Newsletter – March 2016

By: | Tags: | Comments: 0 | March 29th, 2016

Auto Enrolment / Workplace Pensiosn Does this mean ‘You’?

All employers with at least one member of staff and aged between 22 and the state pension age, earning above the tax-free allowance must provide, and contribute to, a pension for their staff.

Many of our members have discovered setting this up is not as easy as first thought, nor is it necessarily that cheap! Yes, you can opt for the basic ‘Nest’ scheme offered by the government but, as with so many aspects if finance, there are many factors to consider.

We have a specialist financial consultant dedicated to assisting clients with the selection and implementation of Workplace Pensions so please contact us for guidance.

ISAs

The Individual Savings Account allowance has been increased significantly of late and you can shelter up to £15,240 into a stocks and shares ISA, a cash ISA or a combination of both in the current tax year (until 5th April). So, a couple can save no less than £30,480 in an essentially tax exempt environment for both this and the next tax year before the allowance jumps even further to £20,000 each from 6th April 2017.

ISAs allow interest and capital growth to be free of tax. Which is better depends on your circumstances, aspirations and attitude to risk so, for specialist guidance, please contact us at the earliest opportunity.

Pensions v ISAs

Which is better again depends very much on individual circumstances and requirements. There are fundamental differences, the most important of which are, firstly, pension contributions attract tax relief whereas ISAs do not and, secondly, depending upon the specific ISA selected, you have immediate access to your savings whereas pension funds are only accessible from age 55.

New Pension Rules

The new pensions freedom allows savers to access all the money in their pensions without the need to draw an annuity (a fixed or escalating income). However, what many haven’t appreciated is that any surplus drawn over the 25% tax free allowance will be subject to tax and, almost certainly, at a higher rate.

And it is not a question of just drawing the pension as cash because the rules state that you can. Most pension providers will not accede to this request unless you have counselled independent financial advice and, guess what? Yes; you’ve got to pay for it! But as you professionals will appreciate, a consultation followed by a diagnosis and treatment plan or, in our case, a report and recommendation, cannot be done for nothing.

We, like you, are professionally liable for any advice and consequently cannot simply facilitate a transaction which could have serious financial implications. Our professional indemnity insurers will not allow it.

If you have an ‘old style’ personal pension, it would be prudent to consider switching it to one of our modern and flexible arrangements so you can take advantage of the new pensions freedom and, specifically, Draw-down which allows you to release cash but without the obligation to take an income. It would certainly be cheaper to do it now than at retirement when your pension fund is at its greatest.

Pensions Surcharge

For NHS practitioners with long service and consultants with high earnings, it would be prudent to seek guidance as to whether you are likely to breach the lifetime allowance or the annual contribution limits. It can be a tricky issue because the NHS may not alert you until eighteen months after the end of the tax year in question.

You may wish to contact the Pensions Schemes Office in Fleetwood for a Pension Benefit Statement, although this may not be forthcoming for some time. Your accountant should be able to advise you as he or she will have first-hand knowledge of your tax position but for specific pensions advice, please contact us as we have a number of suitably qualified consultants who would be pleased to assist.

Mortgages

If you are considering buying a new home, then do not hesitate to contact us because:

With the increase in regulation and the tightening of lending criteria, it is important not to be disadvantaged by applying for finance without expert advice.

Knowing your credit rating would be prudent and disclosure of all outstanding loans and credit card debts is essential. It sounds obvious but you wouldn’t believe the number of mature practitioners who overlook what they consider minor loans or balances.

Also, be careful when ‘shopping around’ because you may unwittingly be allowing lenders to carry out credit searches which actually have the effect of reducing your credit score in the short term! Make sure you are on the voters’ roll.

For younger practitioners without two years’ accounts, obtaining a mortgage can be a real challenge and shopping around will prove fruitless as the mainstream lenders won’t lend to you. We can save you both time and money by introducing you to a professional lender understanding of your status and circumstances.

Finally, retain your bank statements. A lender will invariably wish to see three months consecutive statements. And think carefully before incorporating – you may have just blown your chance of getting a mortgage or a re-mortgage!

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