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Financial Services
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2. 02 WELCOME / RETIREMENT
Welcome Good news for
Welcome to the latest issue of our
magazine, full of information about
how we can help you protect and
grow your wealth in 2011.
your nest egg
Despite the current economic
Surprise cut to NEST charges for some company pension savers
uncertainty as to what the future
holds, pressure will continue for The new employer duties under the The reforms include the stipulation
increased rates of taxation. This will government’s workplace pension that from 2012 employers either pay
be further fuelled by the disparity reforms will be introduced over a four- a minimum contribution of 3 per cent
in rates of taxation, particularly for year period from 1 October 2012. The into the scheme or automatically
income and capital gains. We can’t staggered introduction of these duties enroll workers in existing pension
over-emphasise the importance is known as ‘staging’. Broadly speaking, vehicles. NEST will launch its scheme
of tax planning at an early stage. the new duties will apply to the largest for voluntary enrolment in the second
Ideally you should commence your employers first with some of the quarter of this year.
tax planning before the year even smallest employers not being affected The new two-part charge by NEST will
starts but after that, the earlier the until 2016. As part of the new duties work as follows: if a member has a fund
better. The current 2010/11 tax year firms will be enrolled into the National of £10,000, they will pay £30, due to the
ends on 5 April and, if you haven’t Employment Savings Trust (NEST). 0.3 per cent annual management charge;
done so already, now is the time to Last November NEST announced a if that same member makes a monthly
start assessing how you could trim a surprise cut to the charges it will apply. contribution of £100, including tax relief,
potential tax bill. On page 10, follow NEST said that it would initially apply a they will pay £1.80 on the sum, due to
our guide to some of the key areas 0.3 per cent annual management charge the 1.8 per cent contribution charge.
to consider during the period leading and a contribution charge of 1.8 per cent, NEST also said that in the long
up to 5 April. after the former Labour government had term, once the costs of establishing
In the event of your premature indicated that the contribution charge the scheme had been met, the
death, unless you plan carefully, would be 2 per cent. contribution charge could fall away,
your family could end up paying a The former government established leaving a flat annual management
sum in Inheritance Tax (IHT). Have NEST as part of pension reforms aimed charge of 0.3 per cent. n
you recently assessed your potential at tackling a lack of adequate pension
liability to Inheritance Tax (IHT)? If savings among low- and middle-income WHETHER yOU’RE AN EMpLOyEE
so, and you have a potential liability, UK workers. The NEST’s investment OR EMpLOyER, If yOU WOULD LIKE
have you planned to reduce it? On strategy will be low-risk and there may be TO fIND OUT MORE ABOUT HOW
page 08 we explain how we could a possibility that, after five years, savers THE INTRODUCTION Of THE NEST
COULD AffECT yOUR pARTICULAR
help you ensure that more of your will be able to move their money out of SITUATION, pLEASE CONTACT US.
hard-earned assets go to the people the NEST into other pension schemes.
you want them to rather than falling
into the hands of the taxman. A pension is a long-term investment.
The new employer duties under The fund value may fluctuate and can go
the government’s workplace pension down. NEST schemes are regulated by
reforms will be introduced over a the Pensions Regulator.
four-year period from 1 October 2012.
The staggered introduction of these
duties is known as ‘staging’. Broadly
speaking, the new duties will apply to the
largest employers first with some of the
smallest employers not being affected
until 2016. As part of the new duties
firms will be enrolled into the National
Employment Savings Trust (NEST). Read
the full article on this page.
Also in this issue we consider why
many families with elderly relatives
in care could find themselves in
a difficult financial situation. We Content of the articles featured in this publication is for your general information and use only and is
explain, too, how important it is that not intended to address your particular requirements. They should not be relied upon in their entirety
and shall not be deemed to be, or constitute, advice. Although endeavours have been made to provide
any investment vehicles you hold accurate and timely information, there can be no guarantee that such information is accurate as of
the date it is received or that it will continue to be accurate in the future. No individual or company
match your feelings and preferences should act upon such information without receiving appropriate professional advice after a thorough
towards risk and return. A full list of examination of their particular situation. We cannot accept responsibility for any loss as a result of acts
or omissions taken in respect of any articles. Thresholds, percentage rates and tax legislation may change
the articles featured in this edition in subsequent finance acts.Levels and bases of and reliefs from taxation are subject to change and their
appears on page 03. value depends on the individual circumstances of the investor. The value of your investments can go
down as well as up and you may get back less than you invested.

3. NEWS / IN THIS ISSUE 03
In this Issue
Life expectancy Good news for your nest egg
02
rises unexpectedly
Surprise cut to NEST charges for
some company pension savers
Life expectancy rises
unexpectedly 03
further pressure on public sector pension schemes further pressure on public
sector pension schemes
In England and Wales the life expectancy The figures calculated by the actuarial Income drawdown
of people has risen unexpectedly, data profession come from its long-running Keeping your pension funds 04
from a report published by the faculty research project, known as the invested beyond your normal
and Institute of Actuaries last November Continuous Mortality Investigation (CMI). retirement date
has shown. This has raised further the In search of
issue of additional increases in the cost What the numbers show boosting your income 05
of providing pensions and the state n The improvement in life expectancy Strategies that pay dividends
pension age. is greatest for those who are oldest,
An extra year of life for a retired particularly for men aged over 80 Diversifying your investments
Selecting assets that behave in
06
person typically means a pension and women aged over 70.
different ways
scheme must increase its stock of n The current projections suggest
assets by 3-4 per cent to generate the that a man who is 100 this year will Savvy ISA
necessary extra income. live, on average, a further two and a returns of the year
07
The faculty and Institute of Actuaries quarter years. This is a 3.7 per cent Will you be rushing to use up
said in their report that life expectancy increase on the 2009 prediction. your tax-free allowance?
had increased in 2009, despite data from n By contrast a man aged 20 is
Inheritance Tax
the previous year indicating a ‘slowing predicted to live on average another
Isn’t it time you assessed your 08
down’ in mortality improvement, the rate 70 years, to the age of 90. This is estate’s potential liability?
of decrease in the death rate. ‘This trend only 0.2 per cent longer than was
has been partially reversed by the 2009 estimated in 2009. Is your retirement
data for males, and wholly negated for n Women aged 90 are expected to live a clock ticking? 09
females,’ the group said. further three and a half years on average, Steps you can take to catch
Chancellor George Osborne which is 2 per cent more than last year. up on a shortfall
revealed in October last year that the n But the improvement in life Make time to review your
state pension age would rise to 66 by expectancy for women aged 20 has personal tax position 10
2020 to tackle the rise in longevity. risen by just 0.3 per cent in the past Essential planning to beat the
Increasing longevity also puts year, to just under 92 years. n 5 April 2011 deadline
pressure on public sector pension
Cost of care:
schemes, as well as on people who
have not saved for their retirement.
TO fIND OUT HOW THE pROpOSED
CHANGES COULD AffECT yOUR affordability gap widens 12
RETIREMENT pLANNING pROvISION, Why an increasing number of
This issue is likely to affect a wide
pLEASE CONTACT US – DON’T LEAvE older people are giving away
range of other areas, including their wealth
IT TO CHANCE.
healthcare and care for the elderly.
Want to make more of your money? 12
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 n Capital gains tax planning
n Building an investment portfolio n Corporation tax/income tax planning
n Generating a bigger retirement income n Director and employee benefit schemes
n Off-shore investments n Other (please specify)
n Tax-efficient investments
n family protection in the event of premature death Name
n protection against the loss of regular income Address
postcode
n providing a capital sum if I’m diagnosed with serious illness
Tel. (home)
n provision for long-term health care
Tel. (work)
n School fees/further education funding Mobile
n protecting my estate from inheritance tax Email
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.

4. 04 RETIREMENT
Income drawdown
Keeping your pension funds invested beyond your normal retirement date
Income drawdown, or ‘Unsecured pensions’, became available in age 75. These interim measures are
expected to cease when the full changes
1995. It allows people to take an income from their pension savings
are implemented. Any tax-free cash must
while still remaining invested and is an alternative to purchasing an still normally be taken before age 75,
annuity. you decide how much of your pension fund you want to although there will be no requirement to
move into drawdown and then you can normally take a 25 per cent draw an income. In the event of death any
remaining pension pot can be passed to
tax-free lump sum and draw an income from the rest.
a nominated beneficiary as a lump sum
pensioners funding their retirement The new rules are likely to take effect subject to a 35 per cent tax charge.
through income drawdown are from April 2011. If you reach 75 before A spouse has a number of options
permitted to keep their pension April 2011 there are interim measures in when it comes to the remaining invested
funds invested beyond their normal place. Under the proposals, there will no fund. The spouse can continue within
retirement date. They continue to longer be a requirement to take pension income drawdown until they are 75 or
manage and control their pension fund benefits by a specific age. Tax-free cash will until the time that their deceased spouse
and make the investment decisions. still normally be available only when the would have reached 75, whichever is the
providing the fund is not depleted by pension fund is made available to provide sooner. Any income received from this
excessive income withdrawals or poor an income, either by entering income arrangement would be subject to income
investment performance, there is also drawdown or by setting up an annuity. tax. By taking the fund as a lump sum, the
the opportunity to increase the income pension benefits are likely to be tested spouse must pay a 35 per cent tax charge.
taken as they get older. against the Lifetime Allowance at age 75. In general, the residual fund is paid free of
from 6 April 2010 you are now able Currently, on death in drawdown before inheritance tax, although HM Revenue &
to choose to take an income from your age 75, there is a 35 per cent tax charge Customs may apply this tax.
pension fund from age 55. Tax rules if benefits are paid out as a lump sum. As with any investment you need to
allow you to withdraw anything from On death in ASp, a lump sum payment be mindful of the fact that, when utilising
0 per cent to 120 per cent (2010/11) of the is potentially subject to combined tax income drawdown, your fund could be
relevant annuity you could have bought at charges of up to 82 per cent. It is proposed significantly, if not completely, eroded in
outset. These limits are calculated by the that these tax charges will be replaced with adverse market conditions or if you make
Government Actuaries Department (GAD). a single tax charge of around 55 per cent poor investment decisions. In the worst
There’s no set minimum, which means for those in drawdown or those over case scenario, this could leave you with no
that you could actually delay taking an 75 who have not taken their benefits. income during your retirement.
income if you want to and simply take If you die under the age of 75 before you also need to consider the
your tax-free cash lump sum. The amount taking benefits, your pension can normally implications of withdrawals, charges and
of yearly income you take must be be paid to your beneficiaries as a lump inflation on your overall fund. Investors
reviewed at least every five years. sum, free of tax. This applies currently and considering income drawdown should
from age 75, income drawdown is under the new proposals. have a significantly more adventurous
subject to different government limits for pensioners using drawdown as attitude to investment risk than someone
and become known as Alternatively their main source of retirement income, buying a lifetime annuity. n
Secured pensions (ASps). If you’re the proposed rules would remain
already receiving income from an income similar to those in existence now with a
If yOU ARE LOOKING TO RETAIN
drawdown plan, currently when you reach restricted maximum income. However, for
OWNERSHIp Of yOUR CApITAL
the age of 75 it will become an ASp. But pensioners who can prove they have a AND A DEGREE Of CHOICE
you will still be able to receive a regular certain (currently unknown) level of secure ABOUT HOW AND WHEN yOU
income while the rest of your fund remains pension income from other sources, there DRAW AN INCOME AND yOU
invested. The minimum amount you can will potentially be a more flexible form WANT TO fIND OUT MORE
withdraw is 55 per cent (2010/11) of an of drawdown available that allows the ABOUT INCOME DRAWDOWN –
amount calculated by applying the funds investor to take unlimited withdrawals pLEASE CONTACT US.
available to the GAD table, while the from the fund subject to income tax.
maximum is 90 per cent (2010/11). These Since 6 April 1996 it’s been possible for The value of investments and the
limits must be reviewed and recalculated protected rights money to be included in an income from them can go down as well as
at the start of each pension year. income drawdown plan, but before A-Day up and you may not get back your original
The government is currently consulting protected rights couldn’t be included in a investment. Past performance is not an
on changes to the rules on having to phased income drawdown plan. indication of future performance. Tax
take a pension income by age 75 and, for investors who reached age 75 after benefits may vary as a result of statutory
following a review conducted in June 22 June 2010 but before the full changes change and their value will depend on
2010, plans to abolish ASps. Instead, are implemented, interim measures are individual circumstances. Thresholds,
income drawdown would continue for the in place that, broadly speaking, apply percentage rates and tax legislation may
whole of your retirement. drawdown rules and not ASp rules after change in subsequent Finance Acts.

5. INvESTMENT 05
In search of
boosting your income
Strategies that pay dividends
for UK savers investing for income, it is important to strike a balance between hunting out good
dividend paying shares, robust corporate bonds, well-managed funds or just the best savings account.
Investing for income for most requires a mixture of investments, to balance risk with returns.
Historically low interest rates have periods fundamentals come to the fore. money left over after paying out for
left many UK savers searching for real Dividend growth is the key determinant capital expenditure, as this is the stream
returns, but the obligatory warning of long-term share price movements, out of which rising dividends are paid.
that past performance is no guide to the rest is sentiment. The larger the free cash flow relative to
how markets will perform in future Even when UK investors don’t need the dividend payout the better.
always applies. an immediate income from their As with any investment strategy,
Utilising UK equity income funds portfolio, steady and rising dividend diversification is the key to diminishing
that pay good dividends can have yields from UK equity income funds, risk, which is particularly important for
an integral part to play in a well- together with the potential for capital UK income-seekers who cannot afford to
structured income portfolio. When growth, can play a central part in lose capital. Also, don’t forget to utilise
looking to generate an income from an investment strategy. In addition, tax shelters, which can deliver tax-free
UK equity funds, the objective is to dividend income may be particularly income, or a pension, where contributions
select funds that invest in businesses relevant as the UK hauls itself out of the attract initial tax relief. n
that have the potential to provide economic doldrums we’ve experienced
sustainable long-term dividend growth. over the past few years. The value of investments and the
The sector is divided in two, making for UK investors requiring income in income from them can go down as well
it easier to select a suitable fund. retirement, it’s all about the compounding as up and you may not get back your
funds in the UK equity income sector of returns over the long-term. UK equity original investment. Past performance is
must aim for a yield at least 10 per cent income funds look to invest in businesses not an indication of future performance.
higher than the fTSE All-Share index, that can demonstrate consistent Tax benefits may vary as a result of
whereas UK equity income & growth returns on invested capital and visible statutory change and their value will
funds must aim for a yield of at least earnings streams. depend on individual circumstances.
90 per cent of the All-Share. Companies with a high and growing Thresholds, percentage rates and tax
If you invest in a UK equity income free cash flow will typically attract UK legislation may change in subsequent
fund where the growth potential is not investors. These are companies with Finance Acts.
reflected in the valuation of its shares,
this not only reduces the risk, it can
If yOU’RE LOOKING TO GENERATE INCOME, MAyBE yOU’RE
also increase the upside opportunity.
fULLy OR pARTIALLy RETIRED AND WANT TO USE yOUR
In the short-term, UK equity income
fund prices are buffeted by all sorts
INvESTMENTS TO SUppLEMENT yOUR pENSION. TO fIND
of influences, but over longer time OUT HOW WE COULD HELp yOU, pLEASE CONTACT US.

6. 06 INvESTMENT
Diversifying
your investments
Selecting assets that behave in different ways
Investment is intrinsically linked with lower, but less volatile returns. This flip side, any losses are potentially
risk and return – they go hand in hand. provides a ‘safety net’ by diversifying greater. If you are unwilling to take any
Which is why it’s important that any many of the risks associated with risk with your money, you may be better
investment vehicle matches your reliance upon one particular asset. off putting your savings into cash, but
feelings and preferences towards risk It is also important to diversify across you should be aware that inflation can
and return. There are a wide variety of different ‘styles’ of investing, such as eat into the value of your money. n
different asset classes available in which growth or value investing, as well as
to invest and there are commensurate diversifying across different sizes of The value of investments and the
risks attached to each one. companies, different sectors and different income from them can go down as well
By diversifying, investment risk can geographic regions. Growth stocks are as up and you may not get back your
be mitigated as part of your overall held as investors believe their value is likely original investment. Past performance is
investment portfolio. In addition, to grow significantly over the long term, not an indication of future performance.
spreading your investments over a wide whereas value shares are held because Tax benefits may vary as a result of
range of asset classes and different they are regarded as being cheaper than statutory change and their value will
sectors enables you to reduce the risk the intrinsic worth of the companies in depend on individual circumstances.
that your portfolio becomes overly reliant which they represent a stake. Thresholds, percentage rates and tax
on one particular asset’s performance. By mixing styles that can out- or legislation may change in subsequent
Depending on your risk profile, this will under-perform under different economic finance acts. These investments do not
determine the mix of investments you conditions, the overall risk rating of your include the same security of capital
choose. It’s important that you only invest investment portfolio is reduced. your which is afforded with a deposit account.
in what you can afford to lose and have attitude to risk for return is determined As property is a specialist sector it can
savings to cover any short- to medium- by your circumstances, age, goals and be volatile in adverse market conditions
term needs. As an absolute minimum, you other factors and these will help you and there could be delays in realising
should consider holding at least three to decide what type of investments to hold. the investment. Property valuation is a
six months’ earnings in a savings account A general rule is that the greater the matter of judgement by an independent
that offers immediate access, in case of risk you’re prepared to take, the higher valuer; therefore it is generally a matter
an unforeseen emergency. the potential returns could be. On the of opinion rather than fact.
The key to diversification is selecting
assets that behave in different ways.
Some assets are said to be ‘negatively WE CAN HELp yOU MAKE AN INfORMED DECISION ABOUT yOUR
correlated’. This may include bonds
fINANCIAL fUTURE BASED ON yOUR fINANCIAL GOALS. If
yOU WOULD LIKE TO DISCUSS THIS AND CONSIDER yOUR 2011
and property, which often behave in a
INvESTMENT STRATEGy, pLEASE CONTACT US.
contrarian way to equities by offering

7. WEaLTH CREaTION 07
Savvy ISA
returns of the year
Will you be rushing to use up your tax-free allowance?
As the 5 April Individual Savings ISAs are tax-free, meaning the
AS WE COUNT DOWN TO THE END
Account (ISA) deadline approaches, interest you earn is exempt from UK
Of THE TAx yEAR, INvESTORS
every year there is a flurry of last- Income Tax and Capital Gains Tax. BEGIN THE SEARCH fOR THE BEST
minute activity. But why leave it to The tax treatment depends on your pLACE TO pUT THEIR ISA MONEy.
the last minute? We can help you individual circumstances and may not be TO fIND OUT HOW WE COULD HELp
make an informed decision and maintained in future. yOU TO MAKE THE RIGHT DECISION
ensure you take advantage of using To open an ISA you must be aged fOR yOUR ISA MONEy, CONTACT US
fOR fURTHER INfORMATION.
your full ISA allowance. 16 or over and a UK resident or Crown
In this current 2010/11 ISA season, employee serving overseas, or married
the new limit increased to £10,200 for to or a civil partner of a Crown employee The value of investments and the
everyone, so it makes sense to make the serving overseas. n income from them can go down
most of your tax-free allowance. as well as up and you may not get
back your original investment. Past
performance is not an indication of
Take full advantage of using your ISA allowance future performance. Tax benefits may
vary as a result of statutory change and
their value will depend on individual
ISA Option Total ISA investment allowed in the
circumstances. Thresholds, percentage
tax year 2010/11
rates and tax legislation may change in
subsequent finance acts.
Cash ISA only £5,100 maximum in a Cash ISA
or
Stocks & £10,200 maximum in a Stocks & Shares ISA
Shares ISA only
or
Cash ISA and No more than £5,100 in Cash ISA and the balance in the
Stocks & Shares ISA Stocks & Shares ISA up to a combined total of £10,200

8. 08 ESTaTE pRESERvaTION
Inheritancetax
Isn’t it time you assessed your estate’s potential liability?
In the event of your premature death, unless you plan investments they gift away, an income
carefully, your family could end up paying a sum in Inheritance that many people rely on to live on or
even to provide the occasional luxury.
Tax (IHT). Have you recently assessed your potential liability to
Discounted gifts are a way of giving
IHT? If so, and you have a potential liability, have you planned the money away IHT-free after seven
to reduce it? We can help you ensure that more of your years, but the person who makes the
hard-earned assets go to the people you want them to rather gift can also have access to a regular,
than falling into the hands of the taxman. predetermined income for life. In
addition to this, based on a number
IHT facts £3,000 Annual Exemption mentioned of factors including age and level of
If you are single or divorced, current above. All of the above have the effect income selected, there could potentially
UK legislation allows the first £325,000 of reducing the estate upon which the be an immediate discount to IHT.
(2010/2011 tax year) of your estate to IHT can be levied. This means that an investment into a
be free from IHT, or £650,000 if you In most cases, any direct gift amount ‘discounted gift scheme’ usually results
are married or have entered into a civil made either direct or into an absolute trust in a saving in IHT from the moment the
partnership or are widowed (providing no by any one person over the exempt gift monies are placed in the plan.
previous gifts were made by the deceased allowances is a potentially Exempt Transfer
spouse). Under current legislation (pET). This means that you, as the donor, Life Assurance Policy – this is used to
the taxman could take 40 per cent of need to live for seven years from when the insure the liability with a ‘whole-of-life
everything you leave over the threshold transfer is made for the gift to fall outside policy’. Under some circumstances,
(known as the nil rate band) and this your estate. During the seven-year period this can be a cost-effective way of
includes properties, personal effects, cars, the amount of tax payable reduces each providing for the eventual bill and can
savings, investments and insurance – year. This is known as ‘taper relief’. However, be reasonably simple to set up. The
collectively known as your estate. this relief applies only to the part of a gift ‘whole-of-life policy’ has a sum assured
There is a range of allowances that you that is in excess of the nil rate band. which is paid to the beneficiaries on
can use to mitigate a potential IHT liability. death; due to the fact it is written under
The major ones are as follows: Gifts to Trust – this method allows an appropriate trust, it can be paid
the placement of monies in a suitable prior to the rest of the estate being
Annual Exemption – everyone is entitled investment and then this is wrapped released and can, therefore, be used to
to give away £3,000 exempt from IHT in within a trust, of which you and other contribute towards or pay for the IHT
any one tax year. If not previously used, people of your choosing can be trustees. bill for the estate. n
then this allowance can be backdated The monies remain in trust and all, or
THIS IS A vERy COMpLEx AREA
one tax year, so in effect £6,000 could be amounts of this, can be distributed when
Of fINANCIAL pLANNING AND
given per donor to begin with, thereafter you choose. CONSIDERATION SHOULD BE GIvEN
£3,000 per annum (optional). TO fURTHER TAx IMpLICATIONS,
Loan Trust – this type of plan could be fOR ExAMpLE, CHARGEABLE
Marriage Gifts Exemption – each parent suitable for those people who wish to take LIfETIME TRANSfERS, ANy
pERIODIC CHARGES AND
can give wedding gifts of up to £5,000 to steps to mitigate IHT but still wish to retain IMMEDIATE TAx CHARGES OR
each of their children. Grandparents can access to their original capital. Based upon pROpORTIONATE ExIT CHARGES.
gift up to £2,500 to each grandchild. Also, an investment bond (or any other suitable TO fIND OUT HOW WE COULD
you can give up to £1,000 as a wedding investment) which is placed in a ‘loan trust’, HELp yOU REDUCE THIS TAx BUT
STILL RETAIN CONTROL OvER
gift to anyone else. These gifts must be any growth on the investment belongs
yOUR INvESTMENTS AND ESTATE,
given before the wedding day. you can to the trust and is free of IHT, while the pLEASE CONTACT US.
make gifts utilising more than one of the original investment belongs to the settlor
above allowances to the same person. and is fully accessible at any time and Tax benefits may vary as a result of
remains within the estate. statutory change and their value will
Small Gifts Exemption – any number of depend on individual circumstances.
gifts to different people up to a value Discounted Gift Schemes – outright Thresholds, percentage rates and tax
of £250 each can be made in a tax year. gifts can be a highly efficient method legislation may change in subsequent
If the total value of gifts to any one of mitigating IHT, although they are not Finance Acts. Inheritance Tax advice is not
person exceeds £250, then all gifts to suitable for many people because of regulated by the FSA, but any investment
that person must be deducted from the the loss of access to income from the products as illustrated would be.

9. RETIREMENT 09
Is your retirement pension contributions it is also possible to
contribute into a partner’s pension plan.
clock ticking?
Higher earners and those in final salary
schemes should ensure any additional
pension savings do not exceed the lifetime
allowance, as this could mean you end up
having to pay a tax bill.
Don’t leave it until the last minute to
decide what you will do with your pension
Steps you can take to catch up on a shortfall plan. Many people fail to consider their
options properly and simply buy the first
If you are in your fifties, pension planning has never been annuity offered by their pension provider.
so important, which is why there are a number of steps This can significantly reduce your income
in retirement and there is no second
you should take to improve your pension prospects if you
chance to make a better decision.
discover you have shortfall. planning for retirement is one There are now many more retirement
of the biggest financial challenges people face and the one alternatives, from investment-linked and
you can least afford to get wrong. flexible annuities to phased retirement
options, as well as the conventional
In the final ten years prior to your planned to protect capital values. There are a annuities and income drawdown plans. To
retirement date, to begin with you need to number of guaranteed products that could find out what is most appropriate for your
calculate what you are worth. As a starting help you achieve this. particular situation, you should obtain
point establish what your likely state As part of your review, look at the professional advice. n
pension entitlement will be. you should diversification of your assets, as this
also contact the pension trustees of your can help protect against sudden market
WE CAN WORK WITH yOU TO
current and previous employers, who will movements. With a ten-year time frame, DEvELOp THE RIGHT STRATEGy
be able to provide pension forecasts, as investors need to weigh up the risks of TO ACCUMULATE WEALTH IN
will the companies managing any private equity investments against safer cash- ORDER fOR yOU TO ENJOy yOUR
pension plans you hold. based products. RETIREMENT yEARS – TO fIND OUT
Next you need to look at how much Generally, the nearer to drawing your MORE, pLEASE CONTACT US.
income you will need in retirement. It’s pension you are, the less investment risk
important to be realistic. you may spend you should take. But over this period it The value of investments and the
less if you are not commuting to work, but is reasonable to include equities within a income from them can go down as well as
don’t forget to include holidays, travel and mixed portfolio, particularly given the very up and you may not get back your original
any debts you may still have. low returns currently available on cash. investment. Past performance is not an
If you are currently on target to receive Bonds, gilts and some structured products indication of future performance. Tax
less than you will need, you should may also provide a halfway house benefits may vary as a result of statutory
obtain professional advice about how between cash and equities. change and their value will depend on
you could make up a shortfall. During When you enter the next phase of individual circumstances. Thresholds,
the final ten-year period in the run-up your retirement planning – five years percentage rates and tax legislation may
to your retirement, it’s crucial that you or less to go – you need to review your change in subsequent finance acts.
maximise savings. This may not only mean specific retirement goals. Obtain up-to-
contributing to pensions but into other date pension forecasts and review your
investments that may include Individual retirement plans.
Savings Accounts (ISAs). you also need to Consider moving stock market-based
consider whether options such as retiring investments into safer options such as cash,
later or working part-time beyond your bonds or gilts. If there is a sudden market
retirement date may be a more realistic correction now, you may have insufficient
way of meeting your retirement goals. time to make good any losses.
It is not only how much you save but If you’ve lost details of a
where it is invested that can make a pension scheme and need help
difference, so you should also review your contacting the provider, the
investment strategy. Use this opportunity pension Tracing Service may
to carry out an audit of existing pension be able to help you trace
plans; look at where they are invested, ‘lost’ pensions and other
how they have performed and what investments.
charges are levied on them. Don’t It’s also important to
forget also to find out whether there are maximise savings. Save
guarantees on any plans. what you can, utilising
Now will also be an appropriate time to pensions, ISAs and
obtain professional advice about whether other investments. Also
it makes sense to consolidate your existing don’t forget to consider
pension plans, perhaps into a Self-Invested your spouse’s pension. If
personal pension (SIpp), or to take steps you have maximised your

10. 10 Tax MaTTERS
Make time to review
your personal tax position
Essential planning to beat the 5 April 2011 deadline
unless the income arising amounts to no
Despite the current economic uncertainty as to what the future more than £100 gross per annum.
holds, pressure will continue for increased rates of taxation. This
will be further fuelled by the disparity in rates of taxation, The 65 and overs
Taxpayers aged 65 and over are able to
particularly for income and capital gains. We can’t over- claim higher personal allowances. The
emphasise the importance of tax planning at an early stage. benefit of these allowances is eroded
where income exceeds £22,900. In such
Ideally you should commence your tax 40 per cent tax rate paying spouse, circumstances a move to capital growth
planning before the year even starts providing £5,000 of tax savings. or tax-free investments may preserve the
but after that, the earlier the better. The n Moving £10,000 of investment income higher personal allowances.
current 2010/11 tax year ends on 5 April from a spouse whose income is
and if you haven’t done so already, now expected to be between £100,000 and Capital Gains Tax (CGT)
is the time to start assessing how you £112,950 to a non tax-paying spouse Each individual has an annual exemption
could trim a potential tax bill. saves £6,000 due to the recovery for CGT purposes. This is £10,100 for
Wherever the terms ‘spouse’, ‘spouses’ of personal allowance as well as the 2010/11. you should review your chargeable
or ‘married couple’ are used, these also higher rate tax saving. assets and consider selling before 6 April
apply to same sex couples who have 2011 to utilise the exemption.
entered into a civil partnership under Jointly owning assets Bed and breakfasting (sale and
the Civil partnership Act as well as to a Income arising from assets owned jointly repurchase overnight) of the same class of
husband-and-wife married couple. but in unequal shares is automatically taxed shares is no longer tax effective. However,
in equal shares unless a declaration on sale by one spouse and repurchase by the
Income splitting form 17 is made to HM Revenue & Customs other, or sale outside an Individual Saving
between spouses (HMRC) stating that the asset is owned Account (ISA) allowance and repurchase
Married couples in 2010/11 could in unequal shares. The election must be inside, may achieve the same effect. This
potentially make tax savings by reducing made before the income arises. This could can be done either to utilise the annual
or eliminating higher rate tax liabilities, be particularly relevant for a property exemption or to establish a capital loss to
achieved by reviewing the split of investment business producing rental set against gains.
income between spouses. income, so consider such a declaration Children may use their own annual
It may be possible to save significant when a new jointly owned asset is acquired. exemption and take advantage of this
amounts of tax where assets on which The exception to this rule is dividend by investing for capital growth. So with
investment income arise are transferred income from jointly owned shares in some careful planning this could lead
from a higher tax rate paying spouse to ‘close’ companies, which is split according to a £10,100 of gain per family member
a lower tax rate paying spouse or to one to the actual ownership of the shares. being realised every year tax-free.
with no income. Close companies are broadly those owned
for a redistribution of income to be by the directors or five or fewer people. A split tax year
effective, there must be an unconditional Income tax savings may also be made if This year is unique in that there is a split
and outright transfer of the underlying asset you are self-employed. for example, your tax year position in relation to CGT.
that gives rise to the income. This means spouse could be taken into partnership or
that tax savings may not immediately arise employed by the business. Alternatively, a Before 23 June 2010
following an asset transfer between spouses spouse could be employed by the family n Certain qualifying business gains were
until new income arises. company. However, in each case, the level eligible for an effective 10 per cent tax
of remuneration must be justifiable and rate where Entrepreneurs’ Relief (ER)
Examples of tax savings: payment of the wages must actually be was available.
n Moving £43,000 of investment income made to the spouse. n Other gains were charged at a flat
from a 40 per cent tax-paying spouse rate of 18 per cent.
to one with no income could generate a Using a child’s allowance n The ER lifetime limit available covers
saving of up to almost £10,000 in 2010/11. Children have their own allowances and tax the first £2m of eligible gains.
n A gross dividend of £50,000 arising bands. Therefore it may be possible for tax
to an additional tax rate paying savings to be achieved by the transfer of From 23 June 2010
spouse means an additional tax income-producing assets to a child. Generally n Certain qualifying business gains
bill (after taking the 10 per cent this is ineffective if the source of the asset is are charged at 10 per cent where ER
tax credit into account) of £16,250 a parent and the child is under 18. In this case is available.
compared to only £11,250 for a the income remains taxable on the parent n CGT of 18 per cent or 28 per cent will

11. Tax MaTTERS 11
apply to any other chargeable gains once Gift Aid is the most common method and be capped so that overall you do not exceed
the annual exemption has been used. applies to cash charitable donations large the £10,200 limit. 16- and 17-year-olds are
n Both the annual exemption and capital or small, whether regular or one-off. The able to open a cash ISA only.
losses can be allocated to minimise an charity currently claims basic rate tax of
individual’s CGT liability. 20 per cent back from HMRC plus a further Pensions
n The 18 per cent rate will only be 2 per cent supplement. There are many opportunities for pension
available for gains when an individual for the individual donor who is a planning but the rules can be complex
is deemed to have basic rate band higher rate tax payer, a cash gift of in certain circumstances. Individuals can
available after taking income and £78 (£100 for the charity due to 22 per obtain tax relief on contributions up to
business gains into consideration. cent rebate) only costs £58.50, due to £3,600 (gross) per year with no link to
the additional 20 per cent tax relief of earnings. This makes it possible for non-
Other CGT considerations £19.50. Always remember to keep a earning spouses and children to make
n If you have two homes you may be record of any gifts you make. contributions to pension schemes.
able to make elections to maximise It may also be possible to make gifts Tax relief for further contributions
the ‘main residence’ exemption. of quoted shares and securities or land is available on up to 100 per cent
n It may be possible to establish capital and buildings to charities and claim of earnings as long as this does not
losses for use by making a claim income tax relief on the value of the exceed the annual allowance (currently
where assets no longer have any value gift. This may be tax efficient for larger £255,000). Earnings include pay, benefits
– a ‘negligible value’ claim. charitable donations. and trading profits and are generally
referred to as ‘net relevant earnings’.
Family companies Individual Savings The rules include a single lifetime limit
A director/shareholder of a family company Accounts (ISAs) (£1.8m for 2010/11) on the amount of
can extract profits from the company in a ISAs provide an income and capital gains pension saving that can benefit from
number of ways. The two most common tax-free form of investment. Maximum tax relief. This lifetime limit is measured
are by way of bonus or dividend. for every annual limits apply so to take advantage when pension benefits are taken. In
£1,500 retained by a 40 per cent higher of the limits available for 2010/11; the last year’s Emergency Budget, the
rate tax-paying individual, the cost to the investment(s) must be made by 5 April 2011. government announced the reduction of
company is £2,000 if a dividend is paid The rules allow a maximum investment in the annual allowance to £50,000 with
and £2,266 if a bonus is paid. one cash ISA of £5,100 or a stocks and share effect from 6 April 2011. n
This assumes the company is liable to ISA of £10,200. However, if you want to
corporation tax on its profits at the small invest in both, then the investment should
companies’ rate of 21 per cent. There are
other factors that may affect a decision
to pay a dividend, including ensuring
there are sufficient distributable profits.
However, paying a dividend can often
result in significant tax savings.
Giving to charity
To encourage charitable giving, the
government has created a number
of ways of securing tax relief
on charitable donations.
The value of investments and the income from them can go down as well as up and you may not get back your
original investment. Past performance is not an indication of future performance. Tax benefits may vary as a
result of statutory change and their value will depend on individual circumstances. Thresholds, percentage rates
and tax legislation may change in subsequent Finance Acts. Tax advice is not regulated by the FSA.

12. 12 WEaLTH pROTECTION
Cost of care:
affordability gap widens
Why an increasing number of older people are giving away their wealth
Many families with elderly relatives £21,546 a year to £25,896 on average, These means tests apply whether you
in care could find themselves in a a 20.2 per cent increase. need help to stay in your own home
situation of falling house prices, low figures from the Department for or require residential care. your home
interest rates and rising care home Works and pensions show that the is not counted as an asset if a spouse
fees. for those families, the situation income a 75-year-old can expect to or close relative aged 60 or over lives
may be further exacerbated by local receive has been reduced by 27 per cent. there. If you live alone and need to
authority cost cutting. Their average income is now just £15,574 move into residential care, the house
The gap between the cost of against an average £19,843 in 2005. will come into the equation after your
care and what local authorities are first 12 weeks in care.
prepared to pay is growing, requiring The cost of care Local councils, who make the
some families to step in and pay the full-time residential care costs from assessments, can also check on gifts made
difference between the council’s set £30,000 a year, depending on location, in the years prior to applying for care. This
rate and the care home fees once their the quality of home and the medical care is to prevent older people giving away
elderly relatives run out of money. needed. Anyone in England or Northern wealth to beat the means test. n
In the past five years, the gap between Ireland with assets worth £23,250 or
the income families have available to more pays for their own care.
IT’S IMpORTANT TO OBTAIN
pay for care and the fees charged by Those with assets between £14,250 pROfESSIONAL fINANCIAL ADvICE
homes has increased by 600 per cent and £23,250 receive help on a sliding TO ENSURE yOU MAKE THE BEST
for those in residential homes, according scale. In Scotland the limits are £14,000 USE Of yOUR SAvINGS TO COvER
to figures from firstStop. for those in and £22,750. In Wales there is no sliding CARE COSTS AND RECEIvE ALL THE
nursing homes, the affordability gap scale; the state pays for everything once BENEfITS TO WHICH A RELATIvE
MAy BE ENTITLED. pLEASE CONTACT
has widened by 200 per cent over the assets are less than £22,000.
US fOR fURTHER INfORMATION.
same time as fees for care homes have
increased by more than 20 per cent
since 2005.
five years ago, fees for nursing
homes were £29,851 a year on
average; now they are £36,036,
an increase of 20.7 per cent,
according to healthcare analyst
Laing & Buisson. Costs for
residential care have risen from
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