Any Rabbits in there Chancellor?

The annual 'Groundhog day' of the Chancellor proudly posing in front of his Number 11 Residence with his team has come and gone as we know. The annual heckle from the camera-clicking tabloid journalists was louder this year in anticipation of pre-election give-aways with the chirp of 'any rabbits in there Chancellor?', referring to his red Budget box and the possible trick of magic-ing wealth from austerity.

This year, 2014, he really did 'pull the rabbit from the hat' with the furthest reaching changes to the way pension benefits can be drawn during my lifetime. Indeed, I think with a few strokes of his ink pen, some of the pension exams studied over many years become obsolete over the course of the next 12 months when the full effect of these changes will come to fruition. Please do not think I am being negative about the far greater flexibility being encouraged, far from it, I think financial planning and retirement planning will boom over the next decade because of these changes. However, I do have some cautionary concerns that there will be spend, spend, spend with the ultimate consequence that they will be reliant on the state. Sure, basic State Pension benefits are increasing in the next 2 years to a level of approximately £145 per week, but this is unlikely to meet the living needs of many.

Don't forget, and I don't think this is a political statement, the Government, irrespective of their persuasion, is strapped for cash. Cash is generated from tax, tax is charged on pension output (excluding tax free cash), and if many release this early without the caution of stretching the yield across their lifetime, the 'tax take ' could well be quicker. It should also be noted that this new strategy is a bit of a cash-flow gamble for the Treasury. The normal system of 'Annuitising' pension income is achieved by purchasing Gilts. With the need/ preference for annuity purchase now seemingly being removed, the need for Gilt purchases will fall, reducing cash-flow to the Government. It is reported the next weekend that four of the larger Annuity providers had suspended annuity business (Prudential, Aviva, Friends Life and Royal London) and I am sure others will follow. One could argue that the Government us switching their Gilt 'loan' cash-flow for straight non-repayable tax income. The cash-flow effects will be very interesting, possibly fuelling the economy....and clearly the Government.

As a final note, it was good to see that the Chancellor proposes that those reaching retirement for private pension schemes should receive financial planning advice before drawing pension benefits over the age of 55 and we would very much agree with this.

If you would like to consider your retirement benefits and the way these can be used to meet your needs, both now and into the future, then please speak to the team at Chapters Financial in Woking or Guildford.

No individual pension/ financial advice is provided during the course of this blog.

Keith Churchouse FPFS
Director
Chartered Financial Planner
ISO 22222 Personal Financial Planner

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

The end of the tax year looms

We are now just under one month away from the end of the tax year 2013/14. 

The last 18 months has seen a transition in financial services after the implementation of the now replaced Financial Services Authority (now the Financial Conduct Authority) Retail Distribution Review (RDR). We have seen the distribution of financial advice changing across the High Streets (and other locations) of the UK and many clients no longer receive financial advice service from organisations, such as their retail banks. With this in mind, it is very easy to forget or not be prompted to note the end of the tax year and some of the allowances that are available to individuals in the UK and it is normally sensible they try and use these allowances before they are lost.

Good examples of this would be the ISA allowance and also the Capital Gains tax allowance in this tax year.

ISA 2013/2014

As a reminder, the maximum ISA allowance in this tax year is £11,520 (to a Stocks and Shares ISA) or alternatively you can split the investment with £5,760 going into a deposit ISA and £5,760 going into a Stocks and Shares ISA.

The new allowance in the new tax year 2014/15 is £11,880 and in our experience many clients try and use the ISA allowance early in the new tax year, which starts on 6 April 2014, to allow their investments to grow on a tax efficient basis over the coming months.

Capital Gains Tax 

It is also important to remember that where available individuals have a Capital Gains tax allowance of £10,900 and if this gain can be used prudently during the tax year, it would be sensible to do so. The new Capital Gains tax allowance for this tax year 2014/15 is £11,000.

Trust Allowances 

For some Trusts this Capital Gains tax allowance is also available, but at half the level noted above for individuals.

I am sure that we will see much more press in the coming weeks, with regards to using these allowances as we approach the end of the tax year and if you would like advice with regards to these arrangements then please contact the team at Chapters Financial who will be able to guide you and implement where appropriate these opportunities.

No individual pension/ financial advice is provided during the course of this blog.

Keith Churchouse FPFS
Director
Chartered Financial Planner
ISO 22222 Personal Financial Planner

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