The thought of it may be daunting; it can feel like an impossible mission. But with early planning, building up your nest egg is more discipline than difficult. The process of building a retirement fund typically involves a combination of consistent saving and long-term investments. But first, you have to figure out how much you need in order to set a goal.
Funds To Live Life To The Full In Retirement
Retirement is an exciting period in life. You might be looking forward to taking a trip to somewhere you’ve always wanted to go, dedicating more time to a favourite hobby or spending more time with family and friends. However, many people feel concerned about not having the funds to live life to the full in retirement.
Making sure you have enough money to enjoy your retirement is
a matter of sensible planning and being proactive. Ask yourself, what decisions can I make today to start preparing for retirement? Investing even small amounts of money on a regular basis in preparation for retirement could leave you with a larger nest egg.
Head Start On A Retirement Nest Egg
Investing for growth is suited to those who want to get a head start on
a retirement nest egg but won’t be retiring until further into the future. If your goal is to invest for growth, this means that you are more focused on growing your initial investment over a medium-to-long period of time (five years plus) and do not intend to use the investment to boost your current monthly income. For those investing for growth, investing as far in advance as possible from when they plan to start withdrawing the investment should give their funds the best chance of maximum growth.
Investing For Income
This investment goal is designed to generate a bit of extra money now and in the future by providing a boost to your monthly income. This goal could be suitable for those closer to retirement who are looking for their investment to help with paying regular bills and outgoings in retirement. When investing for income, selecting investment trusts focused on asset classes including equities and commercial property can provide a reliable and attractive income boost.
A Time When You Have Stopped Working
Setting up a retirement goal requires you to find out how much income you’ll need when you have stopped working. As part of the planning process, you’ll need to consider answers to questions such as: ‘At what
age do you plan to retire?’, ‘How many years should you plan to be in retirement?’ and ‘What is your desired monthly income during retirement?’
Your retirement fund needs certainty – you can’t risk losing your savings because you need it as a stable income. So how can one balance the need for growth with a certainty of returns when building a retirement fund?
The key lies in considering a number of different factors: RISK APPETITE
Are you a ‘conservative’ investor who cannot afford to lose the initial capital you put up? Can you sacrifice the certainty of having your investment protected in order to gain higher potential earnings?
If you do not already have a large sum of retirement savings, you probably shouldn’t take too much risk when you invest since you may not have the luxury of time to recoup the losses should your investment turn awry.
Generally, a bigger portion of your retirement portfolio can be apportioned to higher-risk investments if you start in your twenties. As you progress nearer towards the retirement years, your portfolio should increasingly focus on investments that are lower risk and provide more stable returns.
You can consider allocating your investments into products suitable for different investment horizons (short, medium and longer term) depending on your risk appetite. For example, a short-term investment can include some riskier assets such as single equities or investing in a fast-growing speciality fund. You should always be reminded that with higher expected returns come higher risks.
If you choose to save your way to retirement by putting cash in a savings account, the value of your money may be eroded due to inflation. In order to ensure that the money you have now preserved its purchasing power during your retirement years, you need to choose savings or investments that give you higher returns above inflation.
The key to growing your retirement fund includes having different asset classes in your portfolio, which is otherwise known as ‘diversification’. Diversification not only helps you manage the risk of your investments, but it also involves re-balancing your portfolio to maintain the risk levels over time.
The chancellor of the exchequer, Philip Hammond, delivered his spring budget to parliament on 9 March 2017. This budget was the last one to take place in the spring, The chancellor said last year that he wanted to simplify the whole business of setting taxes and government spending, which has become too complicated.
Key points from the Budget that could impact your personal financial planning:
New National Savings And Investments Bond Launched
A new NS&I bond paying 2.2% over a term of three years on deposits of up to £3,000 is now available for 12 months from April 2017.
£5K Tax-free Dividend Allowance Cut
The £5,000 tax-free allowance which commenced in 2016 is being cut to £2,000 from 2018.
Income Tax Allowances Confirmed
The personal tax-free allowance has increased to £11,500, with the higher rate tax band rising from £42,385 to £45,000. The Chancellor said the changes ‘will make 29 million people better off’. The additional rate tax band remains at £150,000. Those in Scotland will have different Income Tax bands for earned income.
New Inheritance Tax Residence Allowance
When you pass on your main family home, you can now receive an additional £100,000 on top of the £325,000 Inheritance Tax allowance via the new main residence nil-rate band allowance.
Each individual can pass on up to £425,000 without paying Inheritance Tax as long as your family home is passed on to either children or grandchildren (and your share is worth at least £100,000 in 2017/18). The higher figure applies where more than one nil-rate band is available.
Lifetime Individual Savings Account (LISA)
This new savings product is available to adults aged 18 to 39. It’s designed to support plans to save for retirement or a first home. If you are a first-time house buyer, you can pay up to £4,000 a year into a Lifetime ISA and receive a 25% government bonus. Contributions can continue up to age 50 and can be used to purchase a first property at any time from 12 months after opening the account, or be withdrawn for retirement from age 60.
£20K ISA ALLOWANCE Individual Savings Accounts (ISAs) continue to provide a tax-efficient saving option for many. How much you can save into an ISA each year has been increased to £20,000 – an extra £4,760 of tax-efficient savings. This increase, from April 2017, complements the new dividend allowance and new tax treatment of savings interest.
Buy-To-Let Tax Changes
If you have a buy-to-let property, the amount of mortgage costs you can offset against rental income to assess your profits is being reduced.
The reductions will be phased and may impact how much tax you may need to pay.
Money Purchase Annual Allowance Cut
If you have accessed a money purchase pension flexibly, how much you can then pay into your money purchase pension under the Money Purchase Annual Allowance (MPAA) and receive tax relief is being reduced from £10,000 to £4,000. This only affects you if you have flexibly accessed your defined contribution pension. The reduction doesn’t apply if you have only taken your tax-free cash sum or are already in capped drawdown and remain within the capped drawdown rules.
It's Good To Talk
The Chancellor resisted making far-reaching tax changes in this last Spring Budget, but some of the announcements could have had an impact on your personal or business situation. If you would like to discuss your situation, or if you have any further questions, please contact us.
Levels, bases off and reliefs from taxation may be subject to change, and their value depends on the individual circumstances of the investor. Your home or mortgage. The value of your investments can go down as well as up, and you may not get back the full amount invested.
Coming in to a large amount of money is not something that happens often in a person’s lifetime. You may be tempted to spend, make gifts, give up your job or pay off existing debts and loans, but taking time to consider your options will put you in the best position for your financial future.
Don’t feel you have to take action straight away. Taking time to take in impartial advice about your new-found money will give you all of the options you need to make an informed decision that can potentially reward you well in the future.
The short term
Consider setting yourself up with a savings account that you keep separate. This may benefit you whilst you are deciding how you should deal with your money in the long term.
If you are considering investing your money, it’s important that you seek impartial financial advice so that all options are laid out for you. Independent Financial Advisers (‘IFA’) are not tied to any specific providers, which means that all advice provided to you is in your best interests only.
Financial planning begins with fully understanding where you are with your finances. It’s important to take time to understand all of your outgoings and incomings, so that you can see how your windfall fits in with your circumstances, and what level of risk you are willing to take if you choose to invest your money.
If you choose to receive advice from an IFA they will tell you what your options are, advise you on how best to proceed, and keep you informed at every stage so that you remain in control.
If you received a bonus at work, your employer will usually deduct tax and National Insurance from it on your behalf.
If you received money from an inheritance, then in most cases the tax is paid with funds from the deceased person’s estate. This will usually mean that by the time you receive your inheritance, you won’t need to pay any Inheritance Tax on it.
If you’re lucky enough to have received a lottery win, then these are not considered to be an income and are not taxed. Read more in our blog about lottery wins here.
Other categories including shares may be subject to Capital Gains Tax (CGT) if they have increased in value. Whilst there is a tax-free allowance – you can find out more by checking the GOV website.
Your IFA will give you a full breakdown of applicable taxes depending on your circumstances.
Talk to Beaumont about how we can help you to make investment decisions that are right for you. Call us on 01691 670524 to arrange an appointment for a free initial Independent Financial Review with one of our advisers.
Did you contribute towards the £4.6 billion worth of over-payment in tax to the UK Government in 2016?
Whilst paying tax is a good thing, as it keeps the country running, paying too much tax for an individual or business is not a good thing. There are plenty of legitimate ways to reduce the amount of tax you pay, but you may not be aware of them all, or how you can take advantage of them. Perhaps you may not have done anything about it despite knowing how.
Tax can be complicated, especially if you have more than one income stream or manage a business. Whilst there are many things that can affect the amount of tax you pay each year, the fear of paying too little tax means that we sometimes pay too much.
The most common areas where we tend to waste tax are:
We can help you to identify areas to help you become more tax efficient, which could potentially save you significant amounts of money. As well as assessing your current situation, we can also anticipate how future changes in tax law can affect you or your business, in a good or bad way.
Not all areas of Tax Planning are regulated by the Financial Conduct Authority.
To book your appointment, please call us on 01691 670524. Alternatively, connect with Mark Evans and Matt Hignett on LinkedIn.
Over-55s risk falling prey to the inheritance ‘sibling tax trap’
On 6 April 2017, a new additional main residence nil-rate band (RNRB) was introduces, which allows for less inheritance tax to be paid in situations when a family home is left to children, grandchildren or certain other 'qualifying beneficiaries' - including stepchildren and foster children.
But more than 1.7 million over-55s could miss out because they’ve assigned their sibling to inherit their family home and not a direct descendant.
PASSING A FAMILY HOME TO SIBLINGS RATHER THAN TO CHILDREN OR OTHER DESCENDANTS
Research from the LV= independent legal service shows that one in ten over-55s (10%) have written their Will to pass their family home to their siblings rather than to their children or other descendants, which would lead them to be ineligible to utilise the additional RNRB. Previously, if an estate of a married couple was left to any descendant, anything above the £650,000 combined threshold (£325,000 allowance per individual) would have been taxed at 40% Inheritance Tax.
INHERITANCE TAX–FREE ALLOWANCE FOR THE FAMILY HOME
However, from 6 April 2017, the RNRB has been introduced with an RNRB of £100,000 per person, taking the total maximum individual personal allowance for Inheritance Tax from the current level of £325,000 to up to £425,000, or a total of up to £850,000 for married couples and registered civil partnerships.
LEAVING THE FAMILY ESTATE WITH AN INHERITANCE TAX LIABILITY
The allowance for the family home is set to increase by £25,000 per tax year, so by 6 April 2020 onwards a couple with a family home may potentially be able to leave their children or other direct descendants a combined estate of up to £1 million without any Inheritance Tax to pay. However, if the same couple were to leave their family estate to a sibling, the Inheritance Tax of 40% would apply on the difference between £650,000 and £1 million, leaving an Inheritance Tax bill of up to £140,000.
YOU MAY NEED TO AMEND YOUR WILL
The majority of the people surveyed (72%) don’t know of or understand the changes that have come into force in this new tax year. If appropriate, you may need to amend your Will to ensure your estate can benefit from the increased allowance. Even among those who do know about the changes, half (53%) didn’t realise that the increased tax-free amount can apply to cash proceeds from the sale of the home if you downsize or have to go into care.
WELL-THOUGHT-OUT ESTATE PLAN
Worse still, many people living ‘as married’ with partners – who would want their wealth passed to each other – don’t have Wills (44%). Therefore, unless assets are jointly owned as ‘joint tenants’, their estate will pass to their children who would have no obligation to provide anything to their father or mother’s partner. It has never been more important to have a well-thought-out estate plan, complete with an appropriate Will and supporting documentation, to ensure your assets can pass to your loved ones in a tax-efficient manner.
COULD YOU FALL PREY TO THE SIBLING TRAP?
This increased Inheritance Tax allowance is a boost to those who’ve seen their homes rise in value and want to be able to pass on this wealth without further tax charges, but it’s crucial that they don’t fall prey to the sibling trap. The RNRB rules can be complex. Getting the right professional advice and amending your Will could take a few hours, but with potential to save a lot of money it’s time well spent.
Levels, bases off and reliefs from taxation may be subject to change, and their value depends on the individual circumstances of the investor.
 There are 17.6 million over-55s in the UK (ONS population maps). Of the over-55s surveyed, 10% said they’d left their home to siblings rather than their children or grandchildren – equivalent to 1.7 million over-55s. LV= commissioned Opinium Research to conduct bespoke research among a sample of 1,000 UK residents who are over 55 years of age. Surveys were conducted online between 8 and 14 December 2016 and are nationally representative.
There are lots of old sayings that infiltrate our everyday lives. You may not even be aware that you’re saying some! We decided to investigate the history behind some of the Beaumont team’s favourite sayings about money.
We all love to ‘bring home the bacon’, but where did the saying come from?
Mark tells us, “Like many sayings about money, this one is said to have come from a historical reference – in this case from 1111AD where an Essex woman promised any man in England the prize of a side of bacon, known as a flitch, if they could show that they had been blissfully married for the preceding year and a day. In the next 500 years, there were but 8 winners.It’s even mentioned by Geoffrey Chaucer in The Wife of Bath’s Tale and Prologue, circa 1395: “But never for us the flitch of bacon though, That some may win in Essex at Dunmow.” After the tradition was re-established in 1858, it continued every four years in Great Dunmow.
Today, of course, the saying refers to earning money out of a deal or bringing home a salary. Likewise, you’ll hope that your investments will ‘bring home the bacon’. Talk to Beaumont about how we can help you to make investment decisions that are right for you. You can email mark direct at firstname.lastname@example.org
Where did the term ‘cash cow’ come from?
Matt says, “the term has strong links to the history of farming, and is a metaphor for a dairy cow, which, after being bought, can be milked daily for consistent financial return. The cow can also produce an annual calf that can be sold on, kept or eaten. In the business world, we use the term to describe a company or product that makes dependable and consistent income or cash.”
It might be that you’re looking for a dependable income in your retirement, maybe alongside other investments while you’re still earning. The Beaumont team can help you to establish which products might prove to be your ‘cash cow’. Call Matt on 01691 670524 or email him, email@example.com, to discuss your own financial goals.
How about ‘saving for a rainy day’?
Matt explains, “If you’ve been saving for a rainy day, you’ve been doing what others have for centuries. It’s important to put away extra money for your future in anticipation for when you may need to draw down on these resources. Whilst there are many references to this quote throughout the centuries, the earliest one can be traced back to 1561 in an Italian comedy called La Spiritata, by the Florentine playwright A. F. Grazzini. The plot follows Formosus who manages to get 3,000 crowns from his tight-fisted father Amadeus, as he is secretly wed to a woman who comes to him without a dowry.”
Another popular phrase is ‘keeping up with the Joneses’. Who were they?
Claire says, “Whilst there are several versions of the origin of the phrase, our favourite comes from Edith Wharton (born Edith Newbold Jones) who was a Pulitzer prize-winning novelist in New York in the 1920s. The Joneses were a prominent family in the city with investments in Chemical Bank, obtained through marriage, and they set about building country villas in Hudson Valley. In 1853, a 24-room gothic villa was built, spurring on more building in the neighbourhood, which created the phenomenon known as ‘keeping up with the Joneses’.”
Hopefully your own financial goals aren’t driven by ‘keeping up with the Joneses’, but with careful planning tailored to your circumstances and attitude to risk, you’re more likely to achieve your aims. Talk to the Beaumont team about keeping up the momentum in your financial plans today! Call Claire on 01691 670524 to arrange an appointment for a free Independent Financial Review with one of our advisers.
Are you ‘worth one’s salt’?
Mark recalls, “Whilst today salt might just be for seasoning chips and adding flavour to your dinner, it has played a vital and valuable role in history. Before the age of refrigeration, the only method of preserving food was with salt. Without this, groups of people were unable to migrate long distances; travelers would be unable to explore and armies would remain immobile without food. As a result, salt came to represent power.
This saying has its roots in ancient Rome, where soldiers would be given an allowance to purchase salt. The ancient Latin word ‘salarium’, refers to a soldier’s allowance, or salary, and is derived from the Latin word for salt”
Mark and the team at Beaumont Financial are certainly ‘worth their salt’ when it comes to helping clients plan their financial affairs and investments. That’s why we have a 97% client satisfaction rating on VouchedFor.co.uk and why Mark is listed in the Sunday Times Top 250 IFAs in the country. Find out why for yourself – call for a free Independent Financial Review on 01691 670524 or email firstname.lastname@example.org
Most people with their finger on the financial pulse are familiar with the term ‘in the red’.
Mark explains, “The origins of this saying begin in the bookkeeping industry, where it was customary to make an entry for a loss in red ink, hence why it’s now associated with a debt. The first known existence of the phrase comes from 1907, in Montgomery Rollin’s roll-off-the-tongue title ‘Money and Investments; a reference book for the use of those desiring information in the handling of money or the investment thereof.’ How catchy!
Even in this day and age of computerised accounts, it survives. If you notice on Microsoft Excel, the system will flag up debits in red. Why red though? No one really knows.”
While the value of investments may, of course, fall as well as rise, in the long term using an Independent Financial Adviser can mitigate against risk, provide objective advice and opinion to suit your own goals and approach to risk, and hopefully keep you ‘in the black’. Call Beaumont today to arrange a free Independent Financial Review with one of our trained IFAs.
The idea behind seeking financial advice is to ensure your investments, pensions and protection are right for your needs and circumstances. There are many different ways that you can benefit from Mark and Matt’s advice, such as:
Return on Investment
They can review your needs and circumstances and ensure your invest accordingly.
Ensuring you will have enough income in later life (e.g. pension planning).
Peace of Mind
Knowing you have made the best practical choices and obtained the best deals the market has to offer you.
Making sure you and your family have safeguards in place against unfortunate circumstances (e.g. illness, job loss, premature death).
Overcoming challenges and reaching milestones.
Reducing the risk of making financial decisions you regret, or falling victim to fraud.
Discovering new and unexpected ways to make your money work harder for you.
Research by Royal London shows that more people than ever are breaking pension rules, and they run a risk of HMRC claiming back any tax perks acquired through the annual pension allowance.
Between the tax years 2012-13 and 2014-15, extracted by a request through the Freedom of Information Act, data shows there was a 79% increase in the amount of people who saved beyond the allowance allowed during that time of £50,000.
However, true figures are likely to be much higher, as the statistics submitted to HMRC only represent people reporting their pension contributions.
Many others, predominantly those in “defined benefit” pension schemes, will be unaware because of employers’ contributions and the complex methods used to calculate the total.
The annual allowance has been dramatically cut from a high of £255,000 from as recently as 2010-11, and now sits at £40,000 for 2016-17. These changes came about in an attempt to save billions in pension tax incentives.
For taxpayers earning under £32,000 p.a. your contribution toward your pension is topped up by the Government by 20%. This means that for every £80 you save for your pension, it is topped up to £100. A higher-rate taxpayer has to pay in only £60 to make a £100 pension contribution.
However, if HMRC finds that you have been saving beyond these levels, it will reclaim any tax relief that it has paid out.
How much can I put into my pension each year?
• You can contribute as much as you earn in a year, up to £40,000 annually
• You can also use the past three year’s pension contribution limits if you were a member of a registered pension scheme during that period, and haven’t already – HMRC’s “carry forward rules”
• Your pension limit will be affected if you draw any income from it (not including tax free cash), falling to £4,000. Prior to the Autumn Statement this was £10,000.
Are you a high earner?
• Workers earning over £150,000 will have their annual pension allowance gradually reduced to £10,000 once they earn £210,000 or more.
• To work out whether you will be affected you need to calculate a “threshold” and “adjusted” income.
• If your threshold income is more than £110,000 and adjusted income is more than £150,000 a year you will be caught and start to see your annual allowance drop.
• Threshold income includes income from all sources, not just your salary. From this deduct pension contributions. If the figure produced is less than £110,000 then your annual allowance will be £40,000. If it is above this limit however, you need to calculate adjusted income.
• Adjusted income is calculated in a similar way to threshold income but includes the pension contributions that you and your employer make both from gross pay and via salary sacrifice.
• If adjusted income totals more than £150,000 the taper applies and your annual allowance will fall by £1 for every £2 of adjusted income between £150,000 and £210,000
If you’re concerned about your pension planning or how the information above affects you, please call us on 01691 670524 and speak to an Independent Financial Adviser.
Matt Hignett recently wrote an article to be featured in Oswestry Life Magazine. Here he explains some possible options regarding your finances.
Clients come to see me quite often with the same two queries; both of which have simple solutions.
Firstly, ‘How much cash should I be holding in my bank account?’
The answer to this is always client specific, although the accepted industry standard is 6 months’ expenditure. Realistically I don’t think this works, and would rather treat this as a minimum figure to set. This is because the ‘Mr and Mrs Average’ and ‘one size fits all’ does not work in this situation.
The more important question to be asking is, ‘How much cash do you need to hold in your bank account to cover emergency expenses and to feel comfortable with the situation?’. This is a personal dilemma that can be settled with the help of a qualified financial planner, and is much more important than any financial calculation that tells you what you should be comfortable with. Some people will be happy keeping the bare minimum in cash, while others will want a substantial buffer to make them feel secure.
The second query is, ‘Can I get a better return on my cash without taking a large amount of risk?’
Again, there is a simple answer to this…. YES!!! Not all investments are risky stock market plays that directly mirror stock market movements. For those investors who want to take a more cautious approach, there are investments that are specifically designed to meet their objectives by beating the returns offered by cash.
These investments aim to smooth out the ups and downs of the stock market, removing short term volatility and giving a more measured and continuous return. They do this by investing only a small portion directly into stocks and shares and the majority of the investment into more cautious, fixed investments.
These investments offer projected returns of 3-3.5% per year and are available through stocks and shares ISAs, which make the returns and investments massively tax efficient, while also allowing existing cash ISAs to be transferred without losing the existing ISA allowance, or using up the current year’s allowance.
Obviously, the key to any investment is matching the correct client to the correct investment – after reviewing the client’s needs, objectives and personal circumstances, and the majority of providers will only accept these investments for clients through their adviser. That’s where using a qualified financial adviser comes in. Please remember past performance is not an indicator of future returns.
So, if you want to know how much you should be holding in cash and are unhappy with typical interest rates of 0.10%-1.5% per year with the banks, give me a call on 01691 670524, email email@example.com or pop into Beaumont Financial Planners Ltd at 21 Salop Road, Oswestry for a free, no obligation, initial chat.
BIf you want to have control over what happens to your assets after your death, effective estate planning is essential. After a lifetime of hard work, you want to make sure you protect as much of your wealth as possible and pass it on to the right people. However, this does not happen automatically. If you do not plan for what happens to your assets when you die, more of your estate than necessary could be subject to inheritance tax.
The rules around Inheritance Tax changed from 6 April this year. The introduction of
an additional nil-rate band is good news for married couples looking to pass the family
home down to their children or grandchildren, but not every estate can claim it.
This tax year, according to the Office for Budget Responsibility, more than 30,000 bereaved families will be required to pay tax on their inheritance. So, it pays to think about
Inheritance Tax while you can and work out as soon as possible how much potentially could be
taken out of your estate – before it becomes your family’s problem to deal with.
An Inheritance Tax survey conducted by Canada Life shows that Britons over the age of 45 are either ignoring estate planning solutions or they have forgotten about the benefits these can provide. Only 27% of those surveyed have taken financial advice on Inheritance Tax planning, despite all of them having a potential Inheritance Tax liability.
Leaving An Estate
Every individual in the UK, regardless of marital status, is entitled to leave an estate worth up to
£325,000 without having to pay any Inheritance Tax. This is known as the ‘nil-rate band’.
Anything above that amount is taxed at an Inheritance Tax rate of 40%. If you are married
or in a registered civil partnership, then you can leave your entire estate to your spouse or
partner with no Inheritance Tax liability.
The estate will be exempt from Inheritance Tax and will not use up the nil-rate band.
Instead, the unused nil-rate band is transferred to your spouse or registered civil
partner on their death. This means that should you and your spouse pass away, the value
of your combined estate has to be valued at more than £650,000 before the estate would
face an Inheritance Tax liability.
You don’t have to own a very large estate or even be considered ‘wealthy’ to leave behind
an Inheritance Tax bill. The nil-rate band has remained frozen at £325,000 since April
2009, but the average price of a UK property has risen 33% over the same period.
With much of the UK population’s wealth invested in their property, a growing number
of families are potentially being left with a significant Inheritance Tax bill to pay.
Residence Nil-Rate Band
If you’re worried that rising house prices might have pushed the value of your estate
into exceeding the nil-rate band, then the new ‘residence nil-rate band’ could be
significant. From 6 April 2017, it can now be claimed on top of the existing nil-rate band.
But claiming this new allowance is not as simple as it sounds. It can only be claimed by
the estates of people on property that is, or was at some point in the past, used as their
main residence and which forms part of their estate on death.
It’s only available to homeowners who plan on leaving their residence to ‘direct descendants’, such as children or grandchildren or step children. If you don’t have any direct descendants, or you wish to leave your home to someone else, the new allowance can’t be claimed.
Anyone without a property worth at least £175,000 per person, or £350,000 per couple
(in 2020/21), will only partially benefit. And, because the new allowance was intended to
help ‘middle England’ and those who weren’t especially wealthy, the residence nil-rate
band reduces for estates worth more than £2 million by £1 for every £2 above the
taper threshold. Because of this tapering effect, there is a point at which claiming the
allowance is ruled out completely.
Your estate may still be able to claim the residence nil-rate allowance even if you’ve
already sold your home, for example, because you are in residential care or living
with your children. If your home was sold after 8 July 2015 and you plan on leaving
the proceeds to your direct descendants, then there are provisions in place that
will allow your estate to claim the new allowance. However, this doesn’t apply to
homes sold before 9 July 2015.
If you plan ahead, certain gifts made during your lifetime could reduce the amount of
Inheritance Tax payable on your death. In addition, the proceeds payable from
any life insurance policies written in an appropriate trust will not form part of
your estate and so will not further add to a potential Inheritance Tax bill.
Estate planning will enable you to maximise your wealth and minimise Inheritance Tax. Is it
time for you to have a comprehensive review of all your assets and objectives and consider
the tax-efficient solutions?
What Are Your Requirements And Motivations?
The rules around Inheritance Tax are complex, and when reviewing your
particular situation you should always obtain professional advice. Everyone has
different requirements and motivations – the right solutions for you are the ones
that suit your personal circumstances. We can work with you to discover what these
are. To discuss all the options available to you, please contact us.
The 2015 pension freedoms gave us greater flexibility over our retirement options, but the reforms have also made retirement choices much more complex. This means we need to start thinking abut our retirement earlier. However, half (50%) of respondents aged 45-54 to a LV= Consumer survey  didn't think about retirement at all last year.
Given the lack of time people spend thinking about retirement, it’s perhaps unsurprising
that six in ten (62%) 45 to 54-year-olds don’t know how much they have saved for
retirement, and only around one in ten (12%) say they fully understand the 2015 pension reforms.
If people spent more time planning for retirement, this could help them better identify
whether they are saving enough. According to the survey, people expect to need £1,360 a month in order to live comfortably in retirement. In order to do this, someone retiring at 55 would need to have around £311,000 saved, or £158,000 if they retire at 65 – assuming they qualify for the full State Pension.
However, the average pension savings of those surveyed aged 45 to 54 years old is
£71,342, with four in ten (39%) having less than £50,000, and one in seven (13%) not having
anything at all. To achieve the amount they want and retire at 55, the average 45-year-old
would need to save around £24,000 in pension contributions each year for the next decade.
Anyone approaching retirement should check their pension pots annually and seek professional
financial advice to help them make a plan.
Five areas to consider if appropriate to your retirement plans:
1. Track down lost pensions – If you’ve moved jobs frequently, you may have lost track of
old pensions. The Pension Tracing Service is free and can help you trace a pension that
you’ve lost track of, even if you don’t have the contact details of the provider. All you need to
know is the name of your previous employer or pension scheme.
2. Consider consolidating – It’s easy to build up a number of different pensions over the course
of a lifetime, and by consolidating them into one place you could save money and manage
your savings more effectively. This process lets you simplify your pension arrangements and
makes it easier to manage your pension savings efficiently from a single pot.
3. Check your other assets – Compile a list of any other savings or investments that you have which could help fund your retirement. This could include equity in property.
4. Review the State Pension – It’s unlikely to be enough to see you through retirement
on its own, but it should be taken into consideration when looking at your options.
You can check your State Pension age by using the Government’s state pension calculator –
5. Obtain professional financial advice – Regulated professional financial advice is the
best way to help you plan and save enough money to last throughout retirement.
 Consumer survey: Opinium, on behalf of LV=, conducted online interviews with 2,404 UK adults between 12 and 27 March 2017. Data has been weighted to reflect a nationally representative audience.
 Methodology for retirement income: LV= calculated the size of pension pot needed to give someone in good health a monthly income of £1,361 (or annual income of £16,332) from the age of 55 until death and 65 until death, including the full State Pension.
To provide a guaranteed income between 55 and 65, LV= calculated the pot size needed to purchase a Fixed Term Annuity with no money left at the end of the term. To provide an income after 65, once the State Pension kicks in, three comparison annuity quotes were produced with major providers for someone retiring at 65, and an average figure was taken for each. All quotes are gender neutral and assume a single life annuity with no death benefits.
Accessing pension benefits early may impact on levels of retirement income and is not suitable for everyone. You should seek advice to understand your options at retirement.
Your pension income could also be affected by interest rates at the time you take your benefits. the tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.