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Taking ESG (environmental, social and governance) factors into consideration is a growing trend among investors. But what does it mean and why would you look at these areas when making investment decisions?

Our latest guide explains the basics of ESG investing. According to the Investment Association, 26% of all UK assets use ESG factors in some way, though the depth varies. As a result, it’s gradually being incorporated into more investment strategies. Our guide explains:

  1. What ESG factors cover
  2. How ESG factors may be used when making investment decisions
  3. Why investors may want to consider ESG influences
  4. What the challenges of ESG investing are

Click here to download your copy of the guide.

If you’d like to talk about your investments, long-term goals and ESG factors, please contact us on 01473 636688. We’re here to help you understand your investment options and how they can help you achieve your aspirations.

We all know the nursery rhyme: Remember, remember the fifth of November, gunpowder, treason and plot. I see no reason why gunpowder treason, should ever be forgot.

And 415 years later, the gunpowder plot and Guy Fawkes are still remembered every year on Bonfire Night. As the nights draw in, it won’t be too long before fireworks fill the skies, bonfires are lit, sparklers are waved, and toffee apples are tucked into.

As we remember the foiled plot to blow up King James I and the Houses of Parliament, with Guy Fawkes found in a cellar guarding 36 barrels of gunpowder, there are a few lessons we can learn about investments too.

1. Don’t follow the group

Guy Fawkes might not have been caught up in simply following the group, he was, after all, a Catholic that had fought for Catholic Spain in the Eighty Years’ War against Protestant Dutch reformers. So, the plan to assassinate Protestant King James I would have had an appeal.

But the mastermind behind the plot was Robert Catesby, and it was Guy Fawkes that was discovered armed with a slow match in the cellar surrounded by gunpowder.

In investments, it can be tempting to follow what others are doing. If everyone seems to be investing in a certain sector, they can’t all be wrong, right? But this forgets that investment goals and your circumstances should be central to your plans. An investment that is ‘right’ for one person can be ‘wrong’ for another.

2. Sometimes sensational isn’t best

If it had been successful, the gunpowder plot would have been remarkable. With enough gunpowder to reduce the House of Lords to rubble, killing the King, as well as other Protestants and Catholics, the plot would have been a decisive moment in history. Indeed, despite failing, it’s still taught in every school and still important. If the conspirators had opted for a subtler approach, would they have been successful? We’ll never know but understated is sometimes better.

In investing there are always star fund managers, top funds, and investments that investors are urged to back. But sometimes these headline-grabbing options aren’t what is best for you. A relatively stable option may better suit your plans. Steer away from investments you’re tempted by, simply because they’re claiming to deliver sensational returns, focus on your long-term plans instead.

3. Don’t put all your eggs in one basket

When investing, diversifying is something we talk about a lot. Spreading investments across a range of assets, locations and sectors can help spread risk. If one group of investments is affected by volatility, there’s an opportunity for this to be balanced out by gains in another area of your portfolio.

When the gunpowder plot unravelled, the conspirator fled London. There was no plan B or gunpowder stored in other parts of London. If they hadn’t put all their eggs in one basket, the plotter may have had a second chance to achieve their aims – it could have led to a very different country than the one we recognise today.

4. Know the risks you’re taking

So, Guy Fawkes was certainly aware of the risk he was taking. After all, he was committing treason in a spectacular fashion at a time when monarchs weren’t known for their leniency. He’d have known that being captured would mean capital punishment.

Fortunately, investors don’t run the risk of being hanged, drawn, and quartered.

But there are risks involved in any investment and it’s important to be aware of them. Potentially high returns will usually mean you need to take a higher level of risk. Though the stakes aren’t as high as they were in 1605, are you comfortable with the thought your investments could fall in value?

You need to understand what an appropriate level of risk for you is, considering numerous factors, from your investment goals to the other assets you hold, as well as your general attitude towards investing. It can be complex, but we’re here to help you make investment decisions that reflect your wider circumstances and take on an appropriate amount of risk.

5. Speak to someone you trust

The gunpowder plot began to unravel when a few days before the explosives were due to be lit a letter was shown to the king which stated: “I say they shall receive a terrible blow this Parliament; and yet they shall not see who hurts them.” The phrase ‘blow’ immediately led to suspicions that an explosion had been planned.

It’s not known for certain who wrote the anonymous letter, but it’s thought to have come from conspirator Francis Tresham, though he never mentioned the letter in his confession. Speaking about plans is important and can help you see where the risks lie, but you need to be able to trust the people you speak to.

When it comes to your financial plan, a professional financial planner can help you see both opportunities and risks you may have overlooked. Please get in touch to discuss your plans and concerns.

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 month marked financial planning week, which aims to showcase the benefits of financial planning, from the financial gains to improved wellbeing. To celebrate this, we’ve got a checklist of steps you should take before 2020 ends to ensure you’re on track.

1. Think about your lifestyle goals

The financial steps you make should be linked to your lifestyle goals. As a result, this is one of the first things you should do. Since setting out your current financial plan, have your aims changed? Take some time to think about what you want to achieve in the short, medium, and long term.

2. Review your financial safety nets

No one knows what will happen, but you can prepare for the unexpected. Having financial safety nets in place can provide peace of mind that should something happen, such as becoming too ill to work for an extended time or an unexpected bill comes up, you still have security.

Ideally, you should have an emergency fund that will cover three to six months of expenses. If you’ve dipped into savings, look at how you can replenish this fund. You should also review the financial protection you have in place and ensure they’re still relevant for your circumstances and priorities. In some cases, policies will no longer be needed, while in others it may be useful to take out additional cover.

3. Assess your debts

If you have debts, it’s worth spending some time reviewing them too. What interest rate are you paying and are you on track to pay them off? Prioritising paying off debts with higher interest rates makes financial sense, as can making overpayments where possible. You may be able to reduce the interest rate by transferring the debt too. Switching to a 0% interest credit card can help you reduce the debt quicker.

4. Check the interest rate on your savings

Interest rates for savings accounts are at an all-time low. It means it’s more important than ever to shop around for a good deal to make your savings work as hard as possible. If you’re in a position to, locking your savings away for a set period or choosing an account with restrictions can help you access higher interest rates.

Keep in mind, though, interest rates are unlikely to match inflation. In real terms, this means your savings are reducing in value. If you’re saving for long-term goals, investing may be appropriate.

5. Take a look at your investments

While looking at your savings, you should review investments too. It can be tempting to base your review on simply how investments have performed recently. But keep in mind investments should be made with a long-term goal in mind and there has been significant short-term volatility this year. Rather than focusing on recent performance, look at the bigger picture and ensure your investments are still appropriate for you.

6. Check your pension

If you’re not yet retired, a pension can be abstract. After all, it can be decades before you’ll actually use the money you’re saving for retirement. But it’s important to regularly review what’s going into your pension and what this means once you start using it to create an income.

If you are retired, review your pension savings with your financial plan in mind. Are your withdrawals sustainable? Do you have the level of security you want? And is your current income allowing you to live the lifestyle you want?

Pension savings can be complex and it’s essential you have a long-term outlook. You can get in touch with us if you need help understanding your pension savings.

7. Consider your retirement plan

While looking at how your pension is growing, don’t forget to think about what you want out of retirement too. How do you want to spend your time when retired? We often focus on the big areas when looking at retirement lifestyle, but your day-to-day plans and goals are just as important. Setting out what you want can help ensure your savings are on track and ensure your retirement lives up to expectations.

8. See if you’re making the most of allowances

How have you used your allowances so far? From the ISA subscription limit to the pension annual allowance, making the most of these can help your money to go further. Thinking about how you’ve used allowances now can help you avoid the end of tax year scramble in April 2021.

9. Review your estate plan

While reviewing your finances, you should consider your estate plan too. Changes to your wealth and circumstances may mean you need to adjust your estate plan to reflect these. If you don’t have them already, putting a will and Power of Attorney in place should be a priority. If you do have these, give them a quick review to make sure they still accurately reflect your wishes.

10. Check when your next review is

Finally, regular reviews are an important part of your financial plan. They provide an opportunity to check your plan still aligns with your goals and reflect any legislative changes that may have been brought in. Check when your next review is scheduled for, but remember, you can contact us at any time if you have any questions or concerns you’d like to discuss.

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.

The nights are drawing in and Halloween is around the corner. But while you might get spooked watching a horror film this season, pension mistakes can be just as scary (and cost you far more). With that in mind, here are seven pension mistakes to avoid to keep your retirement on track.

1. Not claiming all the tax relief you can

You receive tax relief on your pension contributions. It means your savings grow faster. However, are you getting everything you’re entitled to?

Pension tax relief is at the highest rate of Income Tax you pay. If you’re a basic-rate taxpayer, a tax relief of 20% will be added to your pension at the source. So, you don’t need to do anything about it.

If you’re a higher (40%) or additional (45%) rate taxpayer, you’ll need to apply for the extra relief by completing a self-assessment tax return. Failing to do this means you could be missing out on significant sums over time that could help you achieve retirement goals.

2. Failing to take advantage of additional employer contributions

All employers must now offer the majority of employees a pension, which they contribute to. An employer’s contribution is a minimum of 3% of your pensionable earnings. This is a useful boost to your savings but it’s worth checking if your employer will increase this.

Some employers, for instance, will match your own contributions up to a certain level. If this is the case, it’s often worth increasing your own pension contributions as you’ll receive extra ‘free money’ to put towards retirement. Other firms may also offer a salary sacrifice on pension contributions, allowing you to reduce Income Tax and National Insurance, with your pension benefiting.

3. Exceeding the Annual and Lifetime Allowance

Exceeding pension limits can mean a larger tax bill than expected – scarier than the traditional haunted house!

It’s important you understand what your Annual and Lifetime Allowance is.

The Annual Allowance is the amount you can tax-efficiently save into a pension each tax year. You can carry forward unused allowance from the three previous tax years. The Annual Allowance is linked to your earnings and can range from £4,000 to £40,000. If you’d like to discuss your Annual Allowance and how to make the most of unused allowances, please get in touch.

The Lifetime Allowance is the total amount you can save tax-efficiently into a pension. For the tax year 2020/21, the Lifetime Allowance is £1,073,100 and it’s expected to increase in line with inflation. The sum sounds like a lot but you need to consider that it will include decades’ worth of your contributions, employer contributions, tax relief and investment growth.

4. Triggering the MPAA without realising

It’s not just your earnings that can affect your Annual Allowance either. If you start to take money from your pension, the amount you can pay in and still receive tax relief on reduces to £4,000. This is called the Money Purchase Annual Allowance (MPAA).

If you access your pension at the point of retirement, the MPAA is unlikely to affect you. However, if you make withdrawals before retiring and then plan to continue contributing, it can limit how much you’re able to save. It doesn’t mean your pension savings have to remain inaccessible, but being aware and having a plan is crucial.

5. Withdrawing from your pension when you don’t need it

Recent research from PensionBee found that just 3% of those considering accessing their pension was planning to retire soon. A further 26% planned to make a withdrawal to increase day-to-day income or purchase something special. However, the remaining respondents didn’t need their pension savings yet but were still thinking about making a withdrawal.

It can mean you need to compromise when you retire as your savings will be lower. If you’re thinking of accessing your pension before retirement consider:

  • What will you use the withdrawals for?
  • Will it affect your retirement lifestyle in the future?

If you don’t need your pension savings yet, for most people, leaving savings invested through a pension is the most appropriate option.

6. Not shopping around for the best Annuity deal

If you have a Defined Contribution pension, purchasing an Annuity is the only way to create a guaranteed income for life.

But it’s not as simple as choosing a provider and moving forward. There are many different options on the market and providers will offer varying rates. You should take the time to shop around and find the best deal for you. It could mean your retirement is more comfortable.

It’s also important to look at the extra features on an Annuity that are important to you. For instance, some will provide an income linked to inflation, maintaining your spending power, or provide an income to your spouse or civil partner if you pass away.

7. Not taking financial advice at the point of retirement

Retirement comes with a lot of decisions to be made. And they could affect the rest of your life. Financial advice can build confidence and offer guidance at the point of retirement and beyond.

Seeking financial advice at the point of retirement can help you understand your assets and how they can be used with your goals in mind. Since 2015, pension savers have far more choice in accessing their pension, but it comes with more responsibility too.

Getting to grips with your pension now and avoiding common mistakes means that pension savings and retirement doesn’t have to be scary at all, but something you look forward to. Please get in touch to discuss your pension.

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 can 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 becoming self-employed and it’s a step that’s been linked to improved wellbeing. But it can mean your financial security falls, particularly when looking ahead to retirement. For self-employed workers, it’s important to take steps that can ensure your financial security in the long term.

According to research from the Institute of Fiscal Studies, wellbeing improves markedly upon entering self-employment. Job satisfaction was found to rise by 1 point on a 7-point scale. The improvement is even found among those who did not expect to start their own business and may have been ‘pushed’ into self-employment.

Self-employment can offer many benefits that lead to improved wellbeing, from being able to work flexible hours to focusing on projects you enjoy. It’s part of the reason why self-employment figures have increased. One in nine workers is solo self-employed, where you work entirely on your own with no employees, today, up from one in eleven in 2008.

Yet, self-employment comes with drawbacks too. One of these is that your income may be affected, and you don’t benefit from a Workplace Pension. While your focus may be on short-term finances, it’s essential you think about what happens when you retire. Here are five things to do to prepare for retirement.

1. Think about your retirement

It’s impossible to properly plan for retirement if you haven’t spent some time thinking about it.

The first question to consider is when do you want to retire and is this realistic with your job in mind? For some, retiring completely isn’t for them. But you may still want to wind back tasks and have more time for yourself. Setting out a time frame can help ensure you’re on track and it doesn’t have to be set in stone.

You should also think about how you plan to spend your retirement and what this means for your income needs. How much income would you need to cover essentials and what extras do you want to meet your lifestyle goals? This can give you an idea of how much your pension needs to deliver in income each year.

Remember, inflation means the cost of living will rise throughout your retirement and this should be factored into your plans.

2. Set a pension goal

With a clear idea of when you want to retire and the lifestyle you want, you’re in a better position to understand how much you’ll need in your pension when you retire. There are still numerous factors to consider here, from how long your pension will need to last to how investment performance will help you meet that goal.

A financial planner can help you understand how much you need with your goals in mind. The final sum can be daunting at first glance. But once you break it down into regular contributions and understand how investments will support growth, it can seem far more achievable. Contact us to talk about the size of your pension and what it means in retirement.

3. Open the right pension for you

With a pension goal in mind, open a pension and make regular contributions. There are several pensions to choose from, including a Personal Pension, Self-Invested Personal Pension and Stakeholder Pension.

Each of these pensions has pros and cons to weigh up. Take some time to research the options and discuss them with a financial adviser to choose the right one for you.

Your pension won’t benefit from employer contributions, but you will still receive tax relief. This is given at the highest rate of Income Tax that you pay. It can significantly boost your retirement savings over the long term. If you’re a higher or additional rate taxpayer, you’ll need to claim the extra tax relief through a self-assessment tax form.

4. Protect your income now

While we’re thinking long term when saving for your retirement, the income you have now is important. After all, this is where regular contributions will come from and you may be reluctant to tie up additional money in a pension if you don’t feel secure now.

Taking out appropriate financial protection products can give you peace of mind. Income Protection Insurance, for instance, can provide a regular income, based on a percentage of your usual earnings, if you become too ill to work. It can provide confidence in your current financial situation and can deliver benefits long term. Before you take out a financial protection product, you should assess what your priorities are. There is a range of different products to choose from and you should take the time to pick the right one for you.

5. Seek advice

Planning for retirement can be complex for anyone. When you’re self-employed, it can be even more complicated. Seeking financial advice can help you make the most of your savings with both your security now and retirement in mind. It’s a step that can help you see where retirement fits into your wider plans and the lifestyle you can expect.

If you’re self-employed and would like to discuss what you can do to improve your retirement, please get in touch. We’re here to help you make the most of your income to meet goals now and in the future.

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

Your 55th birthday, rising to 57 in 2028, often marks being able to access your pension for the first time. The opportunity to take a 25% lump sum tax-free is certainly attractive and can be too tempting to resist. But it’s not a decision to take lightly and it isn’t the right move for everyone.

The ability to take a tax-free lump sum means that pension savings are becoming disconnected from retirement, research suggests. For many of us, retirement is still some way off at 55 and you may plan to work for many more years. Removing a quarter of your savings before you give up work could affect your long-term income.

Deciding when and how to access your pension is important. Despite this, a survey from PensionBee indicates thousands of over-55s aren’t fully considering the impact early withdrawals will make. In fact, almost half (48%) hadn’t considered how they’d manage throughout retirement.

So, what should you think about before you withdraw that lump sum?

1. Why do you want to take a lump sum from your pension?

According to the survey, just 3% of those considering accessing their pension did so because they were retiring or stopping work. A further 17% would use the money to cover day-to-day expenses and 9% would spend it on something special.

If those thinking about accessing their pensions aren’t planning to spend the money, why are they taking this step? Three popular responses suggest that for some, the reasons don’t align with financial goals.  

  • 32% worry about pensions falling in value
  • 20% would make a withdrawal so they would have more ‘control’
  • 12% said they simply felt a pressure to do something with it

What’s the issue with these responses?

First, pensions are typically invested, and you should expect some short-term volatility. If you’re worried about your pension losing value, it’s important to focus on the long term. If you don’t plan to use your pension as an income for several years, leaving it invested is likely to be most appropriate. It’s also worth noting that if you choose to take a flexible income from your pension, the money you don’t withdraw will usually remain invested. Speak to us if you have concerns about pension investments and market movements.

Second, you do have control over your pension investments. With a typical Defined Contribution pension, you’re usually able to choose from several different investment funds to match your risk profile and goals. This is suitable for most pension savers. For some, a Self-Invested Personal Pension (SIPP) is an option to explore but this can be complex and you must be comfortable managing investments, we’re here to provide guidance where needed.

Finally, don’t feel under any pressure to make pension withdrawals just because you’ve turned 55. For most people, if you’re not retiring, it makes sense to leave savings invested through a pension and continue adding to it.

2. What will you do with your tax-free lump sum?

The figures above established that relatively few people considering accessing their pension to withdraw a lump sum intend to spend the money. If you do plan to spend, you need to consider the long-term consequences first, which we’ll look at in the next point.

However, if you don’t plan to spend the money, what are your options?

Placing the money in a savings account: Some responders indicated they intended to withdraw money to place it into a cash savings account. If you’re nervous about pension values falling or want retirement savings to seem more tangible, this may be viewed as a ‘safe’ option. After all, market movements won’t affect the lump sum withdrawn.

But inflation will affect savings. Interest rates are low at the moment and while values won’t fall because of investment performance, the value will decrease in real terms. That means over time your savings will buy less due to inflation.

Investing the money: If you’re thinking about taking money out of your pension to invest it, remember your pension is likely already invested. Pensions are a tax-efficient way to save for retirement. Leaving your money invested in a pension and adding to it until retirement makes financial sense for most people. It’s worth taking the time to understand how your pension savings are currently invested, the associated costs, and the long-term investment performance before you make any decisions.

3. What impact will it have on your retirement plans?

Over a third (35%) of people said they didn’t know how to find out how much they could expect to receive from their pension in retirement.

Before you make plans to make any withdrawals, it’s essential you understand the value of your pension and how this will translate to an income. If you took the maximum 25% tax-free lump sum from your pension, that’s a sizeable amount. Doing it while you’re still in your 50s, with retirement perhaps several years away, means you’re missing out on the investment growth of this sum too.

Making a pension withdrawal as soon as it becomes an option could mean your income is far lower during retirement. Would you still take a lump sum to spend now if it meant the 30 years you spend in retirement are less comfortable?

The key here is to understand what impact taking the tax-free lump sum would have. We’re here to provide insight. We’ll help you to see what income your pension will provide if you take a lump sum now, taking it further down the line, or not taking it all, taking your retirement goals and plans into consideration.

If you’re able to take a tax-free lump sum out of your pension and want to understand your options, please get in touch. We’ll help you see how removing a lump sum from your pension now will affect your income in retirement and how to make the most of any withdrawals. 

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. Your pension income could also be affected by the interest rates at the time you take your benefits.

Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.

From 2028, you won’t be able to access your Personal Pension until the age of 57. The government’s decision could affect your retirement plans and it’s important to review what it means for your future.

The government previously stated it intended to increase the age people could access their Personal Pensions, currently set at 55. However, it didn’t put legislation in place, leading to speculation that the change wouldn’t go ahead. The government has now confirmed that it will legislate for the rise ‘in due course’. So, if you turn 55 in 2028 or after, you’ll have to wait an extra two years before you can access your retirement savings.

Why is the pension age rising?

The rise in Personal Pension age follows similar plans to increase the State Pension age. As people are living longer, pensions are being stretched to last for several decades. The move is part of this trend, helping people to ensure their pension savings are there to provide an income in later life.

When Pension Freedoms were first introduced in 2015, providing pension savers with more freedom, there were concerns that some would recklessly spend too much too soon and leave themselves financially vulnerable in later retirement. However, figures suggest this hasn’t been the case. The majority are taking a sustainable income.

So, is a further rise on the cards? We can’t predict what will happen. But it’s likely the age you can access your Personal Pension will rise again in the future, perhaps in line with the State Pension age. Keeping up to date with pension changes and what they mean for you is essential, this is an area we can help you with.

How does the change affect your retirement plans?

Whether the change to Personal Pension age will affect you will depend on what your plans are.

  • I don’t plan to access my pension before the age of 57

If you had no plans to access your pension before the age of 57, the recent announcement doesn’t affect you. Your retirement plans should be able to go ahead. However, it’s still important to regularly review your long-term financial plans and keep in mind that further changes could be announced in the future.

  • I want to retire after 57 but intended to access a portion of my pension

The Pension Freedoms meant retirement savings could be accessed how and when you liked from the age of 55.

One attractive option was the ability to take a tax-free lump sum up to the value of 25% from your pension. It’s an option many have taken advantage of before they’ve retired. Alternatively, you may want to access your pension to supplement your income before you retire.

If you had intended to start making withdrawals from your pension at 55 while still working, you’ll now need to adjust your plans. The simplest option is to push your plan back by two years to reflect the recent changes. However, if you don’t want to do this, you should assess how your other assets can bridge the gap. You may be able to use savings and investments, for instance, to provide the income you want for the two years before your pension is accessible.

Make sure you understand how using other assets could affect your wider plans and where to make withdrawals from. For example, there’s a subscription limit for ISA accounts so it may make sense to use other assets first. Please get in touch to discuss how your assets could be used in place of your pension.

  • I plan to retire and access my pension at 55

If you plan to retire at 55 after 2028 and don’t want to delay plans, you need to create a new plan for building an income now. The sooner you tackle this, the better the position you’ll be in to still reach your retirement goals.

In some cases, it may be necessary to make adjustments. For instance, you may need to delay plans or cut back on your planned outgoings. While this can be frustrating after looking forward to retirement, it can help preserve your wealth to create a stable income for retirement, which could last decades.

However, you may find you’re in a better position and can still proceed with plans.

Exploring your options and assessing other assets may provide alternative ways to create the reliable income you need for the first couple of years of retirement until you can access your pension.

It’s crucial that you look at the long-term impact of using other assets. For instance, if you’d intended to use them to supplement your pension throughout retirement, how will taking a larger sum in early retirement have an impact? Or will it mean your legacy is reduced?

If your retirement plans have been affected by the changes, please get in touch. We’re here to help you understand how other assets could be used and what it means for your plans. We’ll use a range of tools to demonstrate how your wealth can be used and will be affected over the long term by funding retirement, giving you the confidence you need to make decisions.

Reflecting legislative changes in your retirement plans

Keeping up to date with government changes and how they affect your retirement plans, can be challenging. Understanding how changes will have an impact on your retirement goals, even more so. Working with a financial planner can help you see whether changes present opportunities or a need to adjust your plans. Please get in touch to discuss your retirement plans, pensions and what legislative changes means for you.

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. 

Back in July, Chancellor Rishi Sunak announced a second range of measures designed to protect the economy through the Covid-19 pandemic.

His next update was scheduled to be the Autumn Statement in the coming weeks. However, given the newly imposed Covid-19 restrictions and economic uncertainty, the Budget has been cancelled.

In a statement sent to the BBC, a spokesperson for the Treasury said: “As we heard this week, now is not the right time to outline long-term plans – people want to see us focused on the here and now.

“So, we are confirming today that there will be no Budget this autumn.”

Instead, on Thursday 24th September, the Chancellor unveiled his winter economy plan, setting out the next phase of the economic response to the Covid-19 pandemic.

Introducing his new measures, the Chancellor acknowledged that the virus will be a fact of life ‘for at least the next six months’ and so the economy will need ‘a more permanent’ adjustment.

Here are the main points announced in Rishi Sunak’s latest speech.

A new Job Support Scheme

The Chancellor announced the Coronavirus Job Retention Scheme, dubbed the ‘furlough scheme’, in March just as the scale of the pandemic was becoming clear. The aim was to prevent a rise in unemployment when businesses were forced to shut down to slow the spread of Covid-19.

The furlough scheme initially paid 80% of the wages of workers that were unable to work, up to a maximum of £2,500 per month. As the economy reopened, employers had to pay 10% of the wages of those on furlough and workers could return part-time, with the government making up the hours not worked.

With the furlough scheme ending at the end of October, the Chancellor was keen to continue to support at-risk jobs.

A new Job Support Scheme means that the government and employers will jointly cover the cost of those having to work fewer hours. Under the scheme, businesses will have the option of keeping employees in a job on shorter hours, rather than making them redundant.

To be eligible for the scheme, an employee will have to work a minimum of 33% of their hours, in order that the scheme only protects ‘viable’ jobs.

For the remaining hours not worked, the government and employer will each pay one-third of the employee’s wages. It means that employees working 33% of their hours will receive at least 77% of their overall pay.

The scheme will begin on 1 November 2020 and last for six months.

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It’s important to note that, while all small and medium-sized firms are eligible, large firms are only eligible if their turnover has fallen in the pandemic.

The Job Support Scheme can also be used in conjunction with the Job Retention Bonus that the Chancellor announced in his Summer Statement.

CBI director-general Carolyn Fairbairn says: “These bold steps from the Treasury will save hundreds of thousands of viable jobs this winter. It is right to target help on jobs with a future but can only be part-time while demand remains flat.”

An extension to the Self-Employed Income Support Scheme

The Chancellor has been keen to provide the same support to self-employed workers as to employed staff.

In his statement, he revealed that he would extend the Self-Employed Income Support Scheme to 30 April 2021, although at a much-reduced rate.

The extension will support viable traders who are facing reduced demand over the winter months, covering 20% of average monthly trading profits through a government grant.

More flexibility with government loan schemes

Sunak announced that, under his Pay as you Grow Scheme, he will offer more than one million businesses, which have borrowed under the Bounce Back Loan Scheme, the choice of more time and greater flexibility to make their repayments.

For example, businesses can now extend their loans from six to ten years, and businesses can choose to make interest-only repayments – or suspend repayments for up to six months – without affecting their credit rating.

Lenders who have been enabled to offer the Coronavirus Business Interruption Loan Scheme will also offer borrowers more time to make their repayments where needed.

The Chancellor also extended the application deadline for all coronavirus loan schemes – including the future fund – to the end of 2020.

Tax deferrals

Sunak announced that businesses who deferred their VAT this year will no longer have to pay a lump sum at the end of March 2021.

Instead, they will have the option of splitting it into smaller, interest-free payments over the course of 11 months. This will benefit up to half a million businesses.

The Chancellor also announced that any of the millions of self-assessed income taxpayers who need extra help can also now extend their outstanding tax bill over 12 months from January 2021.

VAT reduction extended for hospitality sector

In his Summer Statement, the Chancellor reduced the VAT rate applicable to hospitality businesses from 20% to 5%.

In his address, Sunak announced that he will extend this VAT cut to the end of March 2021. Sunak says that this will continue to support more than 150,000 businesses and protect 2.4 million jobs.

Get in touch

If you have any questions about how these measures might affect you or your business, please get in touch.

Supporting worthy causes is often something people want to include in their financial plan, whether through regular donations or a charitable legacy in their will. The good news is that to encourage charitable giving, there are tax breaks you can benefit from too.

If you’re thinking of supporting a charity, now could be a perfect time. A report suggests that many organisations in the third sector are struggling to balance rising demand with lower incomes.

Since the Covid-19 crisis began, charities have been facing more challenges. With people going out less, reducing spontaneous giving, and many worried about their financial future, donations have fallen. In a Charities Aid Foundation report, it was revealed 53% of charities have seen donations decrease. This was linked to families having less disposable income and the areas they were giving to changing to reflect current circumstances.

However, coinciding with this, 36% of charities said demand for their services had increased due to Covid-19. The support given to the causes close to your heart could have a huge impact and it can benefit you too. There are three key ways that donating to charity can be tax-efficient.

1. Paying directly from your salary for tax relief

If you want to provide a regular donation to a charitable cause, giving directly from your salary or pension each month can be a hassle-free option. It can be advantageous in terms of tax too.

To be able to give directly from your salary or pension, your employer or pension provider must offer a Payroll Giving scheme.

If this is available to you, donations are given before tax is deducted from your income. This means you get tax relief in line with the rate of Income Tax you pay. So, in England and Wales to donate £10 to a charity, you’d need to pay:

  • £8 if you’re a basic-rate taxpayer
  • £6 if you’re an additional-rate taxpayer
  • £5.50 if you’re a higher-rate taxpayer

The tax relief can help your donations have a far bigger impact and provide financial benefits to you too.

2. Tax relief when donating assets

If you want to provide one-off or occasional support during your lifetime, you may choose to donate assets to a charity, including land, property and shares.

This option can provide tax relief for both Income Tax and Capital Gains Tax.

You can pay less Income Tax by deducting the value of your donation from your total taxable income. You can do this by filling in a self-assessment tax return and including the donation in the ‘charitable giving’ section of the form.

Capital Gains Tax is paid on the profit you make when selling certain assets. However, you do not have to pay Capital Gains Tax on land, property or shares you give to charity.

In some cases, a charity may ask that an asset is sold on their behalf. You can still claim tax relief on these donations, but you must keep records of the gift and the charity’s request.

3. Reducing Inheritance Tax

Is your entire estate worth more than £325,000? If it is, your estate could be liable for Inheritance Tax when you pass away. That means leaving less behind for your loved ones, but a charitable legacy can do good and minimise the amount of tax due.

There are two ways charitable legacies can reduce the amount of Inheritance Tax due.

First, any charitable legacy will be taken off the value of your estate before Inheritance Tax is calculated. As a result, it can help you keep your estate under the threshold limits for Inheritance Tax and means your estate won’t be liable for any at all.

Second, the standard rate of Inheritance Tax is 40%, which can significantly reduce what you leave behind. If you choose to leave 10% or more of your estate to charity, the rate of Inheritance Tax will fall to 36%. Depending on the size of your estate, this reduction can mean you leave more to loved ones while lending financial support to a charity too.

If you want to use a charitable legacy to reduce Inheritance Tax, this must be included in your will. A charitable legacy can be a fixed amount, what’s left after other gifts have been given, an item or a percentage of your estate.

Do you want to support charitable causes? Please get in touch with us, whether you want to provide ongoing financial support or leave a legacy behind, we can help you understand what it means for your finances and help you make the most of tax reliefs.

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.

If you’re retiring this year, you may be worried about what the market volatility caused by Covid-19 means for your options.

The good news is that Pension Freedoms, introduced in 2015, means you can choose how and when you access your retirement savings.

Market volatility may have affected the value of your pension but that doesn’t mean your overall plans have to be adjusted. However, it’s important that you understand the impact it could have.

The impact will depend on how you intend to access your pension.

1. Taking a lump sum

Once you reach retirement age, it is possible to take your pension through lump-sum withdrawals. You can even choose to withdraw the entire amount, though this isn’t appropriate for most retirees.

Usually, you can withdraw up to 25% tax-free. If you’ve intended to take a lump sum out of your pension to take advantage of this, it’s worth assessing if your pension value has fallen. Withdrawals that exceed the 25% tax-free lump sum will be taxed as income and could push you into a higher Income Tax bracket. As a result, taking a lump sum may not be the most efficient way to access money.

2. Purchasing an Annuity

An Annuity is a product you buy with your pension savings that delivers a lifetime income. As a result, if the value of your pension has fallen, you may find that the income you can purchase is now lower. But it is an option that can provide financial security throughout retirement.

The amount paid out will depend on the Annuity rate. For example, a 5% Annuity rate would pay out £5,000 every year for every £100,000 initially paid.

The Annuity rate you’re offered varies depending on a range of factors, including your age and health. You can also choose to purchase a joint Annuity, ensuring your partner would continue to receive an income if you passed away first, or one that rises alongside inflation to maintain spending power. These options would typically mean a lower level of income to begin with.

If you’d like to use an Annuity to fund retirement, you’ll need to assess how recent volatility has affected your overall pension value. This means you’re able to see what Annuity rates mean in terms of income. Take some time to shop around, different providers will offer varying rates. The good news is that with a guaranteed income, you won’t have to worry about market volatility affecting income in retirement.

3. Using Flexi-Access Drawdown

Flexi-Access Drawdown allows you to take a flexible income that suits you, usually, the remainder will stay invested until you make another withdrawal.

This is the option where investment volatility can have the biggest impact. As your savings remain invested, you need to be aware of how your investments have performed. Continuing to take the same level of income during a downturn, as you did previously, will mean you need to sell more units to receive the same amount. This can deplete your pension quicker than expected if you haven’t considered it beforehand. 

As you’re responsible for how and when you access your pension, you also need to ensure it lasts throughout your life, which will undoubtedly include some periods of short-term volatility. Therefore, you must consider downturns as part of your retirement plan.

Remaining exposed to the markets isn’t all negative though. Historically, markets have recovered in the long term. Keeping your pension invested means you have an opportunity to benefit from a recovery as well as long-term gains.

Creating a retirement plan

How and when is the ‘right’ time to access your pension will vary between retirees. It’s a decision that should focus on your retirement goals and long-term plans.

Remember, you don’t have to access your pension as soon as it becomes available. If you don’t need the savings yet, leaving your pension invested can give your investments a chance to recover in the long term and perhaps grow further.

You also don’t have to choose one of the above options exclusively. You can mix and match the options to suit you. For instance, you could withdraw your 25% tax-free lump sum at the start of retirement, use a portion to create a base income with an Annuity, and use Flexi-Access Drawdown to access the remainder at different points.

If you’d like to discuss your retirement plans, whether this is how current circumstances have affected your initial plans or you’re starting from scratch, please get in touch.

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.