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Budget 2015: Flexibility and simplicity for savers
The Chancellor began his Budget today by stating that he would take action to support savers and pensioners. Some of the most attention-grabbing announcements were directed at those who are saving for their futures and others who have already retired.
Before George Osborne stood up, True Potential had called on the Government to strip away complexity that puts people off from saving and to extend the excellent pension freedoms to those who are saddled with an annuity that they no longer want. On both of these measures, the Budget delivered.
Freedom for annuities
From 2016, pensioners will be able to sell their annuity and benefit from the pension freedoms due to take effect next month. Those who have already bought an annuity will be able to cash it in. The 55% tax rate has been abolished, meaning pensioners will pay at their marginal rate of income tax.
The Chancellor argued that these people have saved all their lives, often without help from anyone else. We agree that they should be trusted with their own money.
New ISA flexibility and innovation
A new fully flexible ISA will be introduced this autumn. This will mean that savers can withdraw money from their ISA and put it back without losing their annual allowance. This increased simplicity makes ISAs an even more accessible and easy-to-understand savings product.
Removing these unnecessary complications and barriers to saving is sensible and we welcome this move. ISAs will also be extended to allow more types of investment.
New ‘Help to Buy’ ISA
A new ‘Help to Buy’ ISA will be available from this autumn. First-time buyers who are building their deposit will get a 25% top-up in the form of tax relief from the Government. Savers can make an initial deposit of up to £1,000, followed by monthly deposits of £200. For every £200 saved, the Government will add £50, up to a maximum of £3,000.
As ISAs are personal, a couple will be able to save £24,000 together for a house and get a £6,000 boost from the Government. The Chancellor has announced this initiative will be open for four years.
New Personal Savings Allowance
There will also be a new Personal Savings Allowance from April 2016. This will mean that, for basic rate taxpayers, the first £1,000 of interest earned on personal savings will be tax-free.
This lets savers retain more of the benefits of doing the right thing andremoves the burden of paying tax on money earned only to pay tax again when it is saved. With the Personal Savings Allowance, 17 million people will see the tax on their savings abolished.
Pension Lifetime Allowance reduced
The Chancellor also changed the rules on the individual pension lifetime allowance. From 2016, it will be reduced from £1.25 million to £1 million. From 2018, the lifetime allowance will be index-linked and the current pension annual allowance of £40,000 remains unchanged.
Savers may need to exercise caution here, because someone who has built up a £1 million pension pot and then takes a 25% tax-free lump sum would be left with £750,000. Based on today’s rates, that would offer an annual income of approximately £21,000 – below the aspirations of 10,000 savers who have told us that they will need more to give them a comfortable retirement.
For those who breach the lifetime allowance, a 55% tax charge applies.
Digital tax accounts
The Chancellor is abolishing the annual tax return. This will be phased out by 2020 and replaced by a new ‘real time’ digital tax account accessible from a computer, tablet or smartphone. George Osborne called it a “revolutionary simplification of tax collection”.
Businesses and individuals will be able to link their own accounting software and their bank accounts to the digital tax account, removing the need to submit an end-of-year return and paying an annual tax bill in one go. Plus, people will be able to pay their tax at any point throughout the year.
When we launched the True Potential Wealth Platform four years ago, one of our aspirations was to integrate the information with investors’ personal tax liabiltiies. With this announcement, we move one step closer to realising that goal.
In summary
We’re pleased to see the Chancellor rewarding savers in his final Budget before May’s general election. ISAs continue to evolve into more attractive savings vehicles and the new freedoms for those with annuities are welcome. Mr. Osborne has built on his excellent 2014 Budget and has begun to realise the importance of closing the savings gap in the UK.
One thing is clear, whoever wins in May, savers will continue to need good financial advice to make the most of their savings and investments, and reach their financial goals. To echo the Chancellor “We choose the future”.
This article is based on True Potential LLP’s interpretation of the 2015 Budget Statement published on the 18/03/15. It is a broad summary and cannot cover every nuance, you should not take or refrain from taking any action based solely on this article.
London had highest ISA balance on death, as rules change
London could be the biggest beneficiary when new rules enabling spouses to inherit their partner’s ISA allowance are introduced in April, statistics suggest.
Around 150,000 married ISA savers die each year, according to Government statistics, although current rules mean their savings lose the tax-efficient wrapper upon death.
However, from 6 April, the surviving spouse will be able to increase their ISA savings by the value of the deceased partner’s ISA balances.
The option is available for ISA holders who have passed away on or after 3 December 2014, if they were in a marriage, or civil partnership, and not separated.
The region with the highest average cash ISA balance held with Nationwide Building Society on death last year was London at £16,674. Second was Northern Ireland with £16,521.
The area with the lowest recorded ISA balances upon death last year was the North West, where the average ISA balance upon death was £13,540.
Nationwide said its customer data showed the average customer with a cash ISA on death during 2014 was aged 81.
The list of regions and average ISA balances is:
Greater London: £16,674
Northern Ireland: £16,521
East Midlands: £14,515
Scotland: £14,362
South East: £14,981
South West: £14,918
North East: £13,970
West Midlands: £13,964
Wales: £13,943
North West: £13,540
Nationwide, which campaigned for ISA parity, said it accounted for more than 20 per cent of market change in ISA balances at the end of last year (November), opened 550,000 new ISA accounts between April and September 2014.
Richard Napier, Nationwide’s director of savings, said: “Changes to the ISA rules are entirely welcome as people will be able to take comfort that their surviving partner will be able to reinvest the full value of their ISA savings in a tax-efficient way.
“This is incredibly important, particularly as the majority of customers will be well into their retirement – a time when finances might be tighter.”
From Financial Planner Online website Thrusday 12th Febuary 2015
An Autumn Statement for Savers
Today’s Autumn Statement saw George Osborne declare he was backing the aspirations of savers with changes to ISAs and Stamp Duty. The Chancellor also confirmed the changes to ISAs and Pensions announced earlier in the year.
We already knew that from April 2015, savers will have greater flexibility over how they access their pensions on retirement. People over 55 will be able to drawdown from their pension in a way that suits them, rather than being forced into buying an annuity. Although pensions will remain top of many people’s agendas, there were some important announcements for savers.
ISA announcements
There was good news for ISA savers from the Chancellor today. ISAs will now be transferrable to spouses and civil partners tax-free on death. This adds to a more general overhaul of estate planning as the 55% ‘death tax’ has been abolished.
True Potential has encouraged the Treasury to continue raising the annual ISA allowance, which increased to £15,000 this year, so we welcome today’s announcement that it will go up again to £15,240 from April. For a couple, this means that they can shelter £30,480 from the tax man each year.
With cash savings still offering low returns, increasing the amount that can be invested tax-free in a Stocks and Shares ISA is great news for savers.
Stamp Duty reforms
Saved for last in the Autumn Statement, and regarded as the ‘rabbit in the hat’ for the Chancellor, was a complete reform of Stamp Duty. The tax, which has long been criticised, will move to an income tax style of marginal rates. George Osborne claims that 98% of house buyers will be better off under the new system.
The changes take effect from midnight tonight and should allow people to get on to the property ladder more quickly by reducing their tax burden.
Here are the new rates:
- Up to £125,000 – 0%
- 2% on the portion up to £250,000
- 5% on the portion up to £925,000
- 10% on the portion up to £1.5m
- 12% on anything above £1.5m
More reasons to feel optimistic
There was more for savers to celebrate in this Autumn Statement with rises in tax allowances, but the relatively low inflation predictions are still higher than the average interest savers receive from their bank, meaning that cash savings will continue to lose value year on year.
The highlights include:
- Inflation predicted to be 1.2% in 2015 and 1.7% in 2016
- Personal tax allowance to rise to £10,600 from April
- Higher rate tax band to rise to £42,385
- Fuel duty frozen
There was also good news on the economy, which may see savers’ confidence grow:
- The economy has grown 8% since 2010 and is predicted to grow by 2.4% next year
- Unemployment is set to fall to 5.4% next year
- The UK’s deficit is set to fall until reaching a surplus in 2018
- New 25% tax on profits generated by multi-nationals that are shifted out of the UK
We’re pleased to see the Chancellor committing to rewarding savers in his Autumn Statement. ISAs are now more attractive than ever, with a rising tax-free allowance and the ability to transfer to a spouse on death whilst retaining tax status. The Stamp Duty reforms will also help those saving to buy a home by reducing a significant part of the costs involved.
This article is based on True Potential’s interpretation of the Autumn Budget Statement published on the 03/12/14. It is a broad summary and cannot cover every nuance, you should not take or refrain from taking any action based solely on this article.
2014: The year to make saving a priority
Copy of a blog post from True Potential Wealth Management. 2nd January 2014
As we enter 2014, now’s the time when people are thinking about their New Year’s resolutions. The second most popular resolution last year was to save money, with reading more books in the top spot and losing weight at third.
This ambition to save more is a promising sign, however, the reality is somewhat different. The results from our national survey of more than 2,000 people show that 29 per cent admit to currently saving nothing for retirement.
In 2014, everyone should resolve to save more and borrow less. Our survey showed that people in the South East took on an average of £406.30 of new debt and saved £674.10 over a three month period, meaning they had net savings of just £89 per month.
We recognise that people are struggling to save anywhere near the amounts that they will need for retirement and, when they do, they are often undermining their efforts by taking on expensive debt on credit cards or payday loans. We need to change this pattern.
To make this happen, it’s clear that there needs to be better education around savings and investing. Only 17 per cent of those surveyed felt that they had sufficient financial knowledge. This is why 2014 will see the launch of the True Potential Centre for the Public Understanding of Finance’s first free access personal finance education module in partnership with the Open University. This will be available through Future Learn, the international MOOC (Massive Open Online Course), as well as the Open University’s own OpenLearn and iTunes U channels.
By providing the education and tools to make investing simple, we believe that we can pave a better future for everyone and one where personal goals become reality. 2014 is an exciting year for True Potential and for those members of the British public who are prepared to make saving a priority, a more comfortable retirement can become something to look forward to.
The winners and losers of the Bank of England’s interest rate announcement
Saw this and it does help to explain how it may effect different people, saver, pensions and mortgages.
Hope it helps!
Mark
Author: Tahmina Mannan, Joanna Faith – IFAonline | 07 Aug 2013
The Bank of England (BoE) has announced it will not raise the base rate of interest from 0.5% until unemployment falls to 7% or below.
Governor Mark Carney, just over a month into the role, has said the 7% mark represents the point at which the BoE will “reassess” its interest rate policy. The unemployment rate currently stands at 7.8%.
The BoE’s median forecast for unemployment in two years is 7.3%, according to today’s inflation report, but Carney said longer-term forecasts are uncertain.
The Office for Budget Responsibility (OBR) said in its March Economic and Fiscal Outlook that it expects unemployment to peak at 8.0% in 2014 before falling back to 6.9% in 2017.
This means there is a very real possibility that interest rates will remain at 0.5% for at least four years.
We look at who is set to win and lose from Carney’s interest rate announcement…
SAVINGS
Those most negatively affected by Mark Carney’s proactive stance will be savers. The bank will likely tolerate above-target inflation over the next few years, meaning real interest rates will remain negative.
After 53 months of savings hell, it is little wonder savers are dropping like flies.
According to the Trade Union Congress (TUC), the rate of household savings has dropped by 43% in the past year, partly due to families struggling with rising prices and partly due to the lack of incentive to squirrel away money for a rainy day.
Campaign group Save Our Savers said that although the financial crisis was caused by debt in the first place, this policy continues to favour borrowing at the expense of savings.
The campaign group said that four and a half years of 0.5% base rate have failed to invigorate the economy yet have stolen over £220bn from the nation’s savers’ and removes consumer’s spending power.
Simon Rose of Save Our Savers said: “The Bank of England has failed to meet its inflation target for most of the past seven years. Now it clearly has decided to ignore even higher price rises, inflicting continuing misery on the majority of Britons, in the hope that the same policies that have failed the country since the crisis will somehow magically work in in the future.”
Danny Cox, head of financial planning at Hargreaves Lansdown, said: “Interest rates on cash deposits aren’t going to rise anytime soon and certainly not significantly for three years it seems. That said, the Funding for Lending Scheme, which has depressed interest rates further, is due to end next year so there may be a little improvement then, unless it’s extended.”
PENSIONS
Those investing into pensions should benefit from more stable and, hopefully, rising stock markets. Pensions are a long term investment and in most cases investors should keep saving regardless of short term news.
Forward guidance will bring clarity to annuity rates which have been subject to questions over rises for some months. We now know annuity rate rises are unlikely for 3 years.
Tom McPhail, head of pensions research at Hargreaves Lansdown, said: “For those with a small pension pot or who need certainty, it now makes sense to get on with buying an annuity; for those with larger pension pots or who can tolerate some investment risk, it makes sense to park the idea of buying an annuity for a few years and look to income drawdown instead.”
Meanwhile, John Fox, managing director of pension provider Liberty SIPP, said today’s news is “disastrous” for pensioners who already rely on savings for their retirement income.
He said: “As Mark Carney basks in the plaudits, many pensioners will be wringing rather than clapping their hands.
“The Governor’s commitment to what’s likely to be an extended period of low interest rates is disastrous news for pensioners who rely on savings for their retirement income.
“Such loose monetary policy may stimulate the wider economy, but the inflation side-effect it is likely to trigger will erode the spending power of anyone struggling to live on an annuity.”
MORTGAGES
The Bank of England itself has said in the past month that mortgage borrowers would struggle with monthly repayments if interest rates rose by as little as 2%, unless the rise was matched with a similar rise in UK incomes.
Therefore it goes without saying that those looking for a new mortgage, or already with one, will be relieved not to see their monthly repayments shoot up.
Danny Cox of Hargreaves Lansdown said: “Lower for longer interest rates and an easing of bank’s currently strict lending criteria will improve the mortgage market and we could see already ultra-low mortgage deals improve further.”
It is also worth noting that the UK’s recovery is largely underpinned by the housing market continuing to strengthen – which will require more people to want to get on the property ladder, more housing transactions and housing development.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “The outlook for the housing market continues to improve as increased mortgage availability, better rates and more choice at higher loan-to-values combine to make buyers more confident about their ability to get funding.
“It is still too early to describe the housing market as being in rude health, however, as there is a worrying lack of stock, which is the main driver behind the latest rise in house prices. However, the number of transactions is also on the rise.”
Changes to the State Retirement Age
Changes to the State Retirement Age
With the Government’s seemingly endless tinkering with the State Retirement Age it is easy to lose track of when you can expect to receive your State Pension. We have moved a long way from the days when men retired at 65 and women at 60.
The following is a summary of where we are at and what further changes the Government is proposing to make to the State Pension Age (SPA).
Current Rules
These were introduced in the Pensions Acts of 2007 and 2011 and were designed to increase the SRA for women to 65 and then to 66 and 68 for both men and women.
| WHEN | WHO | BORN BETWEEN | NEW SPA |
| 2010 to 2018 | Women | April 1950 to December 1953 | SPA increases gradually to 65 |
| 2018 to 2020 | Men & Women | December 1953 to April 1968 | SPA increases to age 66 |
| 2044 to 2046 | Men & Women | SPA increases to age 68 |
Proposed Changes
The Pensions Bill 2013 proposes to make further changes which are likely to be made law by the end of the year. This introduces a SRA of 67.
| WHEN | WHO | BORN FROM | NEW SPA |
| 2026 to 2028 | Men & Women | April 1960 | SPA increases to age 67 |
Confused – well you’re probably not alone. Enter your details in the following website www.gov.uk/calculate-state-pension to get your expected SRA under the current rules but remember that it could well change again if the last few years are anything to go by. In fact, the Government has stated that the SRA will be reviewed every five years with the next review taking place in 2017.
Don’t forget that in addition to the above, the Government will be replacing the current two tier State pension that is comprised of the basic state pension and second state pension (S2P – previously SERPS) with a flat rate pension from April 2016 paying a maximum of around £144 a week in today’s money if you have made National Insurance Contributions for a minimum of 35 years.
Thames Financial Planning in the community
Once again we were pleased to be able to supply St Anne’s Heath school at Virginia Water with the sound system for their sports day.
It was a hot one but they managed to pull it off as always with the headmaster Mr Graham Bollands doing such a great job with the commentary, not sure how he remembers all the names!
Mark
Cost of sending a child to state school soars to £22,500
For all of you that have children! – Mark Bugden
As reported in IFAonline.co.uk
Author: Joanna Faith
IFAonline | 10 Jul 2013
The average cost of putting a child through school in the UK is now £22,596, which works out at £1,614 per child, per school year.
According to research by Aviva, the annual bill for sending a child to state school has grown by 11% in the last five years.
Coupled with government efforts to raise the school leaving age to 18 by 2016, this means the total bill for sending a child to state school has increased by more than £6,000 since 2008.
In total, UK parents can now expect to fork out a staggering £12.9bn just in the 2013/2014 school year on the everyday costs associated with their children’s education. This includes:
• £3bn on school meals and packed lunches (£379 per child)
• £3bn on transport to and from school (£369 per child)
• £1.5bn on uniform and shoes (£186 per child)
• £473m on sports kit (£59 per child)
In addition, UK families spend an average of £558 per child, per year on out of school care.
The cost per family ranges from those who spend nothing each month to those who have a much greater need for support and spend upwards of £160 each month.
And for those parents able to find the additional budget, extra curricular activities could add a further £1,268 per year including up to £480 on music lessons and £120 on school trips.
However, there is also evidence of families cutting back where they can. Parents are using their cars less on the school run in 2013 compared with 2008, suggesting increasing fuel costs are having an impact.
Just over a quarter of all parents currently drive their children to school (27%) compared with a third back in 2008 (33%). Instead, more than half of all parents say their children typically travel either on foot (47%) or by bicycle (3%).
And despite the 11% rise in the annual cost of schooling since 2008, exactly half of parents feel comfortable that they can afford all the expenses of sending their children to school (50%) – with nearly one in five saying they feel very comfortable (19%).
The Aviva ‘school sums’ index also shows:
• More than one in ten parents (11%) have moved house to live in a ‘better’ catchment area, with the quality of local schools ranked as more important than transport links and proximity to family and friends when moving home.
• More than one in four parents (28%) has bought a tablet for their children for educational purposes.
• One in four parents (26%) say they aren’t saving to support their children’s university education because they cannot afford to.
The average cost of putting a child through school in the UK is now £22,596, which works out at £1,614 per child, per school year.
Louise Colley, protection distribution director for Aviva says: “The majority of children in the UK are taught through the state system, but it’s clear from our research that this is far from ‘free’ for parents! With even the basics adding up to more than £1,600 per child, per year, this is a significant challenge, particularly for parents on lower incomes.
“Every parent wants to do the best for their children, especially when it comes to schooling, so it’s no surprise to see that many parents are funding educational extras such as overseas trips and additional tuition. All the same, it’s shocking to see how quickly the cost of these adds up.”
Thames Financial Planning hit the road!
Thames Financial Planning on the road at Lyne Fete with the help of Paul Tennant from James Ramsey Estate Agents.
We had a great day even if it rained!
Had a catch up with some existing clients and talked to some potential new ones.
http://t.co/dWTHrQp30n via @pinterest
10 Reason to use a financial adviser
Many people think that financial advice is only required by the very rich.
However, everyone can benefit from it. Not only can it help you protect and build your assets, it can help you make the most of your investments and help secure you and your family’s long term future.
No 1: To protect your family
There are a lot of people trying to sell you insurance of one type or another but an adviser can tell you which one is actually worth buying. They will assess your position and guide you through the best options to protect yourself and your family – regardless of whether you are single, married, have children or they have long left home.
Whatever your needs, an adviser can help ensure personal tragedy does not turn into financial crisis.
No 2: To help plan your spending –and saving
To secure your long-term future, you need to build some assets, initially to get you through the rainy days and then to pay for holidays and luxuries. Step one is to plan your spending so that you begin to save – and step two is to plan that saving so that you can build your wealth as efficiently as possible. Regardless of whether you currently have £10 or £10,000, a financial adviser will look at your situation and find the best starting point for you.
No 3: To help you plan for retirement
Once you have sorted out your short-term saving needs, you can then start thinking about the long-term – and most people these days realise they cannot rely on the State for more than the absolute basics. However, planning for retirement is a complex business and there are many different options available.
Pensions have come a long way in terms of flexibility and transparency in recent years and now offer a wide range of investment options. A financial adviser will not only help sift through the many rules and product options but also help construct a portfolio to maximise your long term prospects.
No 4: To secure your house
The mortgage market was complicated enough already, with its discounts and variables, AERs and caps, indemnities and early redemption fees. Then the credit crunch hit and things have got even worse. However, buying a house is still one of the most expensive decisions we make, and the vast majority of us need a mortgage.
A financial adviser could save you thousands, particularly at times like this. Not only can they seek out the best rates, they can help you assess sensible levels of borrowing, make the most of your deposit and might also find lenders who would otherwise not be available to you.
No 5: To help meet your investment goals
As you progress through life, you begin to build your assets and your income begins to increase. You then start considering how you can enhance your position rather than simply consolidate it. This could mean anything from looking to retire early through to paying school fees for private schools or investing in overseas property. However your dreams evolve, a financial adviser can help assess what is realistically possible – and put the best plan in place to help you achieve it.
No 6: To find the right combination of assets
Investment is as much about protecting the potential downsides as it is about targeting maximum growth. High returns are often associated with high risk – and not everyone is happy if their investment falls by a third or more overnight.
A financial adviser will make a detailed assessment of your attitude to risk before making any recommendations.
They will also ensure you don’t put all your eggs in one basket by helping you diversify not only across asset classes but also across accounts, individual funds and product providers.
No 7: To obtain an objective assessment
Every new product or investment opportunity is accompanied by hype, proclaiming it is the best ever – but that does not mean it is right for you. Investors the world over have been and will continue to be caught out by market bubbles or high charges because they don’t take a step back. A financial adviser knows how products and assets work in different markets and can outline the downsides for you as well as the benefits. Between you, you can then make a more informed decision about what hype you can believe – and what products you really need to avoid.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
No 8: To save money
Once your risk and investment assessments are complete, the next step is to look at tax and even the most basic overview of your position could help. It may simply mean using ISAs or a pension plan to benefit from Government incentives or it could mean choosing growth assets over income to use capital gains allowances rather than pay income tax. Alternatively, for more complicated arrangements, it might mean moving assets to your spouse or children to make full use of their personal allowances.
A financial adviser will always have your tax position in mind when making recommendations and can help point you in the right direction even in complicated situations.
No 9: To keep you on track
Even when you have every product you need taken care of and your investments are set up and running to plan, someone needs to keep an eye on them in case changes in markets or abnormal events push them off course.
You can ask a financial adviser to do this monitoring work for you. They can assess the performance of individual investments against their peers, ensure that your asset allocation does not get distorted as markets move and also help you consolidate gains as the dates of your ultimate goals approach.
No 10: For peace of mind
Money is a complicated subject and there are many things you need to think about to both protect it and make the most of it. Markets are volatile and the media is prone to exaggeration of both the risks and the rewards.
Employing a good financial adviser can take the emphasis away from you and move it into the hands of an expert.
Whether you need general, practical advice or a specialist with dedicated expertise, the money you invest in taking advice could be paid back many times over in the long term.
