportunity for those of you who want to head to cooler climates during the summer. 

Mount Etna: Italy

If the black diamond runs of Europe don’t quite scratch that itch, why not try carving some tracks along an active volcano? Mount Etna, based in Sicily, houses two ski areas in Provenzana and Nicolosi, both with accessible ski lifts. It has a longer snow season than most, running from November until April. The views from the summit of this mighty mountain are incredible, although skiing can occasionally be hindered by the odd bit of volcanic activity here and there. 

Monte Kaolino: Germany 

With our final entry, we’re doing away with snow entirely. Although it is still seasonal (April – October), Monte Kaolino gives skiers the unique opportunity to ski on beautiful, Quartz sand. There’s one lift to take you to the top of its flagship 200 metre run and it’s sure to provide a dazzling experience. You can even leave your thermal gear at home!

We hope you have enjoyed this break from our regular financial articles and that we’ve inspired you to try something a little more unusual for your next or first ski trip.

Sources
https://www.mountainwarehouse.com/community/unusual-places-to-ski/

Auto-Enrolement changes put pressure on small businesses

April 2019 saw the increase of minimum contributions to auto-enrolment pensions from 5 per cent of wages to 8 per cent. With employers now required to contribute 3 per cent, rather than their previous 1 per cent, the Federation for Small Businesses (FSB) has warned that this could put “substantial” pressure on small businesses.

The Institute of Fiscal Studies (IFS) has reported an increase of workplace pension participation amongst small business employees of around 45% as a result of auto-enrolment. That means that businesses who employ between 2 and 29 workers will be seeing a significant extra cost towards pension schemes. These costs aren’t necessarily as daunting for larger businesses, but in the words of Mike Cherry, National Chairman of the FSB, “The costs involved for smaller employers are substantial, in terms of both expenditure and indeed their time, as they have grappled with finding a good provider and setting up whole new systems. Now that the 3 per cent rate has hit, the burden will be greater still.”

But with 70 per cent of UK workers employed by small businesses now on workplace pensions as a direct result of auto-enrolment (first introduced in 2012), employees seem to consider it as an attractive prospect. They too have seen an increase in their minimum contributions, from 3 per cent to 5, and so sacrificing a higher portion of their monthly wages has been accepted as a move that does come with its own benefits. Predictions from investment firm Hargreaves Lansdown state that in real terms, the average employer will see £30 of their monthly wages go towards their pension pot which, on average, results in total pension savings increasing by around £55,000.

Employers, on average, are predicted to now contribute £55 a month to the average employee’s pension pot, an increase from the pre-April figure of £37. These increases aren’t all bad news for employers however; Guy Opperman, Minister of Pensions, sees them as the opposite. “Automatic enrolment has been an extraordinary success, transforming pension saving and improving the retirement prospects of more than 10 million workers already. The increased cost on employers has been phased in over time so firms have had the opportunity to adapt. Pension contributions are a valuable employee benefit which firms use to attract and retain good people. This is true of small and large firms alike.”

Sources
https://www.peoplemanagement.co.uk/news/articles/increased-auto-enrolment-controbutions-could-have-substantial-impact-smaller-employers
https://www.ifs.org.uk/publications/14012

A guide to self-employed pensions

Running your own business can give you the opportunity to follow your passion and enjoy the ultimate flexible lifestyle. However, it does also mean taking on additional responsibilities. One of these is your pension.

Revealed – the top 5 destinations for British pensions

Many British pensioners choose to move abroad, often in search of warmer climes and a more comfortable retirement.

The stereotypical idea of retiring abroad often involves moving to a mediterranean country. However, only one mediterranean country featured among the top 5 countries from which British expat pensioners claimed their state pension. This indicates that things might be changing…

Here are the top 5, in descending order:

5) Spain – 106,420 retirees

The Iberian nation has long been a retirement favourite for Brits, so we were surprised when it only came in fifth. The amount of British pensioners who spend much of the year in Spain is likely to be much higher, with many owning second homes whilst drawing their pension from the UK. Overall 16.7% of registered Spanish property belongs to UK citizens.

Spain is the only non-English speaking nation among the top 5. However, English is widely spoken in major cities and areas with a large number of tourists and expats, like the Costa Brava and Costa Del Sol.

4) Republic of Ireland – 132,650 retirees

Lush rolling scenery and cheap house prices outside of Dublin make the ‘Emerald Isle’ an attractive destination for British retirees. Although the weather may be a little on the damp side, its scenic countryside, dotted with stone castles and slower way of life have encouraged many to retire across the Irish sea.

The large quantity of Irish people living in the UK is also likely to be a factor, with many moving closer to their family after retiring.

3) Canada – 133,310 retirees

Great scenery, kind people and a low crime rate make Canada an ideal retirement destination. Canadians are famously welcoming, meaning settling in is very easy for retirees.

What’s more, Canada has excellent healthcare. There are no fees for medical treatment, doctors’ appointments and dental visits. Even eye tests come free of charge. It’s unsurprising that it’s just a hair behind it’s much more populous neighbour when it comes to the number British retirees settled here.

2) USA – 134,130 retirees

Despite coming in at second on our list, retiring in the US for non-citizens is tough. If you don’t have a job Stateside or a family member to sponsor you, your only option is the Green Card lottery. This is a lengthy and costly process.

All this said, the USA offers some great retirement options. Warm climates in southern areas, wild scenery and the allure of the American lifestyle can prompt Brits to retire across the pond.

1) Australia – 234,880 retirees

Warm weather, barbies on the beach and a high standard of living. It’s easy to see why Australia is the number one destination for British retirees.

However, retiring here does mean having a sizeable pension pot. Australia is a relatively expensive country, reflecting the much higher salaries people generally earn Down Under. House prices are expensive and food bills can leave you reeling.

Sources
https://www.independent.co.uk/news/business/news/brits-are-behind-one-fifth-of-properties-sold-to-foreigners-in-spain-as-sky-high-uk-prices-push-a6681296.html
https://www.thisismoney.co.uk/money/expat/article-6606883/Australia-number-one-destination-retired-British-expats.html
https://www.investopedia.com/articles/personal-finance/031115/how-retire-us-visas-process.asp

Why moving abroad can affect your state pension



Retiring overseas is a dream for many Brits. After all, who wouldn’t be tempted by the better climate and the amazing travel opportunities found abroad. Where you choose to spend your retirement, however, will affect how much state pension you get.

State pensions are frozen if you decide to move abroad to certain countries, such as Australia, New Zealand, Canada or India. Whilst normal state pensions rise according to the triple lock, in these countries your pension would be frozen. The triple lock means that pensions currently rise by the highest of inflation, average earnings or 2.5% Whether or not your state pension is frozen depends on whether the Government has struck individual deals with the country you move to. As it stands, the Government has only made deals with the EU, the US, Switzerland, Norway, Jamaica, Israel and the Philippines. It has been decades since any new deals have been made.

To illustrate what this freeze means, an expat who retired when the basic rate was £67.50 a week in 2000 would still get that, rather than the £125.95 received by those whose pensions have not been frozen. Likewise, if you qualify for the full state pension of £164.35 and already live in or move to one of the ‘frozen’ countries, the amount you receive will not increase while you stay abroad.

This freeze currently reduces the pensions of approximately 550,000 British pensioners.

However, upon returning to the UK, pensioners are eligible to get their state pension uprated back to the full amount by applying directly to the Department for Work and Pensions service centre.

What about Brexit?

As it stands, nothing is certain until we get a final deal (or no deal!). However, it’s likely that state pensions in the EU will not be frozen. An update on Brexit talks published jointly by the EU and UK indicated they had ‘convergence’ of their positions on state pension increases.

If you’re planning on moving to a ‘frozen’ country like Australia, it’s best to consider the implications of a frozen state pension on your finances sooner rather than later. It will be easier to mitigate the effects when you’re younger and still have greater financial ties to the UK.

Sources
https://www.thisismoney.co.uk/money/expat/article-6278449/Will-state-pension-retire-abroad.html

The long-awaited ban on pensions cold-calling has finally come into force

From January 9 2019, the cold-calling of savers about anything to do with their pensions became illegal. The new law doesn’t just cover phone calls. Any unsolicited emails or text messages about your pension will also be illegal.

As it stands, not every cold-call you receive about your pension is a scam, though many scammers use it as a tactic to get their hands on your retirement savings.

When the ban comes into force, you can be sure that any out-of-the-blue call about your retirement savings is definitely a scam.

The introduction of pensions freedoms in 2015 is widely cited as the reason for the alarming increase in pension fraud over the last few years. Scammers have seized upon these rules, which give savers much more flexible access to their retirement savings, to get unsuspecting individuals to transfer their cash.

Key warning signs of pensions scams include offers of free pension reviews and promises of incredibly high rates of return, among others. Citizens Advice report that as many as 10.9 million people were cold-called about their pensions in 2016 alone.

In the wake of this rise in scamming, savers have been turning to financial watchdogs in huge numbers for help. Between August and October last year more than 173,000 people visited the FCA’s ScamSmart website for more information.

Pension fraud victims lost £23 million in the last year alone, up £9.2 million from the year before. The real amount could be even higher as only a minority of victims report being scammed.

From 9th January, when you put the phone down on would-be pension scammers, you can tell them that they have broken the law just by contacting you.

If you suspect you have been victim to a pension scam, you should report the scam or fraud to Action Fraud as soon as you can. They will pass the information to the National Fraud Intelligence Bureau who will analyse the case to find viable lines of enquiry. If they find any, they will send the report to the police for investigation.

Sources
https://www.telegraph.co.uk/pensions-retirement/financial-planning/scourge-pension-cold-calling-finally-banned-january/