Tuesday 13 August 2013

Pension Lifetime Allowance /Fixed Protection and Individual Protection / HMRC Update

New guidance (and application forms) has become available from HMRC, on the morning of 12 August 2013, both for Fixed Protection from 2014 (must be applied for before 05 April 2014, if required) and for the plans for Individual Protection 2014, which can only be applied for after the start of the new tax year 2014/2015.

A link to this is available here: http://www.hmrc.gov.uk/pensionschemes/pension-savings-la.htm#5

The Member Guidance here is also useful: http://www.hmrc.gov.uk/pensionschemes/fp2014guidance.pdf

I wanted to get this information to you promptly for consideration and action, if required or needed.

In addition, the new HMRC entry on their website notes the expected (to be confirmed) outcomes of its plans for Individual Protection 2014 as follows:

As well as fixed protection 2014, the Government has announced that individual protection 2014 will be available when the lifetime allowance is reduced to £1.25 million for 2014-15. The details of individual protection 2014 will be confirmed later but it is expected that:
  • it will give you a lifetime allowance equal to the value of your pension rights on 5 April 2014 - up to an overall maximum of £1.5 million.
  • you will not lose individual protection 2014 by making further savings in to your pension scheme
  • any pension savings in excess of your lifetime allowance will be subject to a lifetime allowance charge
You'll be able to apply for this from 6 April 2014.

You can hold both fixed protection 2014 and individual protection 2014 but you can't apply for them at the same time.


I hope the above information and the links are of interest to those that are affected by these issues.

If you would like to know more about this pension planning and your tax allowances/limits then please contact the team at Chapters Financial Limited on 01483 578800.

No individual advice has been provided in the text of this blog. You should seek bespoke financial advice in your own circumstances.

Keith G. Churchouse FPFS
ISO22222 Certified Financial Planner
Director and Financial Planner

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899.


Chapters Financial is not responsible for the content of external webpages.

Friday 9 August 2013

The continuing conundrum for savers / 'Forward Guidance'

The new economic tool deployed by the new Governor of the Bank of England, Mr Mark Carney, in August 2013 was heralded as the opportunity to manage economic, and to some extent financial, expectations into the future. 'Forward Guidance' as it is known, provides all those affected by the economy with the opportunity to know how the Bank of England predicts the future, and more importantly, what they plan to do if these expectations are met.

As we have seen, Forward Guidance has linked the Bank Base Rate (currently 0.5%) to UK unemployment levels (currently 7.8%) with the plan that Base Rates will remain at their current level until the unemployment level falls below 7.0% (Subject to anything unexpected happening, which it can). With this plan in mind, the Governor does not expect the target of 7.00% being reached for around 3 years, and therefore does not expect Bank Base Rates to move either in this time.

This new direction provides the benefit of certainty for some (such as businesses and mortgage borrowers as examples), but also provides the negative certainty of continuing low returns for savers.

Many savers have seen returns falling in recent times, with Premium Bond returns also falling from August 2013 onwards. Many are resigned to this situation, sensibly using their tax efficient ISA allowances where possible to reduce the tax take on any gross savings earned.

Against this backdrop, some clients and enquirers are reviewing their attitude to investment risk, where appropriate, and applying this review to their future investment decisions. As an example, UK Dividend returns have remained relatively firm over the last year and these have typically been between 3.00-4.00% gross pa (Not guaranteed, past performance is not a guarantee of future performance). Obviously, by moving into this investment area, the risk to the capital invested increases significantly, with the value of funds varying daily. This volatility (and overall investment risk) is detailed on our Investment Risk Scale further here (Link). However, if an investor is prepared and able to accept this level of investment risk, this investment alternative may be suitable in some investment cases. It should be noted that diversifying any investment is usually worthwhile and we have noted that committing smaller sums initially may be worthwhile to get used to the chosen investment medium before committing larger sums.

Each investment plan and recommendation is different and individual to the Client. To consider your circumstances with regard to savings and investments, you should take individual financial advice. No individual advice is provided in the content of this Blog. The team at Chapters Financial can help you with your planning and look forward to working with you.

Keith Churchouse FPFS
Director
ISO22222 Certified Financial Planner
Chartered Financial Planner
Chapters Financial Limited

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899.

Monday 5 August 2013

Nearly new regulatory regime 2013

We are now entering the eighth month of the inception of the Retail Distribution Review ( or RDR for short) process implemented at the very start of 2013.

As noted on our websites front page, Chapters Financial Limited moved to a transparent  fee based client agreed remuneration policy in 2007 (May). Because of this inspired change, we have found the regime transition less complicated than many of our competitors and are proud to have retained our independent status. This may be a reflection of the significant fall in the numbers of advisers in the UK (with numbers still falling) over the last year. (Source: www.imas.uk.com website). Personally, I am saddened by this reduction in numbers, because the access to financial advice that many enjoyed in the past has fallen away, with the anticipation that the Internet will fill the void left by the loss of these services. (See www.advicemadesimple.com as one example).

As a reminder, the headlines of the FSA's planned customer/ client outcomes for the RDR were:
  • Advisers qualified to a high standard (Qualification 4 or above).
  • Transparent fee based charging structure for both initial and on-going services ( a ban on commission for most services). 
  • Choice to use an Independent (IFA) or Restricted financial advice service
  • As an additional note, in April 2013, the Financial Services Authority was replaced by a new financial regulator, the Financial Conduct Authority (FCA).
What have been some of the initial effects of these changes we have witnessed?

Many retail financial advisory providers have struggled to comply with these new requirements and this has added to the numbers exiting the profession. It has also been interesting and concerning to note how many existing policy providers (namely some of the big insurance based companies) have been unable to meet the changes required for transparency, confirming that in some cases existing plans cannot accept additional or changed contributions.

Chapters Financial has seen an increase in focussed enquiries in 2013, ranging from pre-retirement, retirement and inheritance tax planning to many SME owner/ director/ managers now getting closer to their company’s  Auto-Enrolment date. It will be interesting to see how the legislation introduced for Workplace Pensions will affect retirement savings in generations to come.

More evidence of the benefits of this regime change will come in future times. It will be interesting to see in time if all the changes have been a success for those seeking financial planning advice.

No individual advice has been provided in this blog and you should seek financial advice (IFA) for your own individual or company’s needs and requirements. Speak to the team at Chapters Financial Limited on 01483 578800

Keith Churchouse FPFS
Director
Chartered Financial Planner
ISO22222 Certified Financial Planner
Chapters Financial Limited

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899.