Higher Rate Tax Payers – You Need To Act Quickly!

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Deadlines continue to approach – with a major one being the application for higher rate tax relief.

Many higher rate tax payers saving for retirement are unaware that the additional tax relief for being a 40% tax payer is only given when requested from HMRC.  If you are or were a higher rate tax payer and didn’t include your pension contributions on a tax return (or you may not have completed a tax return) then you need to review your situation.

 

Higher rate pension tax relief (and claims in respect of any other tax overpayments) for 2008/09 must be claimed by 5 April 2013 or it will be lost.

 

Those affected need to write to HMRC with full details, who will send the repayment in the post or by bank transfer.

 

The time limits for claiming tax refunds are shown in the table below. If claims aren’t made within the time limit any refund due will be missed.

 

Tax year Tax year ended on Claim must be made by:
2008-09 5 April 2009 5 April 2013
2009-10 5 April 2010 5 April 2014
2010-11 5 April 2011 5 April 2015
2011-12 5 April 2012 5 April 2016

 

As always we’re happy to answer questions and help with any issues.  If you’re unsure whether you’ve been given the correct tax relief then simply get in touch.

Time is running out….

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The tax year ends on 5th April 2013, so it’s worthwhile taking a couple of minutes to ensure you have maximised any allowances or tax breaks.  The most common are:

  • ISAs.  Every tax year millions of pounds of tax is paid unnecessarily by people not using the most appropriate tax wrappers.  If you haven’t maximised your ISA allowances then now is the time to consider doing so.
  • Pension Contributions.  Similar to the above, pension plans give unrivalled tax advantages.  Changing legislation has made it imperative to top up any pensions each tax year.  It is no longer an option to pay large lump sums into pension plans immediately before retirement so forward thinking is needed.
  • Avoid losing any Child Benefit.  One of the most emotive topics of recent legislation is the removal of Child Benefits for those whose taxable yearly income exceeds £50k.  The savings can be huge if you are able to reduce your net relevant earnings by a little forward planning.  Ask us for more information.
  • Maximising any Capital Gains Tax allowances.  Each person can make £10600 tax free profit in terms of capital gains this tax year.  If it isn’t used, this allowance disappears on 5th April.
  • Taking advantage of specialist tax vehicles.  These plans are mostly suited to more speculative investors whose assets and income is geared to taking advantage of such plans, but if you want to know more we can help.
  • Deferring or advancing income.  Something to consider for those who are in control of their income, bonuses, pension income or dividends.  It is worth consulting both us and your accountants.
  • Claiming higher rate tax relief on previous years pension contributions.  We will cover this in more detail in a subsequent blog, but if you were a higher rate tax payer in the tax year 2008/2009 it is important to check you received 40% tax relief on all your pension contributions.  As this will not be repaid to you after 5th April 2013.

Each of the above are valuable allowances which will all be lost on 5th April so now is the opportunity to consider how any of these areas could apply to you.  We can certainly help with this so get in touch.

Long Term Care Reform

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Have you heard about the Government’s proposals for implementing reform of long term care funding? Last year Andrew Dilnot’s report was published which highlighted the need for an urgent review and a cap on costs.

The latest proposals implement some of the well-publicised recommendations but essentially have stopped short of bringing in changes which would give people greater confidence to plan for nursing home care in old age.

The idea is essentially to bring in a cap on funding costs so that we can each make provision and financial industry could devise insurance products designed to cover care costs.

Although this has been introduced, it is far in excess of the recommended level contained in Dilnot’s report.  The Governments proposed limit of £75,000 only relates to nursing costs – given that the nursing costs are often less than a third of the total typical care costs for someone in long term care, the final bill being in care could still amount to in excess of £200,000.  This is obviously far beyond most peoples’ capability to plan or save for when in retirement.

That said, it’s not all doom and gloom.  For years there has been a total failure by all political parties and government to introduce any reform for long term care.  Whilst the proposed cap is too high for most people, it’s a start and something which can hopefully be reduced in the coming years if there is the political and financial impetus.

At Platinum we want to help you plan for all eventualities – talk to us to make sure your retirement plans are on track for the enjoyable years ahead.

Reclaim Your Lost Money

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Within the UK alone there are hundreds of millions of pounds sat quietly in ‘lost’ bank accounts.

Over the years many people hold different bank accounts or savings accounts, which are rarely fully closed and can often have funds still in them.

In 2008  a website was launched to help everyone find any lost bank or building accounts (including National Savings accounts) and products such as premium bonds.  The ‘My Lost Account’ website offers a FREE search facility to connect people to their lost savings.

Despite more than 300,000 people using the service it still remains unknown.  If you, or anyone you know, may have an old lost account follow the link to the website and use the FREE facility to reclaim your money and savings.

Ultimately the government will use any unclaimed funds as they try to tap into the billions of these ‘orphaned’ assets, so it is important that everyone reclaims their savings.

Then contact Platinum and we’ll advise you what to do with your windfall!

 

Keeping Finances Fighting Fit

Once a financial plan has been put in place, it’s tempting to just file the paperwork and forget. However, like your own health, a financial plan needs regular checks to make sure it’s still healthy – but how?

 

A financial plan should be regularly reviewed to check it’s still fit for purpose. The original plan will have been matched to an investor’s goals when it was first set up – to retire at 60 or to fund education for children. A review looks at whether these goals have changed, perhaps with the birth of another child or a change of job or a surprise inheritance. It should then consider whether they need to save more or switch to different types of investments.

 

A review will also look at the investment’s progress because maybe a portfolio has performed particularly well and it’s no longer necessary to take as much risk – or the opposite might be true and an investor needs to take on more risk.

 

Your financial health check will also examine whether the underlying investments are performing in line with market expectations. Fund managers will have good and bad periods, so a run of bad performance may mean their style is out of favour.  We will be able to judge whether this is expected or whether it is a sign of a deeper problem.

 

Finally, a portfolio will also need to be tweaked according to the wider economic environment; the importance of regular reviews and ensuring your financial plan continues to be the best for you means that no matter how difficult times are, your investments stay in great shape.

 

Call us if you want to discuss adding a few more pounds!

State Pensions Made Easy

Do you know about the proposed changes to the state pension? They will affect everyone who reaches state retirement age after 2017.

To understand the proposed changes and why they’re good news for many, you need to have some awareness of the existing system.  Under the current rules your state pension can comprise four different elements:

  • The basic state pension
  • SERPs
  • Graduated pension
  • Second State pension.

Each has its own complex calculation and over the years has used varying basis for the calculations, where you would have to work between 30, 39 and 44 years.  They’re also dependent upon your level of earnings.

On top of these benefits, pensioners may also be entitled to top-ups under the minimum income guarantee to ensure income is above a certain threshold.  Historically most people who need and are entitled to this (and other benefits) don’t claim because of the complexity involved.

As you will probably appreciate, by far the biggest losers of the existing and previous rules are women and low earners.  This is partly due to their earnings often being less than men’s, but also due to career breaks for bringing up families.

The new proposal is simpler and fairer for the majority.  If the legislation goes ahead you will need to work for 35 years between age 16 and age 66 (rising to age 68), at which point you will be entitled to an income of £144 per week (roughly £624 per month).

This new state pension will be the same for everyone and will remove the need for claiming top-up income benefits etc.  It also means that women will get a much fairer deal as they will gain a pension equal to men and in their own name too.

From a financial planning viewpoint, it is also welcome news as people will hopefully have a greater understanding of what their income will be in retirement.  With greater understanding comes a willingness to plan and save.  To be blunt – if you want an income of more than £624 per month, then you need to save and plan for retirement. Talk to us now!

Market Update – Bulls Or Bears?

The past 12 months have seen some very positive movements of global stock markets and these were extended into the New Year as the US narrowly avoided their ‘fiscal cliff’.

Almost all global indices have risen as hopes are kindled that politicians will come together and focus on the welfare of their respective economies.

But there are a number of reservations and caution should balance the optimism.

The issues which have caused so much turmoil in recent years remain and although economic leaders allow time to pass, the key points remain:

  • The US has not removed the ‘fiscal cliff’, rather they have deferred many of the tax rises just a couple of months down the road.
  • Europe has yet to demonstrate greater cohesion and show how the debt crisis can be handled long term.
  • The UK continues to struggle with its own debt burden and lack of economic growth.

So why are the markets so positive?  Even if they fall back slightly they believe the economic conditions are right for growth and/or profits in some form, especially when looking longer term.

There is a long way to go but there are reasons to be upbeat and bullish.  There are no quick solutions to global financial woes but there are signs of recovery and given time, these will filter through to individual investment portfolios.  As always, focusing long term will ensure the best returns.

In the meantime we continue to suggest clients probably lessen their exposure to government debt (Gilts) and maintain their focus on Corporate Bonds and Equities, both in the UK and globally.

As always get in touch if you are concerned with any financial matter or just want to chat about your pensions or investments.

Happy New Year

Welcome to 2013 and best wishes to you all for a prosperous year ahead.  We are certainly looking forward to what promises to be a busy and positive year at Platinum.

By the end of January we hope to launch our regular newsletter, which aims to keep you informed of current issues, key dates affecting your money and relevant news about the financial markets. We will also let you know what’s happening to various members of the Platinum team.

The media are already focusing on the latest changes to legislation in the financial advice sector and if you’ve not already done so, I would suggest you read an earlier blog titled “Things Are Looking Different…”

You can rely on us to keep you informed and we look forward to catching up with our clients over the coming months.

Things Are Looking A Bit Different…

The start of 2013 marks the introduction of some major changes to our industry, although many  won’t be felt by our existing clients.

Approximately six years ago the Financial Services Authority, in its role as regulator, started working towards what has become the Retail Distribution Review (RDR) with the aims of improving professionalism, knowledge and transparency within our industry.  This objective culminates in the implementation of the RDR as of the New Year.

What do these changes mean for both us and our clients?  They reach across all levels of our industry but some of the more noticeable ones are:

  • All advisers will now need to have achieved a higher level of qualifications than previous.  Although this doesn’t affect us directly (we have held the necessary qualifications for some time) it means some financial planners are moving away from qualified financial advice.
  • The definition of adviser and the meaning behind the word Independent Advice (or what is described as Restricted Advice).  Firms can elect to either operate in a restricted manner, offering advice on a ‘whole of market basis’ or tied to one or more providers or they can elect to operate on an independent basis.  We have chosen to retain our independent status as we feel this offers the best outcome for our clients. We feel we can continue to ensure our clients needs are met by utilising the best financial products, funds or providers as dictated by their needs and desires.
  • How we are paid – commission on new investment-related plans will no longer be offered and this will be replaced by adviser charging.  In reality there is little change for our existing clients and the majority of new clients because there have always been costs for advice. Previously these have been associated with plan charges and commissions; the costs will now be explicit and clearly demonstrated.  We have always prided ourselves on not being swayed by varying commission from providers and have consistently maintained our fee costs in line with any commissions so that clients clearly understand the costs of advice.  This will continue and as previously you will have the choice as to whether to pay our fees direct, or whether those fees are paid by the provider and the costs to be deducted from the investment product or plans.
  • Greater accountability for ongoing advice and looking after those existing clients whose plans and situation we review on a regular basis.  This is a major step forward for our industry and is certainly something we welcome.  The majority of our business is built around our existing clients and maintaining their investments so we welcome the opportunity to demonstrate our value to both our clients and the FSA.  It will be a positive move for the industry as a whole if it moves to a similar focus of looking after their existing clients.

In short the RDR changes are very welcome news for Platinum and will result in a better industry and better outcome for all consumers. However there may be some disruption over the initial few months of the new legislation and I would urge our clients not to panic when the media starts to focus disproportionately on specific parts of the legislation which can create concerns.

We are here to help and if you have any queries at all, please do not hesitate to get in touch.

There are other changes and effects of the RDR which will filter through over the coming 12 months but the above are the most headline-grabbing.  Rest assured, we will continue to monitor all our clients investments and keep you informed as to any actions which may be required.

The Chancellor Has Some Good News!

Although politicians from all sides argue about levels of debt, rates of debt reduction and economic growth, the Chancellor made several announcements which – on balance – could have a positive impact to many of our clients.

Modest increases to ISA allowances and the Inheritance Tax threshold will allow people to save a little more and avoid unnecessary tax.

Greater impact though is the changes to pensions legislation.

The reduction in lifetime allowance to £1.25m and a cap of a £40,000 per annum contribution is likely to only affect the minority because the average yearly pension contribution is around £6000  (or £500 per month).  For those affected by the contribution cap, there are alternatives to pension planning which could help meet any financial planning needs.  We are happy to explain these if you think it applies to you.

The major positive impact is the re-introduction of the 120% GAD limit for those clients accessing their pensions under Drawdown.  Whilst annuity rates continue to languish at record low levels, the direct increase of 20% in terms of income withdrawals will be very, very welcome.

If you want to discuss the budget statement or its impact please call or e-mail us.