A NISA Home For Your Investments

Providing you with increased simplicity and greater flexibility……

Individual Savings Accounts (ISAs) have been around since 1999, providing a tax-efficient wrapper for savings and investments. However, in the recent Budget, the Chancellor, George Osborne, promised to increase the simplicity and flexibility of ISAs. As of 1 July 2014, there is now a single ISA which has been named the new ISA, or ‘NISA’, which provides a bigger tax break than ever before and more flexibility about how it can be used.

All ISAs have now become NISAs, including any ISAs opened from 6 April 2014 to 30 June 2014.

How do NISAs differ from ISAs?

Greater flexibility – You can invest your whole allowance in stocks and shares or cash, or any mixture of the two.

Freedom to transfer – You can transfer existing ISAs from stocks and shares into cash, or the other way around.

Improved tax efficiency – You can now earn tax-efficient interest on cash held in a NISA. Previously, with the exception of a Cash ISA, any cash held within the stocks and shares element of an ISA was subject to a 20% charge on the interest earned.

Generous tax break
The ISA allowance has now been increased from £11,880 to £15,000 for the 2014/15 tax year. For any couple, that means they can put aside £30,000 for this tax year, which is a generous tax break. This means you can now save another £3,120 into either cash or stocks and shares in the current tax year. The amount that can be paid into a Junior ISA for the 2014/15 tax year has also increased from £3,840 to £4,000. Do bear in mind that whilst the NISA does allow a generous amount to be sheltered from tax during your life, the total amount forms part of your estate on death and so could be subject to 40% tax.

Moving your existing investments
You also now have the full flexibility of moving your existing investments in a Stocks & Shares ISA to a Cash ISA, or vice versa. You should not withdraw sums from your Stocks & Shares account yourself in order to deposit it into a Cash NISA, or the other way around. If you do, any amount that you pay in may count as a fresh payment against your overall limit of £15,000.

NISA subscription limit
It is worth noting that if you have paid into a Cash or Stocks & Shares ISA since 6 April 2014, you will not be able to open a further NISA of the same type before 6 April 2015. You may however make additional payments – up to the £15,000 NISA subscription limit – into your existing account(s).

Increased flexibility
As of 1 July 2014, there is now increased flexibility in the way that you can use your ISA allowance.

You can now allocate:

- the full £15,000 in a Stocks & Shares ISA
- the full £15,000 in a Cash ISA

- any combination of amounts between a Stocks & Shares ISA and a Cash ISA up to the new limit



Pension Wealth Check

10 ideas served up to help you maximise your pension provision……

It’s important to review your pension planning regularly to make sure it still meets your specific requirements. Over time, your circumstances may have changed, so we have provided ten areas that, if appropriate to your particular situation, should be reviewed.

1. Check your State Pension Age. The State Pension Age is changing. The Pensions Act 2014 provides for a regular review of the State Pension age, at least once every five years. The Government is not planning to revise the existing timetables for the equalisation of State Pension age to 65 or the rise in the State Pension age to 66 or 67. However, the timetable for the increase in the State Pension age from 67 to 68 could change as a result of a future review.

2. How much pension are you likely to receive from the State? An estimate of your likely State Pension can be obtained from the Pension Service. There are two parts to the State Pension – the basic State Pension, which almost everyone gets, and the additional State Pension, which is only for employees. You qualify for the basic State Pension by reaching State Pension age and making 30 years’ worth of National Insurance contributions.

3. Boost your National Insurance (NI) contributions. If you have an NI credit record of less than 30 years you may not receive a full State Pension unless you boost your NI credits. If you’ve got gaps in your NI contributions record, you may be able to top up the gap by making one-off voluntary payments. If you’re not working or getting NI credits, you may also be able to make regular payments to protect your contributions record for the future.

4. Consider retiring later. If you’re not sure you can afford to retire yet, think about delaying retirement. It could increase your State Pension or provide you with a one-off payment. The main reason for delaying your retirement is to try to boost your retirement income. And in order to take a pension early, you’ll need to know you’ll be able to afford a reduced income from it.

5. Decide whether to take a tax-free lump sum from your private pension. The rules for how you can access your private pension pots were made more flexible from 27 March 2014, and will be made even more flexible from April 2015. Commencing 6 April 2015, you’ll be able to access and use your pension pot in any way you wish after the age of 55. Until then, the rules about how much income you can access as a cash lump sum or through income withdrawal have been relaxed.

6. Decide how to use your pension fund to provide an income for life. If you plan to retire from 6 April 2015, you won’t need to buy an annuity to access the remainder of your fund. Instead you could choose to take the whole fund as one or more lump sums. Generally, only 25% is tax-free and the rest will be taxable. For many people, this may still involve buying an annuity, but there are different types of annuity and other products to consider.

7. Select which options you want. If you do opt for an annuity, you need to decide what will happen on your death and whether to protect your income against inflation. Joint-life annuities after you die pay an income to your partner or spouse until they die. Variable or flexible annuities rise or fall in line with investments. However, they have a guaranteed minimum, so you have a degree of certainty, but they’re complex products and not right for everyone.

8. Consider consolidating your pension pots. If you’ve accumulated numerous workplace pensions over the years from different employers, it can be difficult to keep track of how they are performing. These plans can be forgotten and may end up festering in expensive, poorly performing funds, and the paperwork alone can be enough to put you off becoming more proactive. There may be advantages to switching your pensions but there are also pitfalls. You should always obtain professional financial advice.

9. Shop around for the best deal. As you approach your chosen retirement age, you may want to use some or all of your pension savings to purchase an annuity. You don’t have to accept the income offered by the company you’ve saved with. You could boost your pension considerably by shopping around. After deciding what level of income you need, you should shop around and compare rates. This is called using the ‘Open Market Option’. Shopping around can increase your retirement income significantly.

10. Catch up on missed pension contributions. If you haven’t fully utilised your previous years’ contribution allowance, you could use ‘carry forward’ from the previous three years and catch up on contributions you may have missed. The conditions are that in the same tax year you must have earned at least the amount you wish to contribute. In addition, you must have been a member of a UK-registered pension scheme in each of the tax years from which you wish to carry forward, even if you did not make contributions or were already taking benefits.



Budget Tax Trap on Pension Withdrawals

Helping you to understand the increased flexibility and choice available to you.

The Budget announced unprecedented flexibility and choice in how people can use their pension savings in the future. From 6 April 2015, people over 55 can choose to withdraw their pension savings as they wish, although this will be subject to their marginal rate of income tax in that year.

A large part of an individual’s pension fund could be payable in tax if they withdraw large sums in one tax year. Even people who have been used to paying basic rate tax their whole life could find themselves paying 40% tax on part of their fund.

33% tax (£11,867) could be paid on complete cash withdrawal from the average pension pot[1]

New research shows 59% of the over 55s do not understand the tax implications of lump sum withdrawals[2]

This comes as new research shows there is a lack of understanding around the implications of taking the whole pension pot as cash, with 59% of people aged over 55 saying they do not understand the tax implications of such a move. The research also shows that when the tax implications are explained, people are far more likely (83%) to leave their money in a pension wrapper and draw an income as needed, rather than taking the entire pot as cash in one go. 17% say they are happy to pay tax on any withdrawal.
Assuming an average pre-retirement salary of £30,000 and average annuity pot of £35,600, someone would pay around 33% tax (£11,867) if they choose to withdraw their entire pension in the same tax year they were earning.

Although it is anticipated that the new pensions reforms will come into force from the next financial year, discussions are still at the consultation stage. The new freedoms proposed by the Chancellor could result in some sizeable tax bills for those wanting to access their entire pension savings in one go. While increased flexibility is good, there is a minefield to navigate.

[1] ABI, the average annuity purchase price in 2013 was £35,600, after tax-free cash has been taken. These figures have been calculated using income tax limits for 2014/15 as follows: individual personal allowance £10,000, basic rate limit £31,865, higher rate payable £41,865 (figures assume person born after 5 April 1948).
[2] Research carried out online among 1,000 respondents aged 45–65 by Onepoll, all of whom are paying into a pension. 299 people were aged 56–65. Fieldwork was completed 23–27 May 2014.



Investing for Income

Bright ideas to help you develop your portfolios and light up your wealth strategy

Investors with longer-term investment objectives often have requirements for regular income and capital growth. The right mix of income and capital growth may depend on whether you need immediate access to your money or you prefer to draw an income and grow your investments over time.

Regardless of your particular needs, income assets play an important role in investment portfolios by providing a stabilising effect during periods of stock market volatility.

So what do you need to consider?
Identify how much income you need – if your income requirements are too high then you might end up with a portfolio which pays a high income, but at the expense of capital growth. An income in excess of 5 per cent is probably unsustainable in the long run. If your primary need is for regular income and you need quick access to your money, you may find that shorter-term income assets, such as fixed interest and cash, are better suited than growth assets. Interestingly, income and capital growth don’t need to be mutually exclusive. Some shares and listed property trusts can provide a tax-efficient income in the form of dividends. The good thing about these assets is that they can also provide growth over time, so your savings can keep ahead of inflation.

Investment time frame you need – usually, the longer your investment time frame, the more aggressive you can be with your investments – although this depends on your appetite for risk. If your time frame is less than five years, investing in shares may not be the best option as shares can be volatile over shorter time periods. It’s important to be aware of the impact inflation can have on the buying power of your capital and income payments. Including growth assets in your portfolio can help your savings to keep up with inflation.

Look after your capital – many income-seeking investors look to maximise income without protecting their capital. A high yield can be a result of recent falls in the share price. This can signal there is something wrong with the business and the dividend might be cut in future. If appropriate, equity income investors should consider looking for companies that can pay a sustainable and growing dividend. This approach is likely to be supportive of the share price.

Diversify your income stream – if you are dependent on income from your investments, it is essential to have a mixture of investments from which the income is derived. Diversification should help to mitigate the impact of events affecting individual companies. Investing in a number of asset classes may help to provide a more stable income – income generated from corporate bonds is generally less volatile than that from equities. Likewise, investing overseas provides a further opportunity for diversification.

Understand your tax position – consider your tax position when investing. Investment income for each asset class is treated differently. We can help ensure that you understand the tax implications of your investments before you invest.

Past performance is not necessarily a guide to the future. The value of investments and the income from them can fall as well as rise as a result of market and currency fluctuations and you may not get back the amount originally invested. Tax assumptions are subject to statutory change and the value of tax relief (if any) will depend upon your individual circumstances.

Who Could Be The Single Largest Beneficiary of Your Estate?

We can help you identify the source of a wealth leak. Contact us to implement a robust protection strategy

Providing all is going to plan, it can be immensely satisfying building up assets and increasing your personal wealth but, as you know, life can throw you a problem when you are least expecting it. That’s why we believe that the implementation of a robust wealth protection strategy is as important as a wealth creation strategy.

Safeguarding your family’s future
Bad news can impact on any one of us at any time, so it’s important to have the correct wealth protection strategy in place that will enable you to safeguard your family’s future. There are many things to consider when looking to protect your family and your home. Without the right professional advice and careful financial planning, HM Revenue & Customs could become the single largest beneficiary of your estate following your death.

Preventing unnecessary tax payments
The easiest way to prevent unnecessary tax payments such as Inheritance Tax (IHT) is to organise your tax affairs by obtaining professional advice and having a valid Will in place to ensure that your legacy does not involve leaving a large IHT bill for your loved ones.

Effective IHT planning
Implementing an effective IHT plan could save your beneficiaries thousands of pounds, maybe even hundreds of thousands, depending on the size of your estate. At its simplest, IHT is the tax payable on your estate when you die if the value of your estate exceeds a certain amount. It’s also sometimes payable on assets you may have given away during your lifetime, including property, possessions, money and investments.
At present, the first £325,000 (2013/14) of an individual’s estate is not liable to Inheritance Tax (IHT). For married couples and registered civil partners it is currently £650,000, if the full allowance is passed to the surviving spouse. Anything in excess of this amount is taxed at 40 per cent on death.

Mitigating Inheritance Tax
We can help you to mitigate Inheritance Tax. Here are just a few areas to discuss with us:

Consider transferring assets through the use of lifetime gifts

Have your Will written and planned correctly to save the maximum amount of tax

Consider creating a tax-efficient fund to enable the beneficiaries of your estate to meet the tax liability without disturbing your family wealth. Under current IHT legislation, pensions can play a considerable role in
estate planning

Although pension death benefits are broadly exempt from IHT, if they are passed to your survivor they will form part of their estate.

Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts. Levels and bases of, and reliefs from, taxation are subject to change and their value depends on the individual circumstances of the investor. The value of your investments can go down as well as up and you may get back less than you invested.

Investors Get More Tax Savvy With Their Money

Strategies to save tax and invest more tax-efficiently in 2013/14
Taxation can be a complicated area of personal finance and you can easily miss opportunities to reduce the amount of tax you pay, or save and invest tax-efficiently. Your job, your savings and your family’s circumstances can all have an impact on the amount of income tax you pay each year.

As taxation rules change it’s important to take professional advice to ensure you do not pay more than you have to, so that you can enjoy more money as a family.

Individual Savings Accounts (ISAs)
This 2013/14 tax year you can invest up to £11,520 in Cash and Stocks & Shares ISAs (the tax year runs from 6 April 2013 to 5 April 2014). You can invest the full amount (up to £11,520) in a Stocks & Shares ISA or up to £5,760 in a Cash ISA with the balance (within your overall limit) in a Stocks & Shares ISA.

There is no capital gains tax and no further income tax to pay within an ISA. If you are married (or in a registered civil partnership), ensure that you both consider using your ISA allowances. Even if one of you is a non-taxpayer it still often makes sense to make use of this spouse’s ISA.

Junior ISA
For eligible children, this tax year you can invest up to £3,720 in a Cash or Stocks & Shares Junior ISA (the tax year runs from 6 April 2013 to 5 April 2014). Those children with a Child Trust Fund (born 1 September 2002 to 2 January 2011) are not eligible for a Junior ISA and these accounts can also be topped up to £3,720 a year (a Child Trust Fund year runs from the child’s birthday, not the tax year).

There has been a considerable simplification of the contribution rules in recent years. The Annual Allowance, the upper cap on total contributions that can be made to your pensions in one year and benefit from tax relief, is £50,000 for 2013/14 and will reduce to £40,000 from April 2014.

Personal contributions also have to be within 100 per cent of your relevant UK earnings (broadly, earnings from employment or self-employment) to obtain tax relief. Non-earners can still contribute and benefit from tax relief up to a maximum limit of £3,600 gross per annum. Tax relief on personal contributions is available at the basic rate (20 per cent) for all investors and at the highest marginal rate for higher rate and additional rate taxpayers.

It’s important to make the full use of your pension allowance. This is still one of the most tax-efficient ways to save for retirement and the new Annual Allowance and Carry Forward rules are potentially highly beneficial. The ability to Carry Forward the unused Annual Allowance from the last three years potentially enables a significant increase or substantial catch-up of contributions.

Even if you have no earnings or you don’t pay tax, anyone under 75 can still invest £2,880 in a pension and the taxman will top up their contribution to £3,600. Contributions made on behalf of a child also benefit from tax relief. For married couples, building up income in both names may be one of the most tax-efficient ways of generating income in retirement. If you maximise the current personal allowance, the amount of taxable income you’re allowed to receive each year tax free is £9,440.

This could mean that married couples can still receive income from pensions, savings and investments of £18,880 a year tax free.

Any tax reliefs referred to are those currently applying, but levels and the bases of, as well as reliefs from, taxation are subject to change. Their value depends on the individual circumstances of the investor. Within an ISA all gains will be free of capital gains tax and a tax credit will be reclaimed on income from fixed interest investments.

Mind The Pensions Gap!

Laying the foundation to rebuild the UK’s retirement savings system.
In May this year, the Queen announced the Pensions Bill, a vital reform that lays the foundation to rebuild the UK’s retirement savings system and simplify the State Pension for millions of todayís workers, allowing them to plan their retirement with more certainty.

Flat rate State Pension
The Pensions Bill introduced a flat rate State Pension of at least £144 a week, starting from April 2016. To put this in context, to build up an income of £144 a week (approximately £7,500 a year) a 65-year-old would need a pension pot worth around £185,000 today.

The maximum payout is £144 a week and is based on 35 years’ service. The minimum will be between 7 and 10 years’ service, providing between £29 and £41 per week. Anyone with less than this minimum will not get a State Pension; however, the Minimum Income Guarantee remains as a safety net.

Closing a loophole
In addition, there will be no more inheritance of the State Pension for surviving spouses, divorcees, etc. who reach State Pension age after April 2016. Whether or not someone is entitled to a State Pension will depend entirely on their own years of National Insurance contributions.

Increases due to come into force
There will be a review of the State Pension age in the next Parliament; however, there are already increases due to come into force. By 2018, the State Pension age for women will increase to 65; between 2018 and 2020 the State Pension age for both men and women will increase to 66 and is proposed to increase to 67 by 2028. A further rise to 68 is scheduled to start in 2044 but is likely to happen sooner.

Higher rate of NI contributions
There will no longer be an earnings-related element to the State Pension and the ability to contract out of the second tier pension will be abolished. Final salary pension schemes will end contracting out from April 2016. This ended for money purchase pensions in 2012.
Members will therefore pay a higher rate of employee National Insurance contributions from April 2016. Their employers will also pay a higher rate of employer National Insurance. An employee earning £40,000 a year in a final salary pension scheme will pay approximately £480 a year more.

Who could be affected?
How you may be affected depends on when you’ll reach State Pension age. If it’s before April 2016, you won’t be affected – current rules will apply. If it’s after April 2016, there will be a one-off recalculation of everyone’s State Pension to ensure existing entitlements are protected. Whether you’ll benefit or lose out depends on your circumstances.

Contracting into the second tier pension
If you have a combined entitlement of State and second tier pension worth less than £144 per week (under today’s system), you’ll receive £144 per week if you’ve paid 35 years’ National Insurance contributions.

Contracting out of the second tier pension
If you’ve contracted out of S2P or SERPS, you will have a deduction from the £144 per week. Such deduction will reflect the time spent contracted out and is unlikely to result in an income less than the current basic State Pension of £110.15 a week; however, from 2016 until you reach your State Pension age, you can build additional entitlement, up to a maximum of £144 a week.

Contracted in and contracted out periods
If you’ve been both contracted in and contracted out of S2P or SERPS between 1987 and 2016, you’ll have a one-off deduction based on the length of time you were contracted out; however, you could increase this amount up to a maximum of £144 based on the number of years you pay National Insurance contributions between 2016 and your State Pension age.

The self-employed currently only receive a maximum State Pension of £110.15 per week. This will increase from 2016 to £144 per week for those who have 35 or more qualifying years.

Low earner
If you have combined basic and second tier pensions of less than £144, you’ll benefit from an increase to £144 a week.

High earner
Under the present system you might have accrued a State Pension in theory of up to £250 a week. This will now be reduced to £144 per week (although benefits accrued until 2016 are retained).

Time to go east?


China is the world’s most populous nation and its second largest economy, so after a rocky 2012, is it now a good time to look at investing there or in other Far East countries?

While it offers unique opportunities in terms of its scale and manufacturing capabilities,China’s fortunes have been intertwined with the global economy – if wages rise, it becomes less competitive and if export demand falls, then so do its earnings.

China’s performance has disappointed of late, with weaker exports and imports and signs of a property bubble. And, in March 2012, the Chinese Government revised its annual growth target for 2012 down to 7.5%, creating some anxiety.

Despite the slowdown, the HSBC purchasing managers’ index for December rose to 51.5 from 50.5 a month earlier, resulting from increased government spending on infrastructure. Meanwhile, predictions vary about what growth China will see in 2013. The official view is 7.5%.

China may suit you if you have predominantly UK and European holdings and favour diversification. What’s more, valuations are roughly a third of the peak level reached in 2007. However, China is far from being the only Eastern player, and although Japan has been a disappointment for investors over the last couple of decades, it is suddenly looking a little more promising. New Japanese prime minister Shinzo Abe has implemented a programme of fiscal stimulus,and although there have been false dawns before, some commentators believe that Japanese equities are looking good value. There are many funds on offer, so seeking guidance on those likely to outperform could make sense. There is also a wide range of funds focused on the Asia Pacific sector. Some may be heavily influenced by China, but others may be investingin less promoted countries such as Malaysia,Thailand and Indonesia.

The region has also been bolstered by improved relationships with the United States – US President Obama described the region as a ‘top priority’ in terms of its importance as a leading trading partner and in having a pivotal role in the United States recovery. With many western countries being in the doldrums, it is no wonder eastern markets are receiving increasing attention.

The value of your investment and the income from it can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.


Avoiding Tax Avoidance Confusion


Few people had heard of the K2 tax avoidance scheme until it was linked in the newspapers to various wealthy individuals.

K2 is an offshore arrangement that can reduce an individual’s income tax liabilities to as little as 1%, according to its promoters. HMRC is now investigating K2 in depth and the Government has promised a more general crackdown on tax avoidance.

One thing is clear: the tax avoidance environment has changed radically in the last few months – reinforcing changes to the law that governments have made in recent years. Aggressive tax avoidance is now much more risky, but normal tax planning is still perfectly acceptable. Here are some key strategies to consider.

Paying more into a pension. This reduces taxable income, and a higher pension contribution may help you stay out of a higher rate tax band.

Using the ISA allowance. Income on ISAs is tax-efficient and does not need to be declared on tax self-assessment forms. You have an annual ISA limit of £11,280, which up to £5,640 can be invested in a cash ISA and the remainder invested into stocks and shares ISA.

Using the annual capital gains tax exemption means you can save tax on up to £10,600 each year.

Sharing the ownership of assets with a spouse or civil partner can, in many cases, allow couples to make really significant income tax and capital gains tax savings.

Making use of other tax wrappers such as offshore and UK life assurance based bonds. These are especially helpful for inheritance tax planning, but they can also assist if you need an income.

There are advantages and drawbacks to using all these strategies or products and they depend on individual circumstances. So don’t take action without competent advice.

Tax rules, rates and allowances are all subject to change. Tax and pensions law can change. The Financial Conduct Authority does not regulate tax advice and some forms of offshore investments.