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The way we see it

Lifetime Allowance set to increase

The announcement last week of the 3% September CPI means we hope to see a Lifetime Allowance (LTA) of £1,030,000 from April 2018. This is a welcome increase in pension allowances for the first time in 7 years. However, what is important when looking at saving options is not what the LTA is now, or when the fund exceeds it, rather what it might be when amount within the pension plan is tested. In addition, how any tax on excess pension savings compares to the tax on other types of savings and assets.


Reduction in the Money Purchase Annual Allowance – second Finance Bill 2017

Ministers have confirmed that the second 2017 Finance Bill will be introduced as soon as possible after the summer recess which ends on 5th September. This will legislate for all policies that were included in the pre election Finance Bill which was slimmed down due to the election. The government has also re-confirmed that all policies originally announced to start from April 2017 will be effective from this date.

One of these was the reduction in the MPAA from £10,000 to £4,000. Our understanding is this will now mean for those who have flexibly accessed their pension benefits the maximum that can be paid into a pension will now be £4,000 p.a.

 


New ISA allowance

Each year the government sets an annual limit on how much you can put into an ISA. The tax year runs from 6 April 2017 to 5 April 2018. This tax year you can invest up to £20,000 in ISAs, the annual allowance is per individual, meaning a husband and wife can invest up to £40,000 between then into ISAs during this current tax year.


LPA registration fees to reduce

On 1st April 2017, the registration fee for a Lasting Power of Attorney (LPA) or Enduring Power of Attorney (EPA) in England and Wales will reduce from £110 to £82. The fee for a repeat application to register an LPA will also fall from £55 to £41.

According to the Office of the Public Guardian, the fact that the volume of applications has rapidly increased means its income from registration fees now exceeds the cost of the service.


Changes to the treatment of pension death benefits – did you know?

Following on from our earlier post regarding the changes to pension death benefits. There are a couple of points you need to be aware of:

Firstly, the rules do not apply to all pension schemes, many older style schemes may not be eligible, and in each case it is at the discretion of the plan provider. Secondly, there is now flexibility as to who you can nominate to receive the death benefits from your pension. However, in order for this to happen you must complete a ‘nomination of beneficiaries’ form, this should include the names of all potential beneficiaries.

It is now vitally important that you have in place a pension plan which allows this flexibility and of equal importance you have the correct paper work completed.

If you are unsure, please call us to arrange a meeting, we can review your current position and plan a way forward.


FSCS deposit limit increased to £85,000

People now have more financial protection for their deposits. The Financial Services Compensation Scheme (FSCS) limit is now £85,000 which is an increase of £10,000, this change took place on 30th January this year. This  also means the limit for joint accounts has moved to £170,000

 

 

 

 


Lasting legacy – the new pension death benefit options

Less tax and more choice! – the pension death benefits rules will allow you to give more thought to how you can provide a legacy from your remaining pension pot. The changes have made pension pots become far more inheritable than every before.

However, prompt action may be needed to ensure your wishes can be met before its too late. Many pensions have been around for years – designed with a very different retirement journey in mind and may not offer the new options.

Dying while in a pension scheme which doesn’t offer the new freedoms or with an outdated death benefit nomination may be impossible to correct post mortem. Therefore it may be necessary to consider transferring your pension to a more modern one which would offer the new flexibility.

If you are unsure as to whether your existing pension plan qualifies for the new options, please contact us and we can advise you.


Pension Changes: Five things you should know

On 6th April 2015, the most radical changes to pension legislation for decades came into effect. Here are five key facts you can’t afford to ignore:

1) No more reliance on annuities
It is still possible to buy an annuity, but you will also be able to take all of your pension as cash (25% of which is tax free), or invest the money and be allowed to take a flexible level of income without restriction.

2) New ways of accessing your money
From the age of 55 you will be allowed to access your pension money as and when you need it. With the changes, you can take the whole of your pension fund, with 25% tax free the remaining 75% will be subject to income tax. You can take the tax free lump sum of 25% at retirement, convert the rest of the fund to drawdown and pay income tax on the withdrawals. Alternatively there will be the option of leaving the pension fund invested and take a series of smaller lump sums with 25% of each withdrawal being tax free.

3) No more 55% death tax
This has been abolished on both unaccessed pension funds and those in drawdown, allowing more of your pension pot to be passed to your loved ones. Now only age at death dictates if and at what rate the funds are subject to tax. Death before age 75, all funds are passed to beneficiaries tax free. Death after age 75, the beneficiaries must pay income tax on the money received. They can choose to take the entire fund as a lump sum or take the fund as income, either way the money will be subject to the beneficiaries income tax rate.

4) Continue investing until age 75
If you are drawing an income from your retirement fund, under the new ‘flexi access drawdown’ rules you will still be able to invest into your pension and get tax relief until aged 75. However, the maximum you are able to pay into your pension is currently £10,000, this is going to be reduced from 5 April 2017 to £4,000. All payments need to be supported by income.

5) No change to tax relief on contributions
Currently you receive tax relief when you put money into your pension fund. Meaning if you are a basic rate taxpayer you receive 20% tax relief on your contributions and a higher rate tax payer will receive 40%. This is one element of pensions that will remain unchanged after April 5th.

This is just a brief synopsis of the changes, they will bring greater ‘freedom & choice’. However with greater choice there is a real need for advice to ensure you make the right decisions. We are here to guide you, call us to discuss your own situation.


New intestacy rules – who will be entitled to what when you marry?

The government announced a revamp of the intestacy laws in England & Wales, while this will see spouses and civil partners potentially receiving more it may not match a persons intentions. Further highlighting how important it is to make sure Wills and instructions are in place and regularly reviewed.

What is changing?
Intestacy rules determine how a deceased’s estate is divided if they do not have a valid Will. How certain investments are set up can dictate how they are passed on. It is worth remembering that although jointly held investments will typically form part of the estate for IHT, they will pass automatically to the survivor outside the terms of the Will or intestacy.

It is only married couples and civil partners who will see any benefit from these intestacy changes. There are still no statutory rules that give cohabiting couples a right to a deceased loved one’s estate.

The purpose of the changes is to simplify and improve the rights of married couples and civil partners, both with an without children.

Married couples/civil partners without children
From 1st October 2014, if someone dies intestate with no children, the estate is inherited entirely by the surviving spouse of civil partner.

Married couples/civil partners with children
This has been simplified. If someone dies intestate and leaves a spouse/civil partner and children, the spouse/civil partner will inherit three elements from the estate:

* All ‘personal chattels’
* £250,000 (or the whole of the estate, if the value is less than this).
* One half of any balance left over

These  rules will give improved results for some people, but it is always advisable to control who will receive what by making a Will and keeping it reviewed.

This is the same message for pension death benefits, make sure your death benefit instructions continue to reflect your wishes is vital.


Pension death benefits – you can take it or leave it!

Those looking to pass on their pension fund received a boost as the government have scrapped the 55% tax charge on death. This means the tax system will no longer penalise those who draw sensibly on their pension fund, making pensions a very attractive wealth transfer vehicle.

What has changed?
Your age at death will still determine how your pension death benefits are treated, the age 75 threshold remains:

Death before 75 – The pension fund can be taken tax free at any time, whether in instalments or as a one-off lump sum. This will apply to crystallised and uncrystallised funds and is available to any  beneficiary.

Death after 75 –   Defined Contribution savers will be able to nominate who ‘inherits’ their remaining pension fund. This fund can be taken under the pension flexibility rules and will be taxed at the beneficiary’s marginal rate as they draw income from it or take a lump sum.

If you need any further information or would like to discuss your own situation, please call us.