Wealth Management Update – March 2018
Good news for those dealing with Inheritance Tax – the ‘main residence nil-rate band’, which is the amount you can receive before tax from the property that was the deceased’s main residence, will increase from April. The amount will rise from £100,000 to £125,000 per person, giving individuals £450,000 and couples £900,000 tax-free inheritance. This comes at a time The Times reports that HMRC increased their inheritance tax take last year by nearly 15%. Against the backdrop of a much more aggressive approach towards tackling avoidance, experts underline that doing the simple things will be key.
Stock market tumble
In February we saw the worst stock market tumble since the financial crash of 2008. The Dow Jones fell by 4.6% overnight and went on to fall by more than 10% overall over the following days, a total of $300 billion. The FTSE fared only slightly better with a total fall of over 8%.
There was always going to be a market event, we just didn’t know whether this would constitute a crash or a correction. The recovery in the markets suggests that this may only have been a correction in this instance, but who knows if there may be more to come. We have already made the decision to revaluate our portfolio and adjust it to add additional protection against any future market events such as this one.
Many experts believe this event was a reality check and broadly a good thing to have happened. With memories of the 2008 financial crash fading, people have started to take more and more risks without thought for the consequences. The fact that the bubble has partially burst will hopefully curb this behaviour, meaning that we may see slower and steadier growth in the markets instead of the rapid rises we have seen in recent years that could potentially lead to unexpected market corrections.
Now, don’t let me fool you – there will likely be more market corrections in the future. All we can do is protect our and your investments to the best of our ability, as we are doing with our asset allocation readjustments. Rest assured that our Investment Committee are looking at this situation daily and will be monitoring and managing everything for you. Just keep an eye on those emails!
ISA allowance: Use it or lose it
March is the final full month in which you can use your ISA allowance. The current allowance is £20,000 and it is a “use it or lose it” allowance. You cannot carry it forward to the next tax year, so now is the time to make that additional contribution you may have been thinking about.
As we are sure you are all aware, by placing funds into an ISA you are increasing the tax efficiency of your savings, as when you come to withdraw these funds they are not liable for income tax or capital gains tax. So definitely worth doing!
If you want to make use of this allowance, get in touch with us as soon as possible as there may be forms we need to send out to you to sign and we do not want to miss that deadline!
(N.B. Keep in mind that there are two bank holidays close to the new tax year on Friday 30th March and Monday 2nd April, when our offices will be closed.)
If you do not have any additional funds to invest, we can move money from other areas of your portfolio into your ISA to utilise the allowance. Again, just get in touch to make sure this all happens before the new tax year.
Lasting Power of Attorney: Are you owed a refund?
The Office of the Public Guardian (OPG) has announced that they will be choosing to refund part of the fees for Enduring Powers of Attorney and Lasting Powers of Attorney (LPA) charged between 1st April 2013 and 31st March 2017.
Refunds will be processed in approximately twelve weeks from date of request and can be claimed either by phoning the OPG directly on 0300 456 0300 or online by following the link below:
The claim must be made by the Donor (the person whose LPA it is) or, if they are not able to claim, by their appointed attorney on the official document. Sorry but we cannot process or request these refunds on your behalf.
The reason for the refunds is that the OPG is not allowed to charge more than it costs to process LPA documents. During the timeframe mentioned above the OPG’s operating costs came down as more people applied to register a power of attorney and the process became more efficient, but the application fee charged was not reduced in line with this.
There is currently no deadline for the claim process but make sure you start the process as soon as possible, just in case!
We have email you individually if we did your LPAs, if you have done this yourself please do contact the OPG.
Will your pension pass to the right people?
A prominent pension provider, Royal London, carried out a survey on those aged between 55 and 64 years and discovered that the pensions of 750,000 people approaching retirement will pass to the wrong person.
Whenever you have a pension pot, whether it be with your employer or one you have set up personally, you are usually asked to nominate your beneficiaries via an “Expression of Wish” form. Your pension will likely not then pass according to instructions in your Will, but will be inherited by whomever you nominate on the Expression of Wish form (different rules apply for Defined Benefit schemes).
Now, the problem is that having another form to remember to complete means that it is easily forgotten or overlooked. This becomes an issue if circumstances change, for example if you get divorced, remarry or simply no longer want that beneficiary to benefit.
To make sure your chosen beneficiaries receive your pension it is best to set up an Asset Preservation Trust, which nominates specific categories of beneficiary. This means, for example, that your Pension Trust could be passed on to your children, grandchildren, great grandchildren or others without you having to update Expression of Wish forms with each individual name or every time something changes. A Letter of Wishes can be attached to the Trust explaining the proportions you would like each beneficiary to receive, or with any other further details or instructions. Only one Expression of Wish form that allocates the Trust as the beneficiary of your pension will be needed, the Asset Preservation Trust then does the rest.
If a Trust is not something you would be interested in, you should at least check that your pension will go to the right people. If your pension is managed through us you should be able to use your login details to check this, or you could call us to find out. If it is not, you will need to contact your specific provider.
Pension scammers’ comeuppance …
We hear a lot about pension scams, and actually about scams in general, these days. But rarely do we get the satisfaction of seeing the culprits suitably punished for their crimes, generally because they are too adept at hiding themselves and cannot be traced.
However, The Pensions Regulator (TPR) recently secured a ruling that means four scammers have to repay £13.7 million to pension scheme members who were involved in a scam through Friendly Pensions Ltd. An independent trustee has been appointed by TPR to seek the confiscation of the scammers’ assets to distribute for the benefit of their victims. Now, who knows whether they will be successful, but hopefully this first ruling that forces the scammers to repay the money they have stolen from innocent people by accessing their personal assets will be the start of more to come.
The victims of the scam were lured in over a two-year period through the use of cold calling and similar techniques in an attempt to get them to agree to transfer their pensions to one of eleven scam schemes.
Please remember to always be vigilant when receiving calls/emails/texts from unfamiliar people about your pensions and savings. You may think it will never happen to you but the scammers are getting bigger and better at what they do.
Notes on Brexit
Phase 2 of the Brexit negotiations began only recently, so at this stage there is no progress to report. The EU have adopted new Negotiation Directives, and these have highlighted some red-line positions for the EU.
Along with details surrounding what should be covered in Phase 2, the January 2018 Directives set out that, in the view of the EU, a transition will:
• be time-limited, and end by 31 December 2020
• require the entire body (“acquis”) of EU law to continue to apply to the UK, including in areas relating to free movement of people and the EU’s customs and trade laws and policies, and including new EU laws that will enter into force during the transition period
• require the UK to remain within the CJEU’s jurisdiction
• preclude the UK from “being able to conclude” its own trade agreements, unless specifically authorised to do so by the EU
• preclude the UK from having representatives in the EU institutions and in EU agencies, as it will no longer be a “Member State”
It appears that there is not much room for negotiation there, but a paper released by HM Government stated that they feel there is broad alignment on most positions and only a small number of areas need to be discussed, mainly technical in nature.
However, Mr Corbyn has finally decided what his position is on Brexit, and there is now a strong possibility of a parliamentary defeat for any outcome deemed to be “too hard”, so we will have to sit tight and wait for the tangle that is Brexit to unfurl.
Book of the month
This month’s book is interesting for one thing – the chapter about the responsibilities of tech companies. Hit Refresh by Satya Nadella is the story, in his own words, of how a student from India became the CEO of Microsoft, and thus one of the most powerful men in the world. His story makes an interesting read, and demonstrates what you can achieve from a standing start and without the advantages of a family of position. However, we think the most interesting part is the discussion on responsibilities, as we mentioned.
You will probably remember the US bomber whose iPhone was discovered and held by the FBI. They wanted Apple to unlock the phone so that they could find out his contacts and actions. It seems sensible, and we think most people supported that move. However, Apple disagreed, saying that giving the FBI the power to open a phone would affect civil liberties and be against the first amendment (of the US constitution). Before we read Hit Refresh, we believed Apple were totally wrong. However, having read the book, we are not so sure.
If you want to really think through the idea of privacy, the effects of terrorism on privacy and how this affects the new world of tech that is being forced upon us, this is definitely a book for you.
Best Savings Selections
Top three Cash ISAs
|Name||Contact||£1 Gross %||£10 Gross %||£100 Gross %|
|United Bank UK
(3 year term)
|0800 218 2266||n/a||n/a||1.86 (fixed rate)
Min Deposit £2,000
|Marsden BS||Via branch||n/a||n/a||1.30
Min Deposit £5,000
|Chartered Savings Bank||chateredsavingsbank.co.uk||n/a||n/a||1.31
Please check with the terms and conditions before opening any account. If in doubt consult with your financial adviser directly as the above are for information only.
Source: Moneyfacts Magazine March 2018 Edition