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.

Ready to pay 45% income tax? …You might do if you take a large single withdrawal from your pension

You may well be very aware of the new ‘pensions freedoms’ that have become available on 06 April and we have detailed these on our website on a few occasions. Our latest retirement options schedule can be found here:
 http://www.chaptersfinancial.com/assets/downloads/RetirementOptions.pdf

It is interesting to note that, from 06 April 2015, a change has occurred in the way that income tax is applied to pension benefits that are withdrawn from a pension arrangement as a lump sum.

As it stands at this time, you should maintain a normal personal allowance via your tax code (the standard personal allowance for the 2015/2016 tax year is £10,600). Thereafter, you will pay income tax at a rate of 20% on income up to £42,385 and at a rate of 40% on income up to £150,000. For income over this level, the income tax rate applied is 45%.

HMRC has asked pension providers to divide the income tax band allowances by 12, dependent on the number of months that have elapsed during the tax year, and then apply income tax at the highest marginal rate accordingly for any single payment.

As an example, if someone was to withdraw £20,000 gross as a single lump sum in April 2015 from their pension plan, the following may occur (example only):

• The standard personal allowance of £10,600 would be divided by 12 (£883.00).
• The next level (20%) of £31,785 gross would be divided by 12 (£2,648.75).
• The 40% tax band would be divided by 12 up to £150,000 (£8,967.91).
• The balance would be taxed at 45% (£7,500 gross).

In this example, the initial income tax charge on the payment of £20,000 gross could be approximately £7,116.40. This is obviously a lot more than if just a basic rate tax charge of 20% had been applied (£4,000).  This ‘emergency taxation’ will be automatically refunded, although this may only be at the end of the tax year in the absence of a P45.

This effectively gives the government immediate cash flow at higher marginal rates with the opportunity to then reclaim the higher rate tax back, if the various limits noted above are not exceeded, by using an HMRC P55 form.

As these are new arrangements, it is unclear as to how long an income tax reclaim may take, although a 30 day turn around has been indicated if using the P55 form (not guaranteed). In the meantime, you should be aware that you may find that the tax take on any single lump sum pension contribution is higher than anticipated, effectively using ‘emergency taxation’  and also that it may take some time to receive the increased tax funds back.

You may wish to consult with your accountant/tax advisor before making any single large withdrawals from your pension savings, although these are important points for cash flow purposes.

A link to the new HMRC P55 claim form is noted here:

https://www.gov.uk/government/publications/flexibly-accessed-pension-payment-repayment-claim-tax-year-2015-2016-p55

Chapters Financial is not responsible for the content of external web pages

No individual advice is provided during the course of this blog and if you would like to know more about the way pension benefits can be made available to you, then please speak to the team at Chapters Financial in Guildford and 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.

Budget 2015: Key Highlights

The Chancellor, George Osborne, delivered an upbeat Budget at 12.30pm on 18^th march 2015. This was his sixth Budget as Chancellor, and the last of the current Parliament. He announced ‘record employment’ in the UK, living standards at a higher level than in May 2010 and economic growth of 2.6% in 2014 – faster than any other advanced economy. Petrol duty is frozen too, and you can celebrate this with a very slightly cheaper pint of beer (1p off duty)….but not wine!

This positive message was continued in some of the Chancellor’s announcements, although not all (see pensions Lifetime Allowance…). We have listed below the main points that could affect your financial planning and your household income. These are as follows:

Pensions

• Pensions Lifetime Allowance to be reduced from £1.25 million to £1 million from April 2016…although the Chancellor did announce that the new Lifetime Allowance will be indexed to inflation from 2018.
• This will be the third reduction in the Lifetime Allowance since 2012, at which point it was brought down from £1.8 million to £1.5 million. It was then lowered again in 2013 to the current rate of £1.25 million. It may be cold comfort, but no change to the Annual Allowance for pension contributions, which remains at £40,000 gross (from all sources) for the tax year 2015/2016.
• Pensioners to be allowed to access their annuities (full details of how to be confirmed) – 55% tax charge to be abolished and tax applied at highest marginal rate.

Personal taxation

• Annual paper tax returns to be abolished. The current tax return system will be phased out and replaced with individual digital accounts which can be accessed online.
• Tax-free personal income tax allowance to rise from £10,600 in 2015/2016 to £10,800 in 2016/2017 and £11,000 in 2017/2018.
• Higher rate tax threshold to rise at a rate above inflation, from £41,865 in 2014/2015 to £42,385 from April and £43,300 in 2017/2018.
• The transferable tax allowance for married couples (also see new Marriage Allowance) will rise to £1,100.
• There will be a review of legal loopholes that help people to avoid Inheritance Tax (IHT). Of particular interest to the Government is the use of a Deed of Variation to avoid IHT. A Deed of Variation changes a will after the death of an individual and allows the beneficiaries of the estate to change how it is distributed.

Savings

• ISAs will become ‘fully flexible’ – savers will be allowed to withdraw and replace cash ISA money during a tax year without affecting the overall tax-free ISA limit.
• New ‘Help to Buy’ ISA: first time buyers will be able to save up to £200 a month towards their first home with a Help to Buy ISA. The Government will boost their savings by 25%, giving an extra £50 on savings of £200. Accounts will be available from autumn 2015 and savers can make an initial deposit of £1,000 when opening an account, in addition to their monthly savings.
• New personal savings allowance: the first £1,000 interest earned on savings income will be tax-free for basic rate taxpayers from April 2015. Higher rate taxpayers will have a £500 allowance.

Small businesses and charities

• Corporation tax to fall to 20%
• Abolition of Class 2 National Insurance Contributions for the self-employed
• Automatic gift aid limit for charities to be extended to £8,000 from £5,000
• Review of business rates – further details to be confirmed

As always, no individual advice is provided during the course of this blog. If you would like advice on the changes announced in the Budget then please contact the team at Chapters Financial Limited at our Woking or Guildford offices.

Keith Churchouse
Director of Chapters Financial Limited
Certified Financial Planner
ISO 22222 Personal Financial Planner
Chartered 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.

 

Are Annuities dead? Take Financial Planning advice first

I read recently from some actuarial tables that a male and female aged 65 in reasonable health could expect to live for around another 25 years or so. It is interesting to note that the differential between men and women (a while ago women would be expected to live for around 3 years longer than a man) has reduced to around a year’s difference. We never know when we will finally meet our maker, however making your money stretch far enough to ensure you enjoy the years of your autumn is paramount.

A possible quarter of a century in retirement is a long time and with the State Pension being equalised in the tax year 2016/2017 at approximately £145.00 a week (£7,540 pa /paid gross but taxable), this amount may well be the minimum you require to make ends meet. (Current level £113.10 maximum 2014/2015). There are some expectations that we will retire later and this has been partly factored into the rise in the State Pension Age in coming years (increasing to 68 between 2024-2026). The minimum age to which you can draw your pension benefits is also increasing to age 57 from 2028. All because we are living longer.

There is also greater knowledge of the need to provide for the costs of Long Term Care and this cannot, and should not, be ignored. You can see that the pressure is on to get these vital retirement income decisions right.

The new flexibility announced in the Budget 2014 was welcome news for many, the main changes occurring in April 2015. Sure, there is going to be a few who blow their pension pots (after paying income tax at their highest marginal rate) on fast cars and holidays, claiming destitution thereafter. You can see the headlines already! However, there are also those that will see the need for an annuity purchase from some or all of their accumulated pension funds to provide them with the future security they desire in their lengthy retirement. This certainty of income offers great security for some, preferring to avoid the volatility of investment markets with their funds. Do I think annuities are dead? Not for some.

Of course, the new flexible Income Drawdown arrangements will become popular, with the option of releasing tax free cash to spend as you will. Thereafter, careful financial planning needs to be undertaken to meet your current needs, taking into account the likely reality that the decisions being made at retirement will be felt for 20+ years ahead. Getting it wrong at the outset could see some returning to work to make ends meet.

HM Treasury have issued a paper called 'Freedom and choice in pensions' on the 19th March 2014 and this goes into great detail on the proposed changes here: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/294795/freedom_and_choice_in_pensions_web_210314.pdf

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

This might appear to be scaremongering, however, many may regret the flexibility introduced and we recommend caution and careful planning to make sure that your pension funds last as long as you do.

No individual advice is provided during the course of this Blog. Speak to the team at Chapters Financial Limited in Guildford or Woking to address your individual needs for what should be the best part of your life....retirement!

Keith Churchouse FPFS, B A Hons
Chartered Financial Planner
Certified Financial Planner
ISO 222222 Personal Financial Planner

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

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.

Autumn Statement 2013…..What could it mean to you?

The Chancellor of the Exchequer delivered his Autumn Statement on Thursday 05 December 2013. Most people were expecting a rather bland statement, partly because it is still some 16 or so months away from the next General Election and partly because the UK’s financial resources are still stretched. George Osborne MP did however manage to offer a few surprises, especially towards the end of his speech, partly aimed at small business enterprises.

As with all Budgets and Autumn Statements, the ‘devil is in the detail’, and I have endeavoured to provide a brief outline to the Chancellor’s Autumn Budget Statement below. This is not an exhaustive list, but provides some of the main issues:

Personal Planning & Taxation

State Pension

A rise of £2.95 a week will be applied to the Basic State Pension in April 2014. However an increase to 68 of the State Pension Age will be applied in the middle of the 2030s and on to 69 in the latter part of the 2040s.

ISA Allowance 2014/2015

The current full ISA allowance of £11,520 will increase to £11,880 in the new tax year.

TAXES AND ALLOWANCES

• With reference to when you start paying Income Tax, the personal tax allowance will increase to £10,000 from April 2014 and be linked to the Consumer Price Index (CPI) thereafter.
• Due to start in the tax year 2015/2016 (from 06 April 2015) is a tax break for married couples and civil partners, which is likely to cost the Treasury about £700m pa, enables them to transfer £1,000 of income tax allowance to their spouse / civil partner.
• Capital gains tax (CGT) will be applied on future gains made by the sale of residential property in the UK by non-residents from April 2015.
• Free school lunches from September 2014 will be made available to infant pupils (Reception, Year 1 and Year 2) at state schools in England, this will cost about £600m a year.
• Exchange Traded Funds (ETFs) which purchase shares will not have to pay Stamp Duty on the purchase.

Business & Charities

• Business rate increases will be capped at 2% instead of linking it to inflation (as measured by the RPI) in England and Wales. Re-occupation relief will see some retail premises in England receive discount (of 50%) on their business rates.
• New tax relief will be introduced for investment in social enterprises and new social impact bonds from April 2014. This may be of interest to Charities and alike.
• For approximately 1.5 million jobs for young people (under 21 years old), the Employer National Insurance contributions will be removed from April 2015.
• Over the next two years an extra 20,000 apprenticeships will be created.

In addition to these points, there was significant news on the UK economy.

ECONOMIC GROWTH

• This year the growth forecasts were revised from 0.6% to 1.4% (2013), for next year up from 1.8% to 2.4% (2014), and to 2.2% (2015), 2.6% (2016), 2.7% (2017) and 2.7% (2018).
• Support for British businesses of export finance capacity available increased to £50bn.
• Scheme with the aim of helping 50,000 more people start their own businesses via an increase in start-up loans.
• The Office for National Statistics has amended their figures for GDP in 2008/09 from a decline of 6.3% to a decline of 7.2%. This effectively wiped £112bn from the UK Economy.
• The “underlying deficit" in the UK was changed down to 6.8% for this year and 5.6% for next year.

Summary

No individual advice has been given in the course of this blog. This summary is not an extensive or exhaustive list of the Autumn Budget Statement. We hope that some of these highlights are of interest to your future financial planning.

If you would like to discuss any matter in the Autumn Statement with regards to your own individual situation and circumstances or any aspects of financial planning, both personal and business (SME), then please contact the team, either in Guildford or Woking.

Keith G Churchouse FPFS
Director
Financial Planner
Chapters Financial Limited

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

From capital growth to income. The possible life phases of Investment & Savings

Everybody tends to move through their personal life phases over time. It would be natural for their money to do the same as their needs develop and evolve.

This usually requires some financial planning and I have considered below some of the issues that might need to be considered through the phases of a lifetime.

Starting the savings process 

Capital accumulation usually needs (amongst others) time and money. This might sound a bit obvious, but the sooner you can start saving the better, and the more you can put in at the earliest points usually creates the most capital (not guaranteed ) for the future. This might start with smaller amounts in your early working years and build as the pressures of household and family expenses come under control and household income rises as your career develops.

The desire to save can be fuelled by any number of objectives, from buying a house, to saving for a wedding, to paying for school fees, to name just a few examples. It might be simpler than that, just paying for this year’s summer holiday.

Accumulation phase / Capital Growth 

As you move through your working life, and savings are invested, many will focus on capital growth as the objective. They have no real need for additional income and their investment objective is capital growth, with any income produced being re-invested accordingly.  Savings might be invested in tax efficient plans, such as ISAs and pensions, and also balanced across spouses/ partners to ensure that annual allowances are maximised where possible. This last point also has the potential to help balance income using income tax allowances in later years, such as retirement.

Attitudes to investment risk might be balanced or aggressive in this phase to endeavour to maximise returns, accepting that this is likely to import volatility in returns. More information on investment risk (and notes on volatility) can be found on our website here. The important issues of volatility can be considered further at our Investment Risk Scale here.

Income Phase 

It is possible that at the end of a working life (and usually the end of the accumulation phase), savings and investments would be re-balanced with the emphasis being focussed on income generation (rather than capital growth previously targeted) to boost income in retirement.  Attitudes to investment risk should also be checked at this time to re-test tolerance to risk and capacity for loss (ability to withstand falls in the value of the investment and/or reductions in the amount of income it can generate). Some may want to reduce their previous investment risk ratings, becoming less accepting of significant volatility in the capital they have accumulated.

This income phase may sometimes be deferred if not needed, being initiated when higher costs are incurred in later life, such as Long Term Care. More information on this topical point can be found on our website here.

Summary 

As the notes above indicate, a regular review of the allocation of your investment assets is worthwhile, partly to ensure that they continue to match your attitude to investment risk and partly to ensure that they match the life phase (and its requirements) that you reach. Past performance is not a guarantee of future performance.

No individual advice has been provided in the content of this blog. For individual advice on your pensions, savings and investments needs, please contact the team at Chapters Financial 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.

Larger Pension Contributions/ Pension Input Periods (PIPs)

Many clients and enquirers are aware that the tax year 2013/2014 has seen changes to the tax regime being applied to their income and allowances. A good example of this is the fall in the highest tax charge rate of 50% to a new lower level of 45%. More changes to the tax regime are due in the tax year 2014/2015 and one of these points, namely the Pension Input Period, or PIP for short may affect your pension planning in this tax year (2013/2014).

The Annual Allowance (the amount you can put into your pension without a penal tax charge being applied) is dropping to £40,000 in the 2014/2015 tax year from £50,000. It is important that you know the Pension Input Period (PIP) end dates for each of your pension plans to ensure that you do not exceed the limits, attracting a tax charge at your highest marginal income tax rate accordingly.

If the PIP end date for your pension falls in the new tax year 2014/2015, then any contributions will be tested against the reduced Annual Allowance of £40,000, rather than the current Annual Allowance of £50,000.

Remember that not all plans will have the same PIP dates and this should be checked on each plan that you hold.

It is also worth noting that Defined Benefit schemes (such as a Final Salary scheme) are valued using a factor of 16, plus lump sum where applicable, over the Consumer Prices Index (CPI). Therefore any increase in benefits increasing by approximately £2,500 for the year over CPI will breach the new reduced £40,000 Annual Allowance (2014/2015).  

If you would like to know more about this pension planning and your tax allowances 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 independent financial advice (IFA) in your own circumstances.

Keith G. Churchouse FPFS

ISO22222 Certified Financial Planner

Director and Financial Planner

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.