Tag: IFA


Retirement plans on hold for many over 50s

A third of people aged over 50 who are employed in the private sector are now planning to retire later than they previously hoped, Aviva’s latest Working Lives report reveals.

The 2016 report – which comprises research among UK private sector employers and employees – has a particular focus on employees aged over 50, following the end of compulsory retirement and with the first anniversary of the ‘pension freedoms’ approaching.

In particular, the Aviva Report survey asked people what age they hoped they would retire at, before they turned 40. Now, aged over 50, more than one in three (36%) admitted they would be retiring later than they thought – by an average of eight years. Among those who will now retire later than hoped, the report found a variety of reasons for people to postpone their retirement plans:

Not saving enough into a pension – 46%
The amount available through the state pension – 32%
I have debts to pay off (including mortgage) – 24%
Feeling that I still have a lot to offer at work – 21%
The level of enjoyment/satisfaction I get from my work – 20%
My employer wants to keep me on – 13%
Position of my partner – 13%
I have children who need financial support – 8%
I have elderly relatives who need financial support – 1%
Other – 10%
None of these – 3%
Don’t know – 2%

The Working Lives report also reveals a gap between employers’ and employees’ views on the impact of the pension freedoms, as the first anniversary of their introduction in April 2015 approaches. Over one in five (22%) employers think the freedoms could result in their employees having to work longer to make up for a shortfall in savings if they use part of their pension before retirement. At the same time, almost one in three (32%) employers are concerned they will lose valuable skills because people will retire earlier due to the freedoms.

However, these fears may be unfounded as the vast majority of employees aged 50 and above do not intend to alter their plans because of the pension reforms. Only 8% highlighted that the freedoms will result in them retiring earlier, contrasting with the concerns employers have around loss of skills. One in ten (11%) employees over the age of 50 now think they will retire at a later date because of pension freedoms, while 9% still remain unsure as to what the eventual impact of the freedoms will be upon their retirement plans. Seven in ten (71%) stated they have no plans to retire or that the pension freedoms have not affected their expected retirement date.

Aviva’s Working Lives report also questioned 500 private sector businesses of different sizes about a number of issues, including how prepared they are to deal with changing retirement patterns following the scrapping of the Default Retirement Age and the introduction of pension freedoms. The findings suggest the majority of businesses do not have plans in place, and that they are less prepared for staff retiring later (just 25% have plans for this) than they are for staff retiring earlier (29% have plans in place).

Even among large companies (250+ employees), less than half (42%) have plans in place should their employees retire later than expected, compared to 14% across both small and medium sized businesses. Likewise, only 48% of large businesses have plans to cope with staff starting to retire sooner than expected, compared to just 17% of medium sized businesses and only 15% of small businesses.

With many over-50s facing a later retirement than they hoped, the Working Lives report nevertheless found encouraging signs that levels of job satisfaction were highest among those aged over 65. A large majority (86%) of private sector workers in that age group said they enjoy their work, compared with just 57% of those aged 18-64. A similar proportion (85%) also said they get a sense of satisfaction from work, while 81% reported being valued by their employer – again, much higher than the younger age groups combined (57%). This backs up the suggestion that there are positive reasons for people wanting to stay on at work.

Sources: www.aviva.co.uk (Published article: 2016/03/22)

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Wealth? Fame? Working hard? New research reveals what really makes us happy

It’s been 75 years in the making and the topic for countless philosophers to muse over, but a US study seems to have finally uncovered the secret to happiness and health.

Speaking during a TED Talk, Harvard professor Robert Waldinger revealed that, though wealth and fame continue to be commonly cited desires amongst millennials (those born sometime from around the early 1980s to around the year 2000), the research he presides over has found only one consistent factor: positive relationships.

During the twelve minute talk, Waldinger says that the data he and his colleagues have gathered indicates that people who are well connected to family, friends and communities are happier, healthier and live longer than those who are less well connected. People who are more isolated than they want to be suffer from shorter lifespans, see their brain function decline faster and generally experience lower health and happiness levels.

Other links between happiness and relationship status have also been uncovered. Whilst positive relationships can have a majorly beneficial impact on us, the reverse is true of negative relationships. The data gathered suggests that an unhappy marriage, for example, can have a more pronounced negative impact on the parties involved than the corresponding divorce would create.

So, maybe it’s time to forget about your cholesterol levels, because Waldinger looked at those as well in the study’s sample group when they were age 50 and found little link between poor results and happiness and satisfaction when they were 80. Those who had positive relationships at age 50, however, were also the happiest and healthiest individuals when they became octogenarians.

The message, of course, applies to us all and in many ways, but is particularly interesting for us to consider when it comes to our financial health and wellbeing. Great finances, well looked after and planned, allow us to focus on the important things in life; on nurturing those great relationships between ourselves, our connections, our partners and children. Keep working towards positive relationships and we’ll keep your money working for you and those close to you. Here’s to a happy, healthy future!

Sources: http://www.ted.com/talks/robert_waldinger_what_makes_a_good_life_lessons_from_the_longest_study_on_happiness#t-504455

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Pension tax changes: Should you pay more before relief rates are curtailed?

Given recent comment from George Osborne, and mentions of the same during the Autumn Statement, it appears as though pension tax is set for a shake-up in 2016. With that in mind, there appears to be a potential opportunity for higher-rate taxpayers to make the most of their savings while the good times last.

Though not confirmed at this current time, it appears that the writing may be on the wall for up to five million pension savers enjoying the higher-rate tax relief. There is a suggestion that the generous reduction is about to be heavily curtailed – and could be scrapped altogether, with the Chancellor already indicating that major reforms to pension taxation will be announced in the March budget. The changes could see higher-rate taxpayers lose the 40% relief currently offered on pension contributions.

Instead all savers, no matter what rate of income tax they pay, may be offered tax relief at a flat rate of 33%. The Government may also create a less generous tax system for savers with valuable final salary pensions. The Government could also choose to eliminate tax relief on pension contributions, making pensions more like ISAs. This could apply to all savers, or just to those who pay higher rates of tax.

The Government spends £35bn of its £50bn annual pension tax relief bill on higher earners. This has grown substantially from £17.6bn in 2001-2002. Many feel the wealthy should not be able to reclaim large amounts of income tax while in work and pay reduced rates in old age. However, commentators believe the Government has to walk a very fine line here. Take away too much of the incentive to save and millions of people could end up woefully underprepared for retirement. The cost of supporting struggling pensioners would inevitably fall on the state – and working taxpayers.

We already know the annual allowance – the amount you can save into your pension every year and receive tax relief on – will fall for higher earners from next April. Anyone whose income exceeds £150,000 will see their annual allowance fall, via a sliding scale, from £40,000 to as little as £10,000. The lifetime allowance, the maximum value your pension is allowed to reach at any stage, is also falling, from £1.25m to £1m in April. So higher-rate taxpayers should potentially consider pouring as much money into their pensions as they can in the next four months before the days of generous tax breaks are gone for good.

Sources: www.telegraph.co.uk (Article: 2016/01/04)

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How to approach later life care

National Insurance contributions go towards things like your State Pension but they don’t count towards the costs of social care. This type of care is managed by your local authority and generally comes at a price. That is why you have to apply directly to them if you need help with paying for long-term care. Your local authority (or Health and Social Care Trust in Northern Ireland) will first carry out a Care Needs Assessment to find out what support you need.

The next step is to work out who is going to pay. Your local authority might pay for all of it, part of it or nothing at all. Your contribution to the cost of your care is decided following a financial assessment. This Means Test looks at:

  • your regular income – such as pensions, benefits or earnings
  • your capital – such as cash savings and investments, land and property (including overseas property) and business assets

If your income and capital are above a certain amount, you will have to pay towards the costs of your care.

If you own your home, the value of it may be counted as capital after 12 weeks if you move permanently into a residential care or nursing home. However, your home won’t be counted as capital if certain people still live there. They include:

  • your husband, wife, partner or civil partner
  • a close relative who is 60 or over, or incapacitated
  • a close relative under the age of 16 who you’re legally liable to support
  • your ex-husband, ex-wife, ex-civil partner or ex-partner if they are a lone parent.

Your local authority or trust might choose not to count your home as capital in other circumstances, for example if your carer lives there.

The maximum amount you have to pay towards your care is different, depending on where you live in the UK. The cost of living in residential care can be split into:

  • your ‘hotel’ costs, including the cost of accommodation and food
  • your personal care costs.

The cost of care differs around the United Kingdom, and this cost is usually higher where employment costs and housing are more expensive. In England and Wales you can find out how your local authority charges for the care services by first visiting the local authority website. In Scotland, the personal care you receive in a care home is free, if you’re over 65. If you’re in Northern Ireland, you can find your local Health and Social Care Trust on the nidirect website.

The one certainty of care is that, should you need it (and many of us will), you will be in a better position to receive exactly the sort of care you would like if you have some of your own funds set aside to cover the cost. Like the relationship between your state pension and your private pension, the former will only support you to one level. We save into additional pensions to ensure we have the retirement that we want. The same rules could really apply to our approach to care funding.

Sources: www.moneyadviceservice.org.uk (Published information)


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Car sharing deserves better tax incentives

A recent report, ‘On the Move’, published by Policy Exchange Think-Tank researchers, explores ideas and policy proposals on how to create a more mobile workforce. One of the key policy ideas in the Report is about offering tax benefits to commuters who use ride-sharing schemes and free parking in city centres for care sharing. Drivers who offer fellow commuters a lift should be given a tax break as part of plans to increase workers’ mobility, the think-tank has recommended. The Report identified a ‘strong case’ for the Government to encourage the growth of car-sharing.

The On the Move report, says that in a third of local authorities that make up the eight city regions no major employment sites (defined by having 5,000 or more jobs) are within a twenty minute commute by public transport and 80% of these Local Authorities have an unemployment rate above the national average. The think-tank says making it easier for people to travel an extra 20 minutes to a workplace would dramatically increase the job opportunities available.

Having access to a car for an extra 20 minutes of commuting time would give even more options, and the report said:

“Car-sharing, mediated by an app, is lowering the cost of travel for consumers, giving people on low-incomes access to car travel and reducing congestion on the roads. There is a strong case for the Government to incentivise its growth through commuter tax benefits.”

The report suggested such a policy would have a particular benefit in Birmingham, Leeds, Hull and Blackpool where there was already a higher than average number of car sharers.

The think-tank suggested either allowing employers to give workers travel vouchers to pay for ride-sharing which could be issued before tax, or allowing drivers to keep a portion of their earnings tax-free if they offer people a lift.

Sources: www.policyexchange.org.uk (Report published: 2015/08/17

Why the Greek crisis matters to us

Why should you care about the Greek financial crisis? Does it really matter what happens to Greece? Wouldn’t it really be a good thing if it went back to the drachma, the currency collapsed and holidays became dirt-cheap again?

Questions that you will likely have heard, perhaps even asked, over the last few months and weeks, and probably quite rightly so.

After all, Greece is relatively economically insignificant. The economy accounts for less than 2% of the EU as a whole, and 0.4% of world trade. Greek GDP (the measure of national income and economic output) is around $241bn, smaller than some cities in the USA.

Unfortunately, as with most things in economics, it’s not quite as simple as that and the Greek crisis is likely to have implications that will affect Europe as a whole and the UK individually.

Greece isn’t the only country drowning in debt. Yes, Greece’s debt (expressed as a percentage of national economic output) is the highest in Europe, but countries like Italy and Portugal are not far behind. The worry is that if Greece decides to pull out of the euro, or is forced out, then investors and savers will start to withdraw money from other fragile economies.

On the other hand, if concessions are made to Greece then it will encourage other far-left parties, such as Podemos in Spain, to make similar, anti-austerity demands.

The situation is also worrying politically, as well as economically. Along with Italy, Greece has discussed its treatment of migrants recently, which could have knock on effects throughout the Eurozone. Prime Minister Alexis Tsipras has also made well publicised trips to Russia, and called for the end to EU sanctions against Russia over the Ukraine.

As above, Greece is only a very small economy: one calculation suggests that China creates an economy the size of Greece every three months. But Greece and the uncertainty surrounding its fate, still has the power to affect world stock markets. It’s not so much what happens to Greece, as the significance of the EU being unable to resolve the problem.

Britain’s direct exposure to Greece is limited, although quite clearly a ‘Grexit’ could disrupt economies in the Eurozone, the UK’s biggest trading partner. No wonder then, that George Osborne has called the Greek crisis, ‘one of the biggest external threats to the British economy.’

Sources: http://www.tradingeconomics.com/greece/gdp, http://www.bbc.co.uk/news/world-europe-33225461, http://www.theguardian.com/world/2015/apr/08/alexis-tsipras-in-moscow-asks-europe-to-end-sanctions-against-Russia


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NS&I – New Pensioner Bonds – 65 Plus Bonds


In January 2015 NS&I are launching new Bonds for investors aged 65 and over. These are the Bonds announced by the Chancellor in his March 2014 Budget statement.

Full details of the Bonds will be available when they go on sale in January 2015.

The new Bonds at a glance;

What are the Bonds?
• Lump sum investments providing capital growth
• Choice of terms – 1-year and 3-year
• Designed to be held for whole term, but can be cashed in early with a penalty equivalent to 90 days’ interest

When do they go on sale?
• January 2015 – exact date to be announced
• Available for a limited period only

Who can invest?
• Anyone aged 65 or over
• Invest by yourself or jointly with one other person aged 65 or over

How much can I invest?
• Minimum for each investment £500
• Maximum per person per Issue of each term £10,000

What about interest?
• 1 Year Bond 2.80% gross/AER* (2.24% after basic rate of tax)
• 3 Year Bond 4.00% gross/AER* (3.20% after basic rate of tax)
• Fixed rates, guaranteed for the whole term
• Interest added on each anniversary

The tax position
• Interest taxable and paid net (with basic rate tax taken off)
• Higher and additional rate taxpayers will need to declare their interest to HM Revenue & Customs (HMRC) and pay the extra tax due
• Non taxpayers, and those eligible to have any of their interest taxed at the new 0% rate (which starts from April 2015), can claim back the tax from HMRC
• NS&I are not currently part of the R85 scheme so we can’t pay the interest gross on these Bonds


The government has set the total limit of subscription to £10 billion –  Applications will be dealt on first come, first served basis and investors will be able to apply by post, online and by phone.


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The end of (some) £50 notes: time to unstuff the mattress?

Hopefully you don’t keep all of your savings stuffed in or under the mattress of your bed but if you do happen to keep a ‘rainy day’ store of £50 notes, you had better check your bed linen, otherwise you may find that the value of your assets suddenly goes down in the not too distant future!

The Bank of England has announced that the £50 banknote carrying the portrait of Sir John Houblon, the first Governor of the Bank of England, will be withdrawn from circulation on 30 April 2014. From that time, only the £50 notes featuring Matthew Boulton and James Watt, which was introduced in November 2011, will hold legal tender status. Members of the public who have Houblon £50 notes can continue to use them up to and including 30 April.

After 30 April, retailers are unlikely to accept the Houblon notes as payment. However, most banks and building societies will continue to accept them for deposit to customer accounts. Agreeing to exchange the notes after 30 April is at the discretion of individual institutions. Barclays, NatWest, RBS, Ulster Bank and the Post Office have all agreed to exchange Houblon £50 notes for members of the public – up to the value of £200, but only until 30 October 2014.

The Bank of England will continue to exchange Houblon £50 notes after 30 April, as it would for any other Bank of England note which no longer has legal tender status. So if you forget to check your mattress, you can still pack your £50 Houblon notes in a case and take a trip to the Bank of England!

Sources: www.bankofengland.co.uk


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The Risk and Cost of Flooding

The risk of flooding in the UK is growing and could seriously affect the value and amenity of your home or business premises. It is suggested by the Royal Institute of Chartered Surveyors (RICS), amongst others, that there will be an increasing number of floods in the future, due to changes in weather patterns, the amount of new buildings on low-lying areas and other local factors.

The RICS paper which formalised these claims went on to say that many properties which have not previously been at risk of flooding, now are. Of the 28 million homes in the UK, over five million are currently at risk, as well as over 300,000 business premises and many more public and utility services buildings. For most of these properties, the risk of being flooded in any one year is still small but for several hundred thousand properties, especially those which have been flooded in recent years, the risk is more significant.

The increasing risk of flooding can reduce the value of your home or business premises and may make it more difficult and expensive to get insurance cover. A flood can threaten your safety, cause serious damage to your property and its contents, and will result in many months of dislocation and disruption. A flood can happen to any property, from one or more of these causes. For most property in the UK, the risk is still small. Some properties are more at risk than others due to their geographic location and particular local situation.

How will the flood risk affect the value and insurability of my property?

The value of a property at risk from flood is less than that of a similar property that isn’t at risk. Flood risk will affect the value for two reasons. First is the impact of a flood on the continued use of the premises, the health and safety of the occupants and any consequential damage and disruption. The second is obtaining building insurance cover for the property. If it is difficult to arrange cover it will affect the ability to arrange a mortgage for the property. As building insurance is so important in determining whether a property is mortgageable and therefore the market value of the property, owners and prospective purchasers are advised to verify this cover is provided and maintained by determining the property’s flood risk. The reduction in value may range from negligible to severe, depending on the particular circumstances of the property’s location, situation, type of construction, and flood defences, both to the geographic area and to the property in particular. The impact on value can be reduced by ensuring better flood resistance (flood defences) are in place and by increasing the flood resilience of the property and its contents – making the property construction and facilities less prone to damage by flood.

Sources: www.rics.org.uk

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Five strategies for tax planning in 2014

Many of us will be making a New Year’s resolution to sort out our finances – but an often overlooked part of putting your finances in order is making sure that your tax planning is effective. Are you claiming all the tax relief you’re entitled to?

To give your financial planning a head start, here are five strategies for efficient tax planning in the year ahead.

1.First and foremost, be organised. Make sure that you submit your tax returns on time. In addition, make sure you keep good records. This may not seem very exciting, but HMRC are increasingly stressing the importance of accurate record keeping. Everything tax related – interest statements, dividend vouchers, payslips, P60’s and so on – needs to be kept.

2.Make full use of your personal allowances. Even if only one of you is involved, the other could be employed in order to use up his or her personal allowance.

3.There’s also nothing to stop children being employed in the family business so as to take advantage of their personal allowance. Remember though that payment must be for actual work carried out, and at a reasonable commercial rate. Your children also have their own annual exemption for Capital Gains Tax, so it may make sense to move some assets into their names, especially if the value of the assets is likely to increase.

4.The contributions which an employer makes to a pension scheme are generally tax and NI free for most employees. If you want to boost your pension, it may be worth considering ‘salary sacrifice’ – giving up some of your salary to increase your pension contributions. You’ll need to discuss this with your employer and you may need some specialist advice from an independent financial adviser, but it can be a very effective way of increasing the amount going into your pension.

5.If you are running a business, try and incur expenditure just before the end of your tax year rather than just after as this will speed up the tax relief. Examples of the type of expenditure you might consider bringing forward include repairs to buildings and plant, and advertising and marketing campaigns.

As ever, if there is any aspect of your tax planning – or your wider financial planning – that you would like to discuss with us then please don’t hesitate to contact us.

Taxation law may be subject to future change


Tax Dates for your Diary


1   January 2014 – Due date for Corporation Tax payable for the year ended 31   March 2013.

19   January 2014 – PAYE and NIC deductions due for month ended 5 January 2014.   (If you pay your tax electronically the due date is 22 January 2014.)

19   January 2014 – Filing deadline for the CIS300 monthly return for the month   ended 5 January 2014.

19   January 2014 – CIS tax deducted for the month ended 5 January 2014 is payable   by today.

31   January 2014 – Last day to file 2013 Self Assessment tax returns online.

31   January 2014 – Balance of self assessment tax owing for 2012-13 due to be   settled today. Also first payment on account for 2013-14 due today.

1   February 2014 – Due date for Corporation Tax payable for the year ended 30   April 2013.

19   February 2014 – PAYE and NIC deductions due for month ended 5 February 2014.   (If you pay your tax electronically the due date is 22 February 2014.)

19   February 2014 – Filing deadline for the CIS300 monthly return for the month   ended 5 February 2014.

19   February 2014 – CIS tax deducted for the month ended 5 February 2014 is   payable by today.

1   March 2014 – Self Assessment tax for 2012/13 paid after this date will incur   a 5% surcharge.


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