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The Office of Tax Simplification (OTS) is reviewing Capital Gains Tax (CGT) after being ordered to by chancellor Rishi Sunak. Changes that are made following the review could affect tax liability and how you make use of allowances. While changes have yet to be announced, there are two key areas that are being considered for modification: the CGT allowance and rates.

What is Capital Gains Tax?

CGT is a type of tax you pay when you dispose of some assets. Disposing of assets could include selling or gifting them. The profit you make may be taxed.

Assets that may be liable for CGT include:

  • Most personal possessions worth £6,000 or more, apart from your car
  • Property that is not your main home
  • Shares that are not held in a tax-efficient wrapper, such as an ISA
  • Business assets.

The chancellor has asked the OTS to: “Identify opportunities relating to administrative and technical issues as well as areas where the present rules can distort behaviour or do not meet their policy intent.”

While the main aim of the review is to make CGT simpler and fairer, there is also a need to raise revenue. The cost of supporting the economy during the Covid-19 pandemic means the Treasury is left with a deficit. Updates to CGT could go some way to plugging the gap.

The government raises a relatively low amount from GGT; around £8.3 billion a year. Under the current rules, only 265,000 people pay CGT each year, with effective use of allowances and tax breaks meaning many can avoid paying it. However, changes implemented following the review could change that.

The 2 Capital Gains Tax rules that could change

1. The Capital Gains Tax allowance

Under current rules, every individual receives a CGT allowance of £12,300. If the profit you make when disposing of assets falls under this threshold, no CGT is due. Reducing this allowance is one focus of the review.

A small reduction is unlikely to affect many people. In 2017/18, around 50,000 reported net gains just below the threshold. However, the reduction could be more significant. There are suggestions that it could be scaled back to as little as £2,000 – £4,000. For many people, this allowance is an important part of their tax planning and could lead to a higher tax bill than expected.

If you’d be affected by a reduction in the CGT allowance, making use of other allowances will be even more important. For example, selling shares that are held in an ISA, rather than those that aren’t, could help reduce the amount of tax due. Effectively managing the disposal of assets each tax year to make full use of the allowance could also play a role in effective tax management.

2. Capital Gains Tax rates

When CGT is due, how much you pay depends on your Income Tax band and the assets you’re disposing of:

  • Standard CGT rate: 18% on residential property, 10% on other assets
  • Higher CGT rate: 28% on residential property, 20% on other assets.

If you’re not sure what rate of CGT tax you’re liable for, please get in touch.

There are suggestions that the above CGT rates will be brought in line with Income Tax bands. This could mean that higher and additional rate taxpayers face far higher tax bills. It could mean disposing of some assets no longer makes financial sense or that profits would be significantly reduced.

Bill Dodwell, tax director at the OTS, said: “If the government considers the simplification priority is to reduce distortions to behaviour, it should consider either more closely aligning Capital Gains Tax rates with Income Tax rates, or addressing boundary issues as between Capital Gains Tax and Income Tax.”

As with the first point, if this change were brought in, careful management of allowances would become even more important in tax planning. This should be incorporated into your financial plan to reduce tax liability and help you get the most out of your assets.

Reflecting changes in your financial plan

The CGT review highlights why it’s crucial that your regularly review your financial plan. For some people, potential changes to CGT could mean adjustments need to be made in how they hold and dispose of assets to keep goals on track. Continuing with a financial plan that hasn’t considered changes means tax liability could unexpectedly be higher, potentially harming your income or asset growth.

We know that keeping up to date with changes to allowances, tax rates and other areas of finance can be complicated and time-consuming. We work with all our clients to ensure their financial plan consider allowances and more to get the most out of their finances, with frequent reviews to reflect changes.

Please get in touch if you have any questions and to discuss your financial plan.

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 tax planning.

Following a year of uncertainty, you may be worried about your finances. Covid-19 has had an impact in many ways, from reducing income to affecting investments. Some financial firms have also been affected and this may mean you’re concerned about how secure your assets are. The good news is that there are protective measures in place.

More than 4,000 financial firms are at heightened risk due to the Covid-19 crisis, according to the Financial Conduct Authority (FCA). The FCA added that nearly a third of these businesses could potentially harm consumers if they collapsed. The regulator said insurance intermediaries and brokers, payments and electrotonic money firms, and investment management companies experienced the largest drop in cash and assets. The firms at risk are mostly small and medium-sized.

If you’re worried about the security of your assets, the Financial Services Compensation Scheme (FSCS) can provide peace of mind, but it’s important to understand what it does and does not cover.

What is the Financial Services Compensation Scheme?

The government set up the FSCS in 2001 to protect consumers if a financial firm fails. In 2018/19 the FSCS paid out £473 million to over 425,000 customers who had been affected by a firm collapsing.

How much compensation you’re entitled to is dependent on the financial product you have.

Cash accounts

If you hold money in cash, for example, your current account or a savings account, the FSCS covers up to £85,000 per eligible person, and up to £170,000 for joint accounts. To be eligible, the money must be saved with a UK-authorised bank, building society or credit union.

If you hold more than £85,000 in cash, it’s worth spreading it across several different providers to ensure all of it is protected. It’s important to note that some firms operate under different brand names that use the same banking licence. For instance, Nationwide also operate under the names Derbyshire Building Society and Cheshire Building Society, among others. In the unlikely event of Nationwide collapsing, only £85,000 would be protected, even if it were spread between these different brand names.

As a result, it’s important to check how firms are linked if your assets exceed the £85,000 threshold. The easiest way to do this is by checking the FCA’s financial services register.

In some cases, the threshold is temporarily increased to £1 million for 12 months. This provides you with increased protection if a significant amount is deposited in an account following certain life events, such as selling a property or receiving an inheritance, and means you don’t need to make immediate decisions to ensure your assets are protected.


Pensions are likely to be among the largest assets you have and are crucial for security in your later life. The good news is pensions are covered by the FSCS:

  • If a pension provider fails, you’d receive 100% compensation, with no upper limit. This will include defined contribution pensions, such as your workplace pension.
  • Up to £85,000 per eligible person, per firm if your self-invested personal pension (SIPP) operator fails.

It’s important to note that the FSCS does not provide compensation based on investment performance. It provides cover if your pension provider were to collapse, not if your investments perform poorly. As a result, it’s still important that investment decisions reflect your risk profile and long-term goals.

If you have a defined benefit pension, you’re not covered by the FSCS. Instead, these are covered by the Pension Protection Fund.


Your investments may also be protected. Some investments come under the FSCS if a firm has failed, with an £85,000 limit per eligible person, per firm.

Again, the FSCS only covers you if a firm fails, not if your investment values fall. You should ensure your investment portfolio aligns with your risk profile and wider financial plan.

Other financial services may be covered by the FSCS too, including debt management, mortgages, and insurance policies. Before you take out a product, open an account, or use a service, it’s worth checking if you’ll be covered by the FSCS. It can provide confidence and peace of mind.

3 things to do to ensure you’re covered by the FSCS

  1. Always check firms are regulated. Not all services and financial products offered are FCA regulated and if you took out one of these, you won’t be covered by the FSCS. This may be a bank that isn’t authorised in the UK or unregulated investments. You can use the FCA register to check.
  2. Check your existing products. In most cases, your assets will be covered by the FSCS but it’s always worth checking, and ensuring you have not exceeded compensation limits.
  3. Get in touch with us. We want you to have confidence in the products and services used as much as you do in your plans. If you have any questions about whether you’re covered and the risk to your assets, you can contact our team.

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.

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.

Saving into a pension and accessing it comes with a lot of challenges as you need to think about how much income you need throughout retirement.

Research from the People’s Pension suggests that looking at the bigger picture is something many people are putting off, even as they near retirement age and start drawing an income. It’s an outlook that could mean they face financial insecurity later in life or even risk running out of money in retirement.

Pension Freedoms: Understanding income throughout retirement is even more important

In 2015, Pension Freedoms were introduced. This gave retirees far more flexibility and freedom over their income in retirement. However, the greater choice has come with more responsibility and extra complexities.

Those retiring in the last five years and the coming years are likely to enjoy a lifestyle that is very different from their parents. Part of this is because of the flexibility in how you can access your pension.

Previous generations would have given up work on a set date, often purchasing an annuity with their pension savings to generate an income that would be guaranteed for the rest of their life, creating income security throughout retirement. Today, retirees may choose a phased approach to retirement, meaning they need to access a portion of their pension while still earning an income. Or they may choose to flexibly access their pension to suit changing income needs through flexi-access drawdown over an annuity.

These increased options allow retirees to match their income with their lifestyle goals. But it also means more decisions need to be made, including how much income to take and considering how this relates to financial security later in life.

Just half of those nearing retirement have seriously considered how they’ll manage financially

The People’s Pension research asked those over 55: ‘Have you thought about how you are going to manage financially when you retire?’

Worryingly, just 51% said they’d given it some serious thought. In contrast, 36% said they’d thought about it a little and 13% had not considered it at all. Even more concerning is that a third of the people who that hadn’t thought about it or had only given it a little thought, had already accessed their pension in some way. This could mean they’ve made a financial decision that will affect the rest of their life without fully thinking it through.

Overall, the research found that it’s rare to find someone who has made a detailed calculation of their future living expenses. Most people, even those with less than six months until their expected retirement date, preferred a ‘wait and see’ approach. Understanding how much your lifestyle will cost, and how it will change in later years, is essential for ensuring you have enough to last throughout retirement.

Instead, the responses found those nearing retirement were focused on assembling pension information and the ‘fun stuff,’ like thinking about how they’ll spend their time. Both of these are important steps for helping you get the most out of retirement, but they also need to be part of a wider plan.

One example of this is the 25% tax-free lump sum you can take from your pension from the age of 55, rising to 57 in 2028. For most of those questioned, this was viewed as a ‘no brainer’. However, taking a lump sum out of your pension at the very start could mean you run out of money later in life.

If you knew taking out a lump sum at 55 meant you wouldn’t be able to maintain your lifestyle in your later years, would you still do it?

Understanding the impact of your decisions and thinking about these kinds of questions can help you fully prepare for retirement and allow you to enjoy it, safe in the knowledge that you can manage financially.

Balancing retirement aspirations with security

The good news is that most clients find they’re able to balance their retirement goals with long-term security through effective financial planning.

Planning your retirement before you access your pension means you can balance enjoying the retirement lifestyle you’ve been looking forward to with goals you may have for later in life, such as providing a financial helping hand to loved ones, or ensuring you have enough for the unexpected, like potentially paying for care.

If you’ve yet to consider how you’ll manage financially or would like to review your plans with a financial planner, please get in touch. Our goal is to help you get the most out of retirement while ensuring your finances are secure for the rest of your life. With big decisions to make, financial planning at the point of retirement can set you on the right track.

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.

More people are considering and starting to pay into a self-invested personal pension (SIPP). Increased engagement with retirement planning is good news, but a SIPP isn’t the right option for everyone. If you’re thinking about opening a SIPP, it’s important you understand what they are and the drawbacks as well as the advantages.

While there’s a growing interest about SIPPs across all consumers, it’s women and younger generations who are driving the change, according to research from Interactive Investor.

Among women and men aged 25 to 34, there has been a rise of 200% and 185% respectively in the number of people with a SIPP. Across all generations, the rise in women choosing a SIPP surpasses men. For instance, there was an 89% increase in women aged between 55 and 64 opening a SIPP, compared to 66% for men.

Women have traditionally had lower amounts saved in their pensions and it can be hard to encourage younger generations to think about retirement plans that are several decades away. So, the rise in people actively opening a SIPP and, hopefully, making regular contributions, is positive. However, it does come with risks and responsibilities that are important to understand.

What is a SIPP?

A SIPP is a type of pension. As the name suggests, you choose how your contributions are invested. This gives you more freedom, but also means you need to make investment decisions that will affect how much income you have in retirement.

Like other defined contribution pensions, a SIPP becomes accessible at the age of 55, rising to 57 in 2028. At this point, you can choose how you access it, from taking a flexible income through drawdown to purchasing an annuity which would provide a guaranteed income for life. You can also take a 25% tax-free lump sum from your pension.

As with other pensions, you’ll also benefit from tax relief when saving into a SIPP. This means you’d receive an instant boost to your contributions. Tax relief is given at the highest rate of Income Tax you pay.

The pension annual allowance also applies to SIPPs. This is the maximum you can contribute to your pension each tax year, including tax relief and third-party contributions, and it still is tax-efficient. This is usually 100% of your annual earnings up to £40,000. However, some circumstances would mean your annual allowance is lower. Please contact us if you’re not sure how much you can contribute to your pension.

Is a SIPP right for you?

There is no straightforward answer to this question. It will depend on your circumstances and how comfortable you are managing investments.

The key advantage of a SIPP is that it gives you more control and access to a wider choice of investments. This means you can tailor your portfolio to suit your risk profile and goals. You can also hold commercial property in a SIPP, which can be attractive in some circumstances.

However, while the above is an advantage for some, it can also be a drawback. You will need to take responsibility for how your pension contributions are invested and keep in mind that investment values can fall. If you do choose to open a SIPP, it’s essential that you have a clear, long-term investment plan in mind.

The costs associated with a SIPP may also be higher than using other types of pensions, so it’s important to understand the charges and how they compare before selecting a platform.

If you’re currently employed and have a workplace pension, you should also keep in mind that you could be missing out on ‘free money’ if you choose to pay into a SIPP over your employer’s scheme. If you’re paying into your workplace pension, your employer must contribute in most cases. However, if you choose to add to another pension, this is not the case.

Essentially, a SIPP can provide opportunities for some investors and can be particularly attractive for business owners. However, it isn’t a simple decision. You should carefully weigh up the pros and cons of your options for saving for retirement before proceeding. In some cases, another type of pension will be more suitable.

One key question to consider is; am I confident in making investment decisions?

If the answer is ‘no’, an alternative way to save for your retirement may be more suitable for you. If you answered ‘yes’, that doesn’t automatically mean a SIPP is the right place for you to invest. It’s still important to explore other options and fully understand the decisions you’ll need to make.

Please get in touch if you’d like to discuss a SIPP or other pension arrangements you could make to secure your retirement lifestyle.

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.

The current 2020/21 tax year will end on 5 April 2021. As a new year starts, many allowances reset. For some, it will be your last opportunity to use them. Using these six allowances before the deadline can help you get the most out of your money.

1. ISA allowance

ISAs are a popular way to save and invest. They are tax-efficient, you don’t need to pay Income Tax or Capital Gains Tax on the interest or returns earned. Maximising your ISA contributions to make use of the annual allowance can reduce your tax bill. The current ISA allowance is £20,000 per tax year.

Remember, you can also use a Junior ISA (JISA) to save or invest for a child. Similar to an adult ISA, they are tax-efficient. You can contribute £9,000 per tax year. Money contributed to a JISA is locked away until the child turns 18.

2. Pension annual allowance

The annual allowance is the amount you can pay into a pension each tax year while still benefitting from tax relief. Tax relief provides an instant boost to your pension savings and is given at the highest rate of Income Tax you pay. As a result, it makes paying into a pension an effective way to save for retirement.

If you’re in a position to do so, increasing pension contributions to take advantage of this can significantly increase your pension and income when you retire. Usually, you can invest up to 100% of your annual earnings, up to £40,000, into your pension and still benefit from tax relief. However, if you’ve already accessed your pension or are a high-earner, your allowance may be lower. Please contact us if you’re not sure what your annual allowance is.

3. Gifting allowance

If your estate may be liable for Inheritance Tax, gifting money or other assets during your lifetime can reduce the bill, as well as allowing you to see the benefits gifts bring to loves ones. However, some assets are still considered part of your estate for Inheritance Tax purposes for up to seven years after they are gifted.

Making use of gifts that are immediately outside of your estate provides one solution. One of these is the annual gifting allowance, which means you can pass up to £3,000 on to a loved one tax-free. This is per individual, so as a couple you can gift £6,000 without worrying about Inheritance Tax each year.

4. Capital Gains Tax allowance

When you sell or dispose of certain assets, you may be liable for Capital Gains Tax (CGT) on the profit made. The current CGT allowance of £12,300 means that most people will not have to pay this tax. However, if you’re likely to exceed the limit, spreading out the sale of assets across several tax years can make sense.

5. Dividends allowance

If you’re invested in dividend-paying companies, the dividend allowance can be a useful way to boost your income without increasing tax liability. For 2020/21, the dividend allowance is £2,000. If you’re a company director, you can also pay yourself in dividends to make use of this allowance.

6. Marriage Allowance

Finally, if you’re married or in a civil partnership, make use of the Marriage Allowance if one of you doesn’t fully use their Personal Allowance.

The Personal Allowance is the amount you can earn in total each tax year before paying Income Tax. Your total income may include your salary, pension benefits, investment returns and more. For the 2020/21 tax year, this is £12,500. If you or your partner don’t exceed the Personal Allowance, you can usually pass on a portion to the other. This can mean reducing your tax bill by up to £250 as a couple. 

Get in touch to discuss your allowances and financial plan

The above list isn’t exhaustive, other allowances may be valuable to you. If you’d like to discuss your financial plan and the allowances, tax reliefs and incentives that could help you get the most out of your money, please get in touch.

While allowances are often discussed as the end of the tax year approaches, putting a medium-term plan in place that considers these can be beneficial. For instance, if you’re investing through an ISA, spreading contributions across the 2021/22 tax year to fully use your allowance over 12 months can make sense. Likewise, spreading pension contributions across a year is preferable to a lump sum for many people. If you want to create a plan for 2021/2022, please contact us.

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.

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.

The current tax year will end on 5 April 2021, a date when many allowances and tax breaks will reset. In some cases, it will be your last chance to use them. Making use of appropriate allowances can help you get the most out of your money.

Our guide explains seven key allowances you should consider to ensure you’re ready for the 2021/22 tax year. This includes:

  1. Marriage allowance
  2. Pension Annual Allowance
  3. ISA allowance
  4. Gifting allowance
  5. Gifts from your income
  6. Capital Gains Tax
  7. Dividend allowance

Click here to download your copy of the guide.

Keeping on top of allowances and how to use them can be challenging. But creating a financial plan that helps you get the most out of your money can put your mind at ease. Please get in touch to discuss how you can make the most of allowances in the current tax year and put a plan in place for 2021/22.

As the NHS continues to battle the challenges of Covid-19, you may be considering taking out health insurance. The pandemic means many people are facing delays and unable to book appointments when they want to speak to a health professional due to backlogs and restrictions.

Taking out private health insurance could provide you with an alternative and give peace of mind that, should you need to see a nurse, doctor or specialist, you will be able to do so. Before you move forward with taking out a policy, it’s important to know what’s covered and whether it’s appropriate for you.

Number of people taking out health insurance has fallen

According to the Association of British Insurers (ABI), the number of people taking out health insurance has fallen in recent years.

Around 1.2 million people are covered by personal health insurance. In the four years between 2015 and 2019, the figure has fallen by around 10%. A further 3.5 million people are also covered by corporate health insurance, a fall of 5% in the same period.  The fall has been linked to a tax that means insurance premiums are higher, but there are many reasons why people decide to reduce or cannel their cover. You should weigh up if it’s right for you.

How does health insurance work?

Health insurance works in a similar way to other insurance products. You will pay regular premiums for your cover and if you’re ill or injured during the policy’s term, it will pay for medical treatment, tests, and surgery.

In the UK, health insurance is designed to work alongside the NHS. You may still make appointments with your GP through the NHS while seeing a specialist privately. The key benefits of taking out health insurance are:

  • Receiving treatments sooner
  • More choice in where you receive treatment
  • A private room if you are an inpatient
  • A wider range of drugs and treatments that may not be available on the NHS

There is a range of health insurance policies available. Some are more comprehensive, for instance, including physiotherapy, dental treatment, or optical appointments, than others. You can also choose a policy that covers your partner and children if you wish.  

Each policy will have exclusions too. You should read the small print before you proceed to understand what isn’t covered. Most private health insurance policies do not cover:

  • Chronic illnesses
  • Elective treatments, such as cosmetic surgery or fertility treatments
  • Emergency treatment
  • Care and treatment during pregnancy

There will also be a limit on how much you can claim. Again, this will vary by policy and the way it is calculated differs too. Some providers will set a total amount that can be claimed, while others will set a maximum per condition, for example.

Do you need private health insurance? The good news is the NHS is available, so it’s a personal choice. If you want the peace of mind of being able to book appointments quickly or prefer more choice when receiving treatments, health insurance can make sense.

What to consider when taking out health insurance

If you decide to take out health insurance, there are some things to consider to help you pick the right policy and level of cover for you.

  1. Do you have any existing policies? It’s a good idea to review any existing policies you might have so you’re not covered twice and that any new policies complement those already in place. You may have cover that you’re not fully aware of. For example, your employer may offer corporate health insurance and some premium bank accounts include some cover too, so take some time to review your circumstances first.
  2. Who do you want to cover? Decide who you want your policy to cover, this can be just you or include your partner and children too. If you want to cover multiple people, choosing a joint or family policy will typically save you money rather than taking out a policy for each individual.
  3. What do you the policy to cover? The more comprehensive the policy, the more the premiums will be. Setting out what you want the policy to cover first can help you compare different options. Some policies, for instance, will cover mental health and sports injuries, while others may not. Always check what will be excluded too.
  4. What will the premiums be? The cost of the policy will depend on the level of cover you want, as well as your lifestyle and health. Premiums will vary between different providers, so you should compare different options.
  5. Would other protection policies add value too? While talking out health insurance, it’s worth reviewing other insurance products too. Critical illness cover, for example, can provide you with a lump sum following the diagnosis of certain critical illnesses, providing you with financial peace of mind. You may also want to consider Income Protection and Life Insurance policies.

Please get in touch if you’d like to discuss how health insurance and other protection policies can fit into your financial plan.

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

The pandemic and restrictions have meant many families are struggling financially or feel insecure. Research suggests that younger generations have been turning to parents and grandparents for a helping hand. However, some older family members haven’t fully considered the long-term impact that providing support could have on their own plans.

£1.9 billion gifted during the pandemic

According to Legal & General, 5.5 million older family members expect to provide additional financial support as a direct result of Covid-19 on top of the support they may already offer.

Gifting money to help children and grandchildren get onto the property ladder has become commonplace. However, the survey indicates that many are also providing a helping hand to cover day-to-day costs. The figures suggest 15% of the older generation expect to provide an additional sum of £353, on average, in financial aid. In total, that adds up to £1.9 billion being gifted due to the pandemic.

This is on top of support they may already be offering. More than a third (39%) of young adults regularly receive cash from family to help them get by. Collectively, older family members provide £372 million to loved ones each month. Some 29% of recipients use this money to pay for everyday essentials and 27% use it to pay their bills.

When loved ones are struggling with day-to-day costs, it’s natural to want to provide support. However, the research also suggests that some aren’t fully considering the short or long-term impact this could have. The survey found:

  • 38% of those gifting money have made sacrifices in order to do so
  • 31% have cut back on some day-to-day spending
  • 21% admitted they have struggled to pay bills as a result

Understanding the impact a gift can have on your lifestyle before handing it over can mean you feel confident in your decisions. In many cases, family members offering support know they can maintain their current lifestyle, but taking some time to double-check can provide peace of mind.

Don’t forget the long-term impact of gifting

While the study focuses on the short-term implications of gifting, such as paying bills, you need to consider the long term as well.

If you’re taking money out of your pension, for instance, would providing gifts mean you could run out of money later in retirement? Or will cutting back now mean bigger expenses in the future? Again, many clients find they’re in a position to provide the level of financial support they want. But by understanding the long-term consequences, they can proceed with confidence, knowing that it isn’t harming other aspirations they may have.

Reviewing your financial situation now can also help you understand where to take the money from. You may, for example, have money saved in an ISA that you’ve been using, but the annual ISA allowance will limit how much you can replace at a later date. In some cases, this means it makes more sense to draw from other sources of wealth and assets. Reviewing your finances beforehand means you can choose an option that makes sense for you and your plans.

Make gifting part of your financial plan

When asked how they want to use their wealth, many clients will want to provide financial support to loved ones. In the past, this has often been achieved by leaving an inheritance. However, as young families face pressure now, gifting during their lifetime is becoming an increasingly popular option among clients and there are benefits:

  • You can see the impact your money has had for loved ones
  • It can help loved ones overcome challenges they are facing now, such as getting on the property ladder
  • It can reduce a potential Inheritance Tax bill

However, whether you want to lend regular financial support or give a one-off lump sum, gifting should be part of your long-term financial plan. It’s a step that can ensure your plans are viable and have considered other factors, some of which may be outside of your control. For example, if you want to make regular payments to cover school fees for grandchildren, it can allow you to create a plan that ensures this will be provided until they finish their education, even if something unexpected happens.

Please contact us if you’d like to discuss how to pass on money and other assets to loved ones. We’ll help you incorporate it into a financial plan that considers your goals and financial situation to deliver a blueprint you can have confidence in.

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 or tax planning. 

With interest rates low and investment markets experiencing volatility throughout 2020, you may be looking for an alternative place to put your money. Premium Bonds are an option you may be considering, but you could end up missing out on returns.

What are Premium Bonds?

Premium Bonds are a type of investment product issued by National Savings & Investment (NS&I), but they work differently to other types of investments for two key reasons:

  1. The money you place in Premium Bonds is safe and fully backed by the government. This means when you want to withdraw your money, you’ll receive the same amount you deposited.
  2. Rather than receiving interest or investment returns on your money, you’ll be entered into a monthly prize draw.  Prizes range from £25 to £1 million. The more bonds you purchase, the more times you’re entered. Prizes won are free from Income Tax and Capital Gains Tax.

As a result, if you’re lucky, your Premium Bonds could earn you far more than a savings account or investments if you won one of the larger prizes. However, there’s a real chance you’ll receive nothing at all.

One of the reasons that Premium Bonds are attractive is that your deposits are secure. When you decide to withdraw your money, you’ll receive the same amount you put it, but once you factor in inflation, your savings will be lower in value in real terms. This is because the cost of living rises each year and, unless your saving increase by the same amount, your money buys less. In the short term, this effect is minimal. However, look at the impact of long-term inflation and it can be significant.

To keep pace with inflation, your Premium Bonds would consistently need to win the prize draw. So, how likely is that?

According to Money Saving Expert, if you placed £5,000 in Premium Bonds and had average luck, you’d expect to win roughly £50 a year. Of course, there are thousands of people with Premium Bonds that have below-average luck and are potentially missing out on returns.

Recent change means 1 million fewer Premium Bond prizes every month

Since their introduction, Premium Bonds have been popular products. In fact, over 21 million people hold Premium Bonds and over £80 billion is placed in them. But changes in November 2020 mean they’re not as attractive as they once were.

Previously, the prize rate for Premium Bonds was 1.4%, this means each £1 bond had a one in 24,500 chance of winning a prize. The change meant the prize rate was slashed to 1%, resulting in odds of one in 34,500 per bond. That means over one million fewer prizes are given out each month.

As a result, there’s now a greater chance that your Premium Bonds will earn nothing at all, and inflation will affect the value of your savings.

With this in mind, should you use Premium Bonds?

As with every financial decision, the answer will depend on your goals and situation. If you’re looking to create a regular income or guaranteed returns, Premium Bonds are not likely to be the right product for you. However, if you’ve made use if other tax-efficient allowances, such as the Personal Savings Allowance and ISA allowance, they can be a useful option to consider.

How do Premium Bonds compare to savings or investments?

Before you decide if Premium Bonds are the right option, you should weigh up the alternatives too.

Savings: If the security of your money is important, a traditional savings account may be the right option. Assuming you stay within the limits of the Financial Services Compensation Scheme, your money is safe. It will earn regular, guaranteed interest. However, interest rates are low and can mean your savings don’t keep pace with inflation. If you’re in a position to do so, choosing products with restrictions, such as locking your money away for a defined period, can help you access higher rates of interest. Saving accounts are a good option for emergency funds and short-term saving goals.

Investing: If it’s the potentially higher returns that are attracting you to Premium Bonds, investing may be an option. Money invested can deliver returns higher than interest rates, but this is not guaranteed, and your money will be exposed to investment risk. This means that your initial investment can fall, as well as rise, in value. Over the long term, investments have historically delivered returns, so a minimum timeframe of five years is advisable when investing. If you’re focused on long-term returns, investing could provide an alternative to Premium Bonds.

Finding a home for your savings

There’s no right or wrong answer when deciding where to put your money, but it’s essential that you consider what you want to get out of it and your financial circumstances. Please get in touch to create a financial plan that considers your options, whether you have a lump sum to save or want to make regular deposits.

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.

Have you started preparing for retirement yet? If you’re nearing this milestone you may have contemplated whether your pension will be enough and how you’ll create an income. It’s often the financial side of retirement that people focus on.

It’s understandable why. Retirement is a big change to your income. But the lifestyle and emotional aspect of retirement are just as important, yet often overlooked. Not preparing emotionally can mean you miss out on opportunities to get the most out of the next stage of your life and don’t enjoy it as much as you could.

Why retirement can be an emotional challenge

Retirement is a big step to take. It’s one we’ve often been looking forward to, how often have you thought ‘I wish I could give up work now’?

Looking forward to the next chapter of your life is a good thing, but it can mean retirement becomes a dream where everything is perfect. Once the initial excitement wears off, some retirees can find the loss of a routine and focus that work provides can lead to retirement blues or that it simply fails to live up to expectations. 

As retirement draws near, you’ll take steps to prepare an income, thinking about where you’ll live and what your expenses will be. You may also have planned experiences to celebrate the milestone, perhaps travelling or undertaking a renovation project on your home. But you may not have thought about the day-to-day. How will you fill your time?

Retirement has a lot to offer and it’s a chance to indulge your interests. With some planning outside of the financial aspect, it can live up to your expectations.

5 steps to improve emotional wellbeing in retirement

1. Think about the things you enjoy

When working takes up much of your time, some of the things that you enjoy can get left out. Thinking about some of the missed opportunities, such as the times you’d like to have indulged in a hobby, can help you fill your time in retirement and improve your sense of wellbeing.

2. Find something you can focus on

If work provides drive in your life, switching to a retirement lifestyle can be difficult. Picking something that you can focus your energy on and work to improve can help fill the gap. More retirees today are taking a flexible approach to retirement, launching businesses and consulting once they’ve given up a traditional job. Alternatively, you may plan to get involved with charity work, help raise grandchildren or pen that book you’ve always wanted to write.  

3. Keep up with social activities

Isolation and loneliness can harm our emotional wellbeing, and it can be easy to slowly lose social activities when you stop working. Your workplace may have played an important role in your social life, from a quick chat on your lunch break to going for a drink together after work. Spending time with family, friends or old colleagues comes with plenty of benefits. Retirement is also the perfect time to meet new people who you share an interest with.

4. Be open to trying new things

With more time on your hands, don’t get stuck in a routine but try new things too. Taking a class you’ve always been interested in is a great way to learn new things, meet people and break from the day-to-day norm, for example. Heading to new places to take advantage of your new-found freedoms is an option too, whether you explore more of your local area or head further afield.

5. Remember, doing nothing is fine

Going from a work environment to having more free time can make it challenging to just relax. If you’re used to having a packed schedule, you may feel guilty about doing nothing at all. Whether you want to go for a leisurely stroll, spend all day buried in a book, or just watch the world go by, taking some time to yourself is fine. You don’t always have to be productive. Having more time to relax is something you may have looked forward to before retirement, but it can still be difficult to change your mindset.

Financial planning isn’t just about your pensions

It’s a common misconception that financial planning means going over your pensions, investments and savings. And that is an important part of it, after all, you want to understand your assets and how to get the most out of them.

However, financial planning starts with you, not your assets.

We know that what you can do and achieve with your pension is far more important to you than its value. Preparing for retirement with a financial planner means thinking about what you want to achieve, how you want to spend your time and what your priorities are. The financial side comes afterwards when we help you create a long-term that show how you can use your assets to ticks off those goals and improve wellbeing.

Please get in touch if you’re planning for retirement and would like to arrange a meeting.

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.