HMRC are under pressure to increase the tax take. I regularly write about various ways in which they do this, such as when they announce increased staffing in a department. An accountancy firm, 'UHY Hacker Young' recently sent a Freedom of Information request to HMRC asking:
"how much additional tax had been raised as a result of challenging property valuations" submitted in probate valuations.
For 2010/11 it was £70 million but was up to £88 million in 2011/12
The average uplift per case was around £27,000. There were 3,250 cases.
This indicates HMRC is challenging around 1 in 5 taxable estates.
Technology has brought increased ways for HMRC to track and then query estate & property values - in many cases Stamp Duty data was used. HMRC's ability to withhold probate is an effective means of pressuring prompt payment and this trend shows no sign of tailing off - as at the start of this article, my opinion is this type of challenge, across different assets in IHT planning (think auction sale records for chattels etc) and tax in general will increase in these difficult economic times.
As UHY Hacker Young summarised, probate - and I would argue IHT planning in the first place - is not an amatuer exercise
Tuesday 23 October 2012
Wednesday 12 September 2012
Who's Bill Shock?
[with apologies to No Bill Stickers posters and graffitti wags everywhere]
Of course Bill Shock is not a person, but was the headline on The Times money section last Sunday. To be fair, I could have picked a similar headline from any newspaper money section over the last fortnight.
The article refers to the fact that from next year, commission on investments and pensions will be banned and all financial advisers will have to charge their clients a fee for their services.
The good news for clients of Green Financial is that we have worked that way for over a decade so it is great that the regulator is forcing other firms to work in the same clear, transparent way we already do.
Of course Bill Shock is not a person, but was the headline on The Times money section last Sunday. To be fair, I could have picked a similar headline from any newspaper money section over the last fortnight.
The good news for clients of Green Financial is that we have worked that way for over a decade so it is great that the regulator is forcing other firms to work in the same clear, transparent way we already do.
Wednesday 5 September 2012
Premium Bond Win
Around the time I was born in 1971 I was given £7 in premium bonds, each bond £1 in value.
None of those 7 bonds has ever one a prize ... until now!
One came in with a £25 win. So I thought I'd see just how lucky I've been.
Currently, the minimum purchase of premium bonds is £100 (ie 100 units, they are still a £ each)
Since October 2009, the odds per £1 unit winning any prize has been 24,000 to 1
If you have 'average luck' the rate of return should equal 1.50%. All prizes are tax-free
So what is my £1 from 1971 worth? Well, I have data available till 2010. In 2010, £1.00 from 1971 is worth
£11.00 using the retail price index or £19.60 using average earnings
So my £25 looks good value, but of course the other £6 of bonds have never won, so I am about level.
An alternative way of looking at it, without getting complicated or worrying about inflation , is just to divide the £25 return by the number of years held (call it 40) and that gives 0.625% on average (again, forget compounding!) a year.
So on that score, I'm about 2.5x less lucky than average.
Fingers crossed for the £million prize next month then...
None of those 7 bonds has ever one a prize ... until now!
One came in with a £25 win. So I thought I'd see just how lucky I've been.
Currently, the minimum purchase of premium bonds is £100 (ie 100 units, they are still a £ each)
Since October 2009, the odds per £1 unit winning any prize has been 24,000 to 1
If you have 'average luck' the rate of return should equal 1.50%. All prizes are tax-free
So what is my £1 from 1971 worth? Well, I have data available till 2010. In 2010, £1.00 from 1971 is worth
£11.00 using the retail price index or £19.60 using average earnings
So my £25 looks good value, but of course the other £6 of bonds have never won, so I am about level.
An alternative way of looking at it, without getting complicated or worrying about inflation , is just to divide the £25 return by the number of years held (call it 40) and that gives 0.625% on average (again, forget compounding!) a year.
So on that score, I'm about 2.5x less lucky than average.
Fingers crossed for the £million prize next month then...
Tuesday 4 September 2012
Wednesday 25 July 2012
Protect Child benefit - £50k+ Earners
On 21st March 2012 in the Budget the Government announced plans to withdraw child benefit from parents who earn higher levels of income.
This was justified by George Osborne with the statement that “all sections of society must make a contribution to dealing with the deficit.” He went on to say the welfare budget needed to be cut back because social security would consume one-third of public spending if left unchecked.
Until now, child benefit has been universally paid to families of all backgrounds. From January 2013, Households with one person earning more than £50,000 a year will lose some of their child benefit.
Child benefit had been due to be removed from all families with at least one parent paying the higher, 40% rate, of income tax - about £43,000 - from January 2013.
But Mr Osborne said he wanted to avoid a “cliff edge” effect - so it would now only be withdrawn when someone in a household earned more than £50,000, at a rate of 1% of the benefit for every £100 up until £60,000, when it would be cut entirely.
The benefit would only be withdrawn entirely from those where one partner earns more than £60,000 a year.
The benefit will be withdrawn gradually from those where one parent earns more than £50,000. Child benefit totals £20.30 a week for the first child, and then £13.40 for each subsequent child. There is no limit to the number of children that can be claimed for.
So, for a family with two children, one parent would receive £33.70 per week or £1,752.40 per year.
The equivalent in terms of earnings, taking income tax into account, would make it worth £2,190.50 for a basic rate taxpayer and £2,920.67 for a higher rate taxpayer.
Perceived problem
The government had planned to remove the benefit from households in which someone earns more than £42,475 in January 2013.
The perceived problem was an anomaly that a family with a single earner taking home more than £42,475 would lose child benefit, but a couple each earning slightly less than this could take home £80,000 and keep the benefit.
The other issue of debate was the “cliff-edge”. That meant someone earning £42,475 or below would receive the full child benefit. As soon as they earned £42,476, they would lose every penny of the child benefit.
To address this, the benefit will now fall by 1% for every £100 earned over £50,000. That means those earning more than £60,000 will lose the entirety of the benefit.
Entitlement under the original proposals
Some 7.8 million families receive child benefit, of which 1.2 million would have lost their entitlement under the original proposals. The number affected will be lower under the renewed plans.
Three million taxpayers earning over £50,000 will be sent letters in the autumn asking if they or anyone in their household receives child benefit - in order for some to be clawed back through tax from January 2013.
The income tax charge could be levied from monthly pay cheques, via people’s personal tax codes. Otherwise, the first tax bills for child benefit will have to be settled by the end of January 2014.
One possible solution
Brad and Angela have two children and receive child benefit of £20.30 per week for the eldest child and a further £13.40 for the youngest. (that’s the £1,752 mentioned previously). Brad’s salary is £50,000 and Angela’s is £60,000.
On Angela’s income, between £50,000 and £60,000 she will face income tax at 40% and an additional £1,752 (there’s that number again) due to the loss of child benefit, an effective rate of 57.5%
Now, what if Angela made a pension contribution? – to a good pension, mind, not one that has been in the news recently with high & hidden charges, but a decent scheme, with competitive charges, managed and monitored performance and with a financially strong provider – of £10,000.
Because basic rate tax relief of 20% is given automatically, Angela could write a cheque for just £8,000 or pay around £667 per month to get the £10,000 in. She will also receive a further £2,000 rebate when she submits her tax return. Therefore, the net cost of the £10,000 contribution is just £6,000.
In addition to the £4,000 tax relief, she will continue to receive child benefit. This is because the £10,000 pension contribution is deducted from her taxable pay, thus making her salary, for child benefit calculation purposes, £50,000.
So in this example, the family are £5,742 better off.
This was justified by George Osborne with the statement that “all sections of society must make a contribution to dealing with the deficit.” He went on to say the welfare budget needed to be cut back because social security would consume one-third of public spending if left unchecked.
Until now, child benefit has been universally paid to families of all backgrounds. From January 2013, Households with one person earning more than £50,000 a year will lose some of their child benefit.
Child benefit had been due to be removed from all families with at least one parent paying the higher, 40% rate, of income tax - about £43,000 - from January 2013.
But Mr Osborne said he wanted to avoid a “cliff edge” effect - so it would now only be withdrawn when someone in a household earned more than £50,000, at a rate of 1% of the benefit for every £100 up until £60,000, when it would be cut entirely.
The benefit would only be withdrawn entirely from those where one partner earns more than £60,000 a year.
The benefit will be withdrawn gradually from those where one parent earns more than £50,000. Child benefit totals £20.30 a week for the first child, and then £13.40 for each subsequent child. There is no limit to the number of children that can be claimed for.
So, for a family with two children, one parent would receive £33.70 per week or £1,752.40 per year.
The equivalent in terms of earnings, taking income tax into account, would make it worth £2,190.50 for a basic rate taxpayer and £2,920.67 for a higher rate taxpayer.
Perceived problem
The government had planned to remove the benefit from households in which someone earns more than £42,475 in January 2013.
The perceived problem was an anomaly that a family with a single earner taking home more than £42,475 would lose child benefit, but a couple each earning slightly less than this could take home £80,000 and keep the benefit.
The other issue of debate was the “cliff-edge”. That meant someone earning £42,475 or below would receive the full child benefit. As soon as they earned £42,476, they would lose every penny of the child benefit.
To address this, the benefit will now fall by 1% for every £100 earned over £50,000. That means those earning more than £60,000 will lose the entirety of the benefit.
Entitlement under the original proposals
Some 7.8 million families receive child benefit, of which 1.2 million would have lost their entitlement under the original proposals. The number affected will be lower under the renewed plans.
Three million taxpayers earning over £50,000 will be sent letters in the autumn asking if they or anyone in their household receives child benefit - in order for some to be clawed back through tax from January 2013.
The income tax charge could be levied from monthly pay cheques, via people’s personal tax codes. Otherwise, the first tax bills for child benefit will have to be settled by the end of January 2014.
One possible solution
Brad and Angela have two children and receive child benefit of £20.30 per week for the eldest child and a further £13.40 for the youngest. (that’s the £1,752 mentioned previously). Brad’s salary is £50,000 and Angela’s is £60,000.
On Angela’s income, between £50,000 and £60,000 she will face income tax at 40% and an additional £1,752 (there’s that number again) due to the loss of child benefit, an effective rate of 57.5%
Now, what if Angela made a pension contribution? – to a good pension, mind, not one that has been in the news recently with high & hidden charges, but a decent scheme, with competitive charges, managed and monitored performance and with a financially strong provider – of £10,000.
Because basic rate tax relief of 20% is given automatically, Angela could write a cheque for just £8,000 or pay around £667 per month to get the £10,000 in. She will also receive a further £2,000 rebate when she submits her tax return. Therefore, the net cost of the £10,000 contribution is just £6,000.
In addition to the £4,000 tax relief, she will continue to receive child benefit. This is because the £10,000 pension contribution is deducted from her taxable pay, thus making her salary, for child benefit calculation purposes, £50,000.
So in this example, the family are £5,742 better off.
Wednesday 11 July 2012
Psst… Got a Swiss bank Account?
UK residents with undisclosed Swiss bank accounts are facing a 41% payment of their Swiss assets to settle historical liabilities.
In 2011 the UK-Swiss ‘withholding tax agreement’ capped liabilities at 34% but after Germany successfully lobbied for and got 41% the UK Government raised too!
It applies to accounts with at least £7million in and will take effect from 1 January 2013.
Thursday 5 July 2012
The Retail Distribution Review (RDR)
On 1 January 2013, the Financial Services Authority is changing the rules about how financial advisers describe their services and the way consumers pay for them. These changes are commonly known as the ‘Retail Distribution Review’. At the end of this post is the FSA consumer leaflet for your further information.
You’re likely to hear more about this in the media over the next few months – I’ve mentioned it in previous correspondence and I wanted to make sure you heard about it, in full, from me first.
What the new rules mean
Whatever you may hear, these changes do not mean that you’ll have to pay any more in the future for our services or the products we recommend. The new rules are designed to make sure it’s clear what services financial advisers offer, how much we’ll charge you, and that you formally agree to all of this before we give you any new advice.
We’re not planning to make any major changes to either the services we offer, or how much you’ll pay for them because we already explain our services and how much they cost before we start work for our clients.
Therefore our relationship with you will not change in the future.
There’s no need for you to take any action
As you can read on the graphic below, I already provide a service entirely compatible with the new format (and have done for years and years), I hold the necessary qualifications for the business I advise on and I have a statement of professional standing in good order (see below).
Communications from providers
You may also hear directly from your product providers over the next few months. The changes to the rules and how financial advisers operate means they’re likely to make some of changes to their products, especially the older ones.
I should be notified of any changes providers plan to make to your products, so there’s normally no need to tell us if you receive a letter. But if they’re making changes that impact you and you have any concerns please get in touch straight away, I’ll be happy to clarify anything.
Making better financial decisions
What matters is that you do get in touch with me if your plans or circumstances change. Whether there’s been a major event in your life, or you’re reconsidering your plans for the future, we’re here to help you make the right decisions to help achieve your financial goals.
Making the right decisions today can make a huge difference in the future.
Below is the FSA (Financial Services Authority) consumer guide that I enclosed with the letter
Tuesday 3 July 2012
Barclays, sigh...
Regular readers will recall my 2011 posts on Barclays and their crafty interest rates and bad practices in the investment world
http://greenfinancial.blogspot.co.uk/2011/01/banks-i-told-you-so.html
And here is a post from Facebook in March2011 about their crafty interest rates
http://greenfinancial.blogspot.co.uk/2011/01/banks-i-told-you-so.html
And here is a post from Facebook in March2011 about their crafty interest rates
Monday 2 July 2012
Parking for visitors to Green Financial
Limited Parking is available on the driveway to our building. However it is first come, first served so we can't guarantee a place.
Parking is VERY LIMITED in Manfred Road itself due to our proximity to the tube station.
Parking bays which allow both permit holders and visitors to park are available in nearby roads, such as Schubert Road or across the Upper Richmond Road in Keswick Road. Look out for signs which say 'Permit holders or pay at machine'.
Parking is available in metered bays in most roads in the A2 zone
Parking can be paid by coin, card or by phone in various roads
You can print the image above, or email us and ask for a copy.
You can download the original map itself from the Wandsworth Council Parking website
Alternative parking
The Putney Exchange shopping centre is a 15-20 minute walk away.
There are numerous spaces there. The car park entrance is on Lacy Road, which is off Putney High Street.
The vehicle entrance to Lacy Road is next to Halfords and opposite Marks & Spencer.
Once parked, exit the shopping centre and make your way to the high street.
Cross the high street and head away from Putney Bridge towards Starbucks coffee shop and The C&G building society.
Now walk to the other end of Werter Road, passing Sainsburys.
At the end of Werter Road, turn right onto Oxford Road and walk to the top, arriving at the Upper Richmond Road with the Prince of Wales pub on your left. Turn left onto the Upper Richmond Road and head towards the tube railway bridge and East Putney Tube station.
Pass under the bridge, keeping the Wandswoth court building on your left. Continue for 3 minutes along this road until reaching Manfred Road on your left.
If you have any questions on the day, or are lost, or are having difficulty parking, please contact us and we'll help.
Please note our meeting room is on the first floor with stair access only.
If, for any reason, you are unable to climb 15 stairs, please contact us in advance in order that alternative provisions or arrangements can be made.
If, for any reason, you are unable to climb 15 stairs, please contact us in advance in order that alternative provisions or arrangements can be made.
Thursday 28 June 2012
Pensions as food?
Today I've had my eye on pensions and food after @GHLumsden posted a piece suggesting ISAs were like fish 'n' chips. He's now comparing pensions to kebabs (?! - you can view here : http://citywire.co.uk/money/how-pensions-work-and-why-theyre-like-kebabs)
Later today whilst reading the professional press I noted Andy Zanelli of Axa saying "Advising on pensions is like peeling an onion. As you peel off the skin it starts to get painful and by the time you have chopped, sliced and diced, the eyes are really stinging and full of tears"
As an IFA, I know the feeling Andy.
Axa Andy's quote reminded me of seventy-year-old Eletharias of Greece. I saw him on the news last month collecting onions from some wheelie bins.
Since the euro crisis he says he cannot afford to go the supermarket any more, so for the past few months he has started rummaging for food in dustbins. He goes out in Athens at night so that no one sees him.
"Since my pension was cut, I can't buy food so I look through the garbage," he said.
http://news.sky.com/story/20186/families-crumble-in-greeces-economic-crisis
Just a few days ago NEST, the new goverment designed compulsory pension thingy showed the results of a survey : Food, fun and football? ... why ‘Tomorrow is worth saving for’
The survey suggests that low confidence, rather than unwillingness, may be one of the main reasons for people not saving enough for their later lives.
http://www.nestpensions.org.uk/schemeweb/NestWeb/includes/public/news/Food-fun-and-football-NEST-asks-consumers-why-Tomorrow-is-worth-saving-for.html
The majority (71 per cent) agree they may not have put enough aside because they don't want to make the wrong decision about saving for retirement, whereas nearly half (47 per cent) agree it’s because they don’t know enough about what would be their best option.
Here's a final sobering statistic that I calculated myself. If you retired at age 60 and ate a Happy Meal 3x a day (say £3 for the McMeal) and you lived for 25 years, even without inflation, that would be over £80,000 you'd spend on food. From a taxable pension income that means a fund of £100,000!
http://www.mcdonalds.co.uk/ukhome/more-food/happy-meal.html
So if you have aspirations to live happily ever after, but eat more than just happy meals, do visit your retirement planning. Perhaps even consider allowing Green Financial to assist ...
Later today whilst reading the professional press I noted Andy Zanelli of Axa saying "Advising on pensions is like peeling an onion. As you peel off the skin it starts to get painful and by the time you have chopped, sliced and diced, the eyes are really stinging and full of tears"
As an IFA, I know the feeling Andy.
Axa Andy's quote reminded me of seventy-year-old Eletharias of Greece. I saw him on the news last month collecting onions from some wheelie bins.
Since the euro crisis he says he cannot afford to go the supermarket any more, so for the past few months he has started rummaging for food in dustbins. He goes out in Athens at night so that no one sees him.
"Since my pension was cut, I can't buy food so I look through the garbage," he said.
http://news.sky.com/story/20186/families-crumble-in-greeces-economic-crisis
Just a few days ago NEST, the new goverment designed compulsory pension thingy showed the results of a survey : Food, fun and football? ... why ‘Tomorrow is worth saving for’
The survey suggests that low confidence, rather than unwillingness, may be one of the main reasons for people not saving enough for their later lives.
http://www.nestpensions.org.uk/schemeweb/NestWeb/includes/public/news/Food-fun-and-football-NEST-asks-consumers-why-Tomorrow-is-worth-saving-for.html
The majority (71 per cent) agree they may not have put enough aside because they don't want to make the wrong decision about saving for retirement, whereas nearly half (47 per cent) agree it’s because they don’t know enough about what would be their best option.
Here's a final sobering statistic that I calculated myself. If you retired at age 60 and ate a Happy Meal 3x a day (say £3 for the McMeal) and you lived for 25 years, even without inflation, that would be over £80,000 you'd spend on food. From a taxable pension income that means a fund of £100,000!
http://www.mcdonalds.co.uk/ukhome/more-food/happy-meal.html
So if you have aspirations to live happily ever after, but eat more than just happy meals, do visit your retirement planning. Perhaps even consider allowing Green Financial to assist ...
Monday 25 June 2012
Utmost Good Faith, The Marine Act 1906
Life Insurance (and indeed many other forms of consumer insurance) has long been covered by the principle of uberrimae fidei (utmost good faith)
In summary this required applicants, or as we call ourselves now, consumers, to disclose all necessary information relevant to the risk to be insured, even if the insurance company asked no specific question about it.
In summary this required applicants, or as we call ourselves now, consumers, to disclose all necessary information relevant to the risk to be insured, even if the insurance company asked no specific question about it.
The original thinking was simple: only the insured knows all about the risk, so they should have a duty to disclose anything which would ‘influence a prudent insurer’. The underwriter could then make a reasonable judgement based on all the facts.
Once upon a gentlemanly time this sufficed, but in the modern age, with ever more litigation and loss of trust between insurer and insured this has become unworkable. It just isn't what consumers believe and expect to happen when taking out insurance. The general feeling is that the insurance company should ask the questions and we should do our best to answer truthfully. If they don't ask or we forget to mention something, we expect the insurance to be OK. You no doubt have your own view on how the application process should work.
Up until now, the most recent law governing this was in fact The Marine Insurance Act 1906. This has now been repealed. Despite its title, the Act governed every life policy and every other consumer insurance policy too (but not group insurance, fact fans). In its place, the Consumer Insurance (Disclosure and Representations) Act 2012 is now law and should come into effect next year (2013).
In future, if insurers want to know something they must ask. In return, consumers must still tell the truth, but a minor infringement will no longer invalidate the contract. The end result makes sense for all parties and should help engender greater trust in insurers.
Friday 22 June 2012
Financial Planning in the Middle Ages
Following their previous informative video on the early years, Morningstar have followed up with the middle years [yes, my title is much better, isn’t it?!]
In this episode they discuss the fact that you're in a stage where you're perhaps coming senior in your job, you have children, you have a house, other responsibilities. You're starting to think a little bit more about coming into retirement and what the future might start to look like.
http://www.morningstar.co.uk/uk/news/articles/106999/Financial-Planning-in-Your-Middle-Years.aspx
Nick Cann, from the Institute of Financial Planning continues “… it's really important to get a handle on where you are in your personal balance sheet. If you’ve been successful, you've looked at your income and expenditure, you started saving monies, you had a variety of strategies I imagine in different areas to invest, and to save in pensions. You have various life insurances and everything there, but it's now starting to get really important to focus that down to a financial plan to understand fully where you are, how likely you are to be able to retire when you'd like to retire or to do other challenges in your life, where there's things around other important aspects of your family, and other areas are also taken care of.
So, middle years is really important to start making sure you really are on track to have the later years in good order. Because you don't all of a sudden want to panic around 55, 60, and think I really haven't got enough. I wish I had done more in earlier years.”
If this sounds like you, have a look at our ‘How much is Enough? page on the website http://www.iangreen.com/timeline.php
Some readers may be thinking surely I could just do this myself, why do I need a financial planner? Well, a few folks can do this themselves. But many of our clients engage us for a financial plan not through lack of capability, but through a lack of capacity (they just don’t have the time to learn how to do it all properly themselves) or through desire (they’d rather not spend their spare time pouring over numbers and graphs).
That said, if you love DIY finances, Go For It!
But in the same way that professional athletes have coaches and many people report greater results at the gym with a personal trainer, why not consider engaging a financial planner to power up your financial plan and make sure your money isn’t going to run out before you do.
Did you know?
The largest Mint in the middle ages was located in the Tower of London
There is an American website with interesting material on it called ‘Get Rich Slowly’ ( http://www.getrichslowly.org/guide-to-money/ ). The middle ages are covered by the middle three of the following list within the early and later years (see previous blog post http://greenfinancial.blogspot.co.uk/2012/06/are-you-aged-25-to-50.html )
The stages are:
Plan
Protect
Save
Spend
Invest
Live
Retire
If you need any financial help with any of those stages,
for you or your family,
please get in touch, we’d love to hear from you.
Wednesday 20 June 2012
Are you aged 25 to 50?
Different times in life require different financial strategies. This blog post covers earlier on and later on in life.
Earlier On
Morningstar recently started a serious of video interviews looking at different financial topics. This 5 minute clip is about ‘the early years’ and covers a few basics, such as making sure in your late teens and early twenties, when you start work and earning, that you pay down previously accrued debts (such as student loans and credit cards or loans) when you can. Then think about a disciplined saving approach. The alternative to this is spending what you earn without thinking about it but if you save on a regular basis THEN spend what is left it builds over time. The interview finishes with the ‘pensions v ISA’ product question and despite the favourable tax breaks for pensions the flexibility of ISAs gets the nod for ‘the early years’
http://www.morningstar.co.uk/uk/news/articles/106998/Financial-Planning-in-Your-Early-Years.aspx
Later On
Moving on a generation or two, the product provider company MetLife is focusing on the financial needs of what they call ‘the Uncertain Generation’ – UGen for short. Their research shows that those born between 1961 and 1981 are facing unprecedented levels of uncertainty with competing financial needs, making it difficult for them to plan for their retirement.
MetLife have developed an online calculator which should be helpful for all those aged between 30 and 51. http://www.financialfitnessatfifty.co.uk/
As well as showing you how your pension savings compare to the national average, the calculator will also give an estimate for the age that you will be able to retire, based on the retirement income you expect to receive.
The calculator only take a few moments to complete and you don’t need any paperwork to hand, just an idea of what you have in pensions, savings and any debt as well as the age and income you’d like to retire on.
If having completed the calculator you find your pension income at 50 is short of what you hoped it would be, then you’re not alone – MetLife UGen research shows that the average 50 year old has only saved 44% of what is required to guarantee a minimum standard of income when they stop work.
By the time you are 50 you are on the home-straight to retirement – yet just 11% of 50 year olds have seen a financial adviser. That’s despite 51% saying they’d like to see one in order to regain control of their retirement.
If you are one of the uncertain majority and you’d like get some certainty on your financial plans then please have a look at the pension (http://www.iangreen.com/pensionperformance.php) and retirement (http://www.iangreen.com/retirementincome.php) section of the Green Financial website or contact us to find out what the best options are for you.
Or if you are just starting out and would like help with saving for the future so that you are part of a certain generation (!) please get in touch.
Tuesday 29 May 2012
Tax Freedom Day
The UK's Tax Freedom Day – the day when Britons stop working for the Chancellor and start working for themselves – falls today, 29th of May.
The Adam Smith Institute has calculated that, for 149 days of the year, every penny earned by the average UK resident will be taken by the government in tax. This year’s Tax Freedom Day falls two days later than it did in 2011.
There is more on this on the Adam Smith Institute page:
http://www.adamsmith.org/blog/tax-spending/today-is-tax-freedom-day-2012
Hilariously they also say: “In the Middle Ages a serf only had to work four months of the year for the feudal landlord, whereas in modern Britain people have to toil five months for Osborne’s tax gatherers.”
The Adam Smith Institute has calculated that, for 149 days of the year, every penny earned by the average UK resident will be taken by the government in tax. This year’s Tax Freedom Day falls two days later than it did in 2011.
There is more on this on the Adam Smith Institute page:
http://www.adamsmith.org/blog/tax-spending/today-is-tax-freedom-day-2012
Hilariously they also say: “In the Middle Ages a serf only had to work four months of the year for the feudal landlord, whereas in modern Britain people have to toil five months for Osborne’s tax gatherers.”
Thursday 24 May 2012
Income DrawDOWN
This blog post intended for Income drawdown clients of Green Financial only
(but anyone is welcome to read)
I’m writing to you because you have a pension income drawdown plan, which is can also be referred to as an income withdrawal plan.
Please accept my apologies if there is, by necessity, jargon, acronyms and specific pension terminology in this letter. This letter is also published on my blog with helpful links and an appendix with those links is attached and a short jargon buster is also included.
I last contacted you on this matter in February 2011, in advance of the new rules, in case you wished to review your income at that point, as it was the last chance to increase or amend before the new rules were formally announced in the March 2011 Finance Act which was passed into law in July 2011 . I also provided a link to a blog post I wrote with further info. http://greenfinancial.blogspot.com/2011/02/for-green-financial-pension-drawdown.html
Income is falling…
Due to a number of economic and legislative factors, as plans reach their review point, which is now every three years rather than every five, the maximum income available to draw is falling for many people, in some cases quite drastically. This is not the case for everyone or every plan but to be forewarned is to be forearmed in case it affects you.
The purpose of this letter is to explain why and how the changes might affect you and your plan and to prompt you to ask for assistance should you feel you need it.
Why Drawdown?
Many clients opted for drawdown in order to draw as much from their pension as fast as they could, especially if they had other wealth and other income elsewhere, reasoning they’d rather have the money in hand than languishing in a pension.
Other people chose drawdown as they didn’t like the idea of buying an annuity
Some people chose drawdown because they wanted to access a tax free lump sum and didn’t need to take income
And there are many other reasons too – If you need reminding of your specific reason(s) for choosing a drawdown plan they will be in the letter I wrote to you just after the plan was set up.
Why is income falling?
There are a number of reasons mostly to do with the economy and changing pension legislation.
• In recent times there has been a general consensus that the requirement to buy an annuity with a pension (until recently one had to purchase an annuity by the age of 75) was unfair or unjust. Seemingly in response to public opinion the requirement to purchase an annuity has been removed. So in simplistic terms, previously drawdown had an ‘end date’ (75) but now it can go on almost indefinitely, so the money has to last longer, so the rate at which it can be withdrawn has lowered, in order that the pot does not run out, ie there is no money to pay an income.
• The Finance Act 2011 introduced a three year periodic review rather than every five years so the revaluing of the plan happens more frequently meaning any reduction in income happens more frequently (of course of income could increase that would be more frequent too)
• The Finance Act 2011 reduced the maximum permissible income from 120% of HMRC/GAD rate to 100%. Again, to simplify this, it means that previously one could draw income at a rate faster than via annuities, but now the maximum withdrawal rate has been lowered more in line with other methods.
• Interest rates are lower now than previously
• The revised HMRC/GAD rates introduced in April 2011 are lower than previous rates
• Another big factor that could reduce income levels further will be that investment returns have been lower over recent years, particularly equities. Investment performance and review is just one of the topics I mention each year when I send your review pack. So for those relying on high equity performance to keep the remaining pension pot value up, this will be a big factor.
As a rough guide, the ‘balanced’ pension sector typical fund has moved in a band of approximately +/-25% either side of the October 2006 value and in October 2011 was +12% up. Based on that, if drawing 5% of the fund as income per annum, the fund would now be 15% down on the 2006 value on investment performance alone. Please remember this is a simplified example to illustrate how investment performance affects these products not a personalised report on your plan and content.
• Those invested in cash will also have seen the real value of the fund reduce and thus the real value of the income it can provide reduce as inflation erodes the value.
More detailed information is included in the guide I have enclosed.
If you’d like to speak about your own plan, please do contact me.
Yours sincerely,
Ian Green
Appendix
Please note:
Any links to websites, other than those written by Green Financial are provided for general information purposes only. We accept no responsibility for the content of these websites, nor do we guarantee their availability.
Any reference to legislation and tax is based on our understanding of United Kingdom law and HM Revenue & Customs practice at the date of production. These may be subject to change in the future. Tax rates and reliefs may be altered. The value of tax reliefs to the investor depends on their financial circumstances. No guarantees are given regarding the effectiveness of any arrangements entered into on the basis of these comments.
This letter and attachments are also stored on your secure personal client website. Let me know if you need help accessing this
Links
Green Financial Blog Post from Feb 2011 with action point reminder and jargon buster
http://greenfinancial.blogspot.com/2011/02/for-green-financial-pension-drawdown.html
Finance Act 2011
http://services.parliament.uk/bills/2010-11/financeno3.html
HMRC Pension Website
www.hmrc.gov.uk/pensionschemes
GAD tables
www.hmrc.gov.uk/pensionschemes/gad-tables
Money Advice Service Income Withdrawal Guide
http://www.moneyadviceservice.org.uk/_assets/downloads/pdfs/your_money/a5_guides/income_withdrawal.pdf
Green Financial guide to Retirement
Information on drawdown on page 18 and A-Z jargon buster at the end
http://www.iangreen.com/downloads/Retirement.pdf
(but anyone is welcome to read)
I’m writing to you because you have a pension income drawdown plan, which is can also be referred to as an income withdrawal plan.
Please accept my apologies if there is, by necessity, jargon, acronyms and specific pension terminology in this letter. This letter is also published on my blog with helpful links and an appendix with those links is attached and a short jargon buster is also included.
I last contacted you on this matter in February 2011, in advance of the new rules, in case you wished to review your income at that point, as it was the last chance to increase or amend before the new rules were formally announced in the March 2011 Finance Act which was passed into law in July 2011 . I also provided a link to a blog post I wrote with further info. http://greenfinancial.blogspot.com/2011/02/for-green-financial-pension-drawdown.html
Income is falling…
Due to a number of economic and legislative factors, as plans reach their review point, which is now every three years rather than every five, the maximum income available to draw is falling for many people, in some cases quite drastically. This is not the case for everyone or every plan but to be forewarned is to be forearmed in case it affects you.
The purpose of this letter is to explain why and how the changes might affect you and your plan and to prompt you to ask for assistance should you feel you need it.
Why Drawdown?
Many clients opted for drawdown in order to draw as much from their pension as fast as they could, especially if they had other wealth and other income elsewhere, reasoning they’d rather have the money in hand than languishing in a pension.
Other people chose drawdown as they didn’t like the idea of buying an annuity
Some people chose drawdown because they wanted to access a tax free lump sum and didn’t need to take income
And there are many other reasons too – If you need reminding of your specific reason(s) for choosing a drawdown plan they will be in the letter I wrote to you just after the plan was set up.
Why is income falling?
There are a number of reasons mostly to do with the economy and changing pension legislation.
• In recent times there has been a general consensus that the requirement to buy an annuity with a pension (until recently one had to purchase an annuity by the age of 75) was unfair or unjust. Seemingly in response to public opinion the requirement to purchase an annuity has been removed. So in simplistic terms, previously drawdown had an ‘end date’ (75) but now it can go on almost indefinitely, so the money has to last longer, so the rate at which it can be withdrawn has lowered, in order that the pot does not run out, ie there is no money to pay an income.
• The Finance Act 2011 introduced a three year periodic review rather than every five years so the revaluing of the plan happens more frequently meaning any reduction in income happens more frequently (of course of income could increase that would be more frequent too)
• The Finance Act 2011 reduced the maximum permissible income from 120% of HMRC/GAD rate to 100%. Again, to simplify this, it means that previously one could draw income at a rate faster than via annuities, but now the maximum withdrawal rate has been lowered more in line with other methods.
• Interest rates are lower now than previously
• The revised HMRC/GAD rates introduced in April 2011 are lower than previous rates
• Another big factor that could reduce income levels further will be that investment returns have been lower over recent years, particularly equities. Investment performance and review is just one of the topics I mention each year when I send your review pack. So for those relying on high equity performance to keep the remaining pension pot value up, this will be a big factor.
As a rough guide, the ‘balanced’ pension sector typical fund has moved in a band of approximately +/-25% either side of the October 2006 value and in October 2011 was +12% up. Based on that, if drawing 5% of the fund as income per annum, the fund would now be 15% down on the 2006 value on investment performance alone. Please remember this is a simplified example to illustrate how investment performance affects these products not a personalised report on your plan and content.
• Those invested in cash will also have seen the real value of the fund reduce and thus the real value of the income it can provide reduce as inflation erodes the value.
More detailed information is included in the guide I have enclosed.
If you’d like to speak about your own plan, please do contact me.
Yours sincerely,
Ian Green
Appendix
Please note:
Any links to websites, other than those written by Green Financial are provided for general information purposes only. We accept no responsibility for the content of these websites, nor do we guarantee their availability.
Any reference to legislation and tax is based on our understanding of United Kingdom law and HM Revenue & Customs practice at the date of production. These may be subject to change in the future. Tax rates and reliefs may be altered. The value of tax reliefs to the investor depends on their financial circumstances. No guarantees are given regarding the effectiveness of any arrangements entered into on the basis of these comments.
This letter and attachments are also stored on your secure personal client website. Let me know if you need help accessing this
Links
Green Financial Blog Post from Feb 2011 with action point reminder and jargon buster
http://greenfinancial.blogspot.com/2011/02/for-green-financial-pension-drawdown.html
Finance Act 2011
http://services.parliament.uk/bills/2010-11/financeno3.html
HMRC Pension Website
www.hmrc.gov.uk/pensionschemes
GAD tables
www.hmrc.gov.uk/pensionschemes/gad-tables
Money Advice Service Income Withdrawal Guide
http://www.moneyadviceservice.org.uk/_assets/downloads/pdfs/your_money/a5_guides/income_withdrawal.pdf
Green Financial guide to Retirement
Information on drawdown on page 18 and A-Z jargon buster at the end
http://www.iangreen.com/downloads/Retirement.pdf
Friday 4 May 2012
E&OE
Mistakes and Corrections
With the number of variables involved in investment funds, the number of funds and the general complexity it is no surprise that often a provider, in an audit, picks up an error.
This could be a pricing error (under or over), a tax error, a naming error or other similar mistake.
Normally when this happens the provider will inform me, the IFA, of the error that has been found and what they will be doing. They then give me a list of my clients it applies to.
They then write directly to the client, informing them what went wrong, any implications, what happens next and generally putting everything back where it should be.
So whilst this kind of thing is far from a day to day occurrence neither is it normally cause for concern.
If you receive one of these letters and after having read it, it still doesn’t make sense, please contact us and we'll be delighted to explain exactly what is happening with your plan.
But if you receive one and it all seems OK to you, feel free to carry on as normal.
There are examples below.
Monday 30 April 2012
Directions to Hyde Park House
Directions to Hyde Park House
From Putney mainline Rail station
It is a 10-12 minute brisk walk from the mainline station to the office:
Turn left out of station, to the main crossroad junction and turn left staying on the same pavement, past Halifax and Foxtons estate agent
Continue along the Upper Richmond Road, past the multitude of estate agents, past Virgin Active Gym and crossing Oxford Road.
Another short row of shops includes a 'beer boutique', a cafe Nero coffee shop and a number of convenience stores.
You will now pass under the railway bridge at East Putney, passing the builder's yard and can continue directions from there (below), starting outside the Wandsworth Court and crossing Oakhill Road:
From East Putney Underground/Tube Station (District Line, Wimbledon branch)
this is a 5 minute brisk walk:
Turn right out of station,
Under bridge, past Valentina foods and SW1SH flats
Cross the main road at the pedestrian crossing outside the co-operative supermarket, crossing towards the Wandsworth court building.
Once you have crossed the Upper Richmond Road onto the other pavement, turn right, crossing Oakhill Road and continue along the Upper Richmond Road
You will see and pass Majestic wine warehouse on the opposite side of the road
The first road on your left is Manfred Road
Hyde Park House is the white building immediately after Normanby Close on your left
If you reach and pass the request bus stop and The Lodge Hotel you have gone too far
BICYCLE
There is currently no designated cycle parking nearby but there are cycle posts within a few minutes walk. We are in discussions with the local council to have cycle posts installed nearby.
We may be able to arrange cycle parking inside our building given notice - please contact us in advance if you'd like to consider this.
CAR
Limited Parking is available on the driveway to our building. However it is first come, first served.
Parking is VERY limited in Manfred Road and many bays are resident only or tightly time patrolled by local traffic wardens. Manfred Road is a turning off the Upper Richmond Road and is an 'L' shape, and continues into a one-way street, 'Oakhill Road' which itself returns to the Upper Richmond Road - so if you miss a space on Oakhill you can loop round again easily.
However, parking bays which allow both permit holders and visitors to park are available in nearby roads, such as Schubert Road or across the Upper Richmond Road in Keswick Road. Look out for signs which say 'Permit holders or pay at machine'. There is a separate post on parking, a local map, spaces in nearby roads, Putney shopping centre parking and more, here:
http://greenfinancial.blogspot.co.uk/2012/07/parking-for-visitors-to-green-financial.html
Please note our meeting room is on the first floor with stair access only.
If, for any reason, you are unable to climb 15 stairs, please contact us in advance in order that alternative provisions or arrangements can be made.
From Putney mainline Rail station
It is a 10-12 minute brisk walk from the mainline station to the office:
Turn left out of station, to the main crossroad junction and turn left staying on the same pavement, past Halifax and Foxtons estate agent
Continue along the Upper Richmond Road, past the multitude of estate agents, past Virgin Active Gym and crossing Oxford Road.
Another short row of shops includes a 'beer boutique', a cafe Nero coffee shop and a number of convenience stores.
You will now pass under the railway bridge at East Putney, passing the builder's yard and can continue directions from there (below), starting outside the Wandsworth Court and crossing Oakhill Road:
From East Putney Underground/Tube Station (District Line, Wimbledon branch)
this is a 5 minute brisk walk:
Turn right out of station,
Under bridge, past Valentina foods and SW1SH flats
Cross the main road at the pedestrian crossing outside the co-operative supermarket, crossing towards the Wandsworth court building.
Once you have crossed the Upper Richmond Road onto the other pavement, turn right, crossing Oakhill Road and continue along the Upper Richmond Road
You will see and pass Majestic wine warehouse on the opposite side of the road
The first road on your left is Manfred Road
 |
| Manfred Road, as seen approaching from East Putney Tube |
Hyde Park House is the white building immediately after Normanby Close on your left
If you reach and pass the request bus stop and The Lodge Hotel you have gone too far
 |
| Hyde Park House - Green Financial is behind the arched window |
BICYCLE
There is currently no designated cycle parking nearby but there are cycle posts within a few minutes walk. We are in discussions with the local council to have cycle posts installed nearby.
We may be able to arrange cycle parking inside our building given notice - please contact us in advance if you'd like to consider this.
CAR
Limited Parking is available on the driveway to our building. However it is first come, first served.
Parking is VERY limited in Manfred Road and many bays are resident only or tightly time patrolled by local traffic wardens. Manfred Road is a turning off the Upper Richmond Road and is an 'L' shape, and continues into a one-way street, 'Oakhill Road' which itself returns to the Upper Richmond Road - so if you miss a space on Oakhill you can loop round again easily.
However, parking bays which allow both permit holders and visitors to park are available in nearby roads, such as Schubert Road or across the Upper Richmond Road in Keswick Road. Look out for signs which say 'Permit holders or pay at machine'. There is a separate post on parking, a local map, spaces in nearby roads, Putney shopping centre parking and more, here:
http://greenfinancial.blogspot.co.uk/2012/07/parking-for-visitors-to-green-financial.html
Please note our meeting room is on the first floor with stair access only.
If, for any reason, you are unable to climb 15 stairs, please contact us in advance in order that alternative provisions or arrangements can be made.
Wednesday 4 April 2012
CASH ISAs for Investment Clients of Green Financial
Are you an investment client of Green Financial?
Are you considering a CASH ISA for the tax year 2012/13?
And possibly one that locks you in to the product for a number of years?
As a rule, for clients who have previously stated to me they have sufficient accessible cash, unless you have a need to accrue more cash for emergency purposes (and I’m assuming this isn’t the case if you have opted for a fixed term cash ISA where you lock the money away) I am not currently recommending cash ISAs
If you are simply rolling an existing ISA over, to obtain a better rate – or transferring an existing cash ISA to a better rate, that makes great financial sense.
And as above, if you are wishing to accrue more cash for a specific purpose, then sheltering the interest from tax makes sense.
But for most (not all) Green Financial planning clients we have already considered the amount of cash you have available.
Based on this, and on the premise that in the future, we are aiming to help you provide tax efficient income and capital for when you are no longer working, the current numbers don’t seem to stack up for cash ISAs
The current official rate of inflation on the Bank of England Website is 3.4%
On the day of writing this, the last day of the 2011/12 tax year, using my professional sourcing software I can recommend cash ISAs paying up to 3.5% for instant access.
MoneySavingExpert.com shows instant access rates at 3.1%
I can recommend products where you lock your money away for a year and it goes up to 3.6%
Lock your money away for 5 years and rates of around 4.5% are available
So if inflation remains the same (ie doesn’t go up) you’ll earn a real return of 0.1%, on the best instant access ISA. Using the maximum £5,340 that is just £5.34 a year. If you locked away for 5 years in year 1 you’d be earning £53.40 – I know every little helps but it hardly seems worth locking away £5,000+ to earn £50 to me?
And if inflation goes up – it will eat into that real return.
And many people feel the official rate of inflation is not realistic. Many people report things like petrol, heating costs, food bills etc going up far in excess of 3.4% which means in real terms you may be even lose money in terms of spending power over the term of the product
Anyway, just my thoughts as your professional financial adviser.
But to reiterate, this blog post is not intended to be personalised financial advice. If you have other reasons for investing in cash ISAs they may well override what I have typed here. If you wish to discuss your own personal situation as a client of Green Financial I’d be delighted to speak.
But as a general rule, for those clients that have a financial plan, whereby we have already taken into account your cash savings, and given the current rate of returns on ISAs compared to the rate of inflation (official and ‘real life’) and given the long term nature of a financial plan, I do not think cash ISAs make much sense today.
Are you considering a CASH ISA for the tax year 2012/13?
And possibly one that locks you in to the product for a number of years?
As a rule, for clients who have previously stated to me they have sufficient accessible cash, unless you have a need to accrue more cash for emergency purposes (and I’m assuming this isn’t the case if you have opted for a fixed term cash ISA where you lock the money away) I am not currently recommending cash ISAs
If you are simply rolling an existing ISA over, to obtain a better rate – or transferring an existing cash ISA to a better rate, that makes great financial sense.
And as above, if you are wishing to accrue more cash for a specific purpose, then sheltering the interest from tax makes sense.
But for most (not all) Green Financial planning clients we have already considered the amount of cash you have available.
Based on this, and on the premise that in the future, we are aiming to help you provide tax efficient income and capital for when you are no longer working, the current numbers don’t seem to stack up for cash ISAs
The current official rate of inflation on the Bank of England Website is 3.4%
On the day of writing this, the last day of the 2011/12 tax year, using my professional sourcing software I can recommend cash ISAs paying up to 3.5% for instant access.
MoneySavingExpert.com shows instant access rates at 3.1%
I can recommend products where you lock your money away for a year and it goes up to 3.6%
Lock your money away for 5 years and rates of around 4.5% are available
So if inflation remains the same (ie doesn’t go up) you’ll earn a real return of 0.1%, on the best instant access ISA. Using the maximum £5,340 that is just £5.34 a year. If you locked away for 5 years in year 1 you’d be earning £53.40 – I know every little helps but it hardly seems worth locking away £5,000+ to earn £50 to me?
And if inflation goes up – it will eat into that real return.
And many people feel the official rate of inflation is not realistic. Many people report things like petrol, heating costs, food bills etc going up far in excess of 3.4% which means in real terms you may be even lose money in terms of spending power over the term of the product
Anyway, just my thoughts as your professional financial adviser.
But to reiterate, this blog post is not intended to be personalised financial advice. If you have other reasons for investing in cash ISAs they may well override what I have typed here. If you wish to discuss your own personal situation as a client of Green Financial I’d be delighted to speak.
But as a general rule, for those clients that have a financial plan, whereby we have already taken into account your cash savings, and given the current rate of returns on ISAs compared to the rate of inflation (official and ‘real life’) and given the long term nature of a financial plan, I do not think cash ISAs make much sense today.
Thursday 22 March 2012
Offshore 'cluster' bonds
According to budget documents HMRC will introduce measures to combat tax avoidance on insurance policies, capital redemption polices and annuity contracts.
No clients, who purchased their product via Green Financial, will be affected by this.
The measures apply to so-called cluster arrangements where tax charges are confined to just one segment of life assurance bond.
Green Financial have always considered this very aggressive tax planning and subject to threat of legislation or query by the authorities.
With the 'cluster policies' an example would be a bond holder who wants access to their cash before the end of the bond who then redeems nine segments of a ten segment bond while the taxable gains are applied only to the tenth.
It is still the case that with investment bonds we recommend due care and attention should be made to how withdrawals are taken, so as not to trigger unneccesary tax - but this is not to be confused with the type of plan and action the budget has outlawed.
If you are a Green Financial client and have any questions regarding this matter or your investment, please contact us.
No clients, who purchased their product via Green Financial, will be affected by this.
The measures apply to so-called cluster arrangements where tax charges are confined to just one segment of life assurance bond.
Green Financial have always considered this very aggressive tax planning and subject to threat of legislation or query by the authorities.
With the 'cluster policies' an example would be a bond holder who wants access to their cash before the end of the bond who then redeems nine segments of a ten segment bond while the taxable gains are applied only to the tenth.
It is still the case that with investment bonds we recommend due care and attention should be made to how withdrawals are taken, so as not to trigger unneccesary tax - but this is not to be confused with the type of plan and action the budget has outlawed.
If you are a Green Financial client and have any questions regarding this matter or your investment, please contact us.
Tax tables – March 2012
Please find below a link to our tax tables, outlining the key tax data in George Osborne’s Budget of 21 March. The Chancellor unveiled a range of measures that left no doubt that the ‘age of austerity’ is not yet over – though thanks to a steady stream of pre-Budget announcements and leaks, Mr Osborne had little to offer in the way of surprises.
The Budget highlights included:
• The personal allowance will be increased to £9,205 in 2013/14, but the higher rate threshold will be reduced by £1,025 to £41,450.
• There will be a limit on the maximum amount of income tax reliefs that can be claimed from 2013/14.
• As expected, from 2013/14 there will be a drop in the higher rate of income tax from 50% to 45%.
• The so-called ‘mansion tax’ has taken the form of higher stamp duty on house sales over £2 million.
• Child benefit is to be phased out where income is over £50,000.
The tax tables are available for download on the website at: www.iangreen.com/taxtables.pdf
or to view at www.facebook.com/GreenFinancial
These will be joined by budget summaries and other info in the days to come.
We trust that you find the enclosed tax rates useful, and that you find them to be a helpful basis for a discussion with us about your financial future.
The Budget highlights included:
• The personal allowance will be increased to £9,205 in 2013/14, but the higher rate threshold will be reduced by £1,025 to £41,450.
• There will be a limit on the maximum amount of income tax reliefs that can be claimed from 2013/14.
• As expected, from 2013/14 there will be a drop in the higher rate of income tax from 50% to 45%.
• The so-called ‘mansion tax’ has taken the form of higher stamp duty on house sales over £2 million.
• Child benefit is to be phased out where income is over £50,000.
The tax tables are available for download on the website at: www.iangreen.com/taxtables.pdf
or to view at www.facebook.com/GreenFinancial
These will be joined by budget summaries and other info in the days to come.
We trust that you find the enclosed tax rates useful, and that you find them to be a helpful basis for a discussion with us about your financial future.
Friday 16 March 2012
Card £1.99, Flowers £10.99, Mum. Priceless.
With mothering Sunday this weekend, what is a mum actually worth?
The answer of course, is priceless.
But those actuarial types at a life insurance company have calculated a number.
And not just mum, but dad too. Legal & General (www.legalandgeneral.com) have been surveying the nation for over 30 years and the latest figures can be summarised as follows:
Value of a PARENT
Legal & General in their ‘Value of a parent survey’ state it could cost £30,000 a year to pay someone to replace a mum’s domestic work and £21,000 for a dad. The actual national calculated averages are £30,032 and £21,306.
These figures are calculated using the number of hours spent on household chores and childcare, then multiplied by the average hourly pay rate for equivalent jobs, as published by the Office of National Statistics (ONS). Finally the weekly numbers are multiplied by 52 to obtain the average value.
A mum is perceived to do, on average, 18 hours worth of work a week around the home. However, this is 53 hours less than the 71 hours of actual work they do [author’s note: My mum says she didn’t need a survey to tell her that!]
Dads are perceived to do an actual 15 hours worth of domestic work reckoned to be 35 hours less than the actual figure of 50 hours.
These figures were obtained by asking mum or dad what they thought the other one did. So the survey found a massive difference in the perception of what one parent thinks the other does compared to what they really do!
Mum’s do an average of £249 per week of childcare.
Value of a GRANDPARENT
In addition, over a quarter (27%) of households rely on grandparents for extra unpaid work.
For single parents this figure increased to 36%. Parents with younger children also relied more on grandparents with 34% obtaining regular assistance. On average, across the nation, grandparents are providing 7 hours of time a week to help out. If these parents were to pay for a childminder instead, the average cost would be £60 per week, or £3,120 a year.
Time
In terms of time to themselves, mum’s are averaging 6.5 hours a week. Quality time spent with partner averages just 3 hours per week.
From the L&G survey 49% of parents said they’d rather spend time with children than work. For parents with children between the ages of 0 & 5 this figure was almost 60%
The £30,000 figure was calculated using the hours of a non-working parent. Interestingly the value of household chores completed by a full-time working parent still came out at around £20,000!
Since the financial crisis [we can call it a recession even if the powers that be won’t!] in 2009 68% of parents said they had cut back on spending. In households earning over £70,000 this reduction was lower, but still there, at 51%
Full disclosure: Why the Green Financial interest in this?
As a financial adviser, I have seen claims pay out on insurance products to a family when a parent ‘is no longer there’, be it illness or disability that means household chores can’t be completed or in the worst case, the unfortunate and untimely death of a parent.
Most parents in the survey (57%) stated they didn’t know what state benefits would be available if their partner were to die. Over three quarters (77%) of parents think that if a partner was unable to work due to disability the government should be responsible for helping financially. That probably means a lot of disappointed, not to say hard up, people when they discover the actual level of state benefits payable.
Only half (53%) of families surveyed had any life insurance. For illness protection the number was nearer a quarter
In all cases, be it life insurance, health insurance or critical illness cover, mums had less protection than dads. And since the last survey in 2009, due to the financial crisis, the total cover in place has fallen across families. The upshot of this being that the global financial crisis may well be stretching further and causing a family financial crisis for those that suffer the illness or death of a parent and do not have any or sufficient cover.
In a similar fashion, only 34% of parents surveyed had a Will. The likelihood of having a Will does increase with age and more dads (40%) than mums (30%) had a will.
If you wish to read more on protecting your family or making a Will there is a free 28 page guide here: http://www.iangreen.com/downloads/protection.pdf
Life Insurance help is on page 4 and Wills on page 18. Do seek professional advice if you think your circumstances may require it.
And remember this Sunday, even if you don’t have the full £30,032 to give the mum in your life, a simple heartfelt thank you is also priceless.
Tuesday 28 February 2012
The Financial Year End, The Budget & A Tax Planning Ticklist
Financial folk speak of the end of the tax year and rush to finalise fiscal matters.
But what exactly is the tax year, what needs to be done and why?
Whether a layperson, interested observer, lapsed expert or those simply in need of a memory jog there follows a quick introduction to the tax year, a brief guide to the budget and a short tax planning ticklist.
THE FINANCIAL YEAR END
The UK tax year, or financial year, runs from 6th April until 5th April the following year. It is a twelve month period used for, amongst other things, measuring earnings and calculating income and the tax payable on them. Confusingly for the purposes of corporation tax and government financial statements the year starts April 1st (no fooling!) and finishes March 31. And those readers who run companies or know someone that does will know a company year can start and end whenever the owner wants and a company year can even be longer than 12 months! But that is for another blog post…
Back to the UK taxpayer fiscal year. Why April 6th? Surely running the tax year the same as the calendar year would make life easier? The sensible Swedes and the economical Germans do exactly that. But we Brits are not alone in our quirky dates. Across the pond Americans run from October to September and down under our Australian cousins have a tax year that starts in July and ends in June.
The April 5th year end for personal tax and benefits reflects the old ecclesiastical calendar, with New Year falling on March 25 (which was known as ‘Lady Day’), the difference being accounted for by the eleven days "missed out" when Great Britain converted from the Julian Calendar to the Gregorian Calendar in 1752. The British tax authorities and landlords were unwilling to lose 11 days of tax and rent revenue so under the ‘Times of Payment of Rents, Annuities, &c’ of the Calendar Act 1750, the 1752–3 tax year was extended by 11 days. From 1753 until 1799, the tax year in Great Britain began on April 5, which was the "old style" new year of March 25. A 12th skipped Julian leap day in 1800 changed its start to April 6. It was not changed when a 13th Julian leap day was skipped in 1900. So since 1800 the start of the personal tax year in the United Kingdom has been April 6th.
THE BUDGET
The next Budget will take place on Wednesday 21 March 2012. Readers who are up to speed with social media will be able to follow the official HM Treasury Twitter channel with the #Budget2012 hashtag.
Or me at @ianjamesgreen
Most of us recognise budget day as when the Chancellor appears on his doorstep with the famous red box. The Budget box or 'Gladstone box' was used to carry the Chancellors speech from Number 11 to the House for over 100 consecutive years. The wooden box was hand-crafted for Gladstone, lined in black satin and covered in scarlet leather. The word “budget” derives from the term “bougette” – a wallet in which either documents or money could be kept. And one more fascinating budget fact … Chancellors are allowed to refresh themselves with alcoholic drinks during their Budget speech - no other Member of Parliament can do this although we could be forgiven for thinking otherwise with some of the hullabaloo we witness!
The Budget is the single most important economic and financial statement made each year by the Chancellor of the Exchequer to Parliament and the nation. There is an act of parliament that requires the Government to produce a Budget Report for each financial year. There is a ‘Charter for Budget Responsibility’ which sets out what the Budget Report must cover.
The Office for Budget Responsibility (OBR) has to publish two economic and fiscal forecasts for each financial year, one of which is to be the official forecast on which the Chancellor sets out the Government’s fiscal policy in the Budget. The OBR’s duty is to examine and report on the sustainability of the public finances and it is required to do so objectively, transparently and impartially.
The Budget is actually the Chancellor’s response to the OBR’s forecasts.
Historically, the chancellor would often announce in the budget (end of March) a new measure, such as the removal of a benefit, or an increase in an allowance, and give a number of days to act, normally the start of the new tax year (first week of April). Buy now, while stocks last, in other words. Sadly, those days are gone with any new measures (that usually make us worse off!) implemented immediately. This is why the market for budget forecasters is now so big, as those of us that read the financial pages know too well. In the run up to the budget the press is full of ‘what might happen’
Rather than go over here what can be read elsewhere with a quick google, let’s look at just one personal financial matter, that has been mentioned as possibly going every single year I can remember since starting as a financial planner in 1995. Higher rate tax relief on pension contributions. Will this finally be the year it goes? Those against say it is the last thing that should happen. We need to be encouraging private pension provision, not the opposite. Those for say it is a fair tax, that only hits higher earners and will raise billions. Which camp are you in? Tune in to George on March 21 to find out…
What are my predictions? Clients of Green Financial will know that in all matters, whether financial, legal, political or investment I do NOT claim to own a functioning crystal ball! But climbing down off the fence, albeit briefly, I think a budget for growth is needed. I think there will be a few hard decisions for the chancellor and a few unpopular items, normally hidden away in the small print rather than announced in the House. But I also think the nation needs good news, so maybe a few pleasant surprises could be in store.
TAX PLANNING TICKLIST
In terms of personal financial planning, a few items to consider. Please remember, if you are in any doubt as to whether any of these tips apply to you or your family, either please ensure you know exactly what you are doing or preferably seek professional independent financial advice.
ISA – open and use your ISA allowance. You’ll pay no income tax or capital gains tax on any gains. You can choose cash or stocks and shares versions. This year’s allowance is £10,680 per person.
ISA – next year. The allowance rises to £11,280 on 6th April but you can apply now. For those that contribute monthly amounts you’ll need to change your direct debit amount from £890pm to £940 per month
Junior ISA – introduced in November 2011 the allowance is £3,600 per eligible child and the benefits are similar to adult ISAs
Capital gains – we all have a CGT allowance of £10,600 a year. Many of our clients sell shares to realise a gain and use the proceeds to fund the next year’s ISA.
Pension – Will this be the last hurrah for higher rate tax relief? (see above). Currently tax relief up to 50% is available. But pensions are a long term commitment with seemingly ever changing rules. Weigh up the pros and cons for your situation before committing too much.
Junior pension – parents and grandparents can contribute to a pension for a child, placing up to £3,600 away at a cost of only £2,880, a tax break of £800. But will the child thank you for a present they can only open when age 55?!
National Savings – the rates have dropped massively and the number of accounts on sale has also fallen. But there are still tax shelters available including the ever popular premium bonds
Inheritance Tax – There are a number of gifts one can make to reduce the liability including giving away up to £3,000 from capital.
Personal allowances – Ensure you make full use of these, especially if one of a couple is a lower rate tax payer than the other.
As at the start of this part of the article, PLEASE seek professional advice if in any doubt whatsoever over the suitability of these tips for your own situation.
There is a FREE download on end of year tax planning here:
http://www.iangreen.com/downloads/tax2012.pdf
and a FREE wealth & tax tips guide with FIFTY tips here:
http://www.iangreen.com/GFA-Tax&WealthTips2011.pdf
Both of the above are also available as photos to view at www.facebook.com/GreenFinancial
Friday 17 February 2012
Thursday 2 February 2012
Green (regulatory) Fees
Green Financial has to pay a levy each year to help fund the UK regulator and a consumer facing money website and helpline.
The Financial Services Authority, the regulatory body that oversees Green Financial Advice, has proposed to raise annual costs by 15.6% from £500.5m for 2011/12 to £578.4m for 2012/13.
This follows a 10 per cent increase last year.
The consumer facing Money Advice Service for 2012/13 budget has almost doubled from £43.7m for 2011/12 to £86.8m in 2012/13.
I will be standing on Putney High Street rattling a collection tin. All donations gratefully received
Green Financial also pay into a fund called the FSCS. Advisers are facing a Financial Services Compensation Scheme annual levy of £33m for 2012/13.
The investment intermediation sub-class [catchy name huh, I'm so delighted to be a sub-class] faces an annual FSCS levy of £33m
The levy relates to compensation clains for Keydata, Wills and Co and Arch cru [none of which I was involved in, in any way]. However the levy does not include likely compensation claims for MF Global [which again, I was not involved in]. Advisers could face a further interim levy of £40m before the end of March in relation to MF Global claims.
Continues to rattle tin on high street.
The Financial Services Authority, the regulatory body that oversees Green Financial Advice, has proposed to raise annual costs by 15.6% from £500.5m for 2011/12 to £578.4m for 2012/13.
This follows a 10 per cent increase last year.
The consumer facing Money Advice Service for 2012/13 budget has almost doubled from £43.7m for 2011/12 to £86.8m in 2012/13.
I will be standing on Putney High Street rattling a collection tin. All donations gratefully received
Green Financial also pay into a fund called the FSCS. Advisers are facing a Financial Services Compensation Scheme annual levy of £33m for 2012/13.
The investment intermediation sub-class [catchy name huh, I'm so delighted to be a sub-class] faces an annual FSCS levy of £33m
The levy relates to compensation clains for Keydata, Wills and Co and Arch cru [none of which I was involved in, in any way]. However the levy does not include likely compensation claims for MF Global [which again, I was not involved in]. Advisers could face a further interim levy of £40m before the end of March in relation to MF Global claims.
Continues to rattle tin on high street.
workplace pension reform – quick update
In the run up to 2014 (for most Green Financial employer/pension clients) please find following a quick update
The pension scheme you have in place as an employer has a number of standards as a minimum to be met. These include the benefits it provides and the amount of contributions paid to it. Another standard is auto-enrolment for all eligible workers and for any new employees when they become eligible.
Who or What is ‘eligible’?
An eligible employee is someone earning above the income tax personal allowance (2011/12 = £7,475). They must be between the ages of 22 and the state pension age, which varies depending on when you were born and if you are a male or female. You can find out your state pension age on this government web page : http://www.direct.gov.uk/en/Pensionsandretirementplanning/StatePension/DG_4017919
Qualifying earnings
For auto-enrolled employees these are between £5,035 & £33,540.
Contributions
Eventually, when all the various phases have finalised, there will be a contribution of 8% of qualifying earnings to the pension. This will be made up of a minimum of 3% from the employer, with 4% from the employee and the remaining 1% as tax relief.
This will need to be in place by October 2017. Until then, from Oct 2012 to Sept 2016 the minimum will be 2% of qualifying earnings with at least 1% from the employer and Oct 2016 – Sept 2017 a total of 5% with at least 2% from the employer.
However, there are ‘staging dates’ for taking part as an employer depending on your size, as measured by number of PAYE employees. Big companies with 120,000 or more employees are first, in October 2012. Then until July 2013 other companies join in. Those with less than 3,000 employees will be summer 2013.
Those employers with 50 – 250 employees will be spring to summer 2014 and those employers with less than 50 employees phased in from summer 2014 to autumn 2016. The exact date will depend on your tax reference.
Clients of Green Financial can contact us to discover their exact date if they wish to know it. We will be in touch nearer the time though.
The main consideration at this time is budgetary – the employer contributions will need to be funded and budgeted for so it is worth starting to consider now.
There is more generic information regarding workplace pensions and NEST here on this government web page
http://www.direct.gov.uk/en/Pensionsandretirementplanning/Companyandpersonalpensions/WorkplacePensions/DG_183783
After all this regarding auto-enrollment criteria, employees will be able to opt out of auto enrolment! More info here:
http://www.direct.gov.uk/en/Pensionsandretirementplanning/Companyandpersonalpensions/WorkplacePensions/DG_200723
Friday 20 January 2012
TP - No conflict of interest for Green Financial
Green Financial have been offered shares in a piece of software we use as a wealth platform and back office for clients.
We have rejected the offer and elected not to participate in order to avoid any suggestion of conflict of interest. Green Financial place independence and doing the best possible job for our clients at the heart of everything we do.
The shares were offered in return for placing business on the wealth platform element. It has nothing to do with the back office or client facing site. As you can read below, technically it appears there would be no legal conflict of interest. Green Financial recognise that TP is a great piece of software as a back office and client site system and the wealth platform element has much to recommend it to many clients. But not all clients. We will continue to only recommend TP as a wealth platform if we believe that is the best solution for a client.
We will NOT receive any shares or inducement for placing business on it.
We asked TP if they thought this represented a conflict of interest. Their response included:
“…whether a conflict actually exists when the units being offered represent no current or real value and are issued within a trust of a non-authorised entity, True Potential LLP, which is a completely separate legal entity and has no bearing or influence over the regulated Platform nor over the advisers giving advice to their clients.
The actual rules state that for the purposes of identifying the types of conflict of interest that arise, or may arise, in the course of providing a service and whose existence may entail a material risk of damage to the interests of a client, a firm must take into account, as a minimum, whether the firm or relevant person directly or indirectly linked by control to the firm:
1. Is likely to make a financial gain, or avoid a financial loss, at the expense of the client
2. Receives or will receive from a person other than the client an inducement in relation to a service provided to the client, in the form of monies, goods or services, other than the standard commission or fee for that service
What is important here is identifying the risk, loss or damage to your client – if the platform is suitable for your client then there is no loss or disadvantage and in turn no conflict.
Furthermore the FSA guidance states that the circumstances which should be treated as giving rise to a conflict of interest covers cases where there is a conflict between the interests of the firm and the duty the firm owes to a client or between the differing interests of two or more clients to whom the firm owes in each case a duty. It is not enough that a firm may gain a benefit if there is not also a possible disadvantage to a client or that one client to whom the firm owes a duty may gain or avoid a loss without there being an associated possible loss to another such client - this guidance means that if there is no loss to a client or no client loses out as a result of another client being placed on the platform then there is no conflict."
It is worth noting another wrap platform we used recognised our excellent quality and volume of business by offering a 0.05% benefit. Rather than take this money we passed it on to all client accounts as a discount and it is disclosed on literature when it benefits a client.
Green Financial continue to believe that our remuneration should be based on the agreements between you the client and us for the work that we do for you.
We will remain independent and will not accept money or shares for placing volumes of client business with a provider.
We have rejected the offer and elected not to participate in order to avoid any suggestion of conflict of interest. Green Financial place independence and doing the best possible job for our clients at the heart of everything we do.
The shares were offered in return for placing business on the wealth platform element. It has nothing to do with the back office or client facing site. As you can read below, technically it appears there would be no legal conflict of interest. Green Financial recognise that TP is a great piece of software as a back office and client site system and the wealth platform element has much to recommend it to many clients. But not all clients. We will continue to only recommend TP as a wealth platform if we believe that is the best solution for a client.
We will NOT receive any shares or inducement for placing business on it.
We asked TP if they thought this represented a conflict of interest. Their response included:
“…whether a conflict actually exists when the units being offered represent no current or real value and are issued within a trust of a non-authorised entity, True Potential LLP, which is a completely separate legal entity and has no bearing or influence over the regulated Platform nor over the advisers giving advice to their clients.
The actual rules state that for the purposes of identifying the types of conflict of interest that arise, or may arise, in the course of providing a service and whose existence may entail a material risk of damage to the interests of a client, a firm must take into account, as a minimum, whether the firm or relevant person directly or indirectly linked by control to the firm:
1. Is likely to make a financial gain, or avoid a financial loss, at the expense of the client
2. Receives or will receive from a person other than the client an inducement in relation to a service provided to the client, in the form of monies, goods or services, other than the standard commission or fee for that service
What is important here is identifying the risk, loss or damage to your client – if the platform is suitable for your client then there is no loss or disadvantage and in turn no conflict.
Furthermore the FSA guidance states that the circumstances which should be treated as giving rise to a conflict of interest covers cases where there is a conflict between the interests of the firm and the duty the firm owes to a client or between the differing interests of two or more clients to whom the firm owes in each case a duty. It is not enough that a firm may gain a benefit if there is not also a possible disadvantage to a client or that one client to whom the firm owes a duty may gain or avoid a loss without there being an associated possible loss to another such client - this guidance means that if there is no loss to a client or no client loses out as a result of another client being placed on the platform then there is no conflict."
It is worth noting another wrap platform we used recognised our excellent quality and volume of business by offering a 0.05% benefit. Rather than take this money we passed it on to all client accounts as a discount and it is disclosed on literature when it benefits a client.
Green Financial continue to believe that our remuneration should be based on the agreements between you the client and us for the work that we do for you.
We will remain independent and will not accept money or shares for placing volumes of client business with a provider.
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