Now for the real work!

The night of 07 May 2015 was a long one. Waiting for the results of a General Election can be a fascinating time, with a few high profile MPs and candidates falling at the declarations across the UK. As the morning of 08 May broke, the clear outcome of the General Election was a surprise to many, especially the various pre-Poll providers whose predictions were well wide of the final result.

With the press suggesting it was neck and neck to the wire, many, including me, were surprised by the initial exit poll which provided a clear outcome. As the investigations begin as to how the real result was not closely hinted at, many are questioning the motives behind the voting pattern, with thoughts of loyalty to a political party, desire for the economy to stay on track and, conversely fear of an alternative route. Fear, along with other basic emotions, such as love and greed are powerful motives.

With the dust settling and the new cabinet posts being allocated as I type this blog, the real work for the new Government begins. I wish them every success, as it is clear the majority of the UK does, in moving the country forward.

With this in mind, what does this change mean to you, if anything at all? Will it make a change to the way you work or manage your money and financial planning? Some issues are not affected by who governs the country, such as the population naturally living longer. More time to work, possibly, but also more time in retirement. Indeed, the new 'pensions freedoms' which were a legislative change, may help manage this issue. Longer working may give more time to save, but it might also mean that as a bread-winner, you may need to protect the family for longer.

Whatever your individual circumstances, and we are all individuals, now may well be a good time as we head towards the summer to take stock of your financial planning, to review this and to make changes to meet with your plans, whether they have been changed by the General Election results or not.

The team at Chapters Financial can help you with your financial planning and any review that may well now be due. Talk to us at our Guildford or Woking offices or contact us, via our link here

Because each person is an individual, no individual advice is provided during the course of this blog.

Keith Churchouse FPFS
Director
Chartered Financial Planner
Certified Financial Planner
ISO22222 Personal Financial Planner 

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

Are Your Children's Savings Invested Appropriately

How do you save for your children’s future, and are you saving with a particular goal – such as university fees – in mind? If so, are the funds invested in assets appropriate to the length of time until the money is needed?

With the current geopolitical situation causing stock market volatility, parents and grandparents may well be concerned over where best to save for the younger members of the family. However, it is important to bear in mind that most investments made for children are for a term of 10 years plus, and therefore investing in stocks & shares could well be a suitable route to take, on the basis that the investment is regularly reviewed.

It is interesting to note that three quarters of the £578 million subscribed to Junior ISA (JISA) accounts in 2013-14 is invested in cash, with only a quarter subscribed to stocks & shares arrangements. Although the interest rates offered on cash JISAs are superior to those offered to adults, with the majority currently paying between 2% - 3.5% gross AER per annum (source: Money Advice Service), any gains made are at risk of significant erosion by inflation over time. Investing in ‘real’ assets such as stocks & shares can help to protect against inflation and improve the overall return over time (not guaranteed).

Junior ISAs – a popular and tax-efficient way to save

JISA accounts have been available since 1 November 2011 to children under the age of 18 who do not own a Child Trust Fund (CTF) account (CTFs were available to eligible children born on or between 1 September 2002 and 2 January 2011).
According to recently published Government statistics, JISA account openings rose by 46% in the tax year 2013/2014, the second full financial year since the JISA took over from the CTF. £578 million was subscribed to JISA accounts in 2013-14 (source: HMRC ISA Statistics 2014 - http://tinyurl.com/n4l86sx ).

Chapters Financial is not responsible for the content of external websites

 

We expect this figure to continue to rise, with a boost from April 2015 when parents will be allowed to switch funds currently held in CTFs to JISA accounts. It is likely that JISA accounts will prove more flexible and better value than the older CTF arrangements and we would encourage parents to seek advice on the new options available.

Are you taking enough investment risk?

In the current tax year (2014/15), parents and grandparents can invest up to £4,000 in a JISA. Even if you don’t save to this limit, and choose to set aside a small amount each month, this can add up to a substantial amount over an 18 year timescale if invested appropriately.
Understandably, some people will not be comfortable with exposing their savings on behalf of their children to stock market volatility. However, given the long time period over which money is likely to be invested, sheltering the funds in cash may prove counterproductive. An (example) 18 year period provides enough time to absorb short-term stock market movements and investments in stocks & shares offer the potential for real capital growth (not guaranteed).

Maximising the tax efficiency of saving for children

Children are entitled to the same income tax personal allowance as adults (currently £10,000 in the 2014/15 tax year). Most children won’t have ‘earnings’ as such, so this allowance is applied to the income they may receive from sources such as deposit savings or investments. If the return the child receives in a tax year is less than the personal allowance for that year, no tax will be due.
An important point to watch is that if you give your children money outside a tax-efficient investment such as a JISA, and this generates interest of over £100 gross in a tax year, the whole amount of this income will be taxed as if it were your own income, at your highest marginal rate.

This limit applies to parental gifts only, not to gifts from other family members. With Christmas approaching, it may be a good time for grandparents to consider gifting money to their grandchildren, either into a JISA if contributions have not been maximised, or into a savings account or other arrangement. This gifting would have the added advantage of using the grandparents’ annual gift allowance, if not already used. Each individual is allowed to give away gifts worth up to £3,000 in total in each tax year and these will be exempt from inheritance tax from the date of the gift. Any unused part of the annual exemption can be carried forward to the following year.

Summary

If you would like support and advice on saving for your children or grandchildren’s future and maximising the tax efficiency of gifting and investing then please do not hesitate to contact the team at Chapters Financial, who will be able to help you further. No individual advice is provided during the course of this blog. If you would like to receive further information regarding your own family situation and circumstances, please contact the Chapters Financial team in either Guildford or Woking.



Vicky Fulcher
Trainee Financial planner

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

Independent Scotland. The (close) result is in!

I have watched the debate about the possible divide of our United Kingdom union with interest over the last few weeks. Let's face it, media coverage has made it unavoidable, but from a fiscal perspective with good reason. I remain surprised by the panicked 'surprise' of our senior politicians of all denominations that around 10 or so days before the crucial Referendum vote they realised that this was going to happen and was not just an idle threat.

Having now worked in the UK financial services world for 29 years, I started in the mid-80's with the introduction of 'Yuppies' and excess before experiencing my first economic recession at the end of that decade. What was instilled in me from this tender age was the strength (and at the time power) of Sterling as a global currency. I maintain that sadly we as a nation underestimate the real value of Sterling (or GBP) in the new digital-by-default era that we live in. This is especially relevant when we view the slow if not stopped progress of the Euro as a currency example.

Economies run in cycles. As I suggested in my book, The Recession is Over, Time to Grow, produced in the late spring of last year, an economy is like carrying a bucket of water. When it sloshes one way (prosperity), it will surely slosh the other way on the rebound (recession). The cycle is usually (not guaranteed) 10-12 years and this might point to a prosperous decade ahead with economic turbulence in the early years of the 2020's.

The arguments and convictions proffered by the 'Yes' campaign were strong and cannot now be ignored by Westminster. With Scotland now secure (for the time being) in our union, I have no doubt that this has whetted the appetite of other regions to request additional and new autonomy. The physical landscape of the UK will not change, but the economic outlook for us all may look very different.

Yours Aye

Summary

If you would like to consider the points noted above further then please do not hesitate to contact the team at Chapters Financial, who will be able to help you further with your pension enquiries. No individual advice is provided during the course of this blog. If you would like to receive further information regarding your own individual situation and circumstances, please contact the Chapters Financial team in either Guildford or Woking.

Keith Churchouse BA Hons FPFS
Director, Chapters Financial Limited
Chartered Financial Planner
Certified Financial Planner
ISO22222 Personal Financial Planner

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

HMRC Pensions Individual Protection application/ Now available

As an update from the last tax year (2013/2014), we note that the HMRC website has been updated today and now includes full details of the new Individual Protection for pensions, along with a facility to apply for this online.

This application can be found here: http://www.hmrc.gov.uk/pensionschemes/ip14online.htm

Chapters Financial is not responsible for the content of external webpages.
As a reminder, the HMRC website confirms:

Individual Protection 2014

The government announced that individual protection 2014 will be available when the lifetime allowance is reduced to £1.25 million for 2014-15. Individual protection 2014 will operate from 6 April 2014, for those with pension savings valued at over £1.25 million on 5 April 2014.

Individual protection 2014 will give a protected 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 but any pension savings in excess of your protected lifetime allowance will be subject to a lifetime allowance charge.

You'll be able to apply for individual protection 2014 from 18 August 2014. Your application must be received by HMRC no later than 5 April 2017.

You can hold both fixed protection 2014 and individual protection 2014.You can also hold individual protection while holding either enhanced protection or fixed protection but you can't apply for individual protection if you already hold primary protection.

Summary

Pensions and HMRC protection can be a complicated subject, dependent on your individual circumstances. If you would like to consider the points noted above further then please do not hesitate to contact the team at Chapters Financial, who will be able to help you further with your pension enquiries. No individual advice is provided during the course of this blog. If you would like to receive further information regarding your own individual situation and circumstances, please contact the Chapters Financial team in either Guildford or Woking.

Keith Churchouse BA Hons FPFS
Director, Chapters Financial Limited
Chartered Financial Planner
Certified Financial Planner
ISO22222 Personal Financial Planner


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

Top up & take? / More State Pension changes

Top up & take? / More State Pension changes

We all know that as a demographic, we are living longer. To maintain our standards of living, many of us are also working longer, past the current State Pension age of 65 and beyond.

Whilst taxable earnings are available, some chose to defer their State Pension Benefits until they are needed. This in the past has been advantageous for most with an uplift in deferment of 10.4% pa for each full year deferred. The current standard full State Pension (in the tax year 2014/2015 is £113.10 per week (£5,881.20 pa gross) and you may also be entitled to additional State Pension benefits, such as State Earnings Related Pension (SERPS), Second State Pension (S2P) or a Graduated Pension).  

You may want check your State Pension to ensure you are up to date you can use the State Pension Forecast service here:  https://www.gov.uk/state-pension-statement

The Government has recently announced that this deferral uplift in their State Pension will be cut by almost half. These changes are being brought in because we are all living longer, as noted, and the comparatively generous rate of increase to date will not be sustainable into the future.

The Pensions Minister, Steve Webb, stated that when the new, single-tier State Pension system is introduced in April 2016, people who choose to defer their State Pension beyond state pension age will only receive a 5.8% increase in their pension if they delay payments for a year. Just over half the current increase of 10.4%.

Under the current rules, someone choosing to defer for one year would need to live for around another ten years to make the decision financially worthwhile. When the reduced rate of increase is introduced, you would have to live for about 19 years to benefit from their choice. If we knew how long we would live, this would make the financial planning a lot easier, although I am sure it would have many other undesired effects!

In monetary terms under the new regime for State Pensions to be introduced in just over 18 months’ time, an individual receiving the full flat-rate State Pension of approximately £155 a week (£8,060 a year) would see an increase in their total annual benefits of only £467.48 if they defer for a year. If you look at this over the course of retirement, say 25 years, someone deferring at the old 10.4% pa rate of increase would receive over £17,000 more from a State Pension of £155 a week than an individual under the new rules.

The good news is that anyone who reaches State Pension Age before 6 April 2016 can still get the 10.4% rate of increase if they choose to defer taking benefits. It’s disappointing news, though, for anyone who will retire after that date and had planned to delay their State Pension.

Deferral may still be a sensible move for someone in very good health who intends to carry on working, or who has substantial pension income from other sources. However, for the majority of retirees after April 2016, it may well be a case of ‘top-up and take’ – checking that you have accrued the number of years required to qualify for the full basic State Pension and, if you haven’t, make a lump-sum payment to rectify the situation – and then start taking benefits.

The ability to top-up the State Pension (voluntary Class 3A National Insurance Contributions) will currently become available (from October 2015) to those close to and over state pension age and full details can be found here: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/300007/wms-state-pension-top-up.pdf

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

It would be worthwhile checking that any voluntary contribution offers the potential for value before proceeding to join in the new initiative.

The Chapters teams in Guildford and Woking are well placed to advise you on the impact of current and future changes to pension’s legislation on your finances. No individual advice is provided during the course of this blog. If you would like to receive further information regarding your own individual situation and circumstances, please contact the Chapters Financial team in either Guildford or Woking.

Keith Churchouse BA Hons FPFS   

Director, Chapters Financial Limited 

Chartered Financial Planner
Certified Financial Planner 

ISO22222 Personal Financial Planner 

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

More pension changes and updates/HMRC

More pension changes and updates / HMRC

 

In the mid 1990's the then Inland Revenue (now HMRC) introduced a new term that they found unacceptable. This was called 'Cascading'. Cascading was the process of drawing pension benefits and tax free cash and re-investing the tax free cash into another pension to claim further pension tax relief. In effect, using tax free money to claim tax relief through recycling. The authorities made it very clear that they would be looking out for such manoeuvres and now, when claiming benefits with most providers, there is a declaration to be signed to confirm that you will not undertake such related transactions.

 

1. Reduction in Pension Annual Allowance for those drawing tax free cash AND taxable income

Taking this a stage further, the Government has added to this by restricting the amount of Annual Allowance (the maximum gross amount you can put in a pension in a tax year from all sources and receive income tax relief) from £40,000 gross to £10,000 gross for those that draw pension tax free cash AND taxable income after age 55. Full details of this planned change (from April 2015) can be found here:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/332714/pensions_response_online.pdf

Those drawing only tax free cash should not be affected.

This change as a headline does not look significant, but it will catch out some pension investors who are trying to be flexible with their pension benefits whilst still continuing to work.

2. Individual Protection (for those with pension benefits over £1.25M at 05 April 2014)

HMRC has confirmed that applications for Individual Protection 2014 can be made online from 18 August 2014. An HMRC tool for checking your pension Lifetime Allowance is available here: http://www.hmrc.gov.uk/tools/lifetimeallowance/index.htm

 Full details of Individual Protection for pensions can be found here:

 http://www.hmrc.gov.uk/pensionschemes/pension-savings-la.htm#6

 Those who have Fixed Protection from HMRC can also hold Individual Protection (up to a benefit of £1.5M maximum)at the same time in certain circumstances and individual advice should be sought accordingly.

3. State Pension uplift in deferment

The DWP has announced in a Ministerial Statement that the current uplift of 10.4% pa (1% for every 5 weeks deferred) for those not claiming the State Pension at their allowed date will reduce from the tax year 2016/2017 by almost half to 5.8%.

Full details can be viewed here: http://www.parliament.uk/documents/commons-vote-office/July-2014/22%20July%202014/29-DWP-PensionIncrements.pdf

This change will be disappointing for some, but is not a surprise, due to the demographic pressures being placed on the State Pension system. There are other opportunities to top up the State Pension and we will detail this further in an additional blog.

          Chapters Financial is not responsible for the content of external webpages

 

Summary

It is very clear that the authorities involved in pensions legislation are busy people at the moment. These updates have been provided to keep our clients and enquirers up to date with the latest changes planned and announced for pension and retirement planning. Some investors choose to use other alternative vehicles (usually in combination with pension benefits) for their retirement, such as ISAs, or New ISAs (NISAs) as they are now called. The contribution limit for these has increased to £15,000 from the beginning of July 2014 (from £11,880) and this tax efficient allowance is usually worthwhile using where possible.

No individual advice has been provided during the course of this blog. If you would like financial advice on the allocation of your funds or your investment strategy, then please contact the Chapters Financial team in Woking (01483 330800) or Guildford (01483 578800).

Keith Churchouse BA Hons FPFS
Director, Chapters Financial Limited
Chartered Financial Planner
Certified Financial Planner
ISO22222 Personal Financial Planner

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

 

Guidance or Advice? The confusion yet to follow

 

Following the significant changes in retirement planning detailed by the Chancellor in his Budget of Spring 2014, we have now received the full details of the ‘guidance’ planned for retirees from 2015. Although this document is still in consultation, the details are quite clear on the way the government expects this guidance to be deployed.

The keyword that is apparent is the word 'guidance' rather than 'advice'. It is planned that guidance within set parameters will be provided by organisations such as the Money Advice Service and TPAS (The Pensions Advisory Service)  to detail to clients the options that are available to them and the way that they could approach their retirement – without actually providing advice. No individual products or solutions, it appears, will be provided other than to detail the options available to you.

It is of interest that the planned cost of this service will be partly borne by the current advisory industry, almost robbing Peter to pay Paul.

For those that want to read further, the FCA consultation document is here:  http://www.fca.org.uk/your-fca/documents/consultation-papers/cp14-11

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

As the Financial Conduct Authority notes in the detail (Page 6 & 11) ‘The guidance does not replace financial advice given by regulated advisers’ and ‘would be better handled by an authorised independent financial adviser (IFA)’ in reference to product or provider recommendations.

There is a part of me that feels that this blog is of a very defensive nature. To some extent it is, not because of the principles involved, but because of the confusion that is already being caused and the likely end result of consumers’ expectations not being met.

Although for some this guidance will be extremely useful, for others it will be like receiving the instructions for a flat pack furniture unit where the instructions and the reality seem to bear very little resemblance to each other. My concern is that the guidance offered may lead individuals to make decisions which are not suited to their circumstances and, although there is a planned complaints procedure, the ability to receive financial recourse in the consultation paper seems to be limited. This is not the case with true advice.

As you may anticipate, Chapters Financial will respond to the FCA's consultation along with many others. The devil will be in the final detail as to what will be achieved and whilst we applaud the plan to raise awareness of the retirement options that are available to individuals taking into account the new flexible legislation, the way it is applied may lead to much unnecessary confusion.

No individual advice has been provided during the course of this blog. If you would like financial advice and implementation (and not just guidance) on your retirement planning, then please contact the Chapters Financial team in Woking (01483 330800) or Guildford (01483 578800).

Keith Churchouse BA Hons FPFS
Director, Chapters Financial Limited
Chartered Financial Planner
Certified Financial Planner
ISO22222 Personal Financial Planner

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

 

What’s new about the NISA?

All Individual Savings Accounts (ISAs) will become New ISAs (NISAs) from 1 July 2014. This applies to all existing ISAs and new accounts opened after 1 July. The new name reflects the significantly increased limits and flexibility that will be available to account holders following the Budget 2014. Some use this medium as a savings vehicle for retirement and have campaigned to see the limits available under this tax efficient savings vehicle extended.

New limits

The current limit for ISA investment is £11,880 for the new tax year 2014/2015. From July, the annual limit will increase to £15,000 – the biggest ever increase to ISA limits. It is planned that this investment limit will then rise by inflation every year going forward.

You won’t be able to invest the full £15,000 ISA allowance until July. Between 6 April and 30 June 2014, the total amount you can pay into a Cash ISA is £5,940. If you have a Stocks and Shares ISA, you can also pay into that account, but the combined amount you pay into your Cash and Stocks and Shares ISAs must not exceed £11,880.

New flexibility

When the new rules come into play, you will be able to split the amount you pay into an ISA between a Cash NISA and a Stocks and Shares NISA as you choose – up to the new overall annual ISA limit of £15,000. Previously, it was only possible to save up to half the overall ISA subscription into a Cash ISA. This should be a particularly valuable feature for those who are keen to protect their capital from exposure to movements in the stock market.

It will also be possible to transfer between cash and stocks and shares ISAs (either way) to meet your needs and attitude to investment risk. If you want to transfer funds from a Stocks and Shares NISA to a cash NISA after 1 July, different rules will apply depending on when you paid the relevant amounts into your Stocks & Shares ISA. If it was in the current tax year (i.e. after 6 April 2014), you must transfer these savings as a whole. Any savings related to earlier tax years can be transferred to a cash NISA in whole or in part (but you’ll need to check with your ISA provider that they allow part transfers).

New for juniors

If you are aged between 16 and 18, you can hold an adult Cash NISA but cannot open a Stocks and Shares NISA. From 1 July 2014, you will be pay up to £15,000 into your Cash NISA for the tax year 2014/15. This equates to an increase of £9,060 in the amount that a young person can save in an ISA account – a significant step forward in encouraging a savings habit in the younger generation.

For those up to the age of 18, the Junior ISA limit has increased to £3,840 in this tax year. One possible way of saving for university costs.   

Old ISA providers…

If you’ve already paid into a Cash ISA account in this tax year, you may find that the terms and conditions of your account don’t allow further amounts to be added when the new rules come into play. However, you can make additional payments by opening a Stocks & Shares ISA account, or by transferring your Cash ISA to another provider that will allow additional amounts to be added.

Nicer ISAs

This new flexibility will give you far greater freedom of choice in how you shelter your capital from tax. If you don’t want to brave the vagaries of the stock market, you will now have the opportunity to save a significant amount more cash in a tax-efficient manner. If you’re keen to take more of a risk, there’s a whole world of investments out there – and the Chapters Financial team would be pleased to advise you on those that will best meet your financial objectives and your attitude to risk. 

Don’t forget the additional opportunity (for those eligible) introduced in the Budget 2014 of the Pensioner Bonds due to be released in early January 2015 which will also offer attractive savings options for amounts up to a total of £20,000.

No individual advice is provided during the course of this Blog. If you would like to receive further information regarding your own individual situation and circumstances, please contact the Chapters team in either Guildford or Woking.

Vicky Fulcher

Trainee Financial planner

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

2013, a year of change in the delivery of financial advice

2013 has been an interesting year in the financial world with, amongst other headlines, the Bank of England's base rate remaining at its historic low of 0.5% and a change of Governor, the growth in the FTSE 100, and unemployment remaining stubbornly high.

It was only a year ago that we, amongst many other financial advisory companies, were planning for the change in the way financial advice is delivered to the public in the UK. We saw some moving in a positive fashion, preparing to meet the demands of the Financial Services Authority (replaced by the Financial Conduct Authority (FCA) in April this year) under their Retail Distribution Review (RDR) requirements. However many providers, including most of the High Street Banks, found the significant changes too much and withdrew from the market. Each had their own reasons, but it reduced the access that some of the public have to financial advice, as confirmed by the FCA later in the summer of 2013, referring to their ‘concerns’ to the Treasury Select Committee in September 2013. To be clear, there have been benefits to the changes, such as transparency of charging, and we have been advocates of this for many years.

With these RDR changes now nearly a year old, the team at Chapters Financial has seen a significant increase in business over 2013. This may be partly due to a better economic environment, however, we would argue that this is also due to the reduction in advice providers and the maintenance and enhancement of the quality of advice our services provide. As you may have read on our website, we were delighted to have achieved BS8577 certification in late summer 2013, which confirms our high and consistent standards. To improve our coverage of West Surrey, we have also opened a new additional office in Central Woking.

We hope that 2013 has been as positive for you as it has been for Chapters Financial, as our chartered financial planning company heads towards the end of its first decade in business in the south east and London. We plan to expand still further in future years and hope that we can help many more clients, businesses (SMEs) and enquirers.

If you would like to receive further information with regards to your own individual situation and circumstances, then please contact the team, either in Guildford or Woking.

Keith Churchouse FPFS

ISO22222 Personal Financial Planner

Chartered Financial Planner 

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