The families of 6 in 10 over-75s could face challenges if they lose mental capacity

A survey suggests more than half of people aged over 75 haven’t arranged a Lasting Power of Attorney (LPA). It’s an oversight that could mean their families may not be able to make decisions on their behalf if they lost mental capacity.

MoneyAge report that research from Just Group revealed that around 3.4 million over-75s had no LPA in place. If you or your relatives may be among them, read on to find out what an LPA is and why having one may bring invaluable peace of mind to you and your family.

An LPA allows you to choose someone you trust to take care of your affairs

An LPA is a legal document that allows you to nominate one or more people you know and trust to take care of your affairs in the event that you can no longer look after them yourself.

There are two types of LPA:

1. A health and welfare LPA that covers your day-to-day life and any medical decisions or care you need.

2. A property and financial affairs LPA that covers the management of your savings and assets, paying bills, and claiming benefits.

If you don’t have a health and welfare LPA, your loved ones could be prevented from ensuring you receive medical care according to your wishes.

Lack of a property and financial affairs LPA will likely mean that your family will be unable to manage things like paying your bills or bank accounts.

Without an appropriate LPA in place, even your partner or spouse may not automatically be able to gain access to your investments, insurance, or your bank accounts.

Once registered, an LPA remains in place for life, bringing immeasurable peace of mind to both you and your loved ones.

It’s also possible to make an LPA temporary. A temporary LPA allows you to resume control of your affairs if your capacity improves. This can be particularly useful if you are briefly hospitalised due to an accident or illness.

If you begin to lose your mental capacity, it may be too late to set up an LPA

If you become incapacitated without an LPA in place, you could leave your family with the burden of applying for permission to take care of your affairs. At an already difficult time, they will have to apply to the Court of Protection to become a deputy.

Doing this can be time-consuming and expensive. Plus, the judge will decide who is most suitable to make decisions for you, meaning it may not be the person you would choose.

With a registered LPA in place, your attorney can begin managing your affairs immediately after you become incapacitated. This should mean that there’s no delay in your attorney being able to access financial resources or make critical decisions relating to your health.

Remember, if you lose mental capacity, it would be too late to put an LPA in place. With this in mind, it’s something that you should consider organising sooner rather than later.

The 2023 Power of Attorney act will make it easier to put an LPA in place

On 18 September 2023, the Powers of Attorney Bill received Royal Assent and became an Act of Parliament. This means that the existing paper-based system will move online.

It is hoped that the move to an online system will create a simpler process, making it quicker and easier to register.

The new service will change the way LPAs are made but, for the time being, the current LPA service will continue to be available as usual.

Get in touch to discuss how we can help you set up a Lasting Power of Attorney

Putting an LPA in place could provide you with security if you lose the ability to make decisions yourself. If you want to know more about looking after yourself and your loved ones in the future, speak to us.

Please contact us to talk about your concerns and priorities. We’ll work with you to create an estate plan that suits your needs.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate estate planning.

How a contribution to your child’s pension could boost their financial security

As a parent, you might worry about your child’s long-term financial wellbeing. While you might consider supporting them through university, helping out with day-to-day costs, or handing over a home deposit, have you thought about contributing to their pension? It could go further than you think.

Younger generations face some key challenges when saving for their retirement. As people are living for longer, it’s likely workers today will need a retirement plan that will provide an income for several decades.

In addition, financial pressures on household budgets may mean employees are more likely to reduce or pause pension contributions.

Indeed, a Royal London survey found the cost of living crisis has led to a third of workers investigating whether to cut pension contributions. Among employees aged between 18 and 34, the figure rises to a worrying 49%.

While altering pension contributions may boost household budgets in the short term, it can have a significant effect on financial security later in life. As pensions are invested over the long term and benefit from compounding, even a temporary pause could affect their standard of living in retirement.

So, if you’re thinking about how you could lend financial support to your child, reviewing their pension could be valuable.

The power of compounding can transform regular pension contributions into a sizeable pot

Thanks to tax relief and long-term investment growth, the money you deposit in your child’s pension has an opportunity to grow to several times the value of the original deposits.

According to PensionBee, a parent placing £200 a month in their 18-year-old child’s pension for 20 years would contribute £48,000 in total.

Once tax relief, investment returns of 5% a year, and an annual management fee of 0.5% are factored in, it’s calculated the value of the pension would rise to almost £330,000 by the time the child is 64.

Even smaller deposits can add up. Under the same circumstances as the above scenario, depositing £50 a month in your child’s pension over 20 years could lead to a pot of more than £80,000 even though you’d have deposited just £12,000.

You don’t even have to wait until your child reaches adulthood to start paying into a pension on their behalf. Those not earning an income, including children, can deposit up to £2,880 into a pension in 2023/24 and still benefit from tax relief. By investing sooner, the effect of compounding could be even greater.

Of course, investment returns cannot be guaranteed, and all investments carry some risk. However, the above examples demonstrate why you might want to consider pensions if you’re weighing up ways to support your children financially.

A key downside of contributing to a pension is that they’re usually not accessible until the pension holder reaches pension age. This is currently 55, rising to 57 in 2028 and it could change in the future.

3 reasons you may want to consider using your child’s pension to pass on wealth

1. Pension contributions could support long-term financial security

If you’re concerned about your child’s long-term financial security, a pension could be useful. As a pension cannot usually be accessed until retirement age, you can rest assured the deposits won’t be spent on short-term outgoings.

However, it could also mean your gift couldn’t support your child in reaching other milestones or if they faced financial difficulties. As a result, you may want to consider how to balance the support you offer as part of your overall financial plan.

2. Pension contributions benefit from tax relief

One of the key reasons why pensions are efficient when saving for retirement is that contributions usually benefit from tax relief. So, the money you gift to your child through a pension may receive an instant boost that could mean they have more flexibility in retirement. Tax relief will be paid at your child’s marginal rate of Income Tax, rather than yours.

3. Pension contributions could be invested for decades

The earlier example demonstrates the power of compounding – making contributions to your child’s pension early in their career could lead to a pot with a value far beyond your initial deposits. While investment returns cannot be guaranteed, the money you place in a pension could be invested for decades, which provides an opportunity for significant growth.

Keeping the pension Annual Allowance in mind could help your child avoid an unexpected tax bill

If you’re thinking about boosting your child’s pension, it may be a good idea to talk about their income and other contributions to avoid a potential tax charge.

The Annual Allowance limits how much you can place into a pension each tax year while retaining tax relief. In 2023/24, the Annual Allowance is £60,000 for most people, up to 100% of the pension holder’s annual earnings. However, the Annual Allowance may be lower if the pension holder is a high-earner or has already taken an income from their pension.

Exceeding the Annual Allowance could lead to an unexpected tax charge to reclaim the tax relief paid. So, talking to your child about the money that goes into their pension might be important.

Contact us to discuss how to improve your children’s financial security

Contributing to a pension is just one way you could improve your child’s financial security. You might want to set aside assets for them to inherit or gift a property deposit too. Making your family’s long-term finances part of your plan could give you confidence and help you achieve your goals.

Please contact us to arrange a meeting to discuss your options.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future results.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts. 

The Financial Conduct Authority does not regulate estate planning.

2 Autumn Statement announcements you may have missed that could simplify your finances

Jeremy Hunt delivered his second Autumn Statement as chancellor on 22 November 2023. While the headline news was cuts to National Insurance rates for employees and self-employed workers, there may have been less attention-grabbing changes that could make your finances easier to manage.

Read on to discover how ISA and pension changes might be useful to you.

1. ISAs are set to become simpler

ISAs were launched in 1999 to promote saving and investing in a tax-efficient way. Statistics suggest they’ve achieved that goal – according to the government, in 2021/22, 11.8 million ISAs were subscribed to, with around £66.9 billion added to accounts.

Yet, over the years, ISAs have become more complicated. New ISAs have been launched, including the Lifetime ISA, aimed at aspiring first-time buyers, and the Innovative Finance ISA, which allows you to invest in peer-to-peer loans that are typically higher-risk than traditional investments.

There are also rules around contributing to multiple ISAs during the same tax year and transferring between different providers. Key changes from April 2024 could help you manage your savings and investments in a way that suits you.

  • Under current rules, you cannot usually contribute to two ISAs of the same type during the same tax year. For example, if you held two Cash ISAs, you’d only be able to contribute to one each year. From April 2024, you will have more flexibility and will be able to pay into multiple ISAs of the same type. This could mean you’re able to secure a more competitive interest rate or pay into both an easy access and fixed-term account.
  • It is possible to transfer your ISA savings or investments to another provider. However, you must transfer all the money in the account. In the new tax year, partial transfers will be allowed. This step could provide you with more flexibility and the option to move your savings or investments to suit your needs.

Despite hopes that the annual ISA allowance would be increased, it wasn’t announced in the Autumn Statement. In 2023/24, the ISA allowance is £20,000, and £9,000 for Junior ISAs.

However, the changes could help you get more out of your money by allowing you to select a provider that’s right for you.

2. There are plans to reduce the number of pensions workers hold

Auto-enrolment means the majority of employees must be automatically enrolled into a pension by their employer, who must also contribute on their behalf.

It’s successfully encouraged more people to save for their retirement. Yet, it’s also created a retirement planning issue that you might face – managing multiple pension pots.

According to Zippia, the average employee stays with their employer for just 4.3 years. So, over your working life, you could end up accumulating multiple pensions.

This could cause issues for several reasons:

  • It can make your retirement savings difficult to keep track of. Indeed, a report in FTAdviser, estimates there are almost 3 million “lost pensions” totalling £26.6 billion. Managing several pensions could mean you overlook some essential savings.
  • Usually, your pension will be subject to an annual management fee. In some cases, paying fees on several small pensions could add up to more than the fee of a single, larger pension. So, holding several pensions may mean you get less out of your savings.
  • Similarly, your pension will typically be invested. Again, a single, large pension that’s invested in a range of assets may deliver greater returns over the long term, particularly when investment fees are considered, compared to several small pots. However, keep in mind that investment returns cannot be guaranteed.
  • As well as difficulty managing multiple pots during your working life, it can be challenging when you retire too. You might be unsure about which pot you should access first or how long each will last.

Changes to address this haven’t been implemented yet. However, Hunt announced a consultation with the aim of allowing workers to set up a “pot for life”. Under the plans, employees would be able to choose which pot their pension contributions are paid into. It could mean employees can retain the same pot throughout their careers, even when they change jobs.

The move could make it easier to manage your retirement finances.

If multiple small pensions are something you’re concerned about, there may be steps you can take now. Pension consolidation could mean you have fewer pensions to manage, but there are potential drawbacks too. For example, if your pension provides additional benefits, you’d lose these if you transferred the money to another provider.

We can provide tailored pension advice if you’d like to better understand how to make managing your retirement finances simpler. 

Contact us to discuss what the Autumn Statement means for your financial plan

The chancellor made key announcements during the Autumn Statement that might affect your finances now or in the future. If you’d like to discuss what they mean for you, please contact us.

Please note:

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

10 festive markets to visit in Europe this year

It’s not too late to book a last-minute Christmas getaway. These fantastic destinations all boast traditional festive markets that are perfect for getting into the Christmas spirit, enjoying a mulled wine, or picking up some gifts.

1. Tallinn, Estonia

Dates: 1 December 2023 to 7 January 2024

If you’ve yet to visit Estonia, adding Tallinn at Christmas time to your bucket list is a must. There are the usual stalls and food to try here, but it’s the entertainment that really sets it apart. There are dance troupes, bell ringers, bands, and even a reindeer sleigh in Santa’s grotto that are great when you want a break from shopping.

2. Budapest, Hungary

Dates: 18 November 2023 to 1 January 2024

There are two main Christmas markets in Budapest in Vorosmarty Square and the Basilica. Both offer free concerts and plenty of stalls to browse. But the Basilica also hosts an ice-skating rink and laser projections to make it even more magical. The market is a great chance to taste traditional Hungarian food, including halászlé, a fish soup that is often eaten as part of the Christmas feast.  

3. Bohemia, Czech Republic

Dates: 24 November 2023 to 1 January 2024

If you want to see some of the Czech Republic beyond Prague, why not take in some of the Christmas traditions of the Bohemia region? As well as stunning classic and gothic architecture to take in, many cities host Christmas markets that attract fewer tourists than others. Ceske Budejovice and Cesky Krumlov are just two of the options to consider.

4. Seville, Spain

Dates: 1 December 2023 to 5 January 2024

Seville is a great destination to head to if you want to mix Christmas markets with art and culture. You can pick up plenty of handmade gifts from the stalls – with the Feria de Artesania Creativa being particularly packed with handcrafted goods. The main tourist area is filled with impressive lights, and you can often spot holiday dancing or choirs singing Christmas carols too.

5. Merano, Italy

Dates: 24 November 2023 to January 6 2024

What better backdrop to a Christmas market than the stunning Italian Alps? Merano is a picturesque spa town that’s perfect for a mini break during the winter season. As well as the usual stalls selling handmade goods, you can often find choirs and bands playing festive tunes – the sudtirol cakes are a must-try when you’re here.

6. Cologne, Germany

Dates: 23 November to 23 December 2023

Cologne is a favourite destination for people who love to visit Christmas markets, which take over large areas of the city, including beneath the towering cathedral. There’s a whole area dedicated to children, so if you’re planning a winter trip with little ones, Cologne could be the perfect place to book.

7. Zagreb, Croatia

Dates: 2 December 2023 to 7 January 2024

Croatia might be more commonly associated with summer holidays, but the capital hosts dozens of small Christmas markets around the city during the festive season. The Upper Town medieval settlement is a great place to start before heading to the Lower Town to find markets in the parks. You can sample some unusual festive treats, including sarma, a stuffed cabbage roll, and plum brandy.

8. Copenhagen, Denmark

Dates: 17 November to 31 December 2023

Have a glimpse of how the Danish celebrate Christmas by sampling Glögg (it’s similar to mulled wine) as you visit the market in Tivoli Gardens – the world’s second oldest amusement park where you can enjoy thrill rides too. As well as the extravagant market in Tivoli Gardens, you can find smaller markets dotted throughout the city with a cosier atmosphere.

9. Bratislava, Slovakia

Dates: 23 November to 23 December 2023

Every year, the most beautiful part of Bratislava is turned into a Christmas fairy tale when the markets open up. The Old Town is impressive at any time of the year, but with twinkling lights added and delicious delicacies, it’s sure to bring you good cheer. The main square also holds a stage, so be sure to check the programme for performances.

10. Gdansk, Poland

Dates: 2 December to 23 December 2023

If you’re thinking about a trip to Poland, it’s probably Kraków that comes to mind. Yet, you could be missing out on a gem if you overlook Gdansk. The historic city centre is wonderful to explore at any time of the year, but it’s really magical when the Christmas market is on. If you have young children, elf parades and the Snow Queen are sure to keep them entertained.

How to make your Christmas more sustainable

Did you know the amount of waste generated in the UK increases by around 30% over the festive period? While it’s the season for joy and giving, being more mindful about how you celebrate Christmas this year could help you enjoy a more sustainable celebration.

If you want to reduce the environmental impact your family has this year, without compromising on fun, here are five practical tips you could implement.

1. Switch to digital or sustainable cards

The government estimates more than 1 billion Christmas cards are sent every year, only to be thrown away – it takes the equivalent of 33 million trees to make this amount of cards. So, not only is sending cards creating more waste, but it could lead to far fewer trees too.

Sending out digital cards could be a simple way to reduce your environmental impact this year. There are plenty of different options online, many of which you can add a personal touch to so they remain thoughtful.

Plus, you don’t have to worry about it not arriving in time due to postal delays.

If you enjoy sending cards and displaying them, there are ways to make them more sustainable. Choosing a Forest Stewardship Council (FSC) card means the product comes from a well-managed and sustainable forest and is recyclable.

2. Be conscious of the gifts you’re giving

A YouGov poll found that the average Brit spent more than £600 on Christmas in 2022. The biggest expense was presents and gifts, totalling £300 each.

Handing over a present you know the recipient will love is part of what makes Christmas so special, but it can lead to waste, especially if you’re unsure what to buy someone. 

According to the Guardian, half a billion cheap electrical items go to UK landfills every year. So, this year, before you buy a gift, spend some time considering if it’s something the recipient will really value or use.

If they don’t want specific items, gifting an experience could be a great way to make their day without adding more waste. Whether you buy them a spa day to relax or an adrenaline-fuelled adventure, it’s a great way to help them create memories too.

3. Choose a real Christmas tree

If you already have an artificial Christmas tree that’s in good condition, don’t throw it away to buy a more sustainable option. But, if you’re looking to refresh your home’s decorations this year, selecting a real Christmas tree could support the environment.

Check the farm you’re buying from grows the trees responsibly and plants for future generations to maximise your positive impact. Better yet, some farms will take your tree back at the end of the festive period and replant it so you can pick it up for next year’s celebrations.

Don’t forget about your other festive decorations either. Simple switches, like opting for LED lights, could shrink your environmental footprint this year.

4. Be mindful of food waste

Indulging in festive treats might be one Christmas tradition you’re looking forward to. Whether the thought of a turkey dinner has your mouth watering or you want to dig into a box of chocolates, you don’t have to give it up.

Yet, being conscious of the food you might end up throwing away over the festive season could be useful.

Last year, the Waste and Resources Action Programme (WRAP) estimated that more than 70% of the UK’s total food waste comes from homes, collectively costing families an eye-watering £14 billion a year.

The amount of poultry thrown away in one year could be enough to make 800 million Boxing Day curries, while enough potatoes are binned to make enough roasties for Christmas Day for the whole country for 48 years.

So, when you’re doing your Christmas grocery shop (and your regular shopping), consider what you’ll use and how to make the most out of what you’re buying.

As well as cutting waste, you might also want to purchase local produce. It could be a great way to support local farmers and reduce the carbon footprint of your Christmas dinner as it won’t have to travel as far.

5. Give back to your local community

It’s the season for giving, so what better time to support your local community? There are plenty of ways you can help organisations, from giving your time to a financial donation.

You could also make material donations, such as furniture that you’re replacing or unwanted clothing, rather than throwing them away. It could help you clean up your home ready for the new year while benefiting others. The items could go to charity shops to raise much-needed funds for good causes or families that are struggling.

Business owners, don’t take Willy Wonka’s chance approach to succession planning

Eccentric Willy Wonka boasts a lot of enviable skills as a businessman – he’s innovative, understands his target audience, and inspires loyalty from his employees. But his skills at succession planning left a lot to be desired.

Over the years many actors have taken up the role of Roald Dahl’s iconic chocolatier Willy Wonka. The character is getting a new lease of life in December when Wonka releases in cinemas.  

While the new movie looks at how Wonka became the owner of a successful business selling fantastical sweets, the original novel, Charlie and the Chocolate Factory, focuses on his succession plan.

With no children to leave his business to, Wonka hides five golden tickets in chocolate bars to win a tour of his world-famous chocolate factory. He plans to pass on his company to one of the lucky winners.

Despite the risky approach, the competition pays off when Charlie Bucket secures one of the golden tickets.

While Wonka’s method might be perilous, research suggests some business owners could also be taking a risk when it comes to their firm’s future.

According to a report in FTAdviser, more than a third of businesses have no succession plan in place, and a further 10% haven’t thought about it.

Yet, what will happen to their business is a concern for many business owners. 21% said they were most worried about seeing their business fail and 18% were concerned about their employees’ prospects.

Without an effective succession plan, there’s a chance your business’s legacy doesn’t live up to your expectations or pass to the person you want to hand the reins to.

Creating a succession plan can seem daunting and involve a lot of work. However, if it’s something you’ve been putting off, here are seven reasons to make it a priority.

1. It provides a chance to think about your different options

There’s more than one way to step away from your business when you’re ready. You might plan to pass it on to your children, or you may want to sell it to fund your retirement.

Going through your preferences now provides an opportunity to explore the different options and consider which would be right for you.

2. The process could help you identify potential leaders and skill gaps

Handing over his business to someone with no experience might work well for Wonka, but it’s not advised.

As part of your succession plan, you may review the skills and expertise of your current team to identify where there could be gaps in the future. You might then create a training development programme to upskill existing employees or seek to hire someone who fits your needs.

It’s a step that may improve the long-term security of your business and give you peace of mind.

3. Preparing your business may be a lengthy process 

Depending on your plans, preparing your business to hand over could be a process that takes years. Perhaps you need to dedicate time to training existing employees to take over some of your tasks, or you might want to sell the business with an established customer base that you need to build.

Setting out your succession plan now could mean you have more options, reduce stress, and give you a chance to overcome potential obstacles.

4. It could improve processes in your business now

When creating a succession plan, you’ll often want to consider how the business would operate if you weren’t there and how to make processes as efficient as possible.

So, even if passing on your business is years away, a succession plan can be a useful exercise. You might find ways to increase productivity, cut costs, or help your team work more efficiently. It could improve your business now and mean it’s in a better position in the long term too.

5. A succession plan could boost confidence in your business

When Wonka announced he’d be handing over his business to an 11-year-old boy, we’re sure not everyone was thrilled about the decision or optimistic about the firm’s prospects.

A lack of a succession plan could harm confidence in your business. For instance, customers might worry about whether you’ll be able to fulfil orders over the long term. A succession plan could also give your employees more confidence in their security.

6. A succession plan may be useful if the unexpected happens

A succession plan isn’t just useful if everything goes according to plan, it might also be valuable if the unexpected happens.

If you fall ill, having processes and a leadership team in place that you can trust could make the difference between your business continuing to run smoothly or facing challenges. Knowing that your business is in safe hands might mean you’re able to focus on your recovery.

A robust succession plan could also make it easier to step back from your business sooner than initially planned if you decide to.

7. Your decision may influence your long-term plan

As a business owner, your firm is likely to affect your lifestyle and finances.

Your business plans and when you hope to move on might influence areas like your pension or investments. So, understanding how and when you want to move on from your business could mean you’re able to make informed decisions about your personal life and assets.

Contact us to talk about your succession plan and what it means for your future

If you’d like help with your succession plan, we may be able to offer support and could make your decisions part of your personal financial plan too.

Please contact us to arrange a meeting to talk about your aspirations.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

5 valuable reasons planning with your partner could cut your tax bill

Households are paying more in taxes, research suggests. At a time when high inflation may be affecting your outgoings, finding ways to reduce your tax bill could be valuable. If you’re married or in a civil partnership, planning with your partner could help you get more out of allowances.

According to the Institute for Fiscal Studies, at the time of the last general election in 2019, UK tax revenues amounted to around 33% of the national income. By the time of the next general election in 2024, the figure is predicted to have increased to 37%.

Only during the immediate aftermath of the two world wars have government revenues grown by as much.

The think tank notes the response to the Covid-19 pandemic explains some of the increased tax burden. However, it adds higher government spending on things that pre-date the pandemic also plays a role.

On average, the changes mean households are paying an extra £3,500 each year in tax. Yet, the tax rise isn’t shared equally and some families may have seen their tax bill rise much further.

HMRC collected £19.8 billion more in tax between April and August 2023 than a year earlier

Figures released by HMRC support the claim that taxes are rising.

Between April and August 2023, HMRC receipts were £331.1 billion – £19.8 billion higher than the same period in the previous year.

Some of the receipts in the HMRC data are paid by businesses, but others come from individuals. For example, the amount of Income Tax paid was £9.5 billion more than a year earlier.

So, how could planning with your partner potentially reduce your tax burden?

Many of the tax allowances available are for individuals. As a result, passing assets to your husband, wife, or civil partner to utilise both of your allowances could be useful.

Here are five allowances you might want to consider as part of your financial plan.

1. Personal Allowance

The Personal Allowance is the amount you can earn before you’re liable for Income Tax. For 2023/24, it is £12,570.

If your spouse or civil partner doesn’t earn above this threshold, they may be able to pass on some of their unused allowance to you under the Marriage Allowance.

£1,260 of the Personal Allowance can be transferred to the partner with the higher income, which could reduce your annual income Tax bill by up to £252 each year.

The higher-earner must be a basic-rate taxpayer to use the Marriage Allowance.

2. Personal Savings Allowance

The Personal Savings Allowance (PSA) is the amount you can earn in interest before it could become liable for Income Tax.

As interest rates have increased over 2022 and 2023, you might face an unexpected tax bill if you don’t review how much your savings are earning.

Crucially, your PSA depends on the rate of Income Tax you pay. Basic-rate taxpayers can earn up to £1,000 in interest before paying tax. The PSA falls to £500 for higher-rate taxpayers, and additional-rate taxpayers don’t benefit from a PSA at all.

So, if you could exceed your PSA or you’re an additional-rate taxpayer, transferring savings to your partner may help you get more out of your money.

3. ISA allowance

In addition to the PSA, the ISA allowance may be useful to avoid paying tax on your savings.

Each individual can contribute up to £20,000 in the 2023/24 tax year to ISAs. You can choose a Cash ISA, where the money would earn interest, or a Stocks and Shares ISA, where your money would be invested and potentially deliver returns.

The interest or returns earned on money held in an ISA aren’t liable for Income Tax or Capital Gains Tax (CGT). Using both your and your partner’s ISA allowance could help you save or invest more efficiently.

4. Dividend Allowance

Dividends may be a helpful way to boost your income.

You might take dividends if you own a company or you could receive them through some investments. In 2023/24, you can receive up to £1,000 in dividends before tax is due.

If you might exceed this threshold, transferring dividend-paying assets to your partner could effectively double the amount you could tax-efficiently receive as a couple.

The rate of tax you pay on dividends above the allowance depends on your Income Tax band. So, if your partner pays a lower rate of Income Tax, transferring dividend-paying assets to them could also mean you benefit from a reduced tax bill.

You should note that the Dividend Allowance will fall to £500 in the 2024/25 tax year.

5. Capital Gains Tax annual exempt amount

CGT may be due when you dispose of certain assets, including investments that aren’t held in a tax-efficient wrapper, second properties, and some material items.

The annual exempt amount means that in 2023/24, you can make profits of up to £6,000 before CGT is due.

Similar to dividends, transferring assets to your partner could mean you’re able to use both of your annual exempt amounts and potentially benefit from a lower rate of CGT as your tax band affects the rate you pay.

In 2024/25, the annual exempt amount will fall to £3,000 for individuals.

Arrange a meeting with us to discuss how you could potentially reduce your tax bill

If you want to make the most out of your money and reduce your tax bill, please get in touch. We could help you create a long-term financial plan that cuts how much tax you pay with your goals in mind.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate tax planning.

4 annuity myths that could mean you’re missing out on security in retirement

Annuities could provide you with income security in retirement. Despite this being a common goal among many thinking about their future, misconceptions may mean retirees are overlooking annuities.

According to a Standard Life study, almost half of over-50s who are aware of annuities say they don’t know how they work. Read on to discover why an annuity may be an option you want to consider.

Annuities provide you with a way to create a guaranteed income in retirement

If you have a defined contribution (DC) pension, one of the retirement challenges you may face is understanding how to turn it into an income. An annuity is one option.

You’d use a lump sum, often from your pension, to purchase an annuity. In return, you’ll typically receive a guaranteed income for the rest of your life. You could choose an annuity that would provide an income that increased each year, which may help preserve your spending power.

When you buy an annuity, your income isn’t affected by stock market volatility, as it may be with other options, and you don’t have to worry about running out of money. So, it could provide peace of mind.

With 87% of people taking financial advice saying income security in retirement is either “very” or “extremely” important to them, an annuity could be right for some retirees.

Yet, the Standard Life research indicates that annuity myths could mean some are disregarding the possible benefits.

1. 48% of people believe annuities offer poor value for money

When you purchase an annuity the rate a provider offers will affect the income you receive.

There’s a misconception that low annuity rates mean that it’s an option that offers poor value for money. However, since the start of 2022, according to Standard Life, annuity rates had improved by 48% by June 2023.

Calculations made in June 2023 reveal that an average 65-year-old woman purchasing an annuity with £100,000 could receive £158,000 over her lifetime. For men, in the same circumstances, the figure is £142,000.

So, if you’ve dismissed an annuity in the past, it may be worth re-evaluating the income it could provide.

Of course, it’s impossible to tell how much you’ll receive from an annuity when you first buy it. As well as the annuity rate, your lifespan will have an effect. However, the figures suggest many people opting for an annuity could benefit financially in the long run.

2. Almost half of people aren’t aware they can combine an annuity with drawdown

One of the reasons you might not want to consider an annuity is that it’s inflexible – you’ll usually receive a defined income each month, which you cannot change to suit your needs.

In contrast, other options allow you to adjust your income. For example, through flexi-access drawdown, you may increase or decrease how much you withdraw from your pension to match your lifestyle.

When you’re reviewing your pension options, it’s important to note you don’t have to choose just one – you can mix and match them.

So, you could use a portion of your pension to purchase an annuity to provide a secure base income. The rest of your retirement savings could remain in your pension for you to access flexibly when you choose.

3. 24% of people incorrectly believe annuities must be bought at the point of retirement

Purchasing an annuity isn’t a decision you need to make at the start of retirement either.

During the start of the next chapter of your life, you might benefit from a flexible income. Perhaps you want the opportunity to withdraw lump sums to pay for one-off costs like updating your home or travelling.

In the future, an annuity could be more suitable. Regularly reviewing your retirement plan and income could help ensure it continues to align with your lifestyle, and you might decide to purchase an annuity years after you retire.

4. 31% believe they need to be healthy to access the best annuity rates

Health issues can negatively affect some financial decisions, so it’s not surprising that 3 in 10 people receiving financial advice believe they must be healthy to access the best annuity rates. Often, the opposite is true.

If you have a health condition you may be able to purchase an “enhanced annuity”. This considers how health may affect your life expectancy and could pay out a higher regular income as a result.

Contact us if you’d like to talk about your retirement income

Understanding how to use your pension and other assets in retirement to provide a reliable income can be difficult. Whether you want support finding an annuity that’s right for you, or you’d like to explore other options, we could help.

Please contact us to arrange a meeting to talk about your retirement finances.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.

2 key reasons why you may want to update your plan during a financial review

Regular financial reviews may help keep you on track to meet your goals and give you confidence in the steps you’re taking. As well as reviewing your assets, you might also want to make changes to your plan.

Last month, you read about why you shouldn’t skip your financial reviews and how they could help you reach your goals. Now, read on to discover two reasons why you might want to make changes to your financial plan during a review.

Updating your plan in response to short-term movements could harm your goals

While there are times when it’s appropriate to update your financial plan, you should be aware of the risks of responding to short-term movements or bias.

Stock market volatility can be nerve-wracking. If you’ve read about the value of shares falling, it can be tempting to withdraw money from the market to preserve your wealth. However, it could have a negative effect on your progress towards your long-term goals.

Historically, markets have delivered returns over the long term, and investors who weather the ups and downs have benefited in the long run. By taking money out of investments during a downturn, you turn paper losses into actual ones.

Of course, investment returns cannot be guaranteed and do carry risks. Understanding which investments align with your circumstances and objectives may help you take an appropriate level of risk.

Similarly, after speaking to a friend about how they’re investing in a certain asset that’s going to deliver “great returns”, you might want to follow suit. Behavioural biases, like following the crowd, could lead to you making unnecessary changes to your plan, which could harm the projected outcomes.

Remember, your goals and circumstances should be at the centre of your financial plan. If changes are tempting, taking a step back to calculate what’s driving the decisions could be useful.

So, following a financial review, why might you make changes? There are several reasons why it may be appropriate, including these two.

1. Your goals or circumstances have changed

Your financial plan should be built around your goals and circumstances. Over time, these may change, and altering your plan may ensure it continues to reflect your lifestyle.

Perhaps you want to bring forward your retirement date, so you increase pension contributions as a result to provide you with financial security? Or becoming a parent might mean taking out life insurance would provide peace of mind, or you’d like to build a nest egg for your child.

A financial review is a chance to let your financial planner know about changes in your life.

It means they can offer advice that’s suitable for you and your aspirations. In some cases, it could mean altering your plan so that it continues to align with your life.

2. Government changes will affect your plans

Sometimes government announcements will affect what’s suitable for you. Changes to allowances, tax hikes, and more could mean adjusting your financial plan would help you get more out of your assets.

The recent announcement that the government will abolish the pension Lifetime Allowance is a good example.

From 2024, there’s expected to be no limit on how much you can save into your pension over your lifetime. It might mean it’s appropriate to increase your pension contributions or it could alter your retirement date.

Keeping on top of the latest news and then understanding what it means for you can be difficult.

Your financial reviews provide an opportunity for your financial planner to explain what announcements mean for you. Tailored advice can help you identify potential risks or opportunities that may lead to changes in your long-term plan.

Contact us to discuss your financial plan

If you have any questions about your financial plan or would like to understand how we could support you, please get in touch.

Next month, read our blog to find out why financial reviews may help you reduce impulsive financial decisions and focus on your long-term aims.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investment market update: September 2023

Economies around the world continue to struggle with high inflation and weakening demand affecting GDP. Read on to discover some of the factors that may have affected your investment portfolio in September 2023.

When reviewing short-term market movements, remember to focus on your long-term investment goals.

UK

Official data shows the UK economy contracted by 0.5% in July. The Office for National Statistics (ONS) attributed the poor performance to strike action and poor weather.

However, there was some good GDP data. The ONS said the UK economy reached pre-pandemic levels earlier than thought in the final quarter of 2021. The revision is good news as economists previously believed the UK was lagging behind other countries.

Inflation is falling but remains above the Bank of England’s (BoE) 2% target. In the 12 months to August 2023, it was 6.7%.

Despite high inflation, the BoE’s Monetary Policy Committee voted to hold its base interest rate of 5.25%. The Bank’s governor, Andrew Bailey, said he believes inflation will fall “quite markedly” by the end of the year. However, he added, it would be premature to cut interest rates now.

Quarterly data from the central bank shows the public is dissatisfied with the strategy for controlling inflation. Public satisfaction was at its lowest since records began in 1999.

While interest rates didn’t rise in September, households are struggling.

The Resolution Foundation warned average working household incomes are on course to be 4% lower in 2024/25 in real terms when compared to 2019/20 thanks to high interest rates, steep tax rises, and a stagnant economy.

The number of mortgages in arrears also demonstrates the pressure some families are facing. According to the BoE, the number of mortgages in arrears hit the highest level in almost seven years.

Businesses are feeling the strain from rising interest rates too. Think tank Cebr predicts that 7,000 businesses will fail every quarter in 2024.

Statistics from the Insolvency Service indicate some businesses are already struggling to balance costs.

Company insolvencies jumped by almost a fifth in England and Wales in August when compared to a year earlier. However, it’s important to note that insolvencies were at a historic low during the pandemic as businesses benefited from government support.

Despite some negative statistics, the FTSE 100 recorded its best day of 2023 so far – the index gained 1.95% on 14 September.

Europe

GDP data for the eurozone was revised downwards. Statistics show GDP expanded by only 0.3% in the second quarter of 2023, which has led to concerns that the bloc could fall into a recession in the second half of the year.

Inflation in the eurozone fell to 5.2% in the 12 months to August. However, there’s a big difference between economies across the bloc. Hungary had the highest rate of inflation at 14.2%, while Spain and Belgium saw prices increase by 2.4% when compared to a year earlier.

In response, the European Central Bank raised its three key interest rates by 25 basis points.

Purchasing Managers’ Index (PMI) data indicated that business output is still contracting as new orders fell and firms were forced to pay more for raw materials and other costs. Germany and Austria were among the worst-performing nations in the eurozone.

As the largest economy in the eurozone, Germany is often used as a barometer for the economic area.

Unfortunately, signs suggest Germany’s economy could be faltering. The European Commission said it expects the country’s GDP to fall by 0.4% this year as energy price shocks due to the war in Ukraine hit the country hard.

Sentix’s index for the eurozone also suggests Germany’s performance is leading to pessimism among investors.

While many countries are struggling to manage soaring inflation, Turkey’s is among the highest. In the 12 months to September 2023, inflation was 61.5% and its base interest rate was 25% in September.

US

Inflation in the US is lower than in some other developed economies. However, at 3.7% in the 12 months to August 2023, the figure is higher than it was a month earlier.

Similar to countries in Europe, PMI data suggests business productivity flatlined in September. S&P Global said the service sector lost momentum in August, while manufacturers reported a drop in sales.

Towards the end of the month, there was a risk that the US government could partially shut down. A group of Republican members of the House of Representatives refused to compromise with their own party’s leadership.

Credit rating agency Moody’s warned a shutdown could threaten the US’s triple-A rating and cause market volatility.

It would follow Fitch downgrading the US government’s credit rating in August due to a “deterioration of standards”.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.