Tag: paul richardson


Set Specific Financial Targets to Achieve Lifestyle Goals

If you’re creating a financial plan, with a view to achieving certain ambitions in life, you need to include details.

For instance, if you want to travel more in later life, you can’t simply say you’ll put money aside for holidays.

Or if you want to retire early, simply putting money into a pension isn’t enough.

In the first example, you need to consider how much income you’ll receive in later life and your likely outgoings, so you can estimate how much disposable income you’ll have to pay for trips abroad.

And in the second scenario, you again need to have a rough idea of your income, so you’re able to both meet basic living costs and enjoy the kind of lifestyle you want to have.

In short, a financial plan needs to include specific goals, based on real numbers that can be tracked and measured as each year passes. And this is where a financial adviser can make a big difference.

If you’re able to be specific about exactly what you want to achieve, a regulated, professional adviser can work with you to determine the route to your destination. They’ll look at everything from your pension and investments to what tax allowances you may be eligible for, and help you prepare a clear plan that outlines how you can achieve your objectives.

Ultimately, being specific puts you in control of your finances, and helps you plan ahead with a sense of purpose, direction and optimism.

Keep an Eye on Your Finances

Planning ahead with confidence relies on you having a good awareness of your current financial situation. You probably know how much you’re earning, but do you know how much you’re losing in tax, bills and other general living expenses?

That’s why it’s so important to track your income and outgoings, so you have a clear idea of how much money you have available to you.

This can help you highlight where money might be being wasted. Perhaps you’re paying for a streaming subscription service you don’t really use, you’re on a more expensive phone tariff than you actually need or paying over the odds to service a debt.

Or perhaps technology has changed your relationship with money to the point where you’re not really aware of what you’re spending overall. In this age of contactless payment and being able to buy items online in just one or two clicks, it’s so easy to spend large sums without actually thinking about how much you’ve got left in the pot, so it’s essential you look at what you’re spending and how.

Once you’ve worked out where you’re haemorrhaging money unnecessarily, you could perhaps use this cash more effectively, with your lifestyle goals firmly in mind.

Perhaps you could invest it in a revenue-generating asset, put it in a savings account or increase your pension payments. How you use the money you’ve freed up depends on your specific objectives, but if you know how much you have to work with, you’ll be in a better position to achieve it in the future – and a financial adviser can be with you every step of the way.

Getting to grips with every aspect of your finances and planning ahead can seem daunting, but a professional adviser can help you navigate this maze and make sense of the many different options available to you.


Leave a Gift to Charity to Reduce Your Inheritance Tax Bill

As the saying goes, you can’t take your money with you when you die, so it’s only natural that you might want to leave your wealth to those people closest to your heart, such as your children.

But this isn’t the only option open to you, as you can leave your money to a cause that means a great deal to you – and this can have significant benefits when it comes to inheritance tax.

Any gifts you make to charity are exempt from inheritance tax, so if you leave everything to a good cause, your estate wouldn’t have to pay it at all. However, very few people take up this option, as many will still want to leave a generous amount to loved ones.

But even in that case, there are still inheritance tax benefits to be had. If you bequeath more than a tenth of your estate to charity, the total amount of inheritance tax the estate pays will be 36 per cent, lower than the standard rate of 40 per cent on everything over £325,000, or £650,000 for a married couple.

Support a Cause You Care About

Donations made from people’s Wills can be a valuable source of income for countless charitable bodies, so if you want to explore this option, it’s worth spending time thinking about what cause or causes matter to you.

If you’re an animal lover, maybe a national or local animal charity could be a good option.

If you or a loved one has struggled with a long-term illness, such as cancer, you might want to donate to a charity that helps others with that condition, or perhaps a hospice that cares for those with terminal illnesses.

You might even want to support a museum or another cultural institution, or maybe a local community group.

The choice is yours, which means that your Will gives you a great opportunity to leave a positive legacy in an area you care about, or say thank you to a charity that has helped you personally or supported a loved one.

Speak to Your Family and Get Financial Advice

Before you write or update your Will with a view to leaving a gift to a charity, it might be worth speaking with members of your family beforehand.

Many of your family members might be hoping or expecting to receive an inheritance from you, so explaining the reasons behind your decision can help to prevent any upset or family disputes further down the line.

You should also consider speaking to a financial adviser if you are thinking of gifting to charity as part of your estate planning, so they can discuss the inheritance tax implications with you.

A regulated, professional adviser will also be able to talk you through other ways of making sure your estate planning is more tax-efficient.

What Can I Leave to Charity?

You can leave either a set amount of money or a particular item to your charity of choice. Alternatively, you can ask the executor of your estate to take care of awarding a set sum to a charity after other costs have been paid out and gifts to family members distributed.

It’s often said that the only two certainties in life are death and taxes, but with careful planning, there’s no reason why you can’t reduce your inheritance tax bill and leave a positive legacy behind. Please don’t hesitate to get in touch with us if you have any questions about making your estate more tax-efficient.


The UK Closes in on the CPTPP

Last month, it was reported online that the UK was ‘closing in’ on CPTPP membership. The Department of Trade announced that we had moved into the ‘second and final phase’ of the application, and the UK could be a member ‘by the end of the year’.

Many of our clients will know that the CPTPP is a trade bloc. But who are the other members? And what would membership mean for the UK? 

CPTPP stands for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. The 11 member countries are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. 

The agreement evolved from the Trans-Pacific Partnership (TPP) which had been agreed in 2016, and which included the USA. Donald Trump withdrew the US from the agreement when he became President, and the CPTPP in its present form was officially signed in Santiago in March 2018. 

It is immediately apparent that all the countries involved have some link with the Pacific. Brunei may not be the largest economy in the world – it accounts for around 0.01% of global GDP – but it is demonstrably closer to the Pacific than the UK. 

Why then does the UK want to join? And what benefits would being a member bring? 

Simply put, the CPTPP is a huge trading bloc. The 11 member countries account for 13.4% of global GDP at approximately $13.5tn (£10.26tn) making it one of the world’s largest free trade areas. For comparison, China, which is not a member of the CPTPP, accounts for around 15.1% of global GDP. 

If the UK were to become a member of the bloc – and that now looks very likely – it means that the vast majority of our exports to the member countries would become tariff-free, giving a significant boost to British business. Anne-Marie Trevelyan, who has taken over from Liz Truss as Secretary of State for International Trade, said: “CPTPP is one of the largest and most exciting free-trading clubs in the world. Today’s announcement … means the finishing line is in sight.” 

Joining the CPTPP would have a number of advantages. It would mean lower tariffs on key exports such as cars and whisky, and should also benefit the UK’s farmers, with CPTPP members expected to account for 25% of the global demand for meat by the end of the decade. The CPTPP countries are also advanced in both the digital and services sector – which should play to the UK’s strength as the world’s second-largest services exporter. 

Two-thirds of the world’s middle classes are expected to be in Asia by the year 2030, by which time UK exports to the member countries are expected to have grown 65% to £37bn a year. This would be an unquestioned boost to jobs, which could well increase over time, with South Korea, Taiwan, the Philippines and Thailand all thought to be keen on joining. 

The Government will be working hard to make an announcement by the end of the year – by which time, of course, we are likely to be only 18 months off another General Election.

World rankings https://www.worldometers.info/gdp/gdp-by-country/
UK closes on CPTPP membership https://order-order.com/2022/02/18/uk-closes-in-on-cptpp-membership/
Government data https://www.gov.uk/government/news/britain-launches-negotiations-with-9-trillion-pacific-free-trade-area#:~:text=An%20agreement%20would%20make%20it,and%20work%20in%20member%20countries.

It’s Unfair! But how Unfair?

It is now a well-documented fact that the pandemic was good for billionaires. According to Oxfam’s annual report on global inequality – always released to coincide with the World Economic Forum in Davos – the pandemic saw a new billionaire created every day.

The world’s ten richest men more than doubled their collective wealth between March 2020 and November 2021, seeing their combined assets increase from $700bn (£533bn) to $1.5tn (£1.14tn).

In contrast, said Oxfam, ‘99% of the world’s population became worse off because of lockdowns, lower international trade, less international tourism – and, as a result, 160m people have been pushed into poverty’. 

Oxfam clearly has an agenda. Many might disagree. 

After all, Jeff Bezos left a well-paid job on Wall Street to start Amazon (or Cadabra, as it originally was, until someone misheard the name as ‘cadaver’). In the early days, the company operated out of the garage at Bezos’ house in Seattle, so there are many people who’ll say ‘good luck’ to him. After all, Amazon has allowed thousands and thousands of small businesses around the world to flourish, it has allowed authors to publish books, and it has paid spectacular dividends to anyone who invested in the company in its early years. 

There are two sides to every coin. One thing that does appear to be clear though, is that the richest 10% of the world’s population are responsible for a hugely disproportionate amount of the world’s carbon footprint. A recent study in the journal Nature Sustainability concluded that the world’s richest ten percent are responsible for an estimated 47% share of global CO2 emissions. 

On average, a person in the bottom 50% income group produces one ton of CO2 every year – compared to 48 tons for the richest one percent. 

If we look at another measure, just four countries – the USA, China, Japan and Germany – make up over half the world’s economic output, if we take GDP as a guide. 

If we focus solely on the UK, then – according to the Office for National Statistics – the wealth of the richest one per cent of households is more than 230 times that of the poorest ten per cent. The top one per cent – with average wealth of £3.6m – hold 43% of all the wealth in the UK. 

Your view on whether this is right or wrong will almost certainly depend on your political standpoint. What is clear is that however much government’s might talk about ‘levelling up’ or ‘re-distributing wealth’ other factors, such as individual enterprise and initiative, or national and global events, play a far bigger part in shaping the distribution of wealth. 

Oxfam report https://www.bbc.co.uk/news/business-60015294#:~:text=Wealth%20of%20world’s%2010%20richest%20men%20doubled%20in%20pandemic%2C%20Oxfam%20says,-17%20January&text=The%20pandemic%20has%20made%20the,each%20day%2C%20its%20report%20claims.
Inequality and unfairness: the richest 10% = 47% of CO2 emissions https://www.zerohedge.com/geopolitical/visualizing-one-percents-huge-carbon-footprint
Rising inequality https://www.cityam.com/rising-inequality-wealth-of-top-one-per-cent-is-230-times-higher-than-poorest-ten-per-cent/
Four countries make up half the world economy https://www.zerohedge.com/economics/visualizing-94-trillion-world-economy-one-chart

What Does Rising Inflation Mean for Wage Growth?

The UK is facing a cost of living crisis, with inflation hitting 6.2% in February 2022, and according to the Office for Budget Responsibility, it could average at 7.4% this year. But people’s wages aren’t going up at the same rate, despite the words “high wages” effortlessly tripping off the tongues of government ministers only a few months ago.

For example, in an interview on The Andrew Marr Show ahead of his speech at the Conservative Party conference, Prime Minister Boris Johnson said: “Finally after all these years you’re seeing growth in wages.

“Wages are finally going up for the low-paid, and they’re going up faster than for those on high incomes. And about time too… Wages have been totally flatlining for more than a decade.”

Despite being challenged about wages going down, not up, in real terms, Mr. Johnson stuck with this line throughout the interview, and then in his keynote speech, he said the UK is becoming a “high wage, high skill, high productivity” economy.

What the data says

But the numbers back in October and the figures today tell a different story. According to the Office for National Statistics, average earnings did go up in the three months to January by 3.8%, up from 3.7% a month earlier.

However, this rate of increase is well behind the surge in inflation, which is currently at a 30-year high, and means wages fell by 1% in real terms. That’s the biggest real terms fall in wages since 2014, so claims that wages are going up are likely to ring hollow for many struggling households.

The Resolution Foundation, meanwhile, predicts that real household income per person will fall by 2.2% in 2022/23. This would be the biggest fall in a single financial year since records began in 1956/57. Estimates from the body suggest that the current fall in real wages won’t end until at least late 2023, by which time average wages will be no higher than they were in 2007.

Significantly, high wages were not mentioned even once in Chancellor Rishi Sunak’s recent Spring Statement – an acknowledgement perhaps that ministers have recognised that last autumn’s interpretation of the figures hasn’t landed with the public.

Employers under pressure over wages

The disparity between wage growth and inflation is also leading to some employers being placed under close scrutiny.

For example, supermarket chain Sainsbury’s has been urged by a group of investors, brought together by responsible investment charity ShareAction, to commit to paying all its staff the real Living Wage, which is set by the Living Wage Foundation charity and currently stands at £11.05 in London and £9.90 for the rest of the UK.

Earlier this year, Sainsbury’s announced it would increase its basic pay rate from £9.50 to £10 an hour, which is above the real Living Wage outside London. Staff in inner London are paid £11.05 an hour, in line with the real Living Wage, but workers in outer London are receiving £10.50 an hour, which falls short.

Martin Buttle, head of good work at ShareAction, said: “Low-paid workers in the supermarket sector are being hit incredibly hard by rising living costs, yet we all owe them so much following the pandemic.”

This is just one example of how pay structures at major companies are coming under close scrutiny as hard-pressed workers struggle to make ends meet, and something we could see much more of in the next few months as the cost of living crisis bites.

But employers aren’t immune to rising costs either, and following the Spring Statement, the CBI urged the government to do more to “tackle the current challenges facing firms.”

Ministers face a tough balancing act right now, as they seek to minimise the impact of rising inflation while encouraging consumers to spend and businesses to invest, in order to drive growth.


Inheritance Tax Payments Have Doubled in the Last Decade

In the past, inheritance tax would have been regarded by many only as something for the super-wealthy to have to think about.

But the amount the government has collected in inheritance tax has doubled in the last decade, as more and more people are becoming liable to pay the charge.

According to Treasury documents seen by the Mail on Sunday, total receipts from inheritance tax now stand at £5.4 billion – up from £2.7 billion in 2010.

This increase is set to continue, with forecasts suggesting annual inheritance tax receipts could reach £7.6 billion in the next five years.

These latest figures are likely to further the argument that the inheritance tax threshold isn’t keeping pace with wider changes in the economic environment and people’s personal finances.

The inheritance tax threshold currently stands at £325,000, and this tax doesn’t have to be paid if:

  • You leave everything above the £325,000 to a spouse, civil partner or good cause
  • The value of your estate doesn’t exceed the threshold

The standard inheritance tax rate is 40%, and this is charged on anything in your estate that’s above the threshold.

However, house prices have risen dramatically in recent years, which is taking the total value of many people’s assets well above £325,000.

In fact, the latest figures from Nationwide show that the average price of a home in the UK now stands at £260,230, following a record increase of £29,162 over the last year.

This was the biggest cash increase in property prices that Nationwide has observed since it began collecting comparable data more than 30 years ago.

The data also suggests that annual house price inflation is accelerating, rising from 11.2 per cent in the year to January to 12.6 per cent in the year to the end of February.

So is the inheritance tax threshold now too low, and should it be keeping pace with house price growth?

The government plans to keep it at its current level until April 2026, so it will be interesting to see if Chancellor of the Exchequer Rishi Sunak addresses this issue in any way in his upcoming Budget on March 23rd.

The increase in house prices reflects how demand for property is far exceeding supply, and how the type of housing that many people are choosing to purchase has changed as a result of the pandemic.

It’s therefore possible that a push to build more homes could help to solve the issue of more people being pushed into paying inheritance tax, but this would be a long-term solution, with the effects not being felt for several years at least.

In the meantime, there will be a greater need than ever for people to get financial advice about managing their money and taking steps to avoid or reduce their inheritance tax liability.


When is probate required? – an overview of UK financial institutions

When assets are held solely and the balance exceeds their probate threshold, financial institutions may need to see a Grant of Probate before releasing funds. This threshold varies as it is set by the individual institution rather than by the Government. Therefore, it may be a timely task to contact each institution where the deceased held assets to understand their requirements.

Generally, probate isn’t required if the estate is valued at less than £5,000, as most financial institutions will release funds lower than this. Also, if assets were held jointly, probate is often not required as these assets automatically pass to the surviving spouse or civil partner.

Financial institutions, such as banks or building societies, may decide whether probate is required on a case-by-case basis, or they might have a set threshold. Probate thresholds vary greatly from institution to institution, typically ranging between £5,000 and £50,000. It is recommended that you check with the relevant institution when required.

Examples of probate thresholds
Aviva, £50k; Bank of Scotland, £25k; Co-op Bank, £30k; First Direct, 20k; HSBC, decided on a case-by-case basis; Nationwide, £50k; NatWest, £25k; Post Office, 10k; and Santander, 50k. The probate application process involves completing a PA1P (if there is a Will) or a PA1A (if there is no Will). Probate can be applied for online if you have the original Will and death certificate, but documents will still need to be sent by post after submission. There is a set government fee for obtaining probate which has recently been raised to £273 for estates over £5,000. For estates that are £5,000 or less, there is no fee to pay.

KIngs Court Trust

Inheritance Tax reporting for excepted estates

HM Courts & Tribunals Service (HMCTS) has recently changed the Inheritance Tax (IHT) reporting requirements for excepted estates. An estate is referred to as an ‘excepted estate’ when no IHT is payable.

The changes apply to all deaths on or after 1 January 2022. If the date of death is on or after this date, an estate is usually an excepted estate if any of the following apply:

  • Its value is below the Inheritance Tax threshold, which is currently £325,000
  • The estate is worth £650,000 or less and any unused threshold is being transferred from a spouse or civil partner who died first
  • The deceased left everything to a spouse or civil partner living in the UK or to a qualifying charity and the estate is worth less than £3 million (search the charity register for registered UK charities)
  • The deceased was living permanently outside the UK (a ‘foreign domiciliary’) when they died and the value of their UK assets is under £150,000

These changes are expected to reduce the number of submissions that require a completed IHT form to obtain a Grant of Representation.

To summarise, the changes should not be considered a major simplification of the process, as the work to obtain these figures is still mostly required, but it may not need to be submitted on an IHT form.

Kings Court Trust

The difference between probate and estate administration

You might be aware of ‘probate’ but you may not have heard of the term ‘estate administration’. Although both are related to dealing with the deceased’s estate, they have different definitions and people often get the two confused.

Probate may be required when someone passes away. The umbrella term, ‘Grant of Representation’, refers to the ‘Grant of Probate’ or ‘Letters of Administration’ (if there is no Will) in England & Wales. This is called ‘Confirmation’ in Scotland. Probate is not always required. For example, assets that were held jointly will automatically pass to the surviving spouse.

Estate administration is the process of handling a person’s legal and tax affairs after they’ve died. This means dealing with their assets, debts, and taxes before distributing inheritance to the beneficiaries. As each estate is unique, it’s difficult to predict exactly how long the process will take. We advise that it should be expected to take several months.

To sum up the difference between probate and estate administration: probate is just one part of the wider process, providing you with the legal right to move forward with estate administration. Although probate is not always required, estate administration must always be carried out, no matter the estate’s value.

Obtaining probate and carrying out estate administration can often be complex and time-consuming, adding stress at a time that is already difficult for those who are grieving. Many choose to appoint a professional to act on their behalf.

KIngs Court Trust

Let Your Head, Not Your Heart, Guide Your Investment Decisions

Many of us will have spent the last two years longing for the time when most of the UK population had a good immunity against Covid-19, and pandemic restrictions were either being eased or completely dropped.

And although the pandemic isn’t over, these wishes have come to pass, and we’re closer to normal now than we have been for a long time. So why do we not feel like celebrating?

Well, the headlines still make grim reading. From soaring inflation to Russia’s attack on Ukraine, it’s clear that the global economic recovery from the pandemic isn’t going to be smooth, and this volatility is making many investors jittery.

However, we’d urge you not to panic in the face of international uncertainty. Hold firm, stick to your investment plan and don’t let emotions guide your decisions.

Keep a Lid on Your Emotions

Being an investor is like being a football fan, as you can face the highest of highs, crushing blows, and a regular struggle to process the dizzying range of feelings that comes with riding this rollercoaster.

But there’s a key difference with investors, as there can be a big financial cost to you if you go into panic mode as soon as the market falls.

You should be taking a long-term approach to your investments, rather than acting emotionally and impulsively.

Simply sitting tight until the markets recover from whatever has caused them to drop could be a much more lucrative approach than panicking as soon as things don’t go the way you want.

Markets Rise and Fall

Watching the value of your investments plummet as an international crisis escalates will naturally be a cause for worry.

But the markets rise and fall every single day, and while tough times might be difficult to swallow, the value of your investments will eventually bounce back. And that’s why it’s so important to be resilient and stick to your long-term strategy.

You could even use this opportunity to pick up some new investments while prices are low, with the expectation that their value will also rise at some point in the future.

This could be a great way to diversify your portfolio if you’re worried about keeping all your eggs in one basket, but as ever, you should research potential investments thoroughly before making any commitments.

How often do we see investors paying too much for stocks at a time when they are doing well? If you’re prepared to wait, perhaps for several years, for the markets to recover at some point in the future, it could pay off handsomely.

An interesting study by JP Morgan highlights exactly why it’s worth taking a long-term approach to investing. According to the study, an investor who was out of the market for just ten days between January 4th 1999 and December 31st 2018 would have seen their returns fall from 5.62 per cent a year to 2.01 per cent a year. And if you had missed the 60 days in which the market was performing at its best, you would have seen a 7.5 per cent loss per year on your investments.

This puts into context exactly why at times like these, investors should simply do nothing and hold onto their investments. Hopefully, the markets should pick up in the coming months or years, and work in your favour.

Diversifying Reduces Investment Risk

If you’re concerned about the level of risk you face from your investments, it may be time to consider diversifying, rather than selling up.

If you’ve invested solely in one company or one industry, the strength of your portfolio heavily relies on the specific problems and issues facing that particular sector. That means a diverse portfolio, covering shares, bonds and property in different countries and sectors could be more resilient in the face of global economic problems, and international crises such as the current Ukraine invasion.

Ultimately, the message to take away from this article is that now is not the time to panic and sell up. Sit tight, stay calm and stick to a long-term strategy, as that’s more likely to reap rewards for you in the future.