What are the death benefits on your pension and who will receive them?

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If you have pension plans from previous employment, do you know who you will receive your pension if you die?

Completing a nomination form specifies what you would like to happen to your death benefits or to place your death benefits under trust. Without a nomination form, your wishes may not be fulfilled as the pension trustees or administrators have discretion over who they pay death benefits.

New pension flexibilities have made death benefits on pensions a good savings vehicle for inheritance planning. The changes in rules now allow an individual to:

  • pass funds down through the generations via flexi-access drawdown.

  • pay death benefits to a far wider range of beneficiaries than previously available

It is important to bear in mind that it may be impossible to make use of these options if your pension plan or scheme doesn’t offer them.

If you have pensions that can’t facilitate the new freedoms your beneficiaries could find that the only option available to them is annuity purchase or to take a lump sum (which may not be the most tax efficient option).

It is really important that you:

  • check with your pension provider that your death nomination form is up to date

  • check with you pension provider that new pension flexibilities apply to your plan

Alternatively contact us at Platinum and we can guide you through the process and co-ordinate this on your behalf.

We look forward to working with you.

Taking control of your pension is so important

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In days gone by, the only retirement option for most people was to buy an annuity – a guaranteed income for life – so most pension funds were designed with that in mind.

All this changed in April 2015 when pension freedom arrived. You can now access your pension pot from the age of 55, choosing how you want to take the money in a variety of ways. It is likely that your pension fund is set up with an annuity in mind. You are therefore unlikely to achieve the best value if you wish to use it for drawdown.

Arriving at retirement in a few years’ time means taking the right action now – preferably five, ten or even fifteen years before you start to do so.

By failing to plan far enough in advance, you run the risk of letting your pension fund steer your decision, rather than the other way around.

Planning five or ten years in advance gives you a destination to aim for. You can then see if your pension is currently on course for that destination – in the vast majority of cases, it will need at least altering to ensure it is heading in the right direction.

Here are the steps you should be taking to keep your pension on track.

  • Get a sense of where you are now
  • Think carefully about your retirement goals
  • Discuss pension choices with your adviser
  • Is there any action you need to take now
  • Regularly review your goals and pension arrangements

Do you have the time and knowledge to deal with this?

Seeking independent financial advice from us can really help. As advisers we can assess your circumstances and search the whole of the market to find the solution that fits your needs best.

Our assessment also takes into account all your other financial circumstances too, and other factors such as your attitude to investment risk.

So, go on, dig out your pension paperwork and give us a call to start the ball rolling.

We look forward to working with you.

Auto-enrolment – Comply or be fined!

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We are 5 months into 2016 and it’s been nearly 5 years since the first company auto-enrolled their employees into a pension scheme.

The Regulator has increasingly demonstrated its willingness to clamp down and fine those companies not complying with their staging date and the new workplace pension rules.

One notable recent fine was levied against Swindon Town Football Club, with the club having to pay £20,000 in penalties. From an initial penalty notice of £400, the fine rose quickly due to the company’s inaction towards the warnings notices. The fine was calculated at a rate of £2500 a day.

The Pensions Regulator has continued to issue guidance, but even so it is not surprising that we are seeing the number of whistleblowing and enforcement actions increase as the number of employers subject to auto-enrolment grow substantially. The increase in the number of companies having to auto-enrol beckons the increase in the Pensions regulators effort to deal with non-compliance.

This serves as a wake-up call for employers. The regulator has the legislative power to impose fines and is doing so. Simply ignoring auto-enrolment is not an option.

If you are an employer and all this sounds a little confusing – call Platinum and we’ll guide you through the process.

Market Update – A Possible Brexit Looms?

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Speculation about UK’s future within The European Union (EU) has gained momentum as we start the official campaigns for the referendum.

One demonstration of how the uncertainty has impacted the financial world is the Sterlings slide in value compared to the US Dollar and the Euro.

Since the new year there has been a significant reduction in exchange rates, as many holiday makers would have noticed. Obviously this has a knock on effect to financial markets, yet the effect hasn’t been as dramatic as many feared.

In general equity markets, particularly the UK, have demonstrated their resilience and started to recover a little since the start of 2016.

Despite the continual stream of headlines declaring it is bad for the UK economy whether we are in or out of Europe, investors have shown they are looking longer term.

It is likely that the UK will see some continued volatility as we approach June, but there is now a very strong case for investing and looking beyond the next few months.

Investments which are based upon sound foundations and use sensible strategies, in what is often described as value investing, will continue to gereate steady returns.

2016 as a whole is unlikely to be a ‘Boom’ year for financial markets as there is still too many unknown and unpredictable global issues. But it does look as though it could be a year of steady growth for those willing to take on a balanced portfolio of investments, using all the common assets classes ranging from corporate bonds and property, through to equities and absolute return strategy funds.

As always please get in touch with Platinum if you would like to discuss your investment strategy or if you have any concerns.

NS&I Guaranteed Returns Cut?

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National Savings and Investments (NS&I) have yet again announced that they will be cutting interest rates on savings from June 2016 and also reducing the number of prizes available in Premium Bonds.

Some 23.5 million customers will be affected.

In November we posted a blog as NS&I cut their rates from 1.5% to 1.25% for savers. Now a further cut has been announced on their ISA bringing returns down to 1% (a new 7 year low).

Once again, the cut is following a trend in the market as banks and building societies are doing the same which means that although returns are lower, NS&I still remains competitive.

June 2016 also marks a reduction in the chances of winning a premium bond prize to 30,000 to one – a 15% reduction.

Looking ahead, savers need to look at alternatives to make sure that their money is safeguarded from the effects of inflation.

If you would like to speak about alternative strategies for safer returns please do not hesitate to get in touch with Platinum.

Budget 2016 – Sunny Outlook For Savers!

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The recent budget continued the trend of supporting savers and first time house-buyers with the Chancellor of the Exchequer focusing a large part of the budget towards taxes and savings.

The changes announced were varied and will take effect over the coming years. Some are positive and others less generous, however some headlines include –

  • Personal tax allowances are due to increase year on year.
 
  • The £1000 personal savings allowance has started to take effect for most savers.
 
  • Allowances of £1000 were announced for property income and internet sales.
 
  • Increased ISA allowances are available for savers from next year.
 
  • Capital Gains Tax was cut for most transactions, although property was excluded.

 

The chancellor also announced the introduction of Lifetime ISA’s for the under 40’s, whilst not a replacement for pensions, these could be an attractive savings option for many.

We always welcome the opportunity to discuss the overall market situation with our clients. We would urge any clients to get in touch with the team at Platinum if they have any questions.

 

 

A new addition to the ISA family!

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The recent budget laid out quite a few changes for the regular saver. ISAs were handed another variation to the current range available; this new one is known as the LISA (Lifetime ISA) and is created for people to save for the future.

Designed to encourage those under the age of 40, the LISA can be used to help buy your first home or save for your retirement.

The LISA acts as a bonus scheme – the government will add an extra 25% to what you have saved. So if you contribute the maximum amount of £4000 a year the government will contribute an additional £1000 as a savings incentive.

A key benefit of the LISA is you won’t pay tax when you come to take your money out, either in retirement or when you buy that first home.

Be cautious though because as appealing as the above sounds, there are restrictions to the LISA. If you decide to withdraw the money before the age of 60 and decide not to put it towards your first home you will lose the government bonus (and any interest or growth on this). You will also have to pay a 5% charge.

If you have a Help to Buy ISA already in place you can transfer those savings into the Lifetime ISA from 2017.

Getting one pound for every four is a straightforward incentive to save, but there are restrictions.

Contact the team at Platinum to see how we can make the LISA work for you.

Tax Year – Use It Or Lose It

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Both Individual Savings Accounts (ISAs) and pensions provide an opportunity for UK investors to shelter their money from the taxman.  It is something everyone should consider.

Within an ISA you pay no tax on any capital gains or income earned and you do not have to declare your ISA’s existence on your tax return.

With pension savings you immediately receive income tax relief on any personal contributions, and the monies grow free of income tax or capital gains tax.  On encashment you could be liable to some income tax on the proceeds but at least 25% is tax free before you reach 75 years of age.  The new legislation has made pensions an irresistible way of saving and planning with no restrictions on access past the age of 55 and 58.

As an added bonus, pension savings can be seen as an exceptionally efficient tool to avoid inheritance tax.

At present, you can invest up to £15,240 in this tax year and you can choose to invest this in cash, stocks and shares, or a combination of the two.

For the majority of savers pensions contributions are limited only by your earnings or a cap of £40,000. For some people it is up to £190,000, depending upon previous contributions.

From the next tax year, for high earners contributions will be capped at £10,000 per year which means that it is important to take advantage of this tax years limits.

You might already have ideas about the assets in which you want to invest. Perhaps you are considering equities, fixed income, cash or a mix of asset classes. It may be worth considering a collective investment scheme that will provide exposure to a more diverse range of investments.

Since time flies by, you should consider taking action as early as possible. The end of the current tax year is fast approaching and you don’t want to lose this year’s allowances for good. Whatever you choose to do, you should plan ahead in order to make the most of the long-term benefits offered by an ISA or pension.

Of course, you do not have to use the whole allowance but if you can take advantage of it, or if you have investments elsewhere that could be transferred, ISAs and pensions provide a more tax-efficient way to invest.

Contact us at Platinum if you would like to review how you can maximise your allowances and plan to grow more tax efficiently.

 

Time Bomb For Buy-To-Let Investors

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This year brings about changes for purchasers of buy-to-let properties and second homes. Property investment will become unfavourable, as anyone looking to purchase these types of assets will be subject to new Stamp Duty Land Tax (SDLT) rates.

This means that from 1st April 2016, SDLT rates for residential property will be 3% higher than the current rates and will be on a progressive/tiered basis.

Up until then, anyone purchasing a buy-to-let property at a value of £125,000 would not have paid any SDLT but after April 2016 they would be liable for £3,750 in SDLT.

For the average buy-to-let property, which costs around £184,000, the changes mean a fivefold increase in stamp duty from £1,180 to £6,700. A £250,000 buy-to-let bought today has a £2,500 stamp duty bill; it will carry a £10,000 tax burden in three months – a hike of £7,500.

This restriction only applies to investors with less than 15 properties. While that may seem unfair to individuals wanting to purchase a second property, buy-to-let landlords will also be hit by a change to Capital Gains Tax (CGT) rules as well as tax relief rules.

The changes being implemented have their own advantages and disadvantages:

  • New homeowners will have a larger range of properties to buy from as they will not have been taken up by investors

  • However property investors will be restricted on the benefit from spending in buy-to-let property; this combined with low annuity rates in the markets means that savers will have to invest in other asset classes in order get some growth.

This is a big blow to investors, who saw buy-to-let property investment as an alternative to pensions and especially when coupled with the rules being implemented in 2017 which restrict tax relief.

But this is where Platinum can help.

We are happy to speak to anyone who is concerned about how these changes will impact on their investments overall. Our specialist Advisers can help you understand how these changes will affect you and maybe look at alternative strategies to buy-to-let properties.

 

A possible change in tax relief

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The government has hinted they are introducing changes to the tax relief on pensions, with the full details likely to be announced on 16th March – Budget Day, this year.

Currently when someone pays into a personal pension they receive tax relief based on the income tax they pay.

This means:

  • If you are a basic rate taxpayer (with a top rate of 20% income tax) then paying £80 into a pension means the government will add an extra £20 to make the contribution up to £100.

 

  • If you are a higher rate taxpayer (with a top rate of 40% income tax) then paying £80 into your pension means the government will still add an extra £20 from the government, However you will also receive an extra £20 via a tax refund rather than into your pension fund, which gives you an effective rate of 40% income tax relief.

 

The potential change is likely to introduce a ‘flat rate’ of pension tax relief which may be between 25% or 33%.

Let’s take a look at what this will mean if we assume a flat rate tax relief of 33%.

  • If you are a basic rate taxpayer, then paying £80 into a pension means the extra £20 to make the contribution up to £100 but you may also get an extra £13, which could be paid via a tax refund. The basic rate taxpayer could be better off.

 

  • If you are a higher rate taxpayer, then paying £80 into your pension you will also get an extra £20 from the government and also receive an extra £13 via a tax refund (rather than into your pension fund). This gives you an effective rate of 33% income tax relief, so clearly you would be worse off than the current system.

 

Of course we do not know if the changes will be introduced this year or what the new rules could be. However if the current system of pension tax relief is more beneficial to you than the proposed new system Platinum would encourage you to make a pension contribution before 16th March this year.

If you have any questions please let us know.