Smart Money May & June 2012


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Smart Money May & June 2012

  1. 1. gpl7811556 IFS (S).pdf 1 30/04/2012 14:22 SmartMoney Independent Financial Services MAY / JUNE 2012Is it time to getmore flexible withyour money?Remove the cap on theretirement income you can takeAre you savingenough now to livewell in years to come?The closer you get to retirement thegreater the need to talk to usPicking the rightbalance of assets Tfor your portfolio PAC T IM E THE BUDG OUR OF ON YIALKeeping track of lots of individual N ne m lay T IOassets can be a daunting task 2 201INANCING e ly e N S F ANN th ce t d E N ar tes LM PE‘Will’ your loved ones PL ct ffe La O IC es a et? s eget your inheritance? ng R T w ad cha r pock EN MA you TOMake sure you avoid unnecessary legalcomplications and emotional hardship U sc A Independent Financial Services (UK) Ltd 404 The Waterfront, Stonehouse Park, Sperry Way, Stonehouse, Glos, GL10 3UT Tel: 01453 797500 Fax: 01453 797559 Email: Web: Registered in England No. 2937166.Registered Office: 404 The Waterfront, Stonehouse Park, Sperry Way, Stonehouse, Glos., GL10 3UT Independent Financial Services (UK) Ltd is an appointed representative of Lighthouse Advisory Services Limited which is authorised and regulated by the Financial Services Authority.
  2. 2. Welcome RETIREMENTEditorialP ension legislation is always on the move and keeping up to date with the latest changes could open upnew opportunities for you inretirement. In April 2011, someof the most significant changes inpension legislation for five yearswere announced. On page 05 wediscuss the main areas to considerwhen planning for the future soyou can achieve your retirementneeds more successfully. Are you saving Picking the right balance ofassets for your portfolio dependsupon your own risk profile. One enough now to liveway to protect your portfolio isto spread your risk by diversifyingacross several different types of well in years to come?investment funds and classes ofsecurities and localities in order todistribute and control risk. Readthe full article on page 07. In a low gilt yield environment,having flexibility within a pension The closer you get to retirementarrangement can make a big the greater the need to talk to usdifference. On page 09 we look atoptions that include either delaying Retirement is something we all look forward to and, even if ittaking pension benefits until thesituation improves, or phasing seems a long way off, the crucial question is ‘Do you have enoughmoney into drawdown, to benefit saved for a comfortable retirement?’from any potential upturn. A full list of all the articles Whatever the answer, it’s not too late to Want to discover whatfeatured in this edition appears on boost your retirement savings. The closer the future will look like?page 03. n you get to retiring the greater the need to Even if your pension is up and preserve your savings and ensure they will last running, that’s not the end ofContent of the articles featured in this all through your retirement. the story. It’s important thatpublication is for your general information We can help you assess whether you need you review your payments,and use only and is not intended to address to make changes to your investments as youyour particular requirements. They should particularly if you have anot be relied upon in their entirety and approach retirement. change of circumstances. Ifshall not be deemed to be, or constitute, Investing in non-pension savings will you don’t know how youradvice. Although endeavours have been enable you to use these to supplement pension’s doing, you can’tmade to provide accurate and timely know what your future willinformation, there can be no guarantee your pension income – and still access yourthat such information is accurate as of the money if you need to. look like. To discuss howdate it is received or that it will continue to Having the right mix of investments will help we could help you plan forbe accurate in the future. No individual or your savings outpace inflation. retirement, please contact uscompany should act upon such information for further information.without receiving appropriate professional If you are approaching retirement you willadvice after a thorough examination of generally be able to take up to 25 per cent A pension is a long-term investment. The fundtheir particular situation. We cannot acceptresponsibility for any loss as a result of of your pension fund as a tax-free lump value may fluctuate and can go down as wellacts or omissions taken in respect of any sum. This could be used to supplement as up. You may not get back your originalarticles. Thresholds, percentage rates and tax your retirement income by reinvesting in a investment. Past performance is not an indicationlegislation may change in subsequent FinanceActs. Levels and bases of and reliefs from flexible investment. of future performance. Tax benefits may vary astaxation are subject to change and their value Wherever you are with your retirement a result of statutory change and their value willdepends on the individual circumstances of savings, don’t be put off from taking action – depend on individual circumstances. Thresholds,the investor. The value of your investmentscan go down as well as up and you may get there are still steps you could take to boost the percentage rates and tax legislation may change inback less than you invested. income you’ll get when you retire. n subsequent Finance Acts.02
  3. 3. 04 IN THIS ISSUE ss iscu ial o d inanc T f r g you lanninents p iremIn this issue u tain req to ober or furth on, 06 rmatie infopleast us c conta02 Are you saving enough now to live well in 08 Automatic pension enrolment years to come? Latest delay scarcely made the news The closer you get to retirement the greater the need to talk to us 09 Alternatives to help people improve income levels04 11 Eradicate any financial Valuable planning opportunities in a worries by protecting retirement market where the gilt yield your income has declined Choosing the right solutions that are most relevant to your current lifestyle is the key 10 ‘Will’ your loved ones get your inheritance? Make sure you avoid unnecessary legal05 Is it time to get more flexible with your money? complications and emotional hardship Remove the cap on the retirement income you can take 11 The impact of Budget 2012 on your financial planning How do the changes affect your pocket?06 12 What the Chancellor had to say Creating a stable economy, a fairer, 12 Maximise the lifetime income from your pension more efficient and simpler tax system at retirement and further reforms to support growth Why shopping around for an annuity could increase your income07 Picking the right balance of assets for your portfolio Keeping track of lots of individual assets can be a daunting task want to make more of your money IN 2012? For more information please tick the appropriate box or boxes below, include your personal details and return this information directly to us. n Arranging a financial wealth check Name n Building an investment portfolio Address n Generating a bigger retirement income n Off-shore investments n Tax-efficient investments n Family protection in the event of premature death n Protection against the loss of regular income n Providing a capital sum if I’m diagnosed with serious illness Postcode n Provision for long-term health care Tel. (home) n School fees/further education funding n Protecting my estate from inheritance tax Tel. (work) n Capital gains tax planning Mobile n Corporation tax/income tax planning Email n Director and employee benefit schemes n Other (please specify) You voluntarily choose to provide your personal details. Personal information will be treated as confidential by us and held in accordance with the Data Protection Act. You agree that such personal information may be used to provide you with details and products or services in writing or by telephone or email. 03
  4. 4. ProtectionEradicate any financial worriesby protecting your incomeChoosing the right solutions that are most relevant to your current lifestyle is the keyMost of us don’t like to think about how we would manage if your lifestyle? Critical illness insurance can pay out a tax-free cash sum should thewe were ill and unable to work. But it’s important to sit down insured person be diagnosed with oneand think about the future in this way, if only to give both you of a range of specified critical illnesses while the policy is in force. Critical illnessand your loved ones peace of mind. cover can be either arranged on its own or included as part of other forms ofA little forward planning now could insurance or long-term disability cover insurance, such as life cover.provide you or your family with a regular – but they basically do the same thing. Critical illness polices can vary inincome or cash lump sum at a time when When you buy income protection the illnesses they cover but most coverfinancial worries should be the last thing you choose how much income you illnesses which are consistent with theon your minds. want to receive. The maximum income Association of British Insurers’ list of There are a number of different is typically up to 65 per cent of your critical illnesses. These include cancer,solutions to choose from. In an ideal earned income. The payments are tax- heart attack and we’d be able to afford them all. free though, so the shortfall might not You can choose the length of timeBut with so many other everyday financial be as much as you think.   you want the policy to run for – manyresponsibilities, it’s better to choose You need to choose when you want the will stop when you reach 70 years ofthe ones that are most relevant to your regular payments to start should you have age – but it could coincide with the endlifestyle now. Then, as your needs change, to make a claim, so you need to include of your mortgage or children finishingyou can change the type of protection any payments from your employer. Income school or university. nthat you have in place. protection typically pays out until you retire or you recover but you can choose to stopIncome protection matters it earlier, perhaps once a mortgage hasIncome protection insurance is designed been paid off. Payments will also stop if No matter what your financialto provide you with a guaranteed regular you do go back to work. If you were to fall circumstances are, it’s usually better to have some protectionincome if you’re too ill to work due to ill again you may be able to claim again. insurance in place rather thansickness or injury. You usually continue to none, and you should increase orreceive this regular income until you’re well The critical factor change the type of cover you haveenough to return to work. You’ll often find How would you cope financially if you as your financial and personalincome protection referred to as permanent were suddenly diagnosed with a critical circumstances change. To discusshealth insurance, income replacement illness and what effect would it have on your options, please contact us.04
  5. 5. RetirementIs it time to get moreflexible with your money?Remove the cap on the retirement income you can takePension legislation is always on the move and keeping up to date with the latest changescould open up new opportunities for you in retirement. In April 2011, some of the mostsignificant changes in pension legislation for five years were announced.Gaining more control Another age-restricted benefit A pension is a long-term investment.Many of these changes were designed to where the rules have been eased is The fund value may fluctuate and canlimit what the government clearly sees the opportunity to take tax-free cash – go down as well as up. You may notas over-generous tax relief concessions. typically a quarter of your pension pot – get back your original investment. PastBut other changes have created the very when you first start to take your pension performance is not an indication of futureappealing prospect, for people aged benefits. Until April 2011, if you hadn’t performance. Tax benefits may vary as a55 or more, of gaining more control taken your tax-free cash by age 75, result of statutory change and their valueover when and how they can use their you lost the chance to do so. Now that will depend on individual circumstances.retirement savings. restriction is removed too. Thresholds, percentage rates and tax Under the current rules, if you meet legislation may change in subsequentcertain eligibility criteria, you can now Pension contract Finance Acts.take as much as you want from your Depending on your circumstances, allpension without the maximum income these changes may well sound like goodrestrictions that apply to conventional news, but there’s one important thingdrawdown arrangements. To be eligible to be aware of. Just because the rulesfor this facility – known as ‘flexible about when and how you takedrawdown’ – you have to show that you pension benefits havealready have a ‘secure pension income’ changed, it doesn’t meanof £20,000. your pension contract will have changed as well.Enhanced drawdown facilities If the terms of yourWhile, for many people, buying an annuity contract have not beenis likely to remain the most appropriate updated to reflect the newmethod of accessing their pension income, legislation, you could find that yousome will want to take advantage of these can’t take advantage of them. Youenhanced drawdown facilities. could still find yourself obliged to Flexible drawdown could, for buy an annuity at age 75. And if youexample, be used to meet one-off large haven’t taken your tax-free lump sumexpenditure items as they arise or to at that age, you could still lose theoptimise your tax liabilities. It could also opportunity to do so. nbe a way to pass money through thegenerations, either by ‘gifting’ regular We help our clients to plan for the future by meetingpayments, for example into trusts, or as their retirement planning needs.pension contributions to children using For more information about‘normal expenditure’ rules so as to help how we COULD really makeavoid Inheritance Tax. the most of your retirement planning, please contact us for further information.Paying income taxIn moving money out of your pensionfund before you die, you will be payingIncome Tax on such payments but at arate that is lower than the 55 per cent taxcharge payable on a lump-sum paymentfrom your pension fund should you die. 05
  6. 6. Budget 2012What the Chancellor had to sayCreating a stable economy, a fairer, more efficient andsimpler tax system and further reforms to support growthThe Chancellor of the Exchequer, George Osborne, presented his third Budget speech to Parliament on21 March 2012. It maintained the government’s strategy to reduce the deficit, contained far-reaching taxreforms and support for growth and reward for work. The Chancellor set out the actions the governmentwill take in three areas – creating a stable economy, a fairer, more efficient and simpler tax system andfurther reforms to support growth.Tax matters Child benefit gifts from a domiciled to a non-domiciledThere was a welcome increase in the Child benefit will now bring a reduced spouse (or civil partner); and for theIncome Tax Personal Allowance for the benefit for those with income of over non-domiciled spouse to elect to be2013/14 tax year to £9,205, not far off the £50,000 (this is subject to tapering when treated as domiciled – thus allowing fullgovernment’s stated target of £10,000. the claimant earns over £50,000, with it IHT exemption. However, for the elderly this was being reduced entirely for those with anlargely neutralised – or worse – by the income over £60,000). Other measuresunexpected abolition of the Age Related The first steps were also taken to limiting Many previously announced measuresPersonal Allowance from 2013/14 for the amount of tax reliefs such as charitable remained unaltered, such as the limits forthose not yet 65, and the freezing of the gifts, losses and loan interest. From tax-favoured investments in Enterpriseallowance for those who are. 2013/14 the total relief will be limited to Investment Scheme (EIS) shares (£1m Then there was the reduction in the £50,000, or 25 per cent of the individual’s from 6 April 2012) and Venture Capitalhighest rate of Income Tax from 50 per income, whichever is the greater. Trusts (VCT) shares (£200,000 fromcent to 45 per cent from 2013/14. It 6 April 2012), and the IHT thresholdseems likely that taxpayers may wish to Tax avoidance (remaining at £325,000). ndelay income receipts until after 5 April As part of the government’s plan to2013, if they are able. introduce further measures against tax Levels of tax benefits are based on current In contrast to the reduction in the avoidance, it was no surprise that the or proposed legislation and may vary as atop rate of Income Tax, there was a headline measure was the new SDLT rate result of statutory change and their valuefocus on increasing the take from of 15 per cent for residential properties will depend on individual circumstances.other taxes, with a number of new acquired for more than £2m by certainmeasures aimed at raising more ‘non-natural’ persons (i.e. not individuals).revenue from the wealthy. This applies immediately and it is also planned to introduce an annual chargeResidential property for properties owned by these non-A new higher 7 per cent Stamp Duty Land natural persons, but only from 2013. TheTax (SDLT) rate on properties costing more Chancellor made it clear that attemptsthan £2m was introduced. Also, the UK to circumvent the new rules would bewill now copy many other countries in blocked retrospectively.taxing the gains realised by non-residentson UK property disposals. However, Inheritance Taxthis will (at least initially) not apply to Other welcome measures included aindividuals, and will apply only to gains proposal to increase the Inheritancerealised on residential property. Tax (IHT) threshold from £55,000 for The Chancellor of the Exchequer, George Osborne06
  7. 7. InvestmentPicking the right balance ofassets for your portfolioKeeping track of lots of individual assets can be a daunting taskPicking the right balance of assets for your portfolio depends upon your own risk profile. One way toprotect your portfolio is to spread your risk by diversifying across several different types of investmentfunds and classes of securities and localities in order to distribute and control risk.Different risk characteristics Reduce share-specific offset losses in a portfolio and help toThere are many different assets in risk by diversifying achieve better returns over time. which you can invest, each with By diversifying within assets, you candifferent risk characteristics. While the spread your investments into different Investments stylesrisks attributable to assets cannot be shares or bonds to ensure your portfolio to suit your needsavoided, when managed collectively as is exposed to lots of different types of This is another important aspect topart of a diversified portfolio, they can investments rather than, for example, consider when building an investmentbe diluted. having shares in just a few large portfolio. Some investment funds use a The main assets available are shares, companies. In this way, share-specific ‘passive’ strategy. This is an investmentbonds (also referred to as ‘fixed interest’), risk can be reduced should one of those approach that aims to mirror or ‘track’cash and property. companies experience difficulties. the performance of a financial index. While individual assets have a bearing This is normally done by either investingon the overall level of risk you are Different sectors perform in the exact constituents of an index orexposed to, the correlation between in very different ways by taking a representative ‘sample’ ofthe assets has an even greater bearing. It is just as important to spread your that index. The managers of such fundsThe aim is to select assets that behave investments across different sectors – areas of have lower expenses than active fundin different ways, the theory being that the economy where businesses share the same managers, and the charges to investorswhen one is underperforming, the other or a related product or service, for example, are therefore ‘outperforming’. pharmaceuticals, telecommunications or retail Other funds use an ‘active’ approach and Fixed interest investments and property, – as well as different companies. Companies aim to beat the index by using their ownfor example, behave differently to share- are classified by the sector in which they research and analysis to select shares theybased investments by offering lower, more reside, which is dependent on the goods or believe will achieve greater returns. nconsistent returns. This provides a ‘safety services they sell or’ by diversifying away from many of the For many reasons, companies within No matter what yourrisks associated with reliance upon one different sectors perform in very different investment goals are and how much you wish to invest, weparticular asset. ways. By diversifying across sectors you can work with you to develop can access shares with high growth the best portfolio for you. ToSpreading investments expectations without over-exposing your discuss your wealth creationacross different assets portfolio as a whole to undue risk. objectives, please contact us.Keeping track of lots of individualassets can be a daunting task. A Greater geographical This information sets out the basics ofmuch simpler solution is to acquire diversification can help portfolio diversification. It is not designedinvestment funds containing those It’s natural to feel more comfortable to be investment advice and should notassets and leave the diversification investing a portfolio in your home be interpreted as such. Other factors willworries to professional management. By market but this is not necessarily need to be taken into account beforepurchasing a fund that invests in, say, the most sensible option. Because making an investment decision. The value oflarge blue chip companies, another that investments in different geographical investments and the income from them caninvests in smaller growth companies economies generally operate in different fall as well as rise and is not guaranteed.and others that invest overseas, you economic cycles, they have less than You may not get back the amount originallycan spread investments across hundreds perfect correlation. That’s why greater invested. Past performance is not a guide toof different assets. geographical diversification can help to future performance 07
  8. 8. RetirementAutomatic pension enrolmentLatest delay scarcely made the newsReforms designed to get more people saving for retirement have For firms with fewer than 50 employees,been pushed back so many times that the latest delay scarcely these deadlines fall between June 2015 and April 2017, unless whoever wins themade the news. It will now be October 2018 before minimum intervening general election offers them aemployer contributions to workplace pensions are fully phased in. further reprieve.Previously, this was supposed to happen by October 2017 – and Any employer setting up business betweenbefore that by 2016, and before that by 2015. 1 April 2012 and 30 September 2017 will have auto enrolment dates between 1 MayContributions less affordable Smaller employers 2017 and 1 February 2018. nThe government says it is taking things Progressively smaller employers willmore slowly because economic conditions then be brought on board month byhave made contributions less affordable.Nonetheless, the Department for Work and month until February 2014, when all employers with 250 or more staff will £8,105*Pensions (DWP) insists it will adhere to the be within scope. Firms with 250 to Employees earning at leastlatest timetable regardless of whether the 2,999 people on the payroll will not this amount annually will beeconomy improves. now get extra breathing space, as had automatically enrolled into a pension been hinted in November. scheme with employer contributionsEmployer obligations Employers with between 50 and 249 if they are aged between 22 andUnder the new laws, employees will be staff will have compliance dates ranging the state pension age, and are notautomatically enrolled into a pension from April 2014 to April 2015. already in a scheme that meetsscheme with employer contributions ifthey are aged between 22 and the state 8% minimum standardspension age, earn at least £8,105* a Eventually, theyear and are not already in a scheme that automatic level ofmeets minimum standards. Once enrolled, contributions must beemployees can opt out. But saving in a at least this percentagepension will be the new default setting for of the individual’sanyone who does not express a choice. ‘qualifying earnings’ Eventually, the automatic level ofcontributions must be at least 8 per centof the individual’s ‘qualifying earnings’.This includes 3 per cent that must comefrom the employer. Qualifying earningsalso include payments like overtime andcommission, not just salary.Definitions of payEmployers can set higher contributionrates if they prefer. They will also havethe option of basing contributions onmore straightforward definitions ofpay, which would usually increase theamount due. If you are not already in a workplacepension scheme, when you will beenrolled depends on how many peopleare in your employer’s Pay-As-You-Earn tax arrangement. The automaticenrolment regime applies to the verylargest employers from October 2012.08
  9. 9. WEALTH PRESERVATIONAlternativesto help peopleimprove income levelsValuable planning opportunities in a retirementmarket where the gilt yield has declinedIn a low gilt yield environment, having flexibility within a pension arrangement can makea big difference. Options include either delaying taking pension benefits until the situationimproves, or phasing money into drawdown, to benefit from any potential upturn.Immediate income needs income level should apply to the entire arrangements and pension annuities.Alternatively, some people may choose to drawdown fund, not just the additional The cap on the maximum amount ofuse other savings as a means of providing amount drip-fed in, making it an attractive income someone can withdraw from theirfor their immediate income needs, delaying solution in today’s investment market. pension can be a cause of real frustration forthe use of pension savings until later. Using Care should be taken when considering many people. However, there are alternativesother savings first, such as Individual Savings this type of retirement income planning. If to help people improve their income levels. nAccounts (ISAs), leaves the pension fund additional money is drip-fed into incomeuntouched and available for drawdown as drawdown when conditions are not favourable, It’s crucial to find out how youand when the situation improves. for example, when gilt rates or investment can afford the retirement you want. If you’re approaching The changes made to the income markets have fallen further, it may have a retirement, it may be time to thinkdrawdown rules in April 2011 means that negative impact on maximum income levels. hard about turning your pensionmore people can delay accessing their fund into an income for life. Ifpension benefits as they no longer have Option of annual reviews you’re already retired, thereto buy an annuity by age 75, which may Keeping some pension money back is a could still be things you can do to help boost your income. Tohelp to provide greater flexibility at a time particularly good tactic for those who have discuss the options available towhen people need it. a pension contract that does not allow you, please contact us. them the option of annual reviews. If theyPhasing of money only offer the statutory three-year review A pension is a long-term investment.Another consideration is the phasing of period, then people could have to wait a The fund value may fluctuate and canmoney into drawdown, to benefit from long time before they can benefit from any go down as well as up. You may notany potential upturn of both investment improvement in market conditions. get back your original investment. Pastmarkets and gilt yields. By keeping some performance is not an indication of futurepension money back, and drip-feeding it Planning opportunities performance. Tax benefits may vary as ain when stock markets and/or gilt yields These kinds of planning opportunities may result of statutory change and their valueimprove, could mean creating a higher be particularly valuable in a retirement will depend on individual circumstances.income level while inside a three-year market where the gilt yield has declined, Thresholds, percentage rates and taxreview period. If the pension scheme is impacting the maximum income legislation may change in subsequentstructured in the right way the higher available from both income withdrawal Finance Acts. 09
  10. 10. Estate preservation 61% The percentage of British adults who don’t currently 31% The percentage of have a will* people currently drawn up without a will who‘Will’ your loved ones claim the main reason is that they just haven’t got round to doing it yetget your inheritance? 78% The percentageMake sure you avoid unnecessary legal of people without a will who live ascomplications and emotional hardship marriedDespite being a fundamental piece of family financial planning, six out of ten (61 per cent)of British adults don’t currently have a will* drawn up, according to research by Standard Life.The research reveals that this becomes If one of them were to die, the money might take some time to think through,even more worrying when looking at could be passed on to their parents or a finalising a will is not an arduous processthe figures of those with children in the family member before their partner. This and can be done quickly. And also, whilehousehold and also by age. can, of course, lead to unnecessary legal some might not believe they have any People with no children (41 per cent) in complications and financial hardship that substantial assets to pass on, it’s importantthe household are more likely to currently could easily be avoided. Therefore a large to remember that having a will in place ishave a will in place than those with proportion of this group really needs to about peace of mind and confidence inchildren at home (27 per cent). review their circumstances and prioritise having your affairs in order. n the value of having a will to protect theirCurrently without a will partner and any children they might also Can we help?Looking at the age breakdown, more than have in the relationship.two-thirds (77 per cent) of 35 to 44-year-olds Benjamin Franklin once said thatdon’t have a will in place, more than half (56 NO SUBSTANTIAL ASSETS ‘nothing is certain but death andper cent) of 45 to 54-year-olds, two-fifths (42 The research reveals that three out of ten taxes’ – and they are intrinsically linked. Obtaining the right adviceper cent) of 55 to 64-year-olds and almost a (31 per cent) of those currently without can have lasting consequencesquarter (24 per cent) of those 65 and over a will claim the main reason is that they for you and your family. Toare currently without a will. just haven’t got round to doing it yet. This discuss how we could help you Creating a will can be seen as a difficult figure is consistent for those aged 65 and find the right wealth structureand uncomfortable thing to do. The over, with 30 per cent stating they haven’t or combination of structures, please contact us.modern family can be complicated, we’re got round to creating a will.all rushed off our feet and we don’t really The next most frequently stated reasonslike to think about death. But the reality are that people don’t think they have any The Financial Services Authority doesis if you were to die without a will the substantial assets or that they are too not regulate taxation, trust advice oremotional strain on your family, friends young (both 17 per cent), followed by one will writing.and loved ones could far outweigh the in ten (10 per cent) who simply haven’ttime and money spent in sorting out your thought about it. The percentage of those *By will, the research means a legallywill in advance. who felt it was too expensive to have a will executed document that explains how and prepared was very low at only 7 per cent. to whom a person would like his or herUnnecessary legal property distributed after death.complications People’s prioritiesThe fact that the number of people As the research proves, the vast majority All figures, unless otherwise stated, arewithout a will who live as married is so of people currently without a will aren’t from YouGov Plc. Total sample size washigh (78 per cent) is alarming. Couples concerned about the cost of creating 2,051 adults. Fieldwork was undertakenwho aren’t married or in a registered Civil a will. However, the fact that they’re between 8-10 February 2012. The surveyPartnership do not have the same legal using lack of time as an excuse shows a was carried out online. The figures haveprotection as married couples if they die real sense of people’s priorities. Though been weighted and are representative ofwithout a will in place. the decisions that need to be made all UK adults (aged 18+).10
  11. 11. Budget 2012 101,000 The number of filed taxThe impact of Budget 2012 returns in 2009/10 which included discretionary trustson your financial planningHow do the changes affect your pocket?Change to retirement age This tax incentive encourages many to Extension to IHT spouseThe Chancellor confirmed in Budget 2012 make the most of pension contributions exemption for Europeanthat he would increase the state pension now, so they can make the most of their domiciled spouseage and that we should brace ourselves retirement in the future. A consultation review of the restrictionfor having to work much longer in the on the spouse/civil partner exemptionfuture. There are already two increases to No change on GAD maximum was announced. In the last few years,the state pension age scheduled for 2019 The government did not make changes EU law has had an increasing impact onand 2026. If after 2026 the state pension to the drawdown Government Actuary’s UK Inheritance Tax (IHT). IHT reliefs andage increases in line with our changing Department (GAD) maximum. People exemptions for agricultural property andlife expectancy, we could expect that starting drawdown or who have reviewed charities have been extended to coversomeone who is currently 37 won’t be it during the last year may have had the European Economic Area in 2009 andable to start drawing their state pension their income affected by falling gilt 2010. The announcement is good newsuntil they are 70 and someone who is yields caused by the Bank of England for those whose spouse/civil partner is21 won’t receive it until they are 75. quantitative easing programme. At the from another country, meaning they are This means that children born in 2012 same time annuities have also experienced domiciled there rather than in the UK. Itare unlikely to get their state pension until a similar impact, but to a lesser degree should remove a tax worry and layer ofage 80, if life expectancy at retirement as they are backed by a mix of corporate IHT complexity for mobile people withrises in line with the last 30 years. This is bonds and gilts. international connections.a considerable change for everyone, butwomen in particular have to make a big Government ends salary Changes topsychological adjustment as their state sacrifice to fund employee’s discretionary trustspension age is leaping forward. spouse’s pension One of the most complex elements of The two increases already planned The government announced the cessation IHT, the ten-year charge and exit chargefor 2019 and 2026 will be followed by of salary sacrifice to fund an employee’s calculations for IHT in discretionary trusts,increases every five years thereafter. If you spouse’s pension. This tax ‘idea’ involved is to be simplified. This could be goodare thinking ‘this won’t really affect me, an employee sacrificing salary or bonus news for trustees and beneficiaries of theseI’m still going to aim to retire at 60 or 65 and their employer paying this into the trusts, of which there are thousands in theanyway’, unless all of us save a lot harder, employee’s spouse’s pension up to the UK. HM Revenue & Customs statistics showmany people could still be working well annual allowance, including carry-forward. that 101,000 of these types of trust wereinto their seventies. included in tax returns filed in 2009/10. n Introduction of a generalPensions tax relief anti-avoidance rule (GAAR) To find out how BudgetThe Chancellor did not make a change The direction of travel towards a more 2012 may have impactedto tax relief on pension contributions. limited form of GAAR was set out in on your financial plans,This valuable incentive encourages more the Aaronson Report in November please contact us topeople to save for their retirement years. last year. Those endorsing sensible tax review your situation.Tax relief on qualifying contributions planning should have nothing to fearinto private pensions means that a £100 if the recommendations in that report, Laws and tax rules may change in theinvestment made by a basic rate tax payer which target schemes that are artificial or future. Information is based on ouris automatically topped up to £125. And contrived, are implemented. Individuals understanding in March 2012. Yourif you are a higher rate tax payer you can implementing tried and tested routes to personal circumstances also have anstill claim the higher rate tax rebate too. mitigate UK tax should not be affected. impact on tax treatment. 11
  12. 12. RetirementMaximise the lifetimeincome from yourpension at retirementWhy shopping around for an annuity could increase your incomeThousands of people could end up with biggerpensions as new rules will force insurers toinform customers about better annuity options.The Association of British Insurers’ (ABI) newcode of conduct forces insurers to give moreinformation about how consumers can ‘shoparound’ for a better deal, while ensuring thatthose with health problems receive a higherincome as a result.Buying the wrong type of annuityCurrently, according to the ABI, more than half of all investorswho buy an annuity – which pays a fixed income for life –simply buy the default annuity deal from their current pensionprovider. As a result many end up buying the wrong type ofannuity or effectively locking into an uncompetitive pensiondeal for the rest of their lives. Shopping around for the bestannuity deal could increase the size of a pension by overa third. A recent report from the National Association ofPension Funds claimed that this was costing pensioners morethan £1bn in lost retirement income.Benefits of shopping aroundThe new rules stop insurers from including an applicationform in the information pack sent to customersapproaching retirement, making it less likely that peoplewill simply buy the first annuity they see. These ‘retirementpacks’ have been redesigned to place greater emphasis onthe benefits of shopping around. Crucially, where insurersare selling an annuity to one of their existing customers,they will be required to ask about their circumstances and Need help to shop aroundmedical conditions before providing a quote. n for the best annuity deal? If you are approaching retirement it isA pension is a long-term investment. The fund value may essential that you receive the best possiblefluctuate and can go down as well as up. You may not get advice when buying an annuity. To get theback your original investment. Past performance is not an most out of your pension savings fund youindication of future performance. Tax benefits may vary as should be confident that you are making the right decisions about your retirementa result of statutory change and their value will depend on income. To discuss how we could help you,individual circumstances. Thresholds, percentage rates and please contact us for further legislation may change in subsequent Finance Acts.Published by Goldmine Media Limited,Prudence Place, Luton, Bedfordshire, LU2 9PEArticles are copyright protected by Goldmine Media Limited 2012.Unauthorised duplication or distribution is strictly forbidden.