Pension boost ARE YOU CLAIMING ALL OF THE GENEROUS TAX RELIEF YOU'RE ENTITLED TO? - Chadwicks IFA
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JULY/AUGUST 2021
Pension boost
ARE YOU CLAIMING ALL OF THE GENEROUS
TAX RELIEF YOU’RE ENTITLED TO?
REAPPRAISAL OF ‘IT’S NOT WHAT YOU EARN, PROTECT YOURSELF
URBAN LIVING IT’S WHAT YOU KEEP’ FROM PENSION SCAMS
3 million people in the UK aged The potential impact to your expected Understanding the warning
over 50 considering relocating retirement income over time signs to keep your money safe
J U LY/AU G U ST 2021
CONTENTS
INSIDE 04
RETIREMENT PLANNING JOURNEY 10
THIS ISSUE What you need to consider at every
life stage
REAPPRAISAL OF URBAN LIVING
Three million people in the UK aged
over 50 considering relocating
Welcome to our latest edition. Inside this
issue, the unique combination of tax breaks and
flexible access available to pensions makes them
a compelling choice when saving for retirement.
On page 08 we look at one of the key benefits of
saving into a pension rather than another type of
savings or investment vehicle – the generous tax
relief you’re entitled to receive. Making the most
11
of pension saving involves maximising tax relief
and allowances which could substantially boost
06
your retirement savings.
MIND THE DIVORCE GAP
The coronavirus (COVID-19) pandemic has led
Women see incomes fall by 33%
to a reappraisal of urban living, with increasing
following divorce, compared to just 18%
numbers fleeing city confines in search of green PROTECTING FAMILY WEALTH
for men
space. Three million people aged over 50 now Start planning your legacy to mitigate or
plan to relocate in retirement, as a direct result reduce Inheritance Tax
of the pandemic. A year of lockdowns has
motivated these over-50s to want to move closer
to family and friends, pursue a better quality of
life or even move abroad. Turn to page 10.
When you’re planning your retirement
income, there are multiple factors to consider.
But one factor not to overlook is how much of
12
your retirement income you could lose in taxes.
On page 09, new data highlights that retired
households lose nearly 14% of their income a
PLAN FOR TOMORROW,
year to direct taxes.
LIVE FOR TODAY
08
Being online more means criminals have a
Helping you achieve your
greater opportunity to approach unsuspecting
financial goals
victims with their scams. Online scams can have
a devastating financial and emotional impact on PENSION BOOST
victims. Pension scammers are bombarding the Are you claiming all of the generous tax
public with scam calls, texts and emails and it relief you’re entitled to?
09
can be easy to fall victim to such a scam. Turn to
page 30 to find out more. A full list of the articles
featured in this issue appears opposite.
‘IT’S NOT WHAT YOU EARN, IT’S
WHAT YOU KEEP’
EXPLORING EVERY ASPECT
The potential impact to your expected
OF YOUR FINANCIAL WORLD
retirement income over time
Our aim is to help you to secure your financial
future and explore every aspect of your financial
world, taking everything into account to create a INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION
financial plan that works for you, your family and LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS
business. We hope you enjoy this latest issue, FROM, TAXATION ARE SUBJECT TO CHANGE.
and if you require any further information please
THE VALUE OF INVESTMENTS MAY GO DOWN AS WELL AS UP, AND YOU MAY
contact us.
GET BACK LESS THAN YOU INVESTED.
The content of the articles featured in this publication is for your general information and use only and is not intended to address your particular requirements. Articles should not be relied upon in
their entirety and shall not be deemed to be, or constitute, advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information
is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice
after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles. Thresholds, percentage rates and
tax legislation may change in subsequent Finance Acts. Levels and bases of, and reliefs from, taxation are subject to change and their value depends on the individual circumstances of the investor.
The value of your investments can go down as well as up and you may get back less than you invested. Past performance is not a reliable indicator of future results.
CONTENTS
13
WEALTH PRESERVATION
18
PENSION LIFETIME ALLOWANCE
24
MONEY’S TOO TIGHT TO MENTION
How to minimise a Capital Gains Tax bill Do you need to take action to avoid risking Looking to retire from work, not a paycheck?
14
additional tax charges in retirement?
HOW TO FUTURE-PROOF YOUR
FINANCES AS A PARENT
A momentous event that can change every
aspect of your financial stability
25
20
PLAN THE PERFECT RETIREMENT
PENSION FREEDOMS
Looking for a wider choice of investment options?
26
Creating a comfortable, secure retirement takes
care and forethought
NO SUCH THING AS A ‘NO-RISK’ INVESTMENT
Knowing how much risk you are comfortable
taking is key
16 27
ADVICE MATTERS
CREATING WEALTH FOR CHILDREN
Intergenerational planning and wealth transfer
Investing isn’t just a luxury reserved for adults
between advised families
22
EVOLUTION OF ESG INVESTING
Changing face of consumer ethics and
behaviours
28
PENSION TAX RELIEF
27% of people surveyed did not know how it worked
17 30
PROTECT YOURSELF
CHANGING TAX LANDSCAPE
FROM PENSION SCAMS
Time to take a different view and organise your
Understanding the warning signs to keep your
financial affairs?
money safe
04 R ET IREM ENT
Retirement
planning journey
WHAT YOU NEED TO CONSIDER AT EVERY LIFE STAGE
When you’re starting out working in your 20s, you may not be thinking support your desired lifestyle, which will help
you plan your retirement income. Based on this,
about retirement in 40 years’ time. The same goes for your 30s, 40s and
you’ll know if you need to adjust your pension
even 50s. There is always something on the horizon you could be saving for contributions to save enough.
besides your retirement. At this life stage, you might have changed
employers several times, so it might be sensible
N
o matter how old you are, it’s always STAYING ON TRACK IN YOUR 30S to check that you have all of the details for any
a good time to review your pension By your 30s, you may have additional financial old pensions and, if not, look to track them down.
savings and update your retirement plan. responsibilities, such as children and a mortgage.
Understanding your retirement goals during These can make it difficult to dedicate as much MAXIMISING YOUR
each decade is key to making sure you are able money and attention to your pension as you’d like. CONTRIBUTIONS IN YOUR 50S
to enjoy and live the lifestyle you want, and which One way to stay on track is to review your If your pension contributions have fallen behind
you’ve worked hard for, when you eventually pension contributions at least once a year in any of the previous decades, it’s crucial to
decide to stop working. and make sure you’re increasing them as catch up now. As well as your salary sacrifice
your income grows. Another consideration contributions, you might consider adding lump
STARTING TO SAVE IN YOUR 20S is to check your investment strategy. With sums to your pension to help you reach your
Though you’re decades away from retirement, decades remaining before you’ll access your retirement goal.
your 20s are an important time for pension pension, you might choose to take a higher- If you plan to do this, make sure that you’ve
planning. That’s because the investments you risk approach now, and then gradually move checked what your annual allowance for this tax year
make in these early years will benefit from the into lower-risk investments as retirement is, and how much unused annual allowance you have
most growth potential. grows closer. from the last three years. This will determine how
When you start work, if applicable to your much extra you can contribute and receive tax relief
situation, you’ll be automatically enrolled into ACCUMULATING IN YOUR 40S on. For the tax year 2021/22 the annual allowance is
your employer’s workplace pension scheme If your salary follows a typical trajectory, it is £40,000. This includes both contributions paid by you
and they will start to make contributions on likely to start peaking when you’re in your 40s, and contributions paid by your employer.
your behalf. making this decade a crucial time for pension Alternatively, if you’ve stayed on track with
You should definitely not opt out of this – even accumulation. You should, by now, also have a all your pension contributions and your savings
if you feel you could do with the money now. good understanding of the income required to are at a very healthy level, you might need to
R E T I R EM EN T 05
/// By your fifties, if your
pension contributions have
fallen behind in any of
the previous decades, it’s
crucial to catch up now. As
well as your salary sacrifice
contributions, you might
consider adding lump sums
to your pension to help you
reach your retirement goal.
take steps to manage your Lifetime Allowance. THE TAX IMPLICATIONS OF PENSION
Currently, the maximum you can accrue within ADVICE FOR ANY AGE WITHDRAWALS WILL BE BASED ON
your pensions in your lifetime is £1,073,100, so if With so much going on in your life – from YOUR INDIVIDUAL CIRCUMSTANCES, TAX
you’re anywhere near that number you should family and work to pursuing your passions – LEGISLATION AND REGULATION WHICH ARE
seek professional financial advice. retirement planning may not be your priority. SUBJECT TO CHANGE IN THE FUTURE. YOU
But it’s your pension and overall financial SHOULD SEEK ADVICE TO UNDERSTAND YOUR
PREPARING TO RETIRE IN YOUR 60S situation that will allow you to keep up your OPTIONS AT RETIREMENT.
In the decade before retirement, some people current lifestyle and enjoy your golden years.
may choose to take a lower-risk investment Speak to us today and make sure your plans ACCESSING PENSION BENEFITS EARLY
strategy with their pension savings than are on track for the retirement you want. MAY IMPACT ON LEVELS OF RETIREMENT
in previous years. While this may limit the INCOME AND YOUR ENTITLEMENT TO
potential growth of your investments, it can CERTAIN MEANS-TESTED BENEFITS AND
also reduce fluctuations in value, which can A PENSION IS A LONG-TERM INVESTMENT IS NOT SUITABLE FOR EVERYONE. YOU
help you to plan your retirement income with NOT NORMALLY ACCESSIBLE UNTIL AGE 55 SHOULD SEEK ADVICE TO UNDERSTAND
more confidence. (57 FROM APRIL 2028). THE VALUE OF YOUR YOUR OPTIONS AT RETIREMENT.
You’ll also need to weigh up your options INVESTMENTS (AND ANY INCOME FROM
for accessing your pension. You might want to THEM) CAN GO DOWN AS WELL AS UP WHICH
take a lump sum or several lump sums, or you WOULD HAVE AN IMPACT ON THE LEVEL
might want to take a regular income. There are OF PENSION BENEFITS AVAILABLE. YOUR
advantages and disadvantages to each approach, PENSION INCOME COULD ALSO BE AFFECTED
and decisions you make now will affect your BY THE INTEREST RATES AT THE TIME YOU
income throughout your retirement. n TAKE YOUR BENEFITS.
06 TAXATION
Protecting family wealth
START PLANNING YOUR LEGACY TO MITIGATE OR
REDUCE INHERITANCE TAX
P
If you’ve worked hard throughout roper planning can help you pass on as out of your estate, therefore leaving less for the
much as possible to the people you choose recipients of your estate.
your lifetime to grow your wealth,
by avoiding additional unnecessary tax However, there are many tax reliefs and rules
you may hope it will help to charges. But there is a perception by some people that that can minimise the amount of Inheritance
safeguard the financial security Inheritance Tax only affects the rich, which is untrue. Tax due. You can leave your entire estate to a
surviving spouse or registered civil partner with
of your loved ones after you’ve
CURRENT AND FUTURE no Inheritance Tax due. But there are many other,
gone. But without careful planning NEEDS OF YOUR LOVED ONES lesser-known rules and reliefs that can also apply.
in your lifetime, you could leave When you’re getting on with life, it’s not easy to The current Inheritance Tax nil-rate bands will
stop and think about what will happen to your remain at existing levels until April 2026.
them with less than expected after
estate (such as your property, possessions,
the Inheritance Tax bill is paid. investments and cash) when you’re no longer HOW INHERITANCE TAX PLANNING WORKS
around. That’s why it’s important to make sure Inheritance Tax planning is a way of arranging
that any assets you’ve built up over your lifetime your wealth with the various tax reliefs in mind
aren’t subject to Inheritance Tax unnecessarily so that your loved ones don’t pay more tax than
after your death, and that your loved ones, and they legally need to.
any organisations close to your heart, benefit It works best when the process is started many
from your estate as you intended. years in advance. Certain transfers of capital may
By reviewing your wealth and obtaining only become free from Inheritance Tax if you
professional financial advice, you will be able to survive for seven years after they are made, so
consider the current and future needs of your Inheritance Tax planning cannot be rushed.
loved ones and how you can benefit them whilst Of course, Inheritance Tax is not the only
preserving your assets. consideration when it comes to arranging your
finances – you also need to ensure that your wealth
INHERITANCE TAX FACTS works for you in your lifetime. So, this planning
Every individual has an Inheritance Tax ‘nil-rate must work in harmony with other areas of financial
band’ of £325,000 in the current 2021/22 tax year planning. It’s a precise and personal process.
(the UK tax year starts on 6 April each year and
ends on 5 April the following year). This means THREE STEPS TO MITIGATE
that you can pass on up to £325,000 worth OR REDUCE INHERITANCE TAX
of property, money and other assets with no The rules and reliefs that are most beneficial
Inheritance Tax to pay. to you depend on your personal and financial
Above this threshold, Inheritance Tax is normally situation. The advice you receive will be different
levied at 40%. So, as a simple example, if you were based on whether you’re single or married, if you
to pass on wealth of £425,000, the first £325,000 have children or grandchildren, if you own your
would be tax-free, and the remaining £100,000 own business, or on many other factors.
would be taxed at 40%, creating a tax liability of That said, here are three tips that many people
£40,000 for your personal representatives to pay could benefit from.
TAXATION 07
/// Inheritance Tax planning is a way
of arranging your wealth with the
various tax reliefs in mind so that
your loved ones don’t pay more tax
than they legally need to.
1. THE RESIDENCE NIL-RATE BAND (RNRB) rather than waiting to pass on your wealth until Variation so that it is passed directly to that loved
As well as the Inheritance Tax nil-rate band after your death. However, in some situations, a one immediately. It will not be counted as part of
mentioned earlier, there is an additional nil-rate gift can create an Inheritance Tax liability. your estate. n
band that applies when passing on a property that
was your main residence in your lifetime. This is To be sure that yours doesn’t, follow these rules:
WHAT WILL YOUR
an additional Inheritance Tax-free allowance for
LEGACY LOOK LIKE?
‘qualifying’ home owners with estates worth less n Small gifts (up to £250) to different individuals
To learn more about Inheritance Tax
than £2.35 million (where one residence nil-rate are typically free from Inheritance Tax. This
planning and find out which rules and reliefs
band is available) or £2.7 million (where two rule is intended to cover any birthday gifts,
could benefit you, we would be pleased
residence nil-rate bands are available), that can Christmas gifts, etc.
to discuss your circumstances and make
result in you being able to pass on up to £500,000 n Larger gifts are free from Inheritance Tax up to
recommendations based on your needs.
when you die before Inheritance Tax has to be paid a total of £3,000 in each tax year. If you don’t
If you would like to discuss your situation,
using the nil-rate band and residence nil-rate band. use your total allowance in one tax year, you
please contact us for more information.
If you leave a property that has been your can carry it forward to the next year as long as
main residence at some point, to a direct you also use up the current year allowance.
descendant (which includes a child, adopted n Wedding (or registered civil partnership) gifts INFORMATION IS BASED ON OUR
child, stepchild, foster child, grandchild or are free from Inheritance Tax up to a certain CURRENT UNDERSTANDING OF TAXATION
great-grandchild), you’ll qualify for the residence value, which depends on your relationship to LEGISLATION AND REGULATIONS.
nil-rate band, which is currently £175,000. So, the recipient. If you are their parent, the limit
by using both nil-rate bands, the total tax-free is £5,000. If you are a grandparent or great- ANY LEVELS AND BASES OF, AND RELIEFS
portion of your estate will be £500,000. grandparent, the limit is £2,500. In any other FROM, TAXATION ARE SUBJECT TO CHANGE.
If you are a surviving spouse who inherited case, the limit is £1,000.
the total estate of your deceased partner, n Regular gifts out of income – unlimited amounts THE RULES AROUND INHERITANCE TAX
you also inherit their nil-rate bands. So, in this as long as made regularly out of surplus income ARE COMPLICATED, SO YOU SHOULD ALWAYS
scenario, you would be able to pass on up to such that standard of living isn’t affected. OBTAIN PROFESSIONAL ADVICE.
£1,000,000 free of Inheritance Tax (including
£350,000 of property using the RNRB capped 3. A DEED OF VARIATION THE VALUE OF INVESTMENTS
at the property value if less) and a further In some cases, you might have carefully arranged AND THE INCOME THEY PRODUCE CAN FALL
£650,000 of your combined estate). This your wealth for Inheritance Tax purposes, but you AS WELL AS RISE. YOU MAY GET BACK LESS
assumes the estate on both first and second then inherit money or other assets in someone’s THAN YOU INVESTED.
deaths wasn’t over £2 million. Will that would result in your estate exceeding
your available nil-rate bands. THE FINANCIAL CONDUCT AUTHORITY DOES
2. LIFETIME GIFTS Rather than accepting this inheritance (which NOT REGULATE TAXATION & TRUST ADVICE,
One way to minimise your Inheritance Tax bill is you may not need and would likely leave to a DEEDS OF VARIATION & WILL WRITING.
by gifting money or assets during your lifetime loved one later), you could execute a Deed of
08 R ET IREM ENT
Pension boost
ARE YOU CLAIMING ALL OF THE GENEROUS you’ve received a windfall in this tax year that
you’d like to pay into your pension; you have your
TAX RELIEF YOU’RE ENTITLED TO? own limited company and have additional profits
to utilise; or you’ve become a high earner with a
The unique combination of tax breaks and flexible access available to tapered annual allowance.
pensions make them a compelling choice when saving for retirement. One
HOW DO YOU CLAIM
of the key benefits of saving into a pension rather than another type of savings or PENSION CARRY FORWARD?
investment vehicle is the generous tax relief you’re entitled to receive. When planning to make large pension
contributions, spreading them across tax years
can mean higher rate relief is available on the
full contribution. You can utilise pension carry
forward by making additional contributions to
your pension and you don’t need to notify HM
Revenue & Customs to do this.
However, if you accidentally exceed the
annual allowance (including any carry forward),
you could be penalised. So, it’s important to
check your past pension statements to see
how much unused pension annual allowance
you have and keep records to prove that you’re
eligible to carry forward.
This is a complex calculation, so to be sure
you’re following the rules exactly, it’s sensible to
obtain professional financial advice. n
M
aking the most of pension saving WHAT HAPPENS IF YOU DON’T USE ALL OF
PLAN FOR A
involves maximising tax relief and YOUR PENSION ANNUAL ALLOWANCE?
SUCCESSFUL RETIREMENT
allowances which could substantially If you don’t use all of your pension annual
Saving into a pension is one of the most
boost your retirement savings. allowance, you could be missing out on tax relief
tax-efficient ways to save for your retirement.
that you are able to claim.
Not only do pensions enable you to grow
WHAT IS THE PENSION ANNUAL ALLOWANCE? Of course, you may not be able to afford to
your retirement savings largely free of
All UK taxpayers are entitled to claim tax relief contribute the maximum in every tax year. So,
tax, but they also provide tax relief on the
on contributions they make to their pension. Tax it’s helpful to know that you can carry forward
contributions you make. To discuss your
relief is on pension contributions of up to 100% unused annual allowance to use in the future.
retirement plans or any concerns you may
of relevant UK earnings (£3,600 p.a. if more). But
have, please contact us.
there is a cap on how much you can contribute WHAT IS PENSION CARRY FORWARD?
while claiming tax relief, which is called your Pension carry forward allows you to use
annual allowance. unused annual allowance from up to three A PENSION IS A LONG-TERM INVESTMENT
The current pension annual allowance in previous years as long as you had a pension NOT NORMALLY ACCESSIBLE UNTIL AGE 55
the tax year 2021/22 is £40,000, but in some plan in those years. (57 FROM APRIL 2028). THE VALUE OF YOUR
cases, yours could be lower. If your taxable So, for example, if you’re a UK taxpayer with INVESTMENTS (AND ANY INCOME FROM
income is less than £40,000, your personal a salary of £100,000, and you have only used THEM) CAN GO DOWN AS WELL AS UP WHICH
tax relievable contributions are limited to £20,000 of your pension annual allowance WOULD HAVE AN IMPACT ON THE LEVEL
100% of earnings (£3,600 p.a. if more). If in each of the last three tax years, you have OF PENSION BENEFITS AVAILABLE. YOUR
your total taxable income (adjusted income) £20,000 of unused annual allowance from each PENSION INCOME COULD ALSO BE AFFECTED
exceeds £240,000, your annual allowance year, totalling £60,000. BY THE INTEREST RATES AT THE TIME YOU
may be tapered. This year, the maximum you could potentially TAKE YOUR BENEFITS.
contribute towards your pension is £100,000 –
WHAT IS THE TAPERED ANNUAL ALLOWANCE? £40,000 from this year’s annual allowance, plus THE TAX IMPLICATIONS OF PENSION
The tapering rules are complex but, put the £60,000 from your previously unused annual WITHDRAWALS WILL BE BASED ON
simply, for every £2 of adjusted income allowance. YOUR INDIVIDUAL CIRCUMSTANCES, TAX
you receive above £240,000, your annual LEGISLATION AND REGULATION WHICH ARE
allowance reduces by £1. The minimum WHEN IS CARRY FORWARD USEFUL? SUBJECT TO CHANGE IN THE FUTURE. YOU
annual allowance is £4,000, for those with an Usually, when you’re self-employed and your SHOULD SEEK ADVICE TO UNDERSTAND YOUR
income above £312,000. income changes drastically from year to year; OPTIONS AT RETIREMENT.
R E T IR EM EN T 09
‘It’s not what
you earn, it’s
what you keep’
THE POTENTIAL IMPACT TO YOUR EXPECTED Individual Savings Accounts (ISAs). Within an ISA
you pay no UK tax on income or capital gains.
RETIREMENT INCOME OVER TIME Paying less tax could mean higher returns for you
(and less work if you need to complete a tax return).
When you’re planning your retirement income, there are multiple factors to And you can also plan the most tax-efficient
way to access your pension from age 55 (57
consider: how much you can expect from the State Pension, the value of the
from 2028 unless your plan has a protected
pensions you have accumulated in your working life, your projected outgoings and pension age). Taking money from your
your potential later life expenses. pension plan is a big decision, and when and
how you do it can have significant impact on
O
ne more factor not to overlook is how notices with details of your tax codes before the how long your savings will last. So, when the
much of your retirement income you start of the tax year. It’s a good idea to check time comes, it’s important you feel confident
could lose in taxes. The amount you pay these are right and if you think there’s a mistake, you understand your options and how your
to HM Revenue & Customs (HMRC) may be more or if you’re not sure, contact HMRC. decisions might affect the tax you pay and how
than you expect, leaving you with less to cover The first time you take a lump sum (apart from long your money will last. n
your regular expenditure. the tax-free lump sum) from a defined contribution
New data highlights that retired households pension scheme, it’s likely you’ll be charged too
LIFE BEYOND WORK
lose nearly 14% of their income a year to direct much tax. This is because most initial lump sum
Defining your retirement goals and what
taxes. Income tax and council tax take 13.9% off payments are taxed using an emergency tax code.
you think you’ll require in terms of income
the average retired household’s pre-tax income This means you’re taxed as if you made the same
can help shape your plan and how much
of £31,674. Retirees are also impacted by around lump sum withdrawal every month of the tax year.
you will need. To discuss your requirements,
£4,078 a year in direct taxes[1]. You can claim back overpaid tax.
please contact us – we look forward to
hearing from you.
TAXES PAYABLE IN RETIREMENT TAX ON YOUR SAVINGS
Once you retire, you’ll no longer need to pay The way your savings are taxed doesn’t change
certain taxes, such as National Insurance. But when you retire or reach State Pension age. Source data:
other taxes are still applicable, including Income Banks and building societies now pay savings [1] Key Equity Release 6 April 2021
Tax. You’ll pay Income Tax on any taxable income interest without any tax taken off but, depending
you receive above your personal allowance on your situation, you may still have to pay tax on A PENSION IS A LONG-TERM INVESTMENT
(currently £12,570, tax year 2021/22). some of your savings income. NOT NORMALLY ACCESSIBLE UNTIL AGE 55
Taxable income includes your State Pension An effective tax plan is a crucial part of (57 FROM APRIL 2028). THE VALUE OF YOUR
(currently up to £9,339 if State Pension age is planning for retirement and can help you make INVESTMENTS (AND ANY INCOME FROM THEM)
after 5 April 2016), income withdrawn from your the most of your financial resources. It’s always CAN GO DOWN AS WELL AS UP WHICH WOULD
workplace or personal pensions, and income important to consider the amount of after-tax HAVE AN IMPACT ON THE LEVEL OF PENSION
from other sources, such as part-time work or income you’ll earn. Remember: ‘It’s not what you BENEFITS AVAILABLE. YOUR PENSION INCOME
rental income from buy-to-let properties. There earn, it’s what you keep.’ COULD ALSO BE AFFECTED BY THE INTEREST
are also other taxes you might not have factored RATES AT THE TIME YOU TAKE YOUR BENEFITS.
into your budget, such as Council Tax. INCREASING YOUR RETIREMENT INCOME
Before you retire, there are various ways to boost THE TAX IMPLICATIONS OF PENSION
DIFFERENT SOURCES OF INCOME your retirement income in the future. You may be WITHDRAWALS WILL BE BASED ON
If you have different sources of income, you may able to increase the State Pension you’re entitled YOUR INDIVIDUAL CIRCUMSTANCES, TAX
end up with several tax codes, which tell your to claim by filling any gaps in your National LEGISLATION AND REGULATION WHICH ARE
employer or pension provider how much tax to Insurance contributions record. SUBJECT TO CHANGE IN THE FUTURE. YOU
deduct. Don’t assume these are correct – HMRC If you haven’t taken advantage of them, you SHOULD SEEK ADVICE TO UNDERSTAND YOUR
does make mistakes. You should receive coding may have tax-efficient savings options, such as OPTIONS AT RETIREMENT.
10 L IF E ST YLE
/// New research has found that
three million people in the UK aged
over 50 are considering relocating,
as a direct result of COVID-19[1].
Reappraisal of urban living
THREE MILLION PEOPLE IN THE UK AGED OVER 50 CONSIDERING RELOCATING
The coronavirus (COVID-19) pandemic has led to a reappraisal of urban living, BETTER QUALITY OF LIFE
There can be many benefits to relocation,
with increasing numbers fleeing city confines in search of green space. whether it is a better quality of life, more space or
the opportunity to be closer to loved ones.
T
One thing that is clear is that many people will also
hree million people aged over FREEING UP PROPERTY WEALTH
see their decision informed by how their property
50 (12%) now plan to relocate in When planning a move, many over-50s consider
wealth factors into their long-term financial planning. n
retirement, as a direct result of how the value of their current home plays a role in
the pandemic. A year of lockdowns has their long-term plans. 1.3 million pre-retirees over 50
motivated these over-50s to want to move (9%) see themselves as more likely to turn to their LOOKING TO MAKE A
closer to family and friends, pursue a better property wealth to fund their lifestyle than before the LIFE-CHANGING DECISION?
quality of life or even move abroad. pandemic. In instances where people are relocating, As with any big, life-changing decision, it’s
they may downsize to free up property wealth. important to spend time reflecting on the
RETIREMENT MIGRATION HOTSPOTS When considering relocating to a new area, reason (or reasons) you want to move right
In 2020, the Office for National Statistics[2] make sure your new home is as future proof as now and the impact on your finances and
revealed that people of retirement age possible. It’s important to think carefully about future plans. Let us provide our insights into
in England were already leaving major the type of property you choose and whether it such a move – to discuss your requirements,
urban areas and instead moving to rural will suit you for the long term. Is it accessible or please contact us.
areas, locations by the coast or to Areas of could it be easily renovated to meet your needs
Outstanding Natural Beauty (AONBs). in the future?
Source data:
The data demonstrated that Dorset,
[1] Opinium Research for Legal & General ran
Shropshire and Wiltshire were ‘retirement CHALLENGES OF THE PANDEMIC
a series of online interviews among a nationally
migration hotspots’, while England’s largest Understand how a new area might impact on
representative panel of 2,009 over-50s from
cities saw net outflows of retirement age your living costs – consider any difference in
19- 23 February 2021. 242 over-50s plan to
residents, with London, Birmingham and living costs between areas and whether, overall,
relocate out of 2,009 UK over-50s – 242 / 2,009
Bristol seeing the largest number of exits. you are likely to spend more money, or save
25,197,069 over-50s = 3,035,187 or 3 million.
Nearly a year on, the research has found money, in your new location.
[2] https://www.ons.gov.uk/
that the pandemic has influenced some over- Relocating in retirement was already a well-
peoplepopulationandcommunity/
50s to plan a move after a year of lockdowns. observed trend, with older people reprioritising their
birthsdeathsandmarriages/ageing/articles/livinglong
Over-50s want to relocate to somewhere that needs as they enter the next stage of their life. As
ertrendsinsubnationalageingacrosstheuk/2020-07-
offers a better quality of life (7%), to move with many aspects of our lives, the challenges of
20#migration-of-older-people-is-driven-by-movement-
close to friends and family (4%) or to live the pandemic seem to have led many people to
away-from-major-cities-to-rural-and-coastal-areas
abroad (3%). take stock of their current living situation.DIVORCE 11
Mind the divorce gap
WOMEN SEE INCOMES FALL BY 33% FOLLOWING DIVORCE, COMPARED TO JUST 18% FOR MEN
Divorce is an emotionally charged event – and can be an expensive one. Source data:
[1] Opinium Research for Legal & General ran
The financial impact of divorce can also last for decades and carry on into
a series of online interviews among a nationally
older age. Women are also often impacted harder financially by divorce, new representative panel of 2,008 UK adults aged 50+
research highlights. who are divorced from 19-23 September 2020.
[2] https://www.ons.gov.uk/peoplepopulation
M
andcommunity/personalandhouseholdfinances/
any women are likely to see their more likely to worry about the impact of
incomeandwealth/bulletins/pension
household incomes fall by a third their divorce on their retirement (16% women
wealthingreatbritain/april2016tomarch2018
(33%) in the year following their versus 10% men).
divorce, almost twice as much as men (18%)
A PENSION IS A LONG-TERM INVESTMENT
and are significantly more likely to waive rights RIGHTS TO A KEY FINANCIAL ASSET
NOT NORMALLY ACCESSIBLE UNTIL AGE 55
to a partner’s pension as part of a divorce (28% While there is only a slight difference in the
(57 FROM APRIL 2028). THE VALUE OF YOUR
women versus 19% men)[1]. number of men and women who feel that
INVESTMENTS (AND ANY INCOME FROM THEM)
the division of their finances at the point of
CAN GO DOWN AS WELL AS UP WHICH WOULD
FINANCIAL STRUGGLE POST-DIVORCE divorce was fair and equitable (54% men and
HAVE AN IMPACT ON THE LEVEL OF PENSION
Women are more likely to face a financial 49% women), the research found that many
BENEFITS AVAILABLE. YOUR PENSION INCOME
struggle post-divorce (31% women versus 21% women may be signing over their rights to a
COULD ALSO BE AFFECTED BY THE INTEREST
men) and worry about the impact on their key financial asset.
RATES AT THE TIME YOU TAKE YOUR BENEFITS.
retirement (16% women versus 10% men). Women are significantly more likely to waive
Office for National Statistics (ONS) data shows, their rights to a partner’s pension as part of their
THE TAX IMPLICATIONS OF PENSION
on average, women already have a significantly divorce (28% women versus 19% men). This could
WITHDRAWALS WILL BE BASED ON
smaller pension pot than men. There are many have a significant long-term impact, particularly
YOUR INDIVIDUAL CIRCUMSTANCES, TAX
reasons driving this disparity, one being that as women tend to have less personal pension
LEGISLATION AND REGULATION WHICH ARE
women are typically paid less, while men who wealth, according to the most recent findings
SUBJECT TO CHANGE IN THE FUTURE. YOU
divorce are far more likely to have been the from the ONS [2]. n
SHOULD SEEK ADVICE TO UNDERSTAND YOUR
primary breadwinner in the relationship (74%
OPTIONS AT RETIREMENT.
men versus 18% women).
PLAN TO PROTECT
YOUR FINANCIAL FUTURE
GREATER DEGREE OF FINANCIAL BURDEN
This is why women will likely feel a greater
In most families, the two largest assets are /// Women are significantly
the family home and a pension fund. If you’ve
degree of financial burden if transitioning to a
made the decision to file for divorce, it’s time
more likely to waive
single-income household and are likely to face
to gather as much information as you can and their rights to a partner’s
financial struggles following a divorce from their
partner (31% women versus 21% men).
figure out the plan to protect your financial pension as part of their
future. Please get in touch to find out how we
This is particularly true for older women
can help you – we look forward to hearing
divorce (28% women
who divorce. One in four divorces occur after
from you. versus 19% men).
the age of 50 and women are significantly12 F IN ANCIAL PLANNIN G
Plan for tomorrow, live for today
HELPING YOU ACHIEVE YOUR FINANCIAL GOALS
Whatever stage of life you’ve reached and whatever the status of your current INVESTMENTS
From the old adage of saving for a rainy day to
financial situation, you could see a vast improvement in the future by setting financial
planning a comfortable retirement, most of us
goals. Most people are intrinsically motivated by goals and will work hard to achieve them. have investment goals in our life. Whatever your
personal investment goals may be, it is important
T
he key steps toward financial security A few questions to ask yourself: to consider the time horizon at the outset, as this
are to translate them into your own will impact the type of investments you should
terms. What, exactly, are your personal Q: Do I feel as if I’m currently working towards consider. The more time you have, or the more
financial goals? If you have trouble sorting achieving my goals? flexible the timing, the more investment risk you
them out, try classifying them as either wants Q: What changes do I need to make today for my can afford to take with your money.
or needs. goals to become a reality in future?
Go a step further and add short-term, medium- Q: How do I visualise my life in five, ten or twenty PENSION
term and long-term to the descriptions. Now you years from now? Your retirement may still seem a long way off, but
have some useful labels you can apply to your Q: What would I do if my job and income even so, now is the time to get serious about your
priorities. If you’re not sure where to start or what suddenly disappeared? financial plan and the best way to start is to focus
your goals should be, we’ll help you provide a Q: What are my most pressing financial concerns your retirement goals. Taking the time to think about
framework to consider them. I need to address? your most important priorities means you’ll be better
Q: What financial matters keep me awake at night? able to target spending and saving in accordance
IMPORTANCE OF SETTING FINANCIAL GOALS with what you want to achieve, both now and in the
Goals are a core element of any financial ATTACH A MEANING TO YOUR GOALS future. The end goal is to make you financially secure
planning, since you can’t create a strategy To improve your chances of success, be realistic, and independent in retirement, which should provide
without knowing what you are working towards. use actual figures and set time limits. Then ask a major incentive to be proactive. n
Your goals are the things that will motivate you yourself why that goal is important to you. Attaching
to manage your finances better and you should a meaning to your goals makes them more powerful. TIME TO CREATE THE
use them to frame every financial decision that LIFE YOU WANT?
you make in everyday life. SETTING EFFECTIVE FINANCIAL GOALS Whether you need help in setting your
To build an effective strategy based on your It’s sensible to create at least one goal in each of financial goals, or you’ve established them but
goals, they need to be specific, achievable and the following categories: don’t know what you need to do to achieve
personal to you. They’re also there to measure them, professional advice will help. If you’re
your progress and celebrate success. DEBTS unsure about the best approach for you, talk to
If you have outstanding debts and are paying us to discuss your options. Please contact us
PROCESS OF SETTING high rates of interest, your top priority should be for more information.
PERSONAL FINANCIAL GOALS paying them off, as this will usually make a bigger
Before determining how you want your difference to your financial situation than saving INFORMATION IS BASED ON OUR CURRENT
finances to look in the future, you need to the equivalent amount of cash and receiving UNDERSTANDING OF TAXATION LEGISLATION AND
understand how your finances look today. a lower rate of interest. Prioritise high-interest REGULATIONS. ANY LEVELS AND BASES OF, AND
Take note of any assets you currently have: debts, such as credit cards. RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.
your savings, your pension, your investments,
your home and any other assets of value, SAVINGS THE VALUE OF INVESTMENTS AND INCOME
such as your car or your business. ‘Pay yourself first’ by automating your savings. FROM THEM MAY GO DOWN. YOU MAY NOT
Review your debts, for example, your Assign an amount you’d like to add to your savings GET BACK THE ORIGINAL AMOUNT INVESTED.
mortgage, your student loan, and any overdrafts, within the next year and write down a record of
bank loans and credit card debts. Compare your what you’re saving for, whether that’s a deposit to PAST PERFORMANCE IS NOT A RELIABLE
income and your outgoings. buy a house or any other goal personal to you. INDICATOR OF FUTURE PERFORMANCE.TA X AT I O N 13
Wealth preservation
HOW TO MINIMISE A CAPITAL GAINS TAX BILL
The rules around Capital Gains Tax (CGT) are complex and they differ exemption – if you wanted to sell and repurchase
the same asset yourself in order to realise the
depending on your financial situation. It’s a complicated tax and, as a result, some gain there has to be a gap of 30 days between
people may get confused about how much they should expect to pay. sale and repurchase.
WHAT IS CAPITAL GAINS TAX? HOW ELSE CAN YOU MINIMISE DEDUCT COSTS
Capital Gains Tax is a tax payable on the profits YOUR CAPITAL GAINS TAX BILL? Any costs that you have incurred in the process
(or ‘capital gains’) you make from selling certain For assets that can’t be sold free from CGT and can’t of buying or selling an asset can be deducted
assets. These assets include some property, items be held within an ISA, there are other methods you from the profit you have made when calculating
of value such as art, jewellery or collectables, could potentially use to minimise your CGT bill. the CGT due. This could include auction fees,
company shares or other investments, and solicitor’s fees, stamp duty, et cetera.
businesses or business assets. USE YOUR FULL TAX-FREE
CAPITAL GAINS TAX ALLOWANCE REDUCE YOUR TAXABLE INCOME
HOW MUCH IS CAPITAL GAINS TAX? If you have any unused tax-free CGT allowance Your rate of Capital Gains Tax is based on your
The rate of CGT you pay can vary, which in one tax year (£12,300 per tax year 2021/22 income. This means that you could lower your bill
sometimes catches people out. until 2025/26), it might be a good opportunity by lowering the Income Tax that you’re liable to
Firstly, you have a CGT tax-free allowance (of for you to realise some investment gains. If you pay. You could contribute more of your income
£12,300 in the current tax year, though this can can spread your gains over several years, you into your pension pot, helping to avoid this money
change). The UK tax year starts on 6 April each could choose to take only up to the tax-free CGT being taxed, or by making charitable donations.
year and ends on 5 April the following year. If you allowance in each year. The CGT allowance is
make more than this in capital gains, you’ll be reset every year and cannot be carried forward. USE TAX-EFFICIENT INVESTMENT VEHICLES
charged a different rate depending on the asset We’ve already discussed Stocks & Shares ISAs,
that you sold and your Income Tax band. TRANSFER ASSETS TO YOUR PARTNER but another investment vehicle you could use to
Higher rate and additional rate taxpayers pay If appropriate, you could transfer assets to a protect your wealth from CGT is a pension. Other
20% CGT, or an increased 28% when selling spouse or registered civil partner without paying investment vehicles are also available to help you
residential property (other than a main residence, CGT and share assets between the two of you to manage Income Tax, CGT and Inheritance Tax.
the home that you live in). take advantage of both of your CGT allowances. However, due to the complex rules and variety
Basic rate taxpayers pay 10% CGT, increasing If you have exceeded both allowances, it might of options available, you should always obtain
to 18% for residential property, unless their make sense for any partner who is in the lower professional financial advice before investing. n
total capital gains (minus the 2021/22 personal tax bracket to realise further gains, as the rate of
allowance of £12,570), when added to their taxable CGT they pay may be lower. Any transfers must be
LET’S TALK TAX
income, would place them in a higher tax bracket. genuine and outright gifts for this to be effective.
If you’d like to explore or have any questions
If this is the case, they will pay the rates above.
about how to reduce a potential CGT bill,
OFFSET LOSSES
please get in touch to discuss your specific
HOW CAN YOU PROTECT YOUR ASSETS If you have sold any assets at a loss in the current
circumstances and review the options
FROM CAPITAL GAINS TAX? tax year, you can offset this loss against other
available to you.
Some assets can be sold free from CGT, including gains you have made. As long as you register
your main residence (in most cases, though CGT a loss with HM Revenue & Customs, within the
INFORMATION IS BASED ON OUR CURRENT
can sometimes apply), and personal belongings following four tax years, you can continue to
UNDERSTANDING OF TAXATION LEGISLATION AND
worth less than £6,000. offset it against any future gains indefinitely.
REGULATIONS. ANY LEVELS AND BASES OF, AND
In some cases, you can protect your
RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.
assets from CGT by keeping them within an SELL AND BUY BACK WITHOUT WAITING 30 DAYS
Individual Savings Account (ISA) wrapper. You could sell an asset and then your spouse
THE VALUE OF INVESTMENTS AND INCOME FROM
Assets that can be held in an ISA include immediately buys it back, which is known as the
THEM MAY GO DOWN. YOU MAY NOT GET BACK THE
bonds, company shares and investment funds. ‘bed and spouse’ technique. You could sell the
ORIGINAL AMOUNT INVESTED.
Any returns generated by these investments assets, before immediately buying them back
are free from Income Tax and CGT as long as within an ISA and protecting them in an ISA (the
PAST PERFORMANCE IS NOT A RELIABLE
they are held in an ISA. ‘bed and ISA’ technique). There is also the ‘bed and
INDICATOR OF FUTURE PERFORMANCE.
However, you can only contribute up to SIPP’ method. This method sees people saving for
£20,000 into an ISA each tax year, and once retirement sell their assets, before buying them
THE FINANCIAL CONDUCT AUTHORITY DOES NOT
you have used your ISA allowance any further back within their Self-Invested Personal Pension
REGULATE TAXATION & TRUST ADVICE.
investments will not be protected. (SIPP). These are ways of making use of your CGT14 FIN ANCIAL PLANNIN G
How to future-proof
your finances as a parent
A MOMENTOUS EVENT THAT CAN CHANGE
EVERY ASPECT OF YOUR FINANCIAL STABILITY
O
The coronavirus (COVID-19) ne of the areas that tends to cause some can identify any areas where you can cut back. If
anxiety is managing household finances you’re spending more on certain categories than
pandemic has had a shattering
with the additional cost of each child. you expected, set a realistic goal for how much
effect on the country. Future-proofing Starting a family is one of the most momentous you’d like to bring that spending down.
your finances can help you feel events in the life of a couple and it can change
every aspect of your financial stability. Although SET FINANCIAL GOALS
more secure about what lies ahead
you don’t need to be financially well off to start a Now that you know where you stand financially, you
– whether that’s preparing for big life family, it is essential that you plan and budget for it. can plan where you’d like to be in the future. Consider
milestones, such as starting a family, The estimated minimum cost of bringing up a what you want to achieve, and then commit to it. Set
child from birth to their 18th birthday, excluding SMART (specific, measurable, attainable, relevant and
or navigating difficult periods, such as
rent and childcare costs, is £153,000 over 18 years time-bound) goals that motivate you and write them
unemployment or poor health. for the child of a couple and £185,000 for the down to make them feel tangible. Then plan the
child of a lone parent[1]. The lone parent figure steps you must take to realise your goals, and cross
is higher because certain fixed costs of having off each one as you work through them.
children are offset by greater adult savings for Be specific about what’s most important to
the couple. Most notably in the case of transport, you. One of the big ‘hidden’ costs of having
since the cost of having a car is offset by greater children may be the need for more space. For
savings on public transport fares when there are example, your highest priority might be saving
two adults rather than one. for a larger home for your children to grow up in.
Whoever said the best things in life are free Or you might be saving to send your children
obviously didn’t have children. Let’s face it: kids are to a particular school. Be accurate about how
expensive. But, of course, they’re worth every penny. much you’ll need for these goals and break that
Here are some areas to consider for new parents. down into a monthly saving schedule.
CREATE A BUDGET UNDERSTAND YOUR ENTITLEMENTS
A good first step in reducing anxiety about Most people are entitled to financial support
general expenses is to know what you’re when starting a family, such as maternity and
spending. You’re less likely to be overwhelmed paternity pay and child benefit.
by a bigger-than-expected bill if you know it’s
coming. If you don’t have one already, starting a n Statutory Maternity Pay is paid at 90% of your
budget is essential. average weekly earnings for 6 weeks and
If you haven’t done so already, grab your then £151.97 (or 90% of your average weekly
calculator, bank statements and bills and draw earnings if this is lower) for 33 weeks.
up a household budget. Go back over the last n If you are not entitled to Statutory Maternity
few months and review your income (salary, Pay you may be able to claim Maternity
overtime, benefits and any other income sources) Allowance at up to £151.97 a week for 39 weeks.
and spending. n If you already receive certain benefits and
Create categories for spending, such as ‘debts’, this is your first child, you may be entitled to a
‘bills’, ‘groceries’, ‘entertainment’, et cetera and one-off payment of £500, called the Sure Start
mark them as ‘essential’ or ‘non-essential’ so you Maternity Grant.F I N AN C I AL P L A NNING 15
n Depending on your circumstances, you may PLAN FOR RETIREMENT financial advice will enable you to benefit from
be entitled to child benefit, tax credits or child Your retirement may seem a long way off and a expert opinion and make you feel confident
disability benefit. low priority compared to the financial needs of about your family’s finances. n
your young family now. But it’s important to stay on
PROTECT YOUR FAMILY AND LIFESTYLE track with your pension contributions through your
PLANNING FOR YOUR
Even if you have sufficient cash savings to cover twenties and thirties, as it’s the investments you
CHILD’S FUTURE
emergencies or periods of lost income, you also make now that have the best opportunity to grow.
The cost of raising a child won’t always be
need to consider different types of insurance that Look at how much you’re contributing and
the first thing parents think about when
would pay out in these instances. You need to obtain professional financial advice to see how
deciding to have a family, and regardless
ensure you are properly protected should you much income this might provide in retirement. If
of the cost, people wouldn’t change having
find yourself out of work due to an accident or you’re paying into an employer’s pension scheme,
children for the world. Staying on top of
sickness, or if you were to die prematurely. Parents a small increase in contributions might make
everything while also planning for your
with young families need protection the most. a bigger difference than you think. Often, your
child’s future can be challenging. To discuss
Parents considering cancelling insurance such contributions will be matched by your employer,
how we can help you plan for the retirement
as life cover or income protection as a way of and you’ll also receive tax relief, which provides an
you want, please contact us.
saving money need to think long-term. It could instant boost to your savings and helps the fund
have catastrophic implications on the family’s to grow faster than other kinds of investment.
Source data:
finances if either you, your spouse or partner
[1] Child Poverty Action Group – The Cost Of A
became unable to work or were no longer around. SEEK PROFESSIONAL ADVICE
Child In 2020 - October 2020
Of all the things that cross your mind in the
n Income protection insurance – provides a run-up to having children, it’s fair to say that the
regular income in case you are not able to impact on your finances will not be the thing you
work due to illness or injury. wish to dwell on. But how you plan to manage /// Most people are entitled
n Critical illness cover – provides a tax-free lump your money both before and after the patter of to financial support when
sum payment if you’re diagnosed with certain tiny feet should be a consideration once you’ve
starting a family, such as
specified serious illnesses. decided you’d like to start a family.
n Life insurance – provides either a lump sum Creating a budget, choosing protection maternity and paternity pay
or regular income for your family if you’re no insurance and planning for retirement can all be and child benefit.
longer here. difficult to manage alone. Seeking professional16 IN V E STM ENT
Creating wealth for children
INVESTING ISN’T JUST A LUXURY RESERVED FOR ADULTS
Saving for a child today is a wonderful gift for their future. Whether you want to DISCRETIONARY TRUSTS
The main difference between a bare trust and
help them buy their first car, contribute to their first home or even set them up for a
a discretionary trust is that a bare trust is held
comfortable retirement, there is little more fulfilling than providing financial security on behalf of a specific, named individual or
for your children or grandchildren. individuals, while a discretionary trust is held on
behalf of any number of eligible individuals.
I
t’s worrying to think about the expenses they appropriate, due to the very long-term nature of For example, a grandparent may open
will face as adults. So, the earlier you can start the investment, it’s possible to take a higher-risk a discretionary trust that any of their
investing money for your children, the more approach than with shorter-term investments, grandchildren or future grandchildren can
chance it has to grow before they need it as an adult. which has the potential to yield greater rewards. benefit from. Who benefits from the trust will
But, to ensure that the value of their money As with an adult pension, all growth is ultimately be decided by the trustees.
isn’t eroded by inflation, taxes and fees, you’ll protected from Income Tax and Capital Gains The tax treatment of a discretionary trust
need to choose the right investment approach. Tax. So, it could take away some of the burden can vary depending on your specific financial
Here are some of the options you may wish to of retirement planning as an adult. For a child situation, so you should seek professional
discuss with us. with no earnings or earnings below £3,600pa, financial advice before opening one. n
contributions are currently capped at £2,880 a
JUNIOR ISAS year, totalling £3,600 after tax relief is applied, in
A Junior Individual Savings Account (JISA) is the current 2021/22 tax year. WANT TO FIND OUT MORE
the children’s equivalent of a regular Individual ABOUT HOW TO GET STARTED?
Savings Account (ISA) and works in much the TRUSTS When it comes to investing in your child’s or
same way, protecting the capital within it, and Trusts are a legal agreement where you grandchild’s future, putting aside just a small
any capital growth, from Income Tax and Capital – the ‘settlor’ – place assets into a trust amount of money on a regular basis can
Gains Tax. You can choose between a Junior and nominate a trustee to manage those really add up. Each option comes with specific
Cash ISA and a Junior Stocks & Shares ISA, or a assets (whether it’s money, buildings, land advantages and risks. If you’d like to find out more
child can have one of each. or investments) on behalf of your child or about how to get started, please get in touch with
Only a parent or guardian can open a Junior children, known as the ‘beneficiaries’. us today – we look forward to hearing from you.
ISA on a child’s behalf, but anyone can pay into
it, up to a limit of £9,000 in the current tax year BARE TRUSTS
INFORMATION IS BASED ON OUR CURRENT
(that limit may change in future tax years). The A bare trust is an investment vehicle that allows
UNDERSTANDING OF TAXATION LEGISLATION
UK tax year starts on 6 April each year and ends you to invest capital on behalf of a child while
AND REGULATIONS. ANY LEVELS AND BASES
on 5 April the following year. Once a child turns retaining full control of the investments until the
OF, AND RELIEFS FROM, TAXATION ARE
16, they gain control of their ISA, but they cannot child turns 18, or 16 in Scotland.
SUBJECT TO CHANGE.
make withdrawals until they turn 18. Along with the initial capital, any return
generated by a bare trust will belong to the child.
THE VALUE OF INVESTMENTS AND INCOME
JUNIOR SIPPS It will therefore be taxed as such, usually meaning
FROM THEM MAY GO DOWN. YOU MAY NOT
A Junior Self-Invested Personal Pension (Junior that there is less tax to pay than if the investments
GET BACK THE ORIGINAL AMOUNT INVESTED.
SIPP) is a type of pension you can open on behalf were held by the adult, since a child has their own
of someone who is under 18. While we often personal allowances for income and capital gains.
PAST PERFORMANCE IS NOT A RELIABLE
think of a pension as a product for adult workers, Under parental settlement rules for income tax,
INDICATOR OF FUTURE PERFORMANCE.
opening one for a child has many benefits. if the income exceeds £100 each year then the
Investments in a Junior SIPP have more years whole amount will be taxed as the parent’s.
THE FINANCIAL CONDUCT AUTHORITY DOES
to grow before the pension holder retires, and so There is no upper limit on how much can be
NOT REGULATE TAXATION & TRUST ADVICE.
can benefit greatly from compounding returns. If invested each year in a bare trust.You can also read
