Wealth Management Update – January 2019
The four most common questions
As one year comes to an end and we start all over again with 2019, many people want to begin the new year with their affairs in order.
Below are four topics which seem to be the most popular:
- Retirement – when and how?
Pensions are complex, which means many people are not comfortable understanding what they have and what their options are, or even asking their providers. Pensions really are a minefield and encompass many of the more complex parts of financial planning, including income, taxation, legislation changes, allowances and scheme-specific rules – all areas best left to a professional to investigate and sift through the jargon on your behalf. So, if you feel confused, rest assured you are not the only one.
- How can I pay less tax?
With HMRC cracking down on tax evasion, many individuals feel less sure about what they can and cannot do, and asking a financial adviser is a great way to define what is a perfectly acceptable way to decrease your tax bill. Using your available tax allowances is the first step – and 95% of those surveyed weren’t doing this! There are many other ways to maximise income and reduce your tax bill, but they are likely to be more specific to your situation.
- How can I pay less Inheritance Tax?
Inheritance Tax (IHT) is one of the main concerns for individuals, likely because they have paid tax throughout their lifetime and don’t want to see 40% of what they have left evaporate to the tax man on their death. Or they may just be lovely people who want their family to get as much of their wealth as possible. Rising house prices over recent years have seen more estates become subject to IHT, and many of you reading this will have estates large enough to be subject to this tax. There are many ways to mitigate IHT including, but not limited to, getting married, making lifetime gifts and trust arrangements.
- Brexit …
The uncertainty of Brexit means it is a topic in most people’s minds, as uncertainty is not good news for the investment markets. Whilst we wish we could see into the future to plan for exactly what will happen, nobody knows how things will turn out. In these types of situation, it is key to be prepared and to focus on protecting your wealth for the time being rather than taking more risk to pursue growth. A balanced and diverse portfolio is a must.
Solutions to all of these topics feature heavily in our conversations with new and existing clients, which is not surprising as many of you have similar estate set ups and the desire to protect these and the wealth within them as much as possible. If you would like to have a further conversation or a review of any of the arrangements we have put in place for you, please give the team a call.
Gloomy 2019 outlook
The overall outlook for UK markets in 2019 is not looking good, in fact it is positively gloomy. Towards the end of December there were signs that things may get worse before they get better, no doubt fuelled by the uncertainty of Brexit in the most part and global political uncertainty in general, led mostly by President Trump … obviously.
2018 was not a straightforward year and saw volatility rise to an overwhelming high; no surprise when we recall what we were up against throughout the year. But all of this means that in 2019 much skill and experience will be required to protect assets as well as see any discernible returns.
It is not only the UK that is suffering, the global markets are also expected to be highly volatile. The US markets faltered towards the end of 2018 and overall growth has reduced significantly.
Whilst we are certainly not ruling out that 2019 may be a fantastic year in terms of growth (we really don’t know what might happen) a cautious stance is a sensible one. As many of you know, we have already aligned our investment strategy and fund selection to focus on protection of assets as a priority and will likely make further changes as things develop.
The key is to ignore the noise, ignore the temporary decline and just wait for the market to soar over time.
What you should expect from a financial adviser
We were very pleased to read an article in the Financial Times Money supplement that listed the most desired qualities in a financial adviser. Not to blow our own trumpet but we think we excelled in all of them, but we will let you decide!
Full market advice
We are not restricted in any way to recommend any types of products, providers or funds, we simply recommend the best thing for you.
We tell you what the fees will be up front and in writing. We really are as transparent as we can be and are one of the most up-front firms in the country when it comes to fees, and we pride ourselves on this.
We promote our “family” feel and focus strongly on doing the right thing for all of our clients and putting them first before anything else. Our clients are always keen to feed back how much they trust us to look after things for them.
Word of mouth
One of the greatest compliments we get is when a Client introduces someone new to us. We are always here to help a friend, family member or work colleague of a Client and are pleased to see the number of these referrals increasing each year. We believe our service speaks for itself, and for those of you who have referred people, we thank you.
All of this adds up to Penguin Wealth being named one of the 100 Top Advisers for the 6th year running. We did mention this briefly in last month’s Update but this article really sums up what clients want from a financial adviser and how this matches with the service we provide. We pride ourselves on standing out from the crowds of financial advisers by putting you, our clients, above all else and doing the right thing for you.
Pension tax relief
We all know that HMRC finds it extremely difficult to get taxation correct – funny really, as it is their job. Tax relief on pensions is one of the areas they have recently been criticised for not getting quite right. There are two types of tax relief:
Relief at source means your contributions are taken from your net pay (after your wages are taxed). Then your pension provider automatically claims tax relief for you from HMRC, adding the basic tax rate of 20% to your pension contributions.
A net pay arrangement means the pension contributions are collected before income tax. For taxpayers, this means full tax relief at the highest rate is automatic and no income tax is paid on money contributed to a pension.
Many of you whose pensions are managed by us get tax relief using the relief at source method, and one of the most important things to remember with this is that HMRC will only add basic rate tax, so 20% of the contribution. If you are a higher rate (40%) or additional rate (45%) tax payer then you must apply to receive the additional tax using your annual Self-Assessment Tax Return, this will not be done automatically.
This tax relief is due to you, so please be sure to make this part of your annual admin so you don’t miss out on the government adding to your pension.
There is more information on this using the link below.
https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief or speak to us.
Bank fined £32.8m for withholding account information and funds
In December, Santander was the latest high street bank to be fined for not acting fairly to its customers – in this case to customers who are now deceased.
In the UK, when someone dies it is the responsibility of those appointed in the deceased’s Will to identify and report on the value of the estate to be passed on to beneficiaries, which is not always a straightforward process. In Santander’s case, they let families down by not identifying accounts held and the values of those accounts. This meant that these accounts could not be accurately reported on probate paperwork, and bank accounts were not transferred to those entitled to receive them.
In the case of one family identified during an investigation prompted by the FCA, Santander failed to report £120,000. However, the bank then wrote to the family concerned no less than 13 years after the account holder had died – and informed the relatives they were holding £120,000.
Fortunately, Santander have fully cooperated with the FCA and have now improved their handling of a deceased’s estate. We hope that other high street banks follow suit to make this difficult process more straightforward.
When supporting families completing probate, we have identified a couple of banks who are extremely supportive and are very efficient in their administration. If you need to open an executor account to collect the proceeds of an estate that you may be handling, we can suggest approaching Metro Bank or Clydesdale Bank. Of course, if you are an executor for someone who has passed away, you can always speak to our Legal Team or your Adviser, who can take on the probate for you or provide guidance if needed.
Notes on Brexit
Once again we have seen a fraught period in the House of Commons; the Prime Minister’s decision to defer the “meaningful vote” scheduled for 11th December whilst she seeks further assurances from the EU around the Northern Ireland backstop provision led to a “meaningful” backlash against her position as the leader of the Conservative Party. Despite many proclaiming her unfit to continue as leader, Mrs May survived the vote of no confidence, defeating her challengers. This victory means that Mrs May cannot be the subject of another internal no-confidence vote for the next two years, which takes us well into the post-Brexit period. Whilst Mr Corbyn tabled a motion calling on MPs to declare they have no confidence in the government, this failed to conform to the strict wording legally required to actually trigger the vote, and nothing further was raised.
And so we enter the New Year with essentially no changes; nothing has changed in the House of Commons and nothing has changed about the deal on the table from the EU. As the Commons have not debated and decided next steps, section 13(4) of the Withdrawal Act is not yet engaged: the Government does not currently have to make a statement on any contingency plans it has in the absence of Parliamentary approval for its negotiated deal.
The vote is now expected to take place on 15th January, but the deadline of 21st January for an announcement is creeping ever closer. However, the Act does not require a “meaningful vote” to take place on any deal before the 21st January; for example, the Government could, legally, make a statement that political agreement has been reached on 20th January and then schedule a “meaningful vote” for some point in February or March. This would supersede any requirement to make a statement on its contingency plans, even though the Commons had not expressed a view on that deal by 21st January. There are only two hard constraints on the holding of the “meaningful vote”, whether by resuming the frozen debate or bringing forward a new one. The first is that the Government must “so far as is practicable” seek to hold that vote before the European Parliament votes on whether to consent to the deal (we had expected them not to do this until early March). Second, the vote must take place before the UK formally exits the EU, since the withdrawal agreement must be ratified before then.
Only one thing is clear at this stage, and that is there has been no progress or decision made.
Book of the month
Often it is difficult to find role models when we are trying to give the next generation someone to look up to, unless it is a sports personality or an actor. It is particularly tough when we are looking for a female role model. Well, look no further than Michelle Obama. Not only is she a stunning example to all women but all men can also learn a thing or two.
Becoming is Michelle Obama’s biography, and it is a fabulous read. The story of someone who came from the “bad” side of Chicago to be the First Lady is one that everyone should know. Unlike many First Ladies from history, who were simply married to the right man, Barack became President because he was married to the right woman. Not in a Nancy Reagan “I’ll tell you what to say” way, but because she is such an inspiration to her husband.
The book focuses on her life and covers her time in the White House only in small detail, and it is these early years which are so interesting and uplifting. We urge everyone to read this book and then buy it for someone else.
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Source: Moneyfacts Magazine January 2019 Edition