Wealth Management Update April/May 2022
THE AMICABLE SPLIT
No fault divorces were written into law from April 2022 in England & Wales, potentially making the process of a married couple parting ways quicker and easier, with less animosity. The change replaces the ‘five grounds’ allowing couples to divorce without assigning fault. It also introduces the option for joint applications, lowering the possibility of a divorce being contested.
Once a split has been agreed it’s important to accept and plan for the Financial implications as early as possible. Financial objectives may need to change and reliance on a partner for funds potentially reconsidered. Budgeting is key here, as is seeking Independent Financial Advice.
Many couples will naturally have had one or the other take the lead when it comes to finances and getting to grips with the various arrangements that may be in place may not be straightforward. When it comes to Investments and Pension pots, it’s important to think long term – dividing assets by way of ‘who gets what’ isn’t often clear cut – there may be Tax implications, withdrawal penalties or market timing factors that could have a strong influence on the final figures each will receive. With some assets, it may be difficult to separate emotional value from financial.
Whilst the parting of ways might be amicable it would be wise not to assume relations would always continue to be. Best to plan for the future from the outset rather than risk having to do so under a fresh set of circumstances and feelings. If the couple have children, they should consider their obligations to them both now and in later life.
Involving a Financial Adviser early on in divorce proceedings would be a prudent move. Divorce is never pretty, but perhaps the new ‘no fault’ legislation might lower the turbulence.
INTEREST RATE RISES
Last week, the Bank of England voted 6-3 to increase its base rate of interest 0.25% to 1%. This is the fourth rise in succession, putting rates at their highest level since February 2009 off the back of the 2008 global financial crisis.
The increase will hit the 2m+ UK homeowners with variable rate mortgage repayments at a time where cost of living is top-of-mind for many. The move to increase interest rates is widely hoped to bring control to rates of inflation which hit a 30 year high at 7% in March, however, some fear it could act to spark a recession.
Mortgage providers are likely to see increased activity over the coming weeks as many seek to re-mortgage in response to the increase in interest rate levels. However, Tim Bannister, a Director at Rightmove suggests it will not slow the pace of growth in the housing market:
“It will take time for the rise in interest rates to feed through to the market, and despite further rises being a possibility this year, right now the data suggests this is not dampening the desire for people to move. Despite economic headwinds such as the rise in cost of living, buyer demand is still up around 60% from the more normal 2019 market. The home and where we live has become even more fundamental for people over the last couple of years, meaning that even with economic challenges, people are still prioritising this decision.”
Mr Bannister goes on to state that whilst growth will likely continue, buyer behaviour, and budgeting might need become more conservative:
“We do anticipate affordability constraints and these economic headwinds such as rising interest rates to have more of an effect on the market later in the year. People will need to make decisions around what they can afford, which may mean some people need to lower the property price bracket they are aiming for, assess the mortgage products available in terms of duration and fixed-rate length, or raise a higher deposit in order to borrow less.”
Watch our quick videos on this topic – ‘Interest Rates are on the rise’ and ‘The Bank of Mum and Dad’. And don’t forget, if you have any questions you can contact us at anytime.
BEWARE OF HOLIDAY TRAPS
Many of us chose these months to pack our bags and get away for a few days of rest and relaxation, an escape that hasn’t been easy to achieve over the last couple of years with the world gripped by a pandemic and travel restrictions widespread. With demand for bookings now increasing, fraudsters too are taking advantage.
Holiday scams are said to have increased by over one-third according to research by Lloyds Bank. The bank discovered fraud to be increasing across all holiday values, but most prevalent was caravan booking fraud which rose more than 100% in just one year. Flight booking fraud over the same period increased 13% but with a higher average rate of loss of roughly £3,000 compared to roughly £400 for caravan bookings. Rates of defrauding for holiday package bookings and hotel bookings too were seeing increased levels of of 17% and 18% respectively.
The scammers lure in consumers with fake advertisements on websites and search engines, often impersonating well known booking websites. It was found that in some cases the fraudsters used genuine accommodation listings but persuaded their victims to transfer money directly to their bank accounts rather than route it via the official website platform.
The UK’s Online Safety Bill, currently working its way through the House of Commons, would impose a duty of care on social media platform providers and search engines to protect users from many types of paid-for fraud. For now, be sure to remain vigilant when booking online.
TRUST REGISTRATION DEADLINE APPROACHES
New rules on Trusts are due to come in force from September this year. They centre around Trust registration, and could risk putting amateur, unadvised Trustees at risk should they not act.
HMRC’s online Trust Registration Service has been active since 2017 but has now had its remit extended to require even those without a tax liability to also register. unless explicitly exempt. Affected Trustees will need to register by September, or within 90 days of the Trust’s formation.
The obligation, created as an attempt to tackle money laundering, creates a liability for all trustees to ensure their trust remains up to date. The change will impact hundreds of thousands of trusts and yet HMRC have received criticism for failure to clearly communicate the change and its impact. Stacey Love, a tax expert at Canada Life commented:
“The Revenue is not great at communication…A lot of these Trusts are not going to be run by professional trustees. It’s mums and dads and grandparents. They are often just Mr and Mrs Normal, they’re not expecting to be aware of what are quite technical changes.”
The wide use of Trusts and the complex exclusion rules on registration make the changes particularly of risk to amateur, unadvised Trustees. HMRC have said they will not punish those who do not register in time, they will penalise deliberate or ongoing failure to do so, however, they are yet to provide specific details on potential penalties.
If you have arranged a Trust that needs to be registered via us then we have already contacted you.
If anyone you know hasn’t heard from their Legal, Accountant or Finance Team do tell them that our Trust team have the capacity to help. You can also share our Webinar on this topic with them – Trust Webinar.
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