Tax saving opportunities - 'New Age' of self-employment Planning for a more relaxing retirement - Attivo Financial Planning

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Tax saving opportunities - 'New Age' of self-employment Planning for a more relaxing retirement - Attivo Financial Planning
Spring 2021
                                                   £4.99

                                       Planning for a
Tax saving                             more relaxing
opportunities                             retirement

Time to identify, plan for and
mitigate your tax burdens             ‘New Age’ of
                                 self-employment
Tax saving opportunities - 'New Age' of self-employment Planning for a more relaxing retirement - Attivo Financial Planning
CONTENTS

    Welcome
    Welcome to the Spring issue of Life

                                                Contents
    Magazine.
    As we enter a new financial year now
    is the perfect time to start planning
    for, and potentially mitigating, your tax   3 Gender pension gap                                   14 ‘New Age’ of self-employment
    burdens. On page 16 I look at the top       What you can do to reduce a future financial           Changes in how people save, invest and plan
    five things you should consider before      shortfall.                                             for retirement.
    the end of the tax year.
    The coronavirus pandemic has resulted
    in more Britons becoming their own          4 New financial year, new start to                     16 Tax saving opportunities
    bosses, but with just 31% saving into       your finances                                          It’s time to identify, plan for and potentially
    a pension, David Halloran, Financial        Taking time to understand your financial               mitigate your tax burdens.
    Planner, looks at how the self-employed     plans will really pay off.
    can save, invest and plan for their
    retirement on page 14.                                                                             18 Planning for a more relaxing
    Retirement should be what you want it       7 Are you under-prepared for a                         retirement
    to be and on page 18, Sophie Pearcey,       financial emergency?                                   Time to get back to dreaming about stopping
    Financial Planner, looks at the key         Pandemic causes people to re-evaluate their            work. Not dreading it.
    considerations to help you plan for a       financial resilience.
    relaxing retirement and ensure you
    aren’t left fretting about your finances.                                                          18 Breaking up is hard to do
                                                8 Taxing times on the horizon!                         Managing the financial impact of divorce.
    Bitcoin is often in the headlines, and
                                                Taxing times on the horizon!
    with recent high values prompting
    investors to ask whether it’s time to
                                                                                                       21 Bitcoin – time to include?
    include Bitcoin in their portfolio, Roy
                                                10 Why cash may not be king                            The Bitcoin rally has certainly caught the
    Coulson, Proposition Analyst, looks at
                                                How much of your wealth do you currently               attention of many, reaching a high valuation
    the pros and cons of investing in this
                                                hold in cash?                                          of almost $50,000 in February 2021.
    cryptocurrency on page 21.
    If there is a particular topic or area
    you would like us to cover, please let      11 Personal Finance Portal                             22 Is the future of your loved ones
    us know. If you have any questions          Factfind on managing your Personal                     in good hands?
    about any of the articles or would like     Finance Portal                                         Coronavirus spurs one in six to take action on
    to speak to us about your financial                                                                their Will.
    planning needs, please get in touch.
                                                12 Wealth needs managing – now
                      Stuart Harding            more than ever                                         24 More over-55s forced to dip into
                      FPFS FCSI MSc             Achieving your financial goals through                 pension pots
                      Managing Director         investing, and one size does not fit all.              Understanding the different ways you can
                                                                                                       use your pension money.

                                                Also available online at attivofinancialplanning.co.uk/lifemagazine and sovereignasset.co.uk/lifemagazine

2                                                                                                                    LIFE Spring 2021 | Attivo Financial
Tax saving opportunities - 'New Age' of self-employment Planning for a more relaxing retirement - Attivo Financial Planning
RETIREMENT

Gender pension gap                                                                                  Top 5 pension tips:
                                                                                                    1. Find out what you have got by talking
                                                                                                    to your employer or checking your
What you can do to reduce a future financial shortfall                                              pension statement. You can trace old
                                                                                                    pensions at www.gov.uk.

A lot has been made of the gender               lives. Women are more likely to take time           2. Check if you are eligible to join your
pay gap, but what’s not so well                 out of the workplace to look after children         employer pension scheme. It’s a great way
known is how this can affect women              or elderly relatives, which are the two             to build up savings, with your employer
in retirement. Unsurprisingly, women            biggest drivers in the gender pensions gap.         paying in on your behalf too.
don’t fare as well as men when it
                                                Saving enough for retirement                        3. For many women short-term stability is
comes to the savings they’ve built
                                                Also, the social structures of our families,        the priority just now but if you can, try to
up for a healthy and economically
                                                workplaces, benefits systems and                    keep paying into your pension, even if it’s
stable retirement.
                                                communities have an interdependent and              the minimum for now, so your employer
The gender pension gap, the pension             negative impact on women’s abilities to             keeps paying too. It soon adds up.
savings gap between men and women, has          save enough for retirement. As a result of
                                                                                                    4. Decisions like reducing hours or
closed to just 1% – the narrowest on record     the gender pay gap, in the vast majority of
                                                                                                    stopping working can leave you with less
– as more women are putting enough              cases it is women who earn less than men.
                                                                                                    savings at retirement. If your income
money aside for a comfortable retirement.
                                                Therefore, when decisions are made about            drops over time your partner may be able
Almost three in five (59%) women are now
                                                who should stay at home to look after               to pay into a pension for you to keep the
saving adequately, compared to 60% of men.
                                                children it usually makes sense that the            finances balanced.
Persistent pay gap exists                       lower earner takes a career break. The fact
                                                                                                    5. Claim child benefit – check if
Despite this progress, the persistent pay       that this is seen as the norm has an impact
                                                                                                    you are eligible on the government
gap and part-time working ratio means           on women’s career prospects, despite their
                                                                                                    website. Going through the application
women saving adequately on the median           potential – and despite equal opportunities
                                                                                                    process keeps your National Insurance
wage are still saving £1,300 a year less than   legislation.
                                                                                                    contributions up to date, which you’ll
men, according to a new report[1].              Source data:
                                                                                                    need to claim the full State Pension at
                                                [1]
                                                    The research was carried out online by YouGov
This means that for a woman to save the         Plc across a total of 5,757 adults aged 18+. Data
                                                                                                    retirement age.
same amount into her pension as a man,          was weighted to be representative of the GB
she would need to work an extra 37 years        population. Fieldwork was carried out 26 March
– which would take her over the age of 100      – 11 April 2020. An additional survey was
                                                carried out online by YouGov Plc across
if retiring at State Pension age – a number     a total of 2,251 adults aged 18+. Data
that is likely to grow as the full economic     was weighted to be representative
impact of the pandemic is realised.             of the GB population. Fieldwork was
                                                carried out 11 March – 12 May 2020.
Compound interest benefits
Young women are among those struggling
most to save for later life. Just 46%
of those in their 20s are saving the
recommended minimum 12% of salary. This
compares to 56% of men the same age, and
to almost two-thirds (64%) of women in
their 50s, showing that women do tend to
save more as they get older.

However, not saving more while young
means women miss out on the benefits of
compound interest, which can help savings
increase substantially over their working

LIFE Spring 2021 | Attivo Financial                                                                                                                3
Tax saving opportunities - 'New Age' of self-employment Planning for a more relaxing retirement - Attivo Financial Planning
FINANCIAL PLANNING

New financial year, new start
to your finances
Taking time to understand your financial plans will really pay off

Getting our financial life in order will be a top   Money doesn’t buy happiness but          10 areas to consider when
priority for many this year. Consider focusing on   it can certainly help. And the key       setting financial goals
two key areas: goals related to being prepared      is building healthy financial habits.
for the unexpected this year, and those related
to what you want to be different at the end of
                                                    Whether you want to stay on top of
                                                    your bills, pay off your debts sooner,
                                                                                             1  New financial year, new
                                                                                                financial goals
                                                                                             Having clear financial goals to work
the year.                                           save for a dream holiday or look
                                                                                             towards will give you a sense of
                                                    forward to a successful retirement,
                                                                                             purpose and motivation to spend
                                                    taking time to understand your
                                                                                             less and to save and invest more
                                                    financial plans will really pay off.
                                                                                             throughout the year ahead. But
                                                                                             remember, without a plan in place, a
                                                                                             goal is just a dream. So, if you want
                                                                                             to ensure you achieve your financial
                                                                                             resolutions, then it helps to break
                                                                                             the bigger goals down into more

4                                                                                                  LIFE Spring 2021 | Attivo Financial
Tax saving opportunities - 'New Age' of self-employment Planning for a more relaxing retirement - Attivo Financial Planning
FINANCIAL PLANNING

                                                                                                          or to leave something behind for
                       manageable bite-sized objectives that     on interest? The key is making a plan
                                                                                                          grandchildren, reviewing what your
                       you can gradually work through bit by     to pay off the balances before the
                                                                                                          goals are and whether you’re on
                       bit to create better financial habits.    introductory period ends and you
                                                                                                          track is important. Ask yourself
                                                                 begin paying a standard interest rate.

                       2    Go over your budget
                            Review this past year’s budget.
                       What did and didn’t work for you? If
                                                                 Are you utilising less than 25% of
                                                                 your available credit across all of
                                                                                                          these questions: How long should
                                                                                                          I be prepared to put my money
                                                                                                          away for? Do I want to invest for
                       your current budgeting methods and        your cards and loans at any one          income, growth, or both? Are my
                       tools aren’t working, look for a better   time? Anything higher could affect       investments aligned with my values
                       way to track your spending. Assess        your overall credit rating score.        and life goals? How can I grow my
                       your income and expenses, looking                                                  wealth?
                       for places to save money. Revise
                       your budget to reflect any changes
                                                                 4   Check the interest rate on
                                                                     your savings
                                                                 Savings rates have been at
                                                                                                          It’s important to remember that
                                                                                                          volatility is also part of investing. But
                       to your income or expenses in the
                                                                 historically low levels since the        rather than looking at short-term
                       new year. If you don’t have a budget,
                                                                                                          volatility, it pays to look at the bigger
                       it’s time to make one. Ask yourself:
                                                                                                          picture. Your long-term goals should
                       What are my priorities? How can I                  When choosing a                 remain centre stage. All investments
                       make this sustainable?
                                                                          savings account,                come with some level of risk and

                       3   Evaluate your emergency fund
                           Do you have an emergency fund
                       to cover up to six months’ worth of
                                                                 you need to think carefully
                                                                 about whether you will need
                                                                                                          you can decide how much risk you
                                                                                                          want to take. This should be tied
                                                                                                          to your overall financial position
                       your expenses? That’s the goal, but
                                                                 access to your money, how                and investment attitude. Differing
                       even if you haven’t saved that much,      long you are looking to save             circumstances and goals may mean
                       continue to work towards building up      for, and how you                         that what was once appropriate,
                       this important safety net. If you don’t   want to operate it                       no longer is. It’s important that you
                       have an emergency fund, start one.                                                 feel comfortable with the level of
                                                                                                          risk you’re taking with investments.
                       Do you need to save for any big           financial crisis of 2008. Which
                                                                                                          Questions to ask are: Should I review
                       expenses or goals this year? If so,       makes it all the more important
                                                                                                          my investment portfolio? Is my
                       develop a budget for this so you can      to shop around for the best rates.
                                                                                                          portfolio sufficiently diversified?
                       start setting aside the money you’ll      Could you deposit money into
                                                                                                          Does my portfolio reflect my goals
                       need. Consider setting up automated       another account where you receive
                                                                                                          and risk profile?
                       transfers to your savings account(s)      a better rate of interest?
                       to help build your emergency fund
                       and other savings.
                                                                 It’s important to check how your
                                                                 savings are growing and whether it
                                                                                                          6   Planning for your retirement
                                                                                                              Even if retirement seems a long
                                                                                                          way off, think about what you want

                       3   Review your borrowing
                           Find out if you could save money
                       by refinancing your mortgage, car
                                                                 is at a rate above inflation, and then
                                                                 decide if you need to make changes.
                                                                 Different types of savings accounts
                                                                                                          your money to do for you when
                                                                                                          you stop working. Ask yourself: Do I
                                                                                                          know how much money I may need
                       loan or student loan. If you have         have different rules on how much you
                                                                                                          in retirement? How long will my
                       high-interest debt, make a plan           can put in and when. When choosing
                                                                                                          money need to last for? How much
                       to pay it down. If you don’t have         a savings account, you need to think
                                                                                                          should I be saving today?
                       enough extra money in your budget         carefully about whether you will need
                       to make a big dent, investigate           access to your money, how long you       Planning for your retirement is a
                       credit cards with a 0% introductory       are looking to save for, and how you     great way to prepare yourself for
                       balance transfer offer. Could you         want to operate it.                      the future, and to make sure that
                       transfer your high-interest balances                                               you’ll be financially secure and
                       to a card with a temporary 0%
                       interest introductory period to save
                                                                 5  Take a look at your investments
                                                                    Whether your goal is to create
                                                                 a nest egg for early retirement
                                                                                                          live the lifestyle you want – even
                                                                                                          when you’re no longer earning.

LIFE Spring 2021 | Attivo Financial                                                                                                              5
Tax saving opportunities - 'New Age' of self-employment Planning for a more relaxing retirement - Attivo Financial Planning
INVESTMENTS
FINANCIAL PLANNING

                 The earlier you start the process of
                 planning for your retirement, the
                 more manageable it will be, and the
                                                            8    Make the most of your
                                                                 tax-efficient allowances
                                                            Time is running out if you haven’t
                                                                                                    forward to. It can easily slip down
                                                                                                    the to-do list – for a number of
                                                                                                    reasons. If you were to die without
                 less of an impact it’ll have on your       taken full advantage of your tax-       a Will in place, your estate would
                 daily finances. Questions to ask           efficient allowances before the         be shared out according to certain
                 include: Am I taking full advantage        end of the tax year on 5 April.         rules, known as ‘intestacy rules’
                 of the tax-efficiency of my Personal       Every tax year, commencing on 6         and this could create a tremendous
                 Pension or Workplace Pension?              April, you receive new Individual       burden on your family and loved
                 What am I looking forward to doing         Savings Account (ISA) and pension       ones. A Lasting Power of Attorney
                 the most in retirement? How much           allowances. These have valuable         for Health and Welfare (LPA) will
                 retirement savings will I actually         tax benefits that are designed to       also allow you to give someone
                 need? How much can I afford to             encourage you to save what you can      you trust the legal power to make
                 spend yearly once I have retired?          and help you make the most of the       decisions on your behalf in case
                                                            money you put aside.                    you later become unable to make

                 7    Combining a number of
                      different pensions
                 It’s not uncommon now for people                   Pension
                                                                                                    decisions for yourself.

                                                                                                    Other questions to consider: How
                 to have built up a number of                       consolidation                   can I leave money to charity?
                 pensions during the course of their                                                How much money can I give away
                                                            could potentially be a
                 lives. Ask yourself the following:                                                 each year in gifts without tax
                 Over my career, have I worked for
                                                            way to maximise                         implications? Can I make regular
                 different employers and built up a         the value of your                       gifts out of my surplus income?
                 number of different pension pots           investments                             Should I put my assets into a trust
                 and/or pension schemes? Do I have                                                  during my lifetime?
                 personal pensions built up during
                 times spent being self-employed?

                 At some point and not necessarily near
                                                            Questions to ask are: Have I fully
                                                            maximised my contribution levels
                                                            for the current 2020/21 annual
                                                                                                    10       Check when your next
                                                                                                             review is
                                                                                                    You’re not sure what to prioritise –
                 your retirement, you’ll have to decide     £20,000 ISA allowance and annual        your pension, your mortgage or your
                 whether to consolidate your pensions       £40,000 pension allowance? Can          ISA. You’re starting to lose sleep
                 or leave them separate. Pension            I take advantage of pension carry       over whether you’re saving enough
                 consolidation could potentially be         forward to make extra pension           for your children’s education. And
                 a way to maximise the value of             contributions? Am I fully using my      you can’t quite recall whether you
                 your investments. It can make it           Personal Savings Allowance for          have accumulated four, five – or was
                 easier to track how well a fund is         tax-free interest payments? What        it six? – pension pots from previous
                 performing in putting your money to        is my financial gifts tax allowance?    jobs. Now may be time to consider
                 work on the markets to boost your          Can I use my Capital Gains annual       your next financial review so that
                 investment returns, and it provides        allowance to create tax-free returns?   we can discuss your immediate and
                 an opportunity to reduce how much                                                  future plans, and talk you through
                 you lose paying scheme charges.
                 However, consolidating a pension
                                                            9   Review your estate plan
                                                                There is never a good reason to
                                                            not have a Will. Ask yourself: How
                                                                                                    your financial goals. 

                 isn’t for everyone. When weighing up
                                                            can I write my family’s future? Have
                 whether consolidating your pensions is
                                                            I written a Will, or does my existing
                 the right move, it’s essential to obtain
                                                            Will need updating? Making a Will
                 professional financial advice.
                                                            is not a task that many people look

6                                                                                                         LIFE Spring 2021 | Attivo Financial
Tax saving opportunities - 'New Age' of self-employment Planning for a more relaxing retirement - Attivo Financial Planning
FINANCIAL PLANNING

                                                   Are you under-prepared
                                                   for a financial emergency?
                                                   Pandemic causes people to re-evaluate their
                                                   financial resilience

Managing your current and future                   Rainy day funds help people cope with life’s       there be further falls in stock markets. Having
finances successfully can be a minefield           unforeseen events and play an important role       access to emergency cash funds can help tide
in today’s economic climate. The                   for short and long-term planning. The general      them over while markets recover.
coronavirus (COVID-19) pandemic has                rule is that people should build a financial
                                                                                                      Financial ‘haves’ and ‘have nots’
derailed many a financial plan, ushering           cushion, with six months’ worth of living
                                                                                                      Unfortunately, a lack of savings or a savings
in job losses, decreased earnings and              expenses regarded as a good starting point.
                                                                                                      pot that has already run dry means the
creating lifestyle changes that have the
                                                   Year’s worth of savings                            immediate priority for one in four people is
potential to send our spending into an
                                                   Unfortunately, a quarter (24%) of people in        simply ‘just getting by’. The stark reality is that
unhealthy cycle.
                                                   the UK would struggle straight away with           the longer the coronavirus crisis continues,
The general financial uncertainty created by the   no rainy day fund to fall back and almost a        the more people will find themselves in that
COVID-19 pandemic has resulted in over a third     third (31%) would run out of money within          predicament, underlining the real need of
(37%)[1] of UK savers acknowledging they’re        three months. At the other end of the scale, a     safety net savings.
under-prepared for a financial emergency and       fifth (21%) of people have more than a year’s
                                                                                                      There is clearly a contrast in the UK’s financial
have started to build a rainy day fund.            worth of savings in their rainy day fund, with
                                                                                                      health between the financial ‘haves’ and ‘have
                                                   the average covering eight months.
Bigger financial cushion                                                                              nots’ and an individual’s ability to manage
However, while many admitted their need to         Having a cash buffer is particularly important     their money. While the economic outlook
build a bigger financial cushion, the findings     for those approaching or in retirement, helping    has prompted many to begin building a rainy
highlighted wide geographical differences          to protect their pension savings during volatile   day fund for the first time, others have been
across the UK. In Edinburgh, only a quarter        market conditions. However, with more than a       exposed as being perilously under-prepared. 
(24%) of people said the pandemic has              quarter of over 55s having no rainy day fund,      Source data:
prompted them to build up funds for a financial    there is a danger that dipping into retirement      Opinium surveyed 2,000 adults for Aegon between
                                                                                                      [1]

emergency, half the number of those living in      savings at a time when the value has fallen        23 Oct – 26 Oct 2020
London (47%).                                      will deplete their funds more quickly should

LIFE Spring 2021 | Attivo Financial                                                                                                                      7
Tax saving opportunities - 'New Age' of self-employment Planning for a more relaxing retirement - Attivo Financial Planning
TAX

Taxing times on the horizon!
Are you protected against future Capital Gains Tax rises?

           It is almost inevitable that taxes    Investors handed over £9.5 billion       as well as areas where the present
           will have to rise to help meet        to HM Revenue and Customs via            rules can distort behaviour or do not
           the potential £391 billion bill the   capital gains duties in the year to      meet their policy intent.’
           government has racked up in           April 2019, a record haul for the
                                                                                          Distorted behaviour
           supporting the British economy        Government. Subsequently, the
                                                                                          Mr Sunak asked for a review of its
           through the coronavirus               Office of Tax Simplification (OTS)
                                                                                          use in ‘the acquisition and disposal of
           (COVID-19) pandemic.                  published a report[1] in November
                                                                                          property’ and ‘the practical operation
                                                 2020 outlining the policy design and
                                                                                          of principal private residence relief’.
                                                 principles underpinning Capital Gains
                                                                                          This suggests that reform could be on
                                                 Tax (CGT).
                                                                                          the cards. The first report found ‘many
                                                 Shorter timeframe                        features of CGT which can distort
                                                 The OTS acknowledged that the            behaviour, including its boundary with
                                                 consultation has been produced in        Income Tax and interconnections with
                                                 a shorter timeframe and this hints       Inheritance Tax.’
                                                 that change to CGT will be on the
                                                                                          The report said that ‘more closely
                                                 cards as the Government looks to
                                                                                          aligning CGT rates with Income
                                                 counteract the escalating deficit
                                                                                          Tax rates has the potential to raise
                                                 caused by the COVID-19 pandemic.
                                                                                          a substantial amount of tax for
                                                 In July 2020, the Chancellor of the      the Exchequer.’ A second report,
                                                 Exchequer, Rishi Sunak, asked the        which will follow early
                                                 OTS to carry out a review of CGT,        this year, will explore
                                                 to ‘identify opportunities relating to   key technical and
                                                 administrative and technical issues      administrative issues.

8                                                                                               LIFE Spring 2021 | Attivo Financial
Tax saving opportunities - 'New Age' of self-employment Planning for a more relaxing retirement - Attivo Financial Planning
TAX

                       Raising revenues                                 97% of Capital                  wealth transfers to happen earlier, as
                       Above an annual exemption of                     Gains Tax revenue               well as raising significant funds.
                       £12,300 (2020/21), CGT is charged       is paid by over-35s, with                Annual exemption
                       on gains at 10% for basic rate          most people caught by                    The OTS also suggest lowering the
                       taxpayers and 20% for higher and
                                                               the tax in their                         annual exempt amount. Their view
                       additional rate taxpayers. This
                       rises to 18% and 28% respectively
                                                               50s and 60s                              is that while small gains should
                                                                                                        still be exempt in order to avoid
                       where the gains relate to residential
                                                               Income Tax has been touted for           administrative hassle for the sake
                       property. Income Tax is charged at a
                                                               some time and so that is relatively      of a minor tax bill, the current
                       basic rate of 20%, rising to 40% and
                                                               unsurprising, although it would lead     allowance results in too many profits
                       45% for higher and additional rate
                                                               to a significant rise in tax paid by     being tax-free.
                       taxpayers.
                                                               those subject to CGT.
                                                                                                        It seems highly likely that changes
                       According to the OTS, 97% of CGT
                                                               Other proposals, such as scrapping       are on the horizon and, while it
                       tax revenue is paid by over 35s, with
                                                               CGT uplift on death, have far-           is not suitable for everyone to
                       most people caught by the tax in
                                                               reaching consequences and need to        change their financial plans because
                       their 50s and 60s. It means that
                                                               be considered carefully. One of the      of mere policy speculation, it is
                       raising additional revenues can be
                                                               biggest challenges of tinkering with     worthwhile reviewing in light of
                       positioned as a tax on those with
                                                               the CGT system is its interaction        what will inevitably be a harsher
                       the broadest shoulders.
                                                               with several other parts of the tax      tax environment. If adopted, the
                       Reforms package                         system, in particular Inheritance Tax,   recommendations by the OTS could
                       The OTS has suggested a package         so many changes can be complex           have a significant impact on some
                       of reforms, some of which are           and have knock-on consequences for       investors, company directors and
                       tweaks around the edges that will       other parts of the tax system.           buy-to-let property owners when
                       be relatively quick wins and some                                                realising gains. 
                                                               Inheritance Tax
                       which will cause a bit of a stir. The                                            Source data:
                                                               CGT uplift means that CGT is
                       prospect of bringing CGT in line with                                            [1]
                                                                                                            https://assets.publishing.service.gov.
                                                               overlooked when an individual            uk/government/uploads/system/
                                                               dies and they hold taxable assets        uploads/attachment_data/
  Conditions associated with Capital Gains Tax
                                                               that have gone up in value. This         file/935073/
  includes the following:                                                                               Capital_Gains_Tax_
                                                               is because when the assets are
  • You can carry forward losses from previous years           transferred to someone else,
                                                                                                        stage_1_report_-_Nov_2020_-_
                                                                                                        web_
  • Capital Gains Tax arises on disposal of an asset          normally a spouse or family member,
                                                               they are ‘reset’ for CGT purposes.
                                                                                                        copy.pdf

   – normally on sale, but gifts, insurance claims or
                                                               Instead, the assets may be subject to
   compensation for losses can be chargeable disposals
                                                               Inheritance Tax.
  • The value of the gain is normally the amount you          The OTS recognise that this means
   receive, but gifts and certain sales may be valued at
                                                               some people may hold on to assets
   the open market value
                                                               until they die for the tax benefits.
  • Capital Gains Tax is not normally payable on death.        Removing or limiting this relief
                                                               could be seen as a way to encourage

LIFE Spring 2021 | Attivo Financial                                                                                                                    9
Tax saving opportunities - 'New Age' of self-employment Planning for a more relaxing retirement - Attivo Financial Planning
INVESTMENT

Why cash may not be king
How much of your wealth do you currently hold in cash?
One paradox of the coronavirus                 Below the rate of inflation                       holding cash and are comfortable with the
(COVID-19) pandemic is that even               By leaving large amounts of money sitting in      idea of setting your money aside for the long
as businesses have shut down and               cash you could be losing out on substantial       term (at least five years or more).
jobs have disappeared, some British            returns over the long run. The rates of return
                                                                                                 Whether you’re concerned that you’ll lose
households have on average been                on cash accounts are extremely low and have
                                                                                                 your money or just don’t know where to begin
saving more money than they usually            plummeted further still since the COVID-19
                                                                                                 investing, it’s common for some people to
do, due to lower spending, according           outbreak, with the average currently below
                                                                                                 hold large cash balances in deposit accounts,
to new research[1].                            the rate of inflation.
                                                                                                 especially in times of market uncertainty. But
But the choice between holding large           The research also reveals this group are          historically cash has not been a good store
amounts of cash long-term in a savings         aware of the opportunities, as 42%, the           of value for individuals due to the corrosive
account versus investing could have a big      largest of any wealth group, think there are      nature of inflation eating into its purchasing
impact on your future wealth. Prior to the     good opportunities in the current market.         power over time.
COVID-19 outbreak, data also highlighted the   Indeed, 29% would like to move their cash
                                                                                                 Well-structured and well diversified
fact that a considerable number of people      to investment but don’t know what to do,
                                                                                                 portfolio
already had substantial amounts of money in    and 37% plan to be more active with their
                                                                                                 This is particularly acute in the current
cash, including those with £250k or more in    investments overall.
                                                                                                 environment where deposit rates on cash
investable assets.
                                               Long-term return for specific goals               are low and in the event inflation starts to
More money to invest than usual                Every investor needs a cash buffer in case of     accelerate. If you have excess cash balances you
The research reveals that 18% of those with    emergencies, but too much can negatively          should consider how to protect and grow your
£250k or more in investable assets have        impact on returns. A good rule of thumb is        capital to meet your specific needs.
40-60% of these assets in cash, or at least    to save six months of your salary in cash and
                                                                                                 Investing does, of course, carry its own risks
£100k. This group have also benefitted from    then invest in a spread of different assets
                                                                                                 but a well-structured and well-diversified
the lockdown as 35.5% have said they have      that can deliver a long-term return for your
                                                                                                 portfolio, tailored to an individual’s
more money to invest than usual.               specific goals.
                                                                                                 requirements and managed sensibly, ought to
During periods of stock market volatility,     It’s important to do this in the most tax-        protect capital from inflation and the decline in
which we’ve seen over the past                 efficient way, by making sure you fully utilise   purchasing power over time. Diversifying your
year, it’s totally understandable              your allowances, including the Individual         investment portfolio is one of the best ways to
that cash feels safe, and can                  Savings Account (ISA) allowance and the           reduce risk, and thus promote growth. 
be looked upon as a security                   pension allowance.                                Source data:
blanket of sorts. But in the                                                                      Quilter research of 2,005 UK adults aged 40+ carried
                                                                                                 [1]
                                               Purchasing power over time                        out by Toluna. According to ONS figures over-40s hold
long run, it can do more
                                               You might choose to invest because you are        90% of the UK’s savings.
harm than good to your
                                               looking to achieve potentially higher returns
financial wellbeing.                                                                             Information Is based on our current
                                               on your money than you might get from
                                                                                                 understanding of taxation legislation and
                                                                                                 regulations. Any levels and bases of, and reliefs
                                                                                                 from, taxation are subject to change.
                                                                                                 The value of investments and income from
                                                                                                 them may go down. You may not get back the
                                                                                                 original amount invested.
                                                                                                 Past performance is not a reliable indicator of
                                                                                                 future performance.

10                                                                                                              LIFE Spring 2021 | Attivo Financial
Personal Finance
Portal
In this issue we look at the ‘Profile’              The Review tab can be accessed from the           Completing your Profile
section of the Persoanl Finance                     top right of the screen and brings all of your    Where a section is shown in green with a tick, that
Portal. This is where you let us                    personal data together in a form for easy         means that the data in that section is complete. If
know the information your Financial                 reviewing and editing.                            you see a section which is faded and you cannot
Planner needs to help you make                                                                        access it, that means that you need to complete
                                                    Your Family
the most out of your finances. The                                                                    the other sections first before it is unlocked.
                                                    Let us know who is in your family – especially
more up-to-date the information,
                                                    your financial partner and those who depend       The first time you visit your Profile, all of the
the better your Financial Planner can
                                                    on you financially. You can add and edit          sections except ‘About You’ will be locked. This is
advise you. The information you give
                                                    financial dependants (such as children) as well   normal and you just need to review the data in
is all stored securely and is only used
                                                    as add and edit a financial partner (such as      each section to complete that section.
for the purpose of advice.
                                                    a spouse), provided you have consent from
                                                                                                      Some sections feature a ‘wizard’ or ‘carousel’
What is the Personal Finance Portal?                this person to add and maintain personal
                                                                                                      which is a succession of questions on different
Your Personal Finance Portal provides you           information on their behalf.
                                                                                                      screens. Each screen is represented by a dot at the
with a clear overview of your finances and
                                                    Employment                                        bottom and a ticked one indicates that screen has
the ability to manage and track them in one
                                                    Here you can add details of your and your         been answered. If you need to complete a section
place. It is your personal digital filing cabinet
                                                    financial partner’s current employment            then the un-ticked dots will show you which
where all of your financial records are kept
                                                    status and remuneration.                          screens are outstanding.
together, making them easily accessible
whenever you need them.                             Your Home                                         If you have any questions about completing your
                                                    Use this section to add and maintain your         Profile, or the portal in general, please contact
By logging in to the portal via your mobile,
                                                    current address and residence history.            your Financial Planner.
tablet or computer, you can see your
                                                    When you add a current address for a home
investments, savings, pensions, mortgages,                                                            Registering your portal account
                                                    you own you will also be given an up-to-
loans and properties all on one dashboard                                                             Clients of Sovereign Asset Management will
                                                    date valuation of the property by Zoopla
whenever you need to. There is no need to                                                             receive an email inviting them to register for the
                                                    (provided they have one). This value is then
log on to multiple financial sites, reducing                                                          Personal Finance Portal in April 2021.
                                                    recorded against your property asset as part
the risk of online fraud.
                                                    of your net worth.                                Registering your portal account is simple
The portal makes managing your money                                                                  and only takes a few minutes. On your
                                                    Accounts & Policies
simple using easy-to-understand graphics                                                              computer, tablet or smartphone, visit https://
                                                    Review your accounts and policies and
and most importantly, it is completely safe                                                           attivofinancialplanning.mypfp.co.uk/account/
                                                    add any which are not listed. You can add
and secure.                                                                                           register, enter your email address and follow the
                                                    and maintain a variety of different types
                                                                                                      instructions sent in the activation email.
                                                    including savings, investments, protection
What is your Profile?
                                                    policies and liabilities (debts).                 You can only register with the email address we
Your Profile is where you control your data. It
                                                                                                      have on record for you. You will need your own,
is organised into sections and subsections that     Your Income and Your Expenditure
                                                                                                      unique email address – you cannot use the same
represent different aspects of your personal        In these sections you can add and maintain
                                                                                                      one as your spouse or partner. Please contact
and financial information.                          the details of your income and expenditure.
                                                                                                      your Financial Planner if you need to update
                                                    They are broken down into different
About You                                                                                             your email address. For more information
                                                    categories and you can record details for
This is your personal details – name, date of                                                         about the benefits of the portal, please
                                                    yourself and your financial partner as well
birth, marital status etc. You can also upload                                                        speak to your Financial Planner or visit
                                                    as joint income.
your picture to personalise your profile.                                                             www.attivofinancialplanning.co.uk/pfp 

LIFE Spring 2021 | Attivo Financial                                                                                                                   11
INVESTMENTS

Wealth needs managing –
now more than ever
Achieving your financial goals
through investing, and one
size does not fit all

Even as we hope to put the coronavirus                        hope volatility is less elevated this year,   investment goals is important to keep
(COVID-19) pandemic in the rearview mirror in                 financial markets and the economy             you focused when you need it and
2021, uncertainty regarding both the virus and                could still remain at the mercy of            will enable you to build a portfolio
Brexit is likely to continue to weigh further on              COVID-19 developments.                        to get you where you want to be.
the UK and global economies as well as on our                                                               Investment strategies should include
                                                              Strategies to help you manage
personal finances during this year.                                                                         a combination of various investment
                                                              volatility
                                                                                                            and fund types in order to obtain a
                  2020 was a tumultuous year.                 Volatility is essentially a measurement
                                                                                                            balanced approach to risk and return.
                  Government support during the               of risk, and as the balance of risk and
                  crisis has been significant in its scale,   return is at the heart of investing it        Maintaining a balanced approach
                  borrowing more since the lockdown           is important to understand how it             is usually key to the chances of
                  was imposed back in March 2020 than         affects your investments, but it’s also       achieving your investment goals, while
                  during the entire year following the        important not to let emotions drive           bearing in mind that at some point
                  Global Financial Crisis.                    your decision-making.                         you will want access to your money.
                                                                                                            This makes it important to allow for
                  But even with unprecedented steps           Setting specific investment
                                                                                                            flexibility in your planning. Your long-
                  being taken to ensure the roll-out of       goals is key
                                                                                                            term plans (those that are at least five
                  vaccines globally, the big question for     It can be difficult to focus on the big
                                                                                                            years away) should be the focus of
                  2021 is ‘what further market volatility     picture during any times of market
                                                                                                            your investment portfolio.
                  can we expect?’ Market volatility           turbulence. Understandably investment
                  can impact on your investments              volatility can make it easy to focus on       Market factors that
                  considerably, depending on the              the short term and those temporary            determine volatility
                  specifics of your portfolio. While we       peaks and troughs. Setting your specific      Market volatility can be nerve-

12                                                                                                                LIFE Spring 2021 | Attivo Financial
INVESTMENTS

                       racking, even for the most seasoned       returns that allow you to grow your        amount of volatility you experience by
                       investors. Many different factors         wealth. Looking at a twelve month          simultaneously spreading market risk
                       can impact market volatility, sending     snapshot of your investment portfolio      across many different asset classes.
                       values of investments in either           may show that investments have
                                                                                                            By investing in several asset classes,
                       direction. Some of the most common        underperformed but look back over
                                                                                                            you may improve your chances of
                       factors that determine the volatility     the last five or ten years, and you’ll
                                                                                                            participating in market gains and
                       of the market include investor            hopefully be on track.
                                                                                                            lessen the impact of poor performing
                       concern, political events, natural
                                                                 Carefully considered decision              asset categories on your overall
                       disasters and major events in foreign
                                                                 to invest                                  portfolio returns. A well-allocated
                       markets. But it’s important to keep
                                                                 By making a carefully considered           portfolio alleviates the need to
                       matters in perspective. Avoid making
                                                                 decision to invest, you’re giving          constantly adjust investment
                       rash decisions and focus on your
                                                                 your money more opportunity to             positions to chase market trends, and
                       long-term goals.
                                                                 grow than if you’re just saving it.        can help reduce the urge to buy or sell
                       Bear markets are unsettling but they      How much risk you take will affect         in response to the market’s short-term
                       are not new and history proves they       how your money will grow so it’s           ups and downs.
                       don’t last forever. Stop looking at       important to understand how much
                                                                                                            Diversification to protect and
                       your portfolio and its value on your      you’re willing and able to take. All
                                                                                                            grow investments
                       phone, tablet, laptop or desktop. It’ll   investments come with a level of
                                                                                                            Diversify, diversify, diversify – in other
                       only make you anxious – or worse,         risk and don’t always perform as
                                                                                                            words, ’don’t put all your eggs in one
                       make you want to do something.            expected. This is why you need to
                                                                                                            basket’ – is sage investing advice. In
                       Keep investing as you normally            make sure you’re making the choice
                                                                                                            addition to diversifying your portfolio
                       would. Also don’t attempt to pick the     that’s right for you.
                                                                                                            by asset class, you should also
                       market bottom or the turnaround to
                                                                 One of the first steps in developing       diversify by sector, size (market cap)
                       jump in. Fight the impulse to think
                                                                 an investment strategy is to               and style (e.g. growth versus value).
                       you can.
                                                                 identify your tolerance for risk as        Why? Because different sectors, sizes
                       Riding out the market ups                 an investor, referred to as your ‘risk     and styles take turns outperforming
                       and downs                                 profile’. Every investor has a different   one another.
                       Investments don’t always go in a          risk tolerance with regard to their
                                                                                                            By diversifying your holdings
                       straight line – they have the potential   investment selections. Making
                                                                                                            according to these parameters,
                       to react and recover from short-          investment decisions can depend on
                                                                                                            you can smooth out short-term
                       term market events. When markets          your personality as well as the goals
                                                                                                            performance fluctuations and
                       become volatile, the gut reaction         you are investing towards. Weighing
                                                                                                            mitigate the impact of shifting
                                                                 up the level of risk you’re willing to
        Investments don’t always go in                           be exposed to can be challenging.
                                                                                                            economic conditions on your
        a straight line – they have the                                                                     portfolio. Diversification is essential
                                                                 Whether you’re reviewing your
                                                                                                            to any successful investment strategy
potential to react and recover                                   pension or building a personal
                                                                                                            and provides an opportunity for both
from short-term market events                                    investment portfolio, balancing risk is
                                                                                                            protection and growth within your
                                                                 a crucial part of the process.
                                                                                                            investments. 
                       for most of us is to panic – to buy
                                                                 Well-allocated investment
                       when everyone else is buying (and                                                    Information is based on our current
                                                                 portfolio asset classes
                       when prices are high) – and panic sell                                               understanding of taxation legislation
                                                                 During volatile times, asset classes
                       on the downside (when prices are                                                     and regulations. Any levels and bases
                                                                 such as stocks tend to fluctuate
                       depressed). Panic selling also runs the                                              of, and reliefs from, taxation are
                                                                 more, while lower-risk assets such
                       risk of missing the market’s best-                                                   subject to change.
                                                                 as bonds or cash tend to be more
                       performing days.
                                                                 stable. By allocating your investments     The value of investments and income
                       Rather than looking at short-term         among these different asset classes,       from them may go down. You may not
                       volatility, it pays to look at the        you can help smooth out the                get back the original amount invested.
                       bigger picture. Over the long term,       short-term ups and downs. Portfolio
                                                                                                            Past performance is not a reliable
                       investments will usually deliver          diversification may reduce the
                                                                                                            indicator of future performance.
LIFE Spring 2021 | Attivo Financial                                                                                                                13
FINANCIAL PLANNING

‘New Age’ of self-employment
Changes in how people save, invest and plan for retirement

                       Self-employment plays a vital              the self-employed are saving into          for a workplace pension[4], creating
                       role towards the UK’s economy.             a pension. 67% of self-employed            a situation that the Association of
                       In recent years the number of              people are seriously concerned             Independent Professionals and the
                       people who are self-employed               about saving for later life[2].            Self-Employed (IPSE) is calling a
                       has risen steadily. But one of                                                        pensions crisis.
                                                                  Even if retirement seems a way
                       the main drawbacks is that the
                                                                  off, there’s no escaping the fact          And with the fastest growth in self-
                       self-employed do not have the
David Halloran                                                    that we’re going to need to fund it        employment among the over 45s[5],
DipPFS
                       advantage of an employer to
                                                                  somehow. ‘Being your own boss has          how to fund retirement is a question
Financial Planner      help arrange pension provision.
                                                                  many attractions, but unfortunately        that many will have to face up to
and Occupational
                       At a time of rapid technological           it won’t stop us from getting old.’        sooner rather than later.
Pension Specialist
                       advances and societal changes, the
                                                                                                             Tax benefits
                       increasing prevalence of the self-
                       employed not only represents a
                                                                            The pandemic                     There are certainly other savings and
                       change in how people work, it also                   forced even more                 investment accounts you can use to
                                                                   Britons to become their                   save for your retirement, but the fact
                       calls for changes in how people save,
                                                                                                             is that pensions are built for the job
                       invest and plan for retirement.             own bosses. More than                     and come with tax benefits that you
                       Seriously concerned                         5 million people are now                  won’t get elsewhere.
                       Last year, the coronavirus (COVID-19)       registered as self-                       With pensions, the government
                       pandemic forced even more Britons           employed in the UK                        gives tax relief equal to the highest
                       to become their own bosses. More                                                      rate of tax that you pay. So if you’re
                       than 5 million people are now              Pensions crisis                            a basic rate taxpayer, you only need
                       registered as self-employed in the         It’s perhaps no coincidence that           to contribute £80 to end up with
                       UK, up from 3.2 million in 2000[1].        only 31% of self-employed people           £100 in your pension pot. And if
                       The self-employed account for 15%          pay into a pension,[3] compared            you’re a higher rate or additional rate
                       of the UK workforce. Yet just 31% of       with 84% of employees eligible             taxpayer, you can claim back even

     Self-employed and looking to                   to pay into your pension can be daunting.         longer working. So instead, visualise the
     sort out your pension?                         Getting into the habit of saving for your         dreams and goals you’d like to pursue when
     Here’s what to do when you don’t know          future is half the battle for many people –       you finish working. Thinking about the
     where to start.                                so pay in what you can regularly.                 positive benefits of saving can be a good
                                                                                                      motivational tool.

     1   The sooner the better
         When it comes to pensions, it pays to be
     an early bird. The sooner you start paying
                                                    3   Increase it when you can
                                                        If your earnings increase or you secure
                                                    a new contract, consider increasing your          5  Have a regular review
                                                                                                         Once every six months, take a look at
     in, the more tax relief you’ll get from the    regular payments or paying a lump sum             your pension and consider whether you’re
     government, and the more time your             into your pension.                                on track to save enough. Just remember
     money has to potentially grow.                                                                   that, as with any investment, the value of

     2   Aim to pay in a regular amount
         The thought of saving a large lump sum
                                                    4   Visualise your future
                                                        If retirement is still a way off, it can be
                                                    hard to think of your future self and no
                                                                                                      your pension can go down as well as up,
                                                                                                      and you may not get back as much as has
                                                                                                      been invested.

14                                                                                                                  LIFE Spring 2021 | Attivo Financial
FINANCIAL PLANNING

                       more tax relief when you fill out your        Source data:                             file/712812/workplace-pension-
                       self-assessment tax return.                   [1]
                                                                         1 https://www.ons.gov.uk/            participation-and-saving-
                                                                     employmentandlabourmarket/               trends-2007-2017.pdf
                       Comfortable retirement                        peopleinwork/
                       It’s worth noting that there’s an annual      employmentandemployeetypes/articles        https://www.ons.gov.uk/
                                                                                                              [5]

                       allowance which limits how much               coronavirusandselfemploymentintheuk/     employmentandlabourmarket/
                       can be paid into your pension each            2020-04-24                               peopleinwork/
                       year while still receiving tax relief. It’s                                            employmentandemployeetypes/
                                                                      The Association of Independent
                                                                     [2]
                       based on your earnings and is currently                                                adhocs/008728
                                                                     Professionals and the Self-Employed
                       capped at £40,000.                                                                     selfemploymentbyage2001to2017
                                                                     2020
                       Exactly how much you should pay
                                                                      https://www.ipse.co.uk/uploads/
                                                                     [3]
                       into your pension depends on how
                                                                     assets/uploaded/de9c9fad-459a-
                       soon you start. The earlier you begin,
                                                                     4afa-96e85116aad25641.pdf
                       the less you’ll have to put away
                       every month to afford a comfortable           [4]
                                                                         https://assets.publishing.service.
                       retirement. Starting late? You’ll need to     gov.uk/government/uploads/
                       save more.                                   system/uploads/attachment_data/

LIFE Spring 2021 | Attivo Financial                                                                                                            15
TAX

Tax saving opportunities
It’s time to identify, plan for and potentially mitigate your tax burdens
                    The Government has                      any remaining reliefs, allowances and     to you. We’ve listed five things to
                    spent hundreds of billions              exemptions before the end of the          consider before the end of the tax year.
                    on measures to support                  2020/21 tax year on 5 April.
                    businesses and jobs, and fight
                    the coronavirus (COVID-19)
                                                            At the same time, you should be
                                                            considering whether there are any
                                                                                                      1  Maximise tax relief on your
                                                                                                         pension contributions by using all
                                                                                                      of your annual allowance
                    pandemic. But how will it pay
                                                            planning opportunities that you need      Pensions are one of the most
                    for these? We won’t know the
Stuart Harding                                              to consider either for this tax year or   tax-efficient ways to save for your
                    extent of the final bill until
FPFS FCSI MSc                                               for your long-term future.                longer-term future. The annual
                    long after the crisis is over.
Managing Director                                                                                     allowance for 2020/21 is £40,000,
and Chartered       While the Chancellor of the             Five things to consider before            but you can also use surplus
Financial Planner
                    Exchequer, Rishi Sunak, is looking      the end of the tax year                   allowance from the previous three
                    to reduce the tax gap, there are        The end of the current financial          tax years. Your annual allowance
                    nonetheless still opportunities to      tax year is fast approaching, which       may be restricted to a maximum
                    review your financial arrangements      means now is the time to review           of £4,000 where your total income
                    for saving tax throughout the tax       your finances and make sure that          plus pension contributions for the
                    year. Taking action now will give you   you’ve taken advantage of all of the      year exceeds £240,000, and your
                    the opportunity to take advantage of    tax planning opportunities available      net income exceeds £200,000.

16                                                                                                          LIFE Spring 2021 | Attivo Financial
TAX

                                                                      is to ask HM Revenue & Customs           account set up by a parent or
  What are my tax planning goals?                                     (HMRC) for your PAYE notice of           guardian with a Junior ISA provider,
                                                                      coding to be adjusted. This way your     specifically for their child’s future.
  • To reduce my current            • Maximise the amount of
                                                                      tax relief is given through a new        Only the child can access the money,
   overall tax year liability           my wealth that stays in
                                                                      PAYE code that extends your basic        and only once they turn 18. There
                                        my family
  • Defer my current year’s                                          rate band.                               are two types available: a Cash
     tax liability to future         • Minimise a potential                                                   Junior ISA and a Stocks & Shares
     years, to increase
     availability of cash for
                                        Capital Gains Tax liability

                                     • Minimise potential future
                                                                      2   Take advantage of the
                                                                          Individual Savings Account (ISA)
                                                                      investment limit to generate tax-
                                                                                                               Junior ISA.

                                                                                                               The current annual subscription
     investment, business or
                                        estate taxes to maximise      free income and capital gains            limit for Junior ISAs is up to £9,000
     personal needs
                                        the amount left to my         An ISA allows you to save or invest      for the 2020/21 tax year. The fund
  • Reduce any potential               beneficiaries and/or          money in a tax-efficient way. An         builds up free of tax on investment
     future years’ tax liabilities      charities (rather than the    ISA is a tax-efficient savings or        income and capital gains until your
                                        government)                   investment account that allows           child reaches 18, when the funds can
  • Maximise tax savings
                                                                      you to put your ISA allowance to         either be withdrawn or rolled over
     from allowable                  • Maximise the amount of
                                                                      work and maximise the potential          into an adult ISA.
     deductions                         money I will have available
                                                                      returns you make on your money,
  • Maximise tax savings by
     taking advantage of my
                                        to fund my children’s or
                                        grandchildren’s education,
                                        as well as my retirement
                                                                      by shielding it from income tax, tax
                                                                      on dividends and Capital Gains Tax.
                                                                                                               5   Plan your capital gains to make
                                                                                                                   best use of any capital losses
                                                                                                               The £12,300 (2020/21) allowance
     available tax credits                                            The maximum annual amount that
                                        plans                                                                  is a ‘use it or lose it’ allowance.
                                                                      can be invested in ISAs is £20,000
                                                                                                               You can’t carry it forward to future
                                                                      (2020/21). You can allocate the
                                                                                                               years. But remember that each
                                                                      entire amount into a Cash ISA, a
                                                                                                               individual has their own allowance,
                         For every £80 paid in, your pension          Stocks & Shares ISA, an Innovative
                                                                                                               so a married couple can potentially
                         provider can claim another £20 in tax        Finance ISA, or any combination of
                                                                                                               realise gains of £24,600 this tax year
                         relief from the government, so that a        the three.
                                                                                                               without incurring any tax liability. If
                         £100 contribution actually costs you
                         just £80. Then, if you are a higher rate
                         (40%) or top rate (45%) taxpayer
                                                                      3   Start planning ahead for a first
                                                                          property or retirement
                                                                      A Lifetime ISA (LISA) is a dualpurpose
                                                                                                               appropriate you could transfer assets
                                                                                                               between your spouse or registered
                                                                                                               civil partner taxfree, so it might
                         you can claim up to an additional
                                                                      ISA, designed to help those saving       make sense to consider transferring
                         £20 or £25 respectively, making the
                                                                      for a first home and retirement. If      holdings to a spouse in a lower tax
                         effective cost of a £100 contribution
                                                                      you are aged 18 to 39, you can open      bracket or one who hasn’t used their
                         for you as little as £60 or £55.
                                                                      a Lifetime ISA and save up to £4,000     allowance.
                         There’s a key difference in how              tax-efficiently each year up to and
                                                                                                               Gains and losses realised in the same
                         higher and top rate taxpayers claim          including the day before your 50th
                                                                                                               tax year have to be offset against
                         tax relief however. While 20% is             birthday. The Government will pay
                                                                                                               each other, and this will reduce the
                         reclaimed at source by your pension          a 25% bonus on your contributions,
                                                                                                               amount of gain that is subject to tax.
                         provider, which works for basic rate         up to a maximum of £1,000 a year.
                                                                                                               If your losses exceed your gains, you
                         tax payers, if you’re on a higher            Your Lifetime ISA allowance forms
                                                                                                               could carry them forward to offset
                         or top rate the additional amount            part of your overall £20,000 annual
                                                                                                               against gains in the future, provided
                         has to be reclaimed through a                ISA allowance. You can withdraw your
                                                                                                               you have registered those losses
                         self-assessment tax return and will          savings from age 60 onwards, if not
                                                                                                               with HMRC. 
                         reduce your overall tax liability at         used to buy a home before then.
                         the end of the year.                                                                  Tax laws are subject to change and
                         If you are an employee, an
                         alternative to reclaiming the extra
                                                                      4   Contribute up to £9,000 into a
                                                                          child’s Junior Individual Savings
                                                                      Account (ISA)
                                                                                                               taxation will vary depending on
                                                                                                               individual circumstances.
                         through a self-assessment return             A Junior ISA is a long-term savings

LIFE Spring 2021 | Attivo Financial                                                                                                                 17
RETIREMENT

Planning for a more relaxing retirement
Time to get back to dreaming about stopping work, not dreading it.

                    Life changes when you retire            most important question for many
                    – and so does how you spend             is, ‘How much money will I need to       5 key considerations
                    your money. Whatever your               save to ensure I retire successfully?’   Everybody’s circumstances are
                    plans, it’s important to keep on        To answer this question you need to      different, but the key considerations
                    top of things and think about           know how you want to spend your          for most people when they think
                    the lifestyle you want. It’s also       time in order to know how much           about retiring will come down to
                    worth noting the average life           retirement will cost you.                factors such as:
Sophie Pearcey      expectancy at age 65 years is
DipPFS                                                      Type of lifestyle you want               1. How much money do you think I
                    18.6 years for men and 21.0
Financial Planner                                           to enjoy                                     will need in retirement?
                    years for women[1].
                                                            The amount of money you’ll need
                                                                                                     2. Am I planning to phase my
                    So, it’s vital if you are planning      to enjoy a comfortable retirement
                                                                                                         retirement by working part-time?
                    to retire soon that you make            is subjective and very much related
                    sure you have enough money to           to the type of lifestyle you want to     3. D
                                                                                                         o I have any debt to pay off?
                    last throughout your retirement.        enjoy during your retirement, the
                                                                                                     4. What is my health and potential
                    Whether you’re aiming to retire early   age you want to retire and whether
                                                                                                         life expectancy going to be?
                    or have worked way longer than you      you’ll receive the full state pension
                    imagined, retirement should be what     amount.                                  5. How much money have I saved in
                    you want it to be.                                                                   pensions and other investments?
                                                            An active retirement involving a lot
                    Exciting chapter in your life           of travel and hobbies will cost more
                    This is a new and exciting chapter      than a quiet retirement spent largely
                    in your life. And for a lot of us,      at home. You also have to think
                    retirement will be the first time       about any big-ticket purchases or
                    where we can do what we want,           other plans you’ll need to make.
                    when we want. With no job to tie
                                                            Estimated retirement
                                                            expenses
        Knowing how much you need                           Make a list of all your estimated
        to cover your retirement isn’t                      retirement expenses and then try
always the easiest number to calculate,                     to approximate how much each will
but you can adjust your strategy                            cost you. Remember, some of your
                                                            expenses may decrease between
depending on the size of your pot.                          now and retirement while others
                                                            could increase.
                    us down, retirement is meant to
                                                            Your housing costs may go down if
                    be a relaxing time. However, your
                                                            you pay off your mortgage, but your
                    newfound freedom and leisure
                                                            travel costs could go up if you take
                    time could quickly become stress-
                                                            a lot of trips and holidays. So you
                    inducing if you spend too much time
                                                            can use your current spending as a
                    fretting about your finances.
                                                            baseline, but you’ll have to adjust
                    When planning for retirement the        each figure up or down accordingly.

18                                                                                                        LIFE Spring 2021 | Attivo Financial
RETIREMENT

                    Annual figure for inflation                Unexpected expenses                       or more, it is vital to be prepared and
                    Knowing how much you need to cover         come up                                   build up a retirement income that
                    your retirement isn’t always the easiest   At the point you’re in retirement, it’s   provides the standard of living you
                    number to calculate, but you can adjust    important to keep to the budget you       require in the long term. 
                    your strategy depending on the size of     laid out as best as you can. If you       Source data:
                    your pot.                                  have unexpected expenses come up,           https://www.ons.gov.uk/
                                                                                                         [1]

                                                               try to trim back some of your other       peoplepopulationandcommunity/
                    Once you know approximately                                                          birthsdeathsandmarriages/
                                                               expenditures to make up for them so
                    how much you’ll spend annually in                                                    lifeexpectancies/bulletins/nationallifet
                                                               you don’t run short.                      ablesunitedkingdom/2016to2018#:~:te
                    retirement, you can estimate the total
                                                                                                         xt=1.-,Main%20points,for%20males%20
                    cost of your retirement by multiplying     In recent years, the Government           and%20females%20respectively.
                    this figure by the number of years you     has made great strides in getting
                    expect your retirement to last, and        people to save for retirement. With
                    adding an annual figure for inflation.     retirement often lasting two decades

LIFE Spring 2021 | Attivo Financial                                                                                                                 19
STRAPLINE PLANNING
FINANCIAL

Breaking up is hard to do
Managing the financial
impact of divorce

When long-term relationships end,                 pension assets are divided between the parties.      Pension attachment orders: where the
there are a host of implications for              This has to be expressed as a percentage of          pension provider of one party pays an agreed
mortgages, savings, tax and Wills                 the fund being divided, rather than a monetary       amount directly to the former spouse when the
requiring careful consideration to avoid          figure, so the amount paid to the recipient’s        pension rights come into payment. This does
hardship. If you are contemplating                pension fund can differ quite significantly in       not represent a clean financial break between
divorce, are in the middle of divorce             value to what was originally intended.               the couple and risks the loss of future income
proceedings or dissolving a civil                                                                      for the former spouse if the person with the
                                                  If you are close to retirement age and were
registered partnership, it’s important to                                                              pension rights dies before retiring or the former
                                                  planning to draw down on the pension part of
understand how the current economic                                                                    spouse remarries.
                                                  the settlement in the near future, hoping the
and financial situation could affect you.
                                                  proposed share would produce a certain level         Resolving associated marriage
The impact of the coronavirus (COVID-19)          of income, you may need to consider thinking         finances
pandemic on financial markets highlights the      again. One option is to consider a nominal           The COVID-19 pandemic has thrown many of
importance of obtaining expert professional       maintenance order to hedge against anticipated       us into a difficult period of uncertainty and has
advice when it comes to dealing with pension      income not meeting your needs.                       had a profound impact on every aspect of our
assets on divorce. Many couples may have                                                               lives. This has presented particular challenges
                                                  Most common reason given
a number of pension assets between them.                                                               for separating couples who wish to resolve
                                                  Unreasonable behaviour was the most common
Understanding the different types of scheme                                                            the finances associated with their marriage,
                                                  reason given for opposite-sex couples divorcing
and how their values might be affected by                                                              especially where there are pensions to be
                                                  in England and Wales, published in the latest
stock market fluctuations is crucial.                                                                  considered within their settlement.
                                                  divorce statistics by the Office for National
Different types of scheme                         Statistics (ONS) [1], with 49% of wives and 35%      There has been a reduction in the stock market,
Some defined benefit pensions, such as public     of husbands petitioning on these grounds.            so any pension plan that has invested in shares
sector or final salary schemes, guarantee a                                                            may have decreased in value. Add to this a
                                                  It was also the most common reason for same-
certain level of income on retirement. Usually,                                                        reduction in interest rates, which has decreased
                                                  sex couples divorcing, accounting for 63% of
this is based on years of service and the final                                                        the gilt rate making it more expensive to
                                                  divorces among women and 70% among men.
salary of the pension member. Conversely, the                                                          purchase annuities. This has resulted in an
capital value and therefore income for private    What are the different options to                    increase to Cash Equivalent Transfer Values
money purchase pensions are linked directly       consider?                                            (CETVs) for defined benefit schemes (usually
to the performance of the investments.            When couples divorce, it is important they note      final salary pensions).
                                                  that there are different options for how they
Even if, at the given date, the fund value or                                                          Anyone going through a marital breakup can be
                                                  divide pension assets between them, including:
cash equivalent of the two types of pension                                                            forgiven for wanting to temporarily set aside
arrangements are the same, the value of the       Offsetting: where the pension assets can be          thoughts about Wills, trusts and retirement
underlying benefits and the reliability of the    offset against other assets of the divorcing         for another time. However, it’s a chapter in life
income stream may differ considerably.            parties. For example, one party many wish to         when the people involved need to deal with
                                                  stay in the marital home in lieu of receiving part   both their emotional and financial well-being. 
Pension sharing on divorce
                                                  of their ex-spouse’s pension rights.                 Source data:
Two decades on from the introduction of
                                                                                                        https://www.ons.gov.uk/
                                                                                                       [1]
pension sharing on divorce, the issue remains     Pension sharing orders: where pension assets         peoplepopulationandcommunity/
a hugely complex area that can spark highly       are divided at the time of divorce and there is a    birthsdeathsandmarriages/divorce/bulletins/
emotive battles with no guarantee of equality.    clean financial break.                               divorcesinenglandandwales/2019
Pension Sharing Orders determine how
20                                                                                                                    LIFE Spring 2021 | Attivo Financial
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