Wealth Management Update – June 2020
Good news stories
It is always nice to hear when good things come from the seemingly terrible. So, as we did last month, let’s open with a few items of good news!
Mortgage holidays extended – The Treasury has announced that homeowners who are struggling to pay their mortgage because of Coronavirus will be able to extend their mortgage-payment holiday for a further three months or start making reduced payments.
IHT exemptions rolled out – A little-known scheme that exempts members of the armed forces and the emergency services from being subject to Inheritance Tax (IHT) if they die in the line of duty has been extended to NHS workers and front-line staff who die in the line of duty as a result of Coronavirus.
Financial institutes give back – One of many to give back, Aegon UK has donated £200,000 to charities supporting the Coronavirus effort and £50,000 to its corporate charity partners.
Bereavement Scheme support – an announcement by the Home Office revealed that the Bereavement Scheme is being extended to provide indefinite leave for families and dependants of social care workers and NHS support staff who sadly die from Coronavirus.
Here at Penguin we have also recently offered our clients mental and physical fitness support. We have teamed up with a mindfulness and meditation expert who provided our clients with a 4-week online mindfulness course. We have also partnered with a Personal Trainer who is supplying weekly work-out sessions that our clients can join to keep fit from their living room throughout lockdown.
These are just a few good-news stories in the headlines recently and there are many more out there if you look for them. Let us keep an eye on the good things that have happened during this time and not let the bad things lead the way every day.
OPG delays
The Office of the Public Guardian (OPG) is the body that registers Lasting Powers of Attorney (LPA) – the documents that appoint attorneys on your behalf if you lose capacity or are unable to act during your lifetime. Like many organisations at this time they are experiencing delays because of the effects of Covid-19. Although they do not report any backlogs on their website, they are experiencing substantial delays in registering LPA documents, in some cases up to 20 weeks!
LPAs cannot be registered by any authority other than the OPG, so there is no alternative way to finalise them. If you are currently in the process of putting LPAs in place it is very important that your LPA documents are signed and registered as soon as possible. Imagine having to wait 20 weeks to be able to take over the management of your spouse/partner’s assets or healthcare if the worst were to happen – or your family having to wait to deal with yours.
If we are helping you put LPAs in place and you have questions, or if you want to talk about starting the process, then please let us know.
Will signing … changes on the horizon?
As you can imagine, or may even have experienced, signing Wills whilst adhering to social distancing rules has been very challenging. The Law Society and the Ministry of Justice (MOJ) are considering short- and long- term ways of amending the 1837 Wills Act to accommodate these new restraints.
The ongoing discussions are considering practical changes that could be implemented in the short term to comply with social distancing measures whilst also being valid in law, as well as longer-term changes to be considered that would allow the law to recognise the current ways in which people communicate and live their lives.
Nothing has yet been decided, but an overview of the aspects under discussion are:
Short term:
Reducing the number of witnesses – currently, two independent witnesses are required but consideration is being given to whether one would suffice.
Permitting beneficiaries to be witnesses – at present, having a beneficiary as a witness negates their inheritance. However, many beneficiaries live with the person making the Will, so this change would make the process of witnessing the Will easier.
Long term:
Remote witnessing using video conferencing –u s e of video conferencing has been a life saver in these difficult times for families and businesses, so why not? A bigger debate is needed but this could become the norm over time.
Electronic Wills and e-signatures –technology is taking over and so this is a probability in the future. However, the right infrastructure needs to be in place and many considerations addressed before this can become general practice.
Do not let scammers enjoy your retirement
The Financial Conduct Authority (FCA), who regulates financial advice, has become increasingly concerned about pension scams amidst the turmoil of Covid-19.
To protect Defined Benefit pensions the FCA have introduced a new transfer warning letter that is sent to anyone requesting a transfer value. If we are dealing with a Defined Benefit pension transfer for you don’t be alarmed if you receive such a letter. It is simply an additional layer of protection for you to make sure we are doing what we should and that you are happy with the decisions that have been made. If you have any queries about this please contact the office and a member of the team will be happy to help.
For official guidance, tips and hints on how to spot a scammer, how to protect yourself and what to do if you think someone is trying to scam you, visit the FCA website which has very comprehensive information:
https://www.fca.org.uk/scamsmart/how-avoid-pension-scams
LISA temporary measures
The Treasury has announced a reduction in the penalty applied to non- eligible withdrawals from a lifetime ISA (LISA) with effect from 6th March 2020 to 5th April 2021. Non-eligible withdrawals are those made before age 60 except where in connection with a first home purchase, serious ill-health or the death of the LISA holder. This reduction is being made to help savers access funds during the Covid-19 crisis without being penalised.
The exit charge used to be 25% of the whole fund which could mean you were charged more to exit than you received in government bonuses (depending on investment growth). The charge has been reduced to 20% effectively meaning you will just lose your government bonus amount, but won’t be charged any extra for exit from the LISA.
All non-eligible withdrawals made since 6th March 2020 to which a 25% charge was applied will have the difference between the penalty paid and that due under the revised 20% charge refunded.
There were requests for the government to make this reduction before the Budget so let’s hope they leave things as they are come next April.
Negative interest rate debate
The inflation rate dropped to 0.8% in April from 1.5% in March, its lowest level since August 2016, putting it on course to reach 0% in the coming months. Current Bank of England (BoE) interest rates are also at a low of 0.1% but could be heading towards negative territory in the not too distant future.
Gilts have already been issued with a negative interest rate of −0.003% and, whilst this may not seem to be an appealing investment, in an era of considerable uncertainty and volatility in markets individuals and companies may be prepared to pay a big premium for the confidence that they will get most of their money back, even if it means a slight loss.
If interest rates become negative it is likely that those with small cash sums on deposit in banks and building societies will see their already minimal interest rates cut to zero. However, those with large deposits may well find themselves in the situation of paying banks to hold their money – rocky territory for the UK and bad news for cash savers.
The debate is ongoing about whether the BoE will pull the rhetorical trigger on this particular tactic, but it would seem that one of the only ways to see growth from your savings for the foreseeable future will be in the investment markets.
BEST SAVINGS SELECTION
Top three Cash ISAs
| Name | Contact | £100
Gross % |
£1,000
Gross % |
£5,000
Gross % |
| Al Rayan Bank | alrayanbank.co.uk | 1.10 | 1.10 | 1.10 |
| Cynergy Bank | cynergybank.co.uk | 1.05 | 1.05 | 1.05 |
| Virgin Money | virginmoney.co.uk | 1.05 | 1.05 | 1.05 |
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 June 2020 Edition
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