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.

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.

The Autumn Statement 2012

It was a busy day at Westminster on Wednesday 05th December with the numerous announcements and changes to the many rules and regulations that maintain the UK Governments fiscal policy. As the saying goes 'the devil is in the detail' of these Budget changes, with additional tax and allowances being taken on one hand and given back or withdrawn (such as the planned 3p (approximate) fuel tax rise in January 2013) on the other.

From a financial planning perspective, there are some headlines that will be of interest (with some benefits and concerns) to our clients and enquirers and I have listed some of these changes below. This is not an exhaustive list, but provides many relevant points that you may want to consider:

Capital Gains Tax (CGT) Increase

The current allowance of £10,600 (2012/2013) will increase by 1% the tax year start 2014, rising to £11,100 by tax year 2015/2016.

ISA Allowance Increase

The current allowance of £11,280 will increase by 1% to £11,520 from the tax year start 2013.

Pension Annual Allowance Reduction

The maximum annual pension contribution in a pension input period (PIP) will fall from £50,000 (from all sources) to £40,000 from tax year start 2014/2015.

This is likely to have significant effect on higher earners and those with members of final salary pension schemes with higher annual incomes.

Pension Lifetime Allowance Limit Reduction

The current Lifetime Allowance Limit (LTA) is falling from its current limit of £1.50m to £1.25m from the start of the tax year 2014/2015.

This is likely to haves significant effect on higher earners who have long service within a final salary arrangement or large private pension arrangements. A point of note is that a transitional 'fixed protection' regime will be introduced for those who understand that they may be affected by the reduction in the lifetime allowance (LTA).

Pension Income Drawdown Maximum Withdrawal Limit

Originally the maximum ‘drawdown’ limit was 120% of the Government Actuarial Departments (GAD) limit that could be approximately achieved through averaged single life annuity rates. This fell to 100% about 18 months ago, sadly at a time when annuity rates were continuing to fall.

As soon as legislation will allow, the original limit of 120% is being restored, which will be of interest to those who have seen their maximum withdrawals fall significantly in recent times.

Income Tax Personal Allowance Increase

The Personal Allowance for the tax year 2013-14 will increase to £9,440 and the basic rate limit will be set at £32,010.

The increase in the higher rate threshold will be capped at 1% for tax years 2014-15 and 2015-16.

Inheritance Tax Nil Rate Band Allowance Increase

The current Inheritance Tax nil rate band allowance for an individual of £325,000 will increase to £329,000 from tax year start 2015/2016.

Summary

These are only examples of some of the changes that may be of interest to you when considering your financial planning for the future. Because of the scope of the changes and because each client is advised individually, no individual advice is provided in the content of this Blog.

More details of the Autumn Statement changes can be found at the HMRC website here:
http://www.hmrc.gov.uk/budget-updates/march2012/autumn-statement-dec2012.htm

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

If you would like to consider your own financial planning further then please contact Chapters Financial Limited through our website or on 01483 578800.

Keith G Churchouse FPFS

Director
ISO22222 Certified Financial Planner, Chartered Financial Planner Chapters Financial Limited

Chapters Financial Limited is Authorised and Regulated by the Financial Services Authority, number 402899.