Archive | Pensions RSS feed for this section

Launch of Waverley Court Consulting Ltd – Website www.waverleycc.co.uk

18 Dec

I am pleased to announce the launch of my website – http://www.waverleycc.co.uk

After much work, reviews, re-writing and editing my website is now live. Let me know your thoughts on the content, design and presentation. Personally, I am most pleased with the Testimonials sections – every one who kindly provided their comments presented their views of our relationship.

The Launch Of My Corporate Website

11 Dec

We are almost there !!!

I expect within a few days my website will be up and available.

The official corporate Financial Services site for Welshmoneywiz is Waverley Court Consulting Ltd.

Autumn Budget Statement

10 Dec

You have to give George Osborne his dues…we all knew there were failings in the assumptions from the Summer Budget. He didn’t duck the bullet. Rather than just guidelines and review of the Summer Budget (normally what seems to be the Autumn Budget), it was more an introduction to the Spring Budget 2013, giving details of  some of the fiscal changes ahead.

A benefit of knowing about tax policy to be introduced from a future date is, it gives us a chance to plan now.

Registered Pension Schemes

George Osborne made proposals to cut back on the tax advantages of registered pensions.

The bad news :-

 Annual allowance to be reduced from £50,000 to £40,000 from tax year 2014/15.
 Lifetime allowance to be reduced from £1.5m to £1.25m from 2014/15

The good news :-

 Allowances to remain unchanged for 2012/13 and 2013/14 (at up to £50,000)

 Carry Forward remains unchanged for tax years 2010/11, 2011/12, 2012/13 and 2013/14 (at up to £50,000)

 Fixed protection available – enabling benefits to be taken up to the greater of the standard lifetime allowance and £1.5m without any lifetime allowance charge

1.  Election by 5 April 2014

2.  Protection lost where further accrual/contributions on or after

      6 April 2014

 Personalised protection option – a possible additional transitional protection

1.  Provides a lifetime allowance of the greater of the standard lifetime

     allowance and £1.5 million, but without the need to cease

     accrual/contributions on or after 6 April 2014.

2. Available to individuals with pension benefits with a value of at least

     £1.25 million on 5 April 2014.

 Maximum capped drawdown income to be increased from 100% to 120% of the relevant annuity rate determined from the GAD tables – date to be confirmed.

Planning Opportunities

The reduction in the annual allowance was expected and was only to £40,000 (it could have been worse). The reduction doesn’t apply until tax year 2014/15. Carry Forward of unused annual allowance of up to £50,000 for each of tax years 2010/11, 2011/12, 2012/13 and 2013/14, is available.

It gives a high earners the chance to maximise contributions before the reduction in the allowance bites. Also, for very high earners, if action is taken before the end of this tax year, they may be able to secure the 50% tax relief.

The changes to the lifetime allowance will mean that any one likely to be affected by the reduction and looking to retire in the near future will need to consider all means to reduce/avoid any lifetime allowance charge. This includes :-

  • Electing for fixed protection and/or, if available, personalised protection.
  • Considering drawing some or all of their benefits in 2012/13 or 2013/14 when these will be set against the current £1.5 million lifetime allowance.
  • Consider how benefits are taken.

Income Tax

So, it seems fair to say, there is actually only a very small change in the potential tax bill payable. Personal allowance has increased and the basic rate band has shrunk. The unlucky few are worse off but in most cases the situation seems to either be neutral or possibly a slight improvement.

The personal allowance is to increase by £1,335 to £9,440 in 2013/14 – an improvement in the terms announced in the Summer Budget.

In 2013/14, the basic rate tax limit will reduce from £34,370 to £32,010. This is offset by the increased personal allowance.

The result of these changes is that all taxpayers who are fully entitled to a personal allowance (where net income is less than £100,000) will be better off. At the lower end, the extra increase in the personal allowance will lift a quarter of a million people out of tax altogether.

From 6 April 2013, additional rate income tax will reduce from 50% to 45%. This rate applies for those who have taxable income of more than £150,000. For those affected, there is an incentive to make investments before 6 April 2013 and defer the resultant income until after that time.

In terms of planning for married couples/registered civil partners, this will mean that:

 There is scope to shelter income from tax if a higher/additional rate taxpayer is prepared to transfer income-generating investments (including possibly shares in a private limited company) into a non-taxpaying spouse’s name

 There is an incentive for lower rate taxpayers to make increased contributions to registered pension plans with a view to ensuring that any resulting pension income falls within the personal allowance.

Age Allowance

As the personal allowance increases, the age allowance is gradually being phased out. The amounts of age allowance are frozen at £10,500 for those born between 6 April 1938 and 5 April 1948 and £10,660 for those born before 6 April 1938.

For those who satisfy the age conditions, the age allowance is still currently worth more than the personal allowance. However, the allowance is cut back by £1 for each £2 of income that exceeds the income limit. The income limit will increase from £25,400 to £26,100 in 2013/14.

For those who are caught in this income trap, you should take appropriate planning i.e. reinvesting income-producing investments into tax-free investments (ISAs, VCTs, EISs, SEISs) or possibly tax-deferred investments (single premium bonds) or by implementing independent taxation strategies.

Business Tax

The Government will reduce the main rate of corporation tax by an additional 1% in April 2014 to 21% in April 2014.

The small profits rate of corporation tax for companies with profits of less than £300,000 will remain at 20%.

The capital allowance known as the Annual Investment Allowance will increase from £25,000 to £250,000 for qualifying investments in plant and machinery for two years from 1 January 2013. This is designed to encourage and incentivise business investment in plant and machinery, particularly among SMEs.

A simpler income tax scheme for small unincorporated businesses will be introduced for the tax year 2013/14 to allow:

Eligible self-employed individuals and partnerships to calculate their profits on the basis of the cash that passes through their business. Businesses with receipts of up to £77,000 will be eligible and will be able to use the cash basis until receipts reach £154,000. They will generally not have to distinguish between revenue and capital expenditure.

All unincorporated businesses will be able choose to deduct certain expenses on a flat rate basis.

Tax Avoidance and Evasion

As expected the Government unveiled a bundle of measures aimed at countering tax avoidance and tax evasion.

Areas of particular interest are:-

•  The introduction of the General Anti-Abuse Rule. This will provide a significant new deterrent to people establishing abusive avoidance schemes and strengthen HMRC’s means of tackling them. Guidance and draft legislation will be published later in December 2012;

•  Increasing the resources of HMRC with a view to:

•  Dealing more effectively with avoidance schemes

•  Expanding HMRC’s Affluent Unit to deal more effectively with taxpayers with a net worth of more than £1 million

•  Increasing specialist resources to tackle offshore evasion and avoidance of inheritance tax using offshore trusts, bank accounts and other entities, and

•  Improving technology to help counter tax avoidance/evasion

•  Closing down with immediate effect for loopholes associated with tax avoidance schemes.

•  Conducting a review of offshore employment intermediaries being used to avoid tax and NICs. An update on this work will be provided in the Budget 2013.

•  From 6 April 2013 the Government will cap all previously unlimited personal income tax reliefs at the greater of £50,000 and 25 per cent of an individual’s income. Charitable reliefs will be exempt from this cap as will tax-relievable investments that are already subject to a cap.

Inheritance Tax

The inheritance Nil Rate Threshold is to increase, although by only 1% in 2015/2016 to £329,000. Currently, the Nil Rate Threshold is £325,000 and has been frozen since 2009 until 2015. This means, from 6 April 2015, if the first of a married couple to die does not use any of his/her nil rate band, then the survivor will have a total nil rate band (including the transferable nil rate band) of £658,000.

We await the outcome of the consultation on the taxation of discretionary trusts which is due to be released in December. Hopefully this will incorporate some simplification to the current complex system.

Capital Gains Tax (CGT)

The CGT Annual Exemption (£10,600 in 2012/2013) will increase to £11,000 in 2014/2015 and £11,100 in 2015/2016. We do not know what it will be in 2013/14.

Gains that exceed the annual exempt amount in a tax year will continue to be subject to CGT at 18% and/or 28% depending on the taxpayer’s level of taxable income.

Trustees pay a flat rate of 28% on gains that exceed their annual exemption.

Individual Savings Account

The current maximum investment in an ISA is £11,280 in a tax year (maximum of £5,640 in cash). With effect from the tax year 2013/2014, the maximum will increase to £11,520 (with the cash content not to exceed £5,760). Use of the allowance should always be maximised as any unused allowance cannot be carried forward.

The Junior Isa and Child Trust Fund maximum annual contribution limit will move from £3,600 to £3,720 from 6 April 2013.

The Government will consult on expanding the list of Qualifying Investments for stocks and shares ISAs to include shares traded on small and medium enterprises (SMEs) equity markets such as the Alternative Investment Market and comparable markets. This could lead to ISAs becoming even more appealing as a tax shelter.

Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EIS)

The rule changes, mostly approved months ago, revolved mainly around opening up more companies for investment from VCTs and EIS, and increasing how much can be invested.

The size of companies that the schemes can invest in has been increased from £7 million to £15 million and the number of employees from 50 to 250.

The limit on the amount an individual can invest in an EIS has increased from £500,000 to £1 million, while the amount an EIS or VCT can invest in an individual company has increased to £5 million.

Ian Sayers, director general of the Association of Investment Companies (AIC), commented, ‘The proposed rule changes allow VCTs to invest in a wider range of companies which is a welcome boost to the sector and businesses desperately seeking finance.

‘The Chancellor’s removal of the £1million limit on VCT investment in a single company will ensure more efficient support to smaller businesses in the UK.’

However, the Budget also finalised plans to subject VCTs and EIS to further scrutiny in relation to the investments that they make.

The government will introduce a ‘disqualifying purpose test’, designed to exclude VCTs or EIS that do not invest in qualifying companies and are set up solely for the purpose of giving investors tax relief.

Although the schemes escaped any changes to their individual tax benefits, the Budget introduced a cap on tax relief, in an effort to prevent high income taxpayers getting away with very low tax rates.

The new rules will set a cap of 25% of income on anyone seeking tax relief of over £50,000 but, while the proposals are not particularly clear, it appears EIS and VCTs will be exempt.

Paul Latham, managing director of Octopus Investments, explained, ‘The good news is that the government’s new cap only applies to tax reliefs which are currently classed as “unlimited”. This means that tax-efficient investments, such as EIS and VCTs, are unaffected by this legislation.’

 

ECJ Judgement and the effect on Discounted Gift Trusts

26 Nov

This article summaries the judgement provided by the Court of Justice of the European Union (ECJ) regarding gender discrimination in relation to insurance premiums and its effect on Discounted Gift Trusts (DGT).

The Decision

On 1 March 2011 the ECJ issued a judgement that stated that the insurance services sector will no longer be able to offer gender specific premiums or benefits from 21 December 2012.

How does this impact Pensions, Annuities and Insurance?

This ruling is expected to affect these areas of financial services and following the 21 December 2012, we will see how this will be embedded into our existing legal framework and processes.

How does this impact DGT valuations?

When calculating the open market value of an income stream to arrive at a discount, HMRC guidance provides the use of certain gender specific mortality tables. HMRC have indicated they will review their guidance to take account of the judgement. However, it is likely that any change would not happen until late 2012. For DGTs declared before any change to the HMRC guidance on valuations, this judgement should have no impact, as the basis of the discount calculated will be relevant as at the date the trust is declared not the date of death of the settlor(s).
 
It should be remembered that the discount is just one factor in deciding whether a DGT is a suitable arrangement as part of your Inheritance Tax planning strategy.

The Rationale for the Judgement


Directive 2004/113/EC prohibits all discrimination based on gender in the access to and supply of goods and services. 

This means that from 21 December 2007 the Directive prohibited the use of gender in the calculation of insurance premiums and benefits. However, the Directive allowed exemptions to Member States regarding the use of gender specific premiums and benefits so long as the Member State ensured that the underlying actuarial and statistical data of which the calculations are based are reliable, regularly updated and available to the public.

The judgement considered if the intention of this exemption was to allow gender specific premiums and benefits to continue indefinitely. The Court concluded this was not the case and that gender specific premiums and benefits works against the achievement of the objective of equal treatment between men and women and therefore it was appropriate to bring this practice to an end.

Concluding that gender specific premiums and benefits would be regarded as invalid with effect from 21 December 2012.

 

Retirement Planning and Retirement Income Options

1 Oct

This article focuses on Money Purchase Schemes – so, schemes where you save up a fund to buy your retirement income e.g. Personal Pensions, SIPPs, SSASs, Stakeholder Pensions, Defined Contribution Workplace Schemes

Key Points

  • You do not have to accept the pension income offered by your pension scheme. You have the right to take your retirement income from a different provider – this is called the open-market option (OMO).
  • Your scheme may not offer the best deal for your money when you retire, so check whether you can get more for your money by using the open-market option.
  • In difficult economic times, your pension fund may be worth less than you expected, so getting the best deal is even more important.
  • Choosing how to take your retirement income can be a complicated decision. I always recommend that you take professional advice from a suitably qualified Independent Financial Adviser authorised by the Financial Services Authority (FSA).

Making your retirement choices and always think before you choose 

Things you should know :-

  • Your pension scheme should send you, no later than 6 months before you are due to retire, details of the choices you have.
  • This information will discuss buying an annuity (an arrangement which provides you with a pension income for the rest of your life).
  • Your pension scheme must tell you that you have the right to shop around and about the different types of annuity that are available.
  • You do not have to accept the annuity quoted by your pension scheme and you can shop around to find the best deal – this is called the open-market option.

Your income in retirement will depend on 4 main things:

  • how much money you and your employer have paid into your scheme;
  • how this money has been invested;
  • how much of this money has been used to pay any charges; and
  • the decision you make now on how you take your retirement income.

If your pension fund rises and drops in value (for example, all or some of it is linked to stocks and shares), you may want to consider switching your fund into a lower risk investment to reduce uncertainty in the run up to retirement. Check with your scheme whether this option is available and whether there is a charge for switching your money.

Making your retirement choices
You may get better value for your money if you shop around using your open-market option.

Before you make any decision, you need to consider:-

  • your overall financial situation;
  • what you might need financially in the future; and
  • how much tax-free cash you want to take (i.e. a pension commencement lump sum).

There are limits on the amount of cash you can have as a lump sum – typically, up to 25% of your fund. The cash you take will affect how much money is left over to buy your pension income.

I would recommend that you take qualified financial advice

What is an annuity?
An annuity converts your pension savings into a series of payments – the pension scheme pays your pension savings to an insurance company who, in return, agrees to pay you a regular income for the rest of your life. This is often called a lifetime annuity.

What affects the cost of an annuity?

  • Type of annuity
  • Age – annuity rates tend to get higher the older you are
  • Sex – annuities for women currently cost more. This is due to a change which will apply from December 2012.
  • Health and lifestyle
  • Prices vary from provider to provider just like any other goods or services you buy, which is why it is so important to consider shopping around.

How does the open-market option work?

You have a choice of who provides your retirement income when you retire. Your pension scheme will normally offer you an annuity but you can also shop around so you can choose the annuity that best suits your needs. Shopping around using your open-market option helps you to:

  • find out how the cost might vary between providers;
  • identify different features which may help you find the annuity which best suits your circumstances and how these features can affect the cost of the annuity or how much pension you get; and
  • decide if you want to choose another option instead of buying an annuity if your scheme allows this.
  • to find out if the annuity offered by your scheme is competitive;
  • if you are in poor health as this may mean you can get a higher annuity; and
  • if your lifestyle may qualify you for a higher annuity, for example, if you smoke or do a particular type of job.

Even if you have been very happy with your pension scheme up to now, consider the open-market option to check that it is offering the best deal for you when you come to retire.

What types of annuity are there?
There are 2 basic types of annuity – a single-life annuity and a joint-life annuity. There are other features that you could choose to include in the basic types, to suit your needs and circumstances. Check which features are included in the annuity offered by your scheme.

Single life – This pays an income to you for the rest of your life.
Joint life – This pays an income to you for the rest of your life. And then, when you die, it continues to be paid (possibly at a reduced rate) to your spouse or partner until they die.

Options you may be able to include:

Level – the pension income you receive stays the same throughout your life.

Yearly increases (escalation) – the pension income you receive increases each year, in line with inflation (the Retail Prices Index (RPI) or the Consumer Prices Index (CPI)), or at a fixed rate, for example, 3% or 5% each year.

Guarantee period – your pension income can be guaranteed for a set period, usually 5 or 10 years, so that it continues to be paid (usually to your widow, widower, civil partner, or to your estate) for the rest of the guarantee period if you die before the period ends. If you include a guarantee period, it may involve a small reduction in the amount of your annuity.

Lump sum on death – if you die, the annuity will pay out a taxable lump sum, equal to the cost of your annuity less any income you have already been paid.

Investment-linked annuities (including with-profit annuities) – these annuities offer the potential for you to receive a higher income but rely on stock-market performance. As a result, your income could go down as well as up.

Impaired life annuities – these annuities can pay a significantly higher income if you have a health problem that threatens to shorten your life. In cases of serious ill-health, where a registered medical practitioner confirms that your life expectancy is less than a year, the law may allow you to take the whole of your pension fund as a lump sum.

Enhanced life annuities – these annuities can pay a significantly higher income if your lifestyle may shorten your life.

What alternatives are there to an annuity?
When you retire, you may decide you do not want to buy an annuity.

Some of the alternatives we describe below may only be suitable if you have a large amount in pension savings or other sources of income and are comfortable taking some risk with your pension. Not every pension scheme offers all or any of these alternatives.

Again, before making a decision you should take qualified financial advice.

Make sure you are comfortable with the risks of choosing one of the alternatives to an annuity.

Cash lump sum – for smaller funds (this is sometimes called trivial commutation). 
If you are at least 60, you may be able to take all your pension savings as a lump sum. You can usually only do this if the total value of all your savings in all pension schemes is less than £18,000. If your fund value in an occupational fund is less than £2,000 then you can take it as a cash lump sum if your scheme rules allow, even if all your pension savings are more than the minimum amount of £18,000.

You usually pay tax on part of these lump sums.

Phased retirement – you can use your pension savings to buy annuities at different ages in the future.

Drawdown pension (sometimes also called income withdrawal or drawdown) – you take an income directly from your pension fund.

Short-term annuities – you can buy a series of annuities each lasting for a fixed term (usually up to 5 years). You can then leave the rest of your savings invested or use them to buy a lifetime annuity.

Putting off buying an annuity
Your scheme rules may allow you to put off (postpone) buying an annuity, whether or not you stop working. By postponing buying an annuity (either for a limited time or indefinitely), you may get a higher annuity because your pension savings will have been invested for longer and you will be older. However, annuity rates and investments can go down as well as up. Check whether you may lose any guarantees or have to pay any charges by putting off taking your pension income. It may also be possible for you to be paid your tax-free lump sum but delay taking any income.

Other ways
There are new options now available which pay a regular income and offer protection and/or guarantees of either investment growth or the amount of pension fund you will have left to buy an annuity later on. They vary in:

  • what they’re called;
  • the guarantee/protection they offer; and
  • the charges they make to cover the cost of the guarantee/protection.

You generally have to give up some investment growth potential to pay for the guarantee/protection.

What things should I keep in mind if I shop around?

  • If you use your open-market option and decide to buy your annuity from another insurance company, your pension scheme might take charges from your fund. You need to get an estimate of the value of your fund (less any charges) before you can ask insurance companies for a quote for an annuity.
  • Make sure you compare like with like. For example, don’t compare a level annuity with one that increases.
  • Make sure any annuity you choose fits with your circumstances. (For example, do you need an escalating annuity or do you qualify for an enhanced annuity?)
  • Check whether you will lose any benefits (for example, the option to buy an annuity at a guaranteed rate) or pay any charges if you don’t take up your pension scheme’s offer.
  • Quotes for annuity rates are often available only for a limited time, usually seven to 28 days. Also find out if there is a ‘cooling-off’ period during which time you can cancel any choice you make.
  • You may find it difficult to shop around if you have a small pension fund (less than £30,000) as some firms will not provide an annuity.
  • Not all companies will deal with you direct and only offer products through financial advisers.
  • If you use the open-market option, the adviser can be remunerated through a commission paid by the insurance company (you may prefer to pay via an agreed fee amount).

If you are comparing annuities under the open-market option, remember to compare like with like.

Frequently asked questions
What if I have a defined contribution fund in more than one pension scheme?
You may want to get financial advice. For example, you may be able to combine the money from all your schemes and use it to buy one annuity rather than buy a different annuity for each scheme. This may give you better buying power.

Do I have to pay tax on my pension income?
Yes, your pension income counts as earned income for tax purposes. Remember that most schemes will allow you to take a part of your fund, normally up to 25%, as a tax-free lump sum, as well as receiving an income.

What if I am contracted out of the additional State Pension (the State Second Pension)?
Your employer’s money purchase scheme will be able to tell you if it is contracted out of the State Second Pension (S2P). (This used to be called the State Earnings Related Pension Scheme (SERPS).) If so, you must currently use part of your pension fund to buy a ‘protected rights annuity’.

How will I know how much I have available to buy an annuity?
You can get an estimate of the value of your pension fund (less any charges for using the open-market option) from your pension scheme. Your pension scheme should send this to you before your retirement date, so you can start to shop around. You should then take off any amount you plan to take as a tax-free lump sum when you retire.

Will the stock market affect the value of my pension fund?
If you are invested in a fund which rises and falls in value (for example, it is invested in the stock market), the value can change. You may want to investigate whether you have the option to switch into a lower risk fund to reduce uncertainty in the run-up to retirement.

Who regulates annuities?
The Pensions Regulator, regulate workplace pension schemes. However, you will usually buy your annuity from an insurance company and these are regulated by the Financial Services Authority (FSA).

If an insurance company cannot pay all amounts due, the Financial Services Compensation Scheme (FSCS) may be able to help you.

Important Points to Consider

  • Once you have bought an annuity, you cannot normally change your mind. So, it’s worth making sure you get the right one.
  • In difficult economic times, your pension fund may be worth less than you expected.
  • Take qualified advice as the implications can last a lifetime.
  • If you want to delay taking your pension income, check for charges or penalties which might apply.
  • Do you want to change funds before you retire?
  • Do you want to take tax-free cash from your fund before you take an income? (Remember the Pension Commencement Lump Sum is only available at the date you take pension benefits and not afterwards – “a use it or lose it” benefit)
  • What annuity options are available from your scheme?
  • Compare what your scheme offers with the open-market option.
  • Do you qualify for an impaired life or enhanced annuity?
  • Would one of the alternatives to an annuity be suitable for you?

Where to get more information
You can get more information from the following organisations.

The Money Advice Service – also produce a range of free guides, available from its website.
Helpline: 0300 500 5000
Typetalk line: 18001 0300 500 5000
Website: http://www.moneyadviceservice.org.uk

Department for Work and Pensions (DWP)
Phone: 0845 606 0265
Textphone: 0800 731 7339
Website: http://www.direct.gov.uk

Financial Services Compensation Scheme (FSCS)
The FSCS helps protect consumers against financial loss when firms authorised by the FSA cannot or are unlikely to pay claims against them.
Phone: 0207 741 4100 or 0800 678 1100
Website: http://www.fscs.org.uk

The Pensions Advisory Service (TPAS)
TPAS is an independent organisation which can help with questions about your pension and annuities. You should also consider using the annuity planner on the TPAS website homepage.
Phone: 0845 601 2923
Email: enquiries@pensionsadvisoryservice.org.uk
Website: http://www.pensionsadvisoryservice.org.uk

The Pension Tracing Service
The Pension Tracing Service can help you track down pension schemes you have been a member of in the past. Their tracing service is free – you can either phone them and ask them for a tracing request form or you can use their online form.
Phone: 0845 600 2537
Textphone: 0845 300 0169
Website: http://www.direct.gov.uk

Your trustees or your scheme administrator
You’ll find their contact details in your scheme literature.

A suitably qualified independent financial adviser

So What is Secured Income?

This is the traditional route of Pension Annuities – there are more options available from permanent and temporary annuities but this is fund and age dependent.

Retirement Planning Needs To Be Taught In Schools

30 Aug
Retirement planning needs to be taught in secondary schools and given the same priority as careers advice, according to de Vere Group’s chief executive Nigel Green, who says this is the only sustainable way to solve the pensions crisis. 
His comments follow a study by Barings Asset Management that found 44% of those close to retirement age were unable to say when they would be able to retire. 
Get the Most from Retirement Planning
It’s terrifying to think a large proportion of the population who are nearing retirement age do not know when they will be able to afford to retire. As a nation, it seems we’re ill-informed. In order to ensure people are, in the future, more likely to be able to retire when they choose (and not have to work on past their selected retirement age because they can’t afford to give up work), it’s of vital importance we teach from a young age – how to plan finances.
 
The earlier people start to make informed decisions, the easier it is to enjoy the lifestyle you deserve when you retire. Many are disillusioned with retirement planning and especially pensions but the truth is more likely – people are dissatisfied with the investment returns generated – this is where professional financial advice is paramount (but make sure the person giving the advice has the ability and enthusiasm to provide suitable advice both now and in the future).
M341
In a poll back in April, more than 80% of users said their pension pot had failed to grow in-line with promises and projections made when they first began contributing (information provided by Barings Asset Management). Unless students are informed about the massive risks of ignoring retirement planning, many could find themselves worse off in later life.
Annuity Rates are at historic lows, age-related benefits is being scrapped, soaring living costs and taxes, and people living longer – meaning money has to go further – it’s clear that the world has changed irrevocably in the last few years; things are not the same today as they were a generation ago. Should we fail to plan for retirement, an increasing number could find themselves unable to enjoy the retirement that previous generations have taken for granted.
In secondary schools, students are taught about finding a suitable career, which is right and proper, but it is madness that we stop without equipping them with the life skills of how they are more likely to be financially independent once they are ready to leave the world of work. 
Personally, I am a great believer in both pensions and alternative investment vehicles, such as ISAs, certain structured products/deposits, simple fixed term deposits and collective investments. I have been and will carry on saving through these investments and as an IFA (Independent Financial Adviser) specialising in investments and tax planning – I know that if I do not provide for my future – no one else will. I plan that we will have the retirement we deserve and yes, I expect and have planned to financially assist our daughters through their path to adulthood.

HMRC Crack Down on Tax Avoidance Schemes

22 Aug

HMRC has won, subject to appeal three court decisions against tax avoidance schemes. These cases are expected to provide the Exchequer with £200 Million.

The message is clear – when planning to minimise tax, ensure you use the rules that exist, take advantage of government backed schemes (eg personal pensions, ISAs, VCTs, EISs, AGR & BPR related schemes) and use accepted approaches within the flavour of the law – take professional advice. The cases in question are high value high – profile and are out of the remit of the general investor but the ethos of HMRC is clear.

HMRC Letter 480

HMRC have stated that this sends “a very clear message” that it will tackle efforts to avoid paying tax.

The first case, against ‘Schofield’ and heard in the Court of Appeal on 11 July, involved a business owner using a tax avoidance scheme to create an artificial loss on his sold business, even though it had actually made him a £10m profit. HMRC said he paid £200,000 to be involved in the scheme.

Another case against Sloane Robinson Investment Services, heard in the First Tier Tribunal on 16 July, saw the company’s directors attempt to avoid a combined £13m worth of tax on their bonuses. The First Tier Tribunal ruled the scheme, even once it had been modified to counter recently introduced anti-tax avoidance legislation, did not work.

In the final case, against ‘Barnes’ in the Upper Tribunal on 30 July, a scheme aimed at exploiting a mismatch between two tax regimes on behalf of more than 100 individuals failed to work. HMRC said some £100m was at stake as a result of this scheme.

HMRC director general of business tax, Jim Harra, said: “These wins in the courts are a victory for the vast majority of taxpayers who do not try to dodge their taxes. They send a clear message to tax avoiders – HMRC will challenge tax avoidance relentlessly and we will beat you.

“We have now had three major court successes in avoidance cases in the last month alone and I hope this sends a very clear message: These schemes don’t come cheap, you carry a serious risk that you’ll end up paying the tax and interest on top of a set-up charge which can run into the hundreds of thousands of pounds.

“These were complex cases which show HMRC’s experts doing what they do best, delivering great results for the UK.”