Are ‘Unisex’ Annuity Rates on their way?

The world of retirement planning seems to in a state of transition at the moment with the proposed changes of the coalition government to end the need to purchase an annuity, whilst also introducing an uplift in the death duty on vested pensions from the current level of 35% to an increased level of 55%, such as Income Drawdown plans. I have covered this in greater depth in a previous blog earlier in late January 2011 (called Income Drawdown Policy Review and Proposed Rule Changes on Annuitisation).

European law may now also have an effect of the income available from future retirement funds with the possible introduction of unisex annuity rates from early March 2011. Along with other gender based products based on the sex of the applicant, such as many insurance based products, a ruling from the European Court on 01 March 2011 may see the terms of future contracts change, with varying results dependent on whether you are male or female. My understanding is that their ruling will be based on the argument that the current gender based regime is discriminatory because there is overlap between men and women in the ages to which most people die. Obviously, there are opposing views to this argument and its subsequent studies and the European Court will rule accordingly on 01 March 2011.

This is a multi-billion pound market in the UK each year and many insurance companies and annuity providers are already gearing up for this potential change and the unisex annuity rates from many may change quickly, if not immediately, to meet the new requirements. This may well have an effect on your pension income planning if you are looking at drawing your benefits in 2011. Your Independent Financial Adviser (IFA) should be able to guide you with your individual planning.

As a general suggestion, if this legislation is approved, male annuity rates are likely to fall (some suggest up to 5%) and female annuity rates may rise by approximately 3%. Joint life annuity rates may see a fall of around 1%, as approximate examples, although we will wait to see how providers react. This may see the prevalence of more research by investors into the retirement options available for their pension benefits, such as the use of the Open Market Option (OMO). I have detailed retirement options further on our website here, Retirement Options.

Retirement planning is a complex subject and this article should not be treated as individual advice. Individual advice is only available based on your individual circumstances. Further information, advice and contact details are available at our websites, www.churchouse.com or www.planmypension.co.uk

Keith Churchouse

Director of Churchouse Financial Planning Limited

Churchouse Financial Planning Limited is authorised and regulated by the Financial Services Authority. www.planmypension.co.uk is a trading name/style of Churchouse Financial Planning Limited.

The changing rules for ISAs in 2011

There have been many changes to the ISA allowances in recent years.

No new changes have been proposed for this tax year. This allows a maximum contribution of £10,200 to be made (2010/2011). If you chose, you can split this contribution, with £5,100 being made into a Cash ISA and £5,100 going into an equity type ISA. You can use one provider for each in a year and can vary providers each year if you require. The terms Mini & Maxi ISA’s have now been abolished.

ISA contribution allowance increase 2011/2012

In the new tax year 2011/2012, the new ISA allowance is proposed to increase from the current level of £10,200 to a new level of £10,680 from April 2011. This is an increase in the allowance with RPI (the Retail Prices Index) and it is now proposed that this limit will increase each year

New Junior ISA, October 2011

For further information, a Junior ISA (for those up to the age of 18) will be available from October 2011. At the time of writing, the maximum contribution limit is yet to be decided. Many parents and grandparents may find this of interest for their family in the future.

Review

Through the changes that have occurred with ISA regulations in recent years, it is always worthwhile reviewing your existing investment strategy (including ISA’s) , your asset allocation and your need for income, capital growth or both. This will usually be based on your circumstances and your attitude to investment risk. A guide to investment risk can be found here: http://www.churchouse.com/risk.php. ISA investment may not be suitable for everyone.

As I hope you can see from the above, there is a lot to consider both in the months of February and March 2011 and the forthcoming tax year (2011/2012). With this in mind, it should be noted that we are all different and your ongoing financial planning strategy will be individual to your needs, such as the use of annual tax allowances. Therefore, this article should not be seen or used as individual advice.

Seek Independent Financial Advice (IFA) for your circumstances. Churchouse Financial Planning Limited can be contacted in Guildford, Surrey on (01483) 578800.

Keith Churchouse
Chartered Financial Planner & ISO22222 Certified Financial Planner

Director of Churchouse Financial Planning Limited
Churchouse Financial Planning Limited is authorised and regulated by the Financial Services Authority

February 2011….a month for financial planning?

February is usually a month for both snow and end of year tax planning. Hopefully we will avoid the former of these two this year, especially after the deluges in December, which may leave more time for the latter, i.e. effective financial planning.

Many of you will be aware of the usual and more obvious end of year allowances which, if not used, will be lost, with new allowances made available in the tax year 2011/2012, starting on 06^th April 2011. I have listed some of these below:

• ISA allowance, £10,200 in total: This amount can be fully invested in equity type investments (such as stocks/OEICs/Unit Trusts), or, if you prefer, you can put up to £5,100 in deposit/ cash holdings, still leaving a balance of £5,100 available to go into investments. This is usually an annually renewable allowance and you can use your new ISA allowance each year with different providers if you prefer. (ISA rule restriction of one provider of each option per annum).
• Capital gains tax allowance (CGT): This again is an annually renewable allowance and currently stands at £10,100 in this tax year. This can be a highly efficient tax allowance for those able to use it, especially if you are a higher rate tax payer. The current flat rate charge for CGT is 18% and this rises to a flat rate of 28% for higher rate taxpayers.
• Personal income tax allowance: Currently up to £6,475 can be earned in this tax year without paying income tax in most circumstances. In the new tax year (2011/2012) the nil rate income tax band is increasing to £7,475 for the year, which may be advantageous for those on lower incomes.

This is not an exhaustive list and you should seek independent advice (IFA) about your own circumstances.

The new tax year (2011/2012) is likely to see changes that may well affect your financial planning going forward and I have listed some of the less obvious points as they stand at this time below.

• Higher rate income tax threshold: As noted above, the nil rate income tax band is increasing by £1,000 in the new tax year to £7,475. However, the level of income that can be earned before paying higher rate income tax is falling by a slightly higher amount, to a new level of £42,475 (20% tax band will fall from £37,400 to £35,001 / High rate income tax charge rate applied previously at £43,845 in 2010/2011). There has been much press comment noting that this may affect around 750,000 people. An example is here: http://www.ifs.org.uk/publications/5452
• The effects of higher rate income tax can be offset by pension contributions, however, in the new tax year 2011/2012), there are many changes expected for pension legislation. One example is the change in the level of pension contribution that can be made to a new level of £50,000 in the year. There is also a new three year carry forward facility being introduced and this is detailed on the HMRC website here: http://www.hmrc.gov.uk/pensionschemes/annual-allowance/changes.htm#5
• Other examples of proposed pension changes can be seen in my previous blog (Income Drawdown Policy Review and Proposed Rule Changes on Annuitisation) here: http://www.churchouse.com/blog.php

As I hope you can see from the above, there is a lot to consider both in the months of February and March 2011 and the forthcoming tax year (2011/2012). With this in mind, it should be noted that we are all different and your ongoing financial planning strategy will be individual to your needs, such as the use of annual tax allowances. Therefore, this article should not be seen or used as individual advice. This article contains links to websites of which the content has not been approved by Churchouse Financial Planning.

Seek Independent Financial Advice (IFA) for your circumstances. Churchouse Financial Planning Limited can be contacted in Guildford, Surrey on (01483) 578800.

Keith Churchouse
Chartered Financial Planner & ISO22222 Certified Financial Planner

Director of Churchouse Financial Planning Limited
Churchouse Financial Planning Limited is authorised and regulated by the Financial Services Authority