Monthly Archives: March 2014

Eliminating An Allowance

Posted on March 10, 2014 by - News, Pensions, Taxation

At present the amount of pension savings that can be accumulated by an individual is limited by both an “annual allowance” and a “lifetime allowance”.

As the names would suggest the “annual allowance” is a limit on the amount of tax advantaged pension savings and individual can make in a single “pension input period”, not to be confused with the tax year. This allowance used to be £255,000 per annum, which meant that it was not a concern for all but the most wealthy pension savers. Recent legislation has sought to reduce this allowance though, and on 6th April this year it will reduce to £40,000 per annum.

The “lifetime allowance” restricts the amount of pension savings one can accumulate in their lifetime. Any excess over the allowance carries a rather severe 55% tax charge. Like its annual counterpart, the lifetime allowance has been on the chopping block in recent budgets, falling from a previous £1.8m to £1.25m on 6th April 2014.

Some commentators are predicting that the government will announce the abolition of the lifetime allowance in the 2014 budget (at least for some individuals). This is one prediction which I do hope turns into reality.

It seems counterintuitive to limit an individuals lifetime pension savings, which are influenced by market growth and other factors over which they have no control, when we are already setting a limit on the annual pension input amount.

Surely it makes far more sense to simply limit the annual level of contributions, and stop taxing people on the growth in their pension funds. After years of increasingly complex pension legislation, any move to simplify things is surely a step in the right direction.

If you would like assistance with your own pension provision, please get in touch to arrange your discovery meeting, provided at our expense.

The £10,000 Pot Plan

Posted on March 7, 2014 by - Uncategorized

Rumours have been circulating amongst the financial press today that the chancellor will make an announcement in the budget to increase the previous “small pots” limit of £2,000 to £10,000 or even £15,000!

The “small pots” legislation allows people to take the proceeds of their pension funds as a cash lump sum if the total value of any single plan is under £2000. This prevents people from having to purchase an annuity with such a small pension fund, which in todays’ market, would secure an income of only around £8 per month.

By taking the pension as a lump sum, you avoid the fees and charges usually associated with an annuity, which would be disproportionate for such a small fund.

If the rumours are to be believed, the small pots limit is to be increased to £10,000 or more. This would be great for people who have a single small pension fund, as an annuity rarely represents good value for people in this situation.

The risk is however, that people will be tempted to take multiple pension pots, all as a lump sum, and thus deprive themselves of a lifetime income.

It is easy to transfer pension pots from one provider to another and this may be the best option for those of us who have accumulated several smaller pensions over our lifetime.

By combining the value of your pension funds you will benefit from economies of scale when making a retirement income purchase and the fees involved might seem a bit more proportionate.

What represents the best option will depend very much on your individual circumstances, retirement goals and attitude to risk. Taking high quality advice is key at this “at retirement” stage where many life long, irreversible decisions will be taken.

If you would like assistance in managing your retirement income, please get in touch to arrange your discovery meeting, provided at our expense.

Could You Spare 1/3rd Of Your Time?

Posted on March 2, 2014 by - Investments, News

I have recently finished work on a set of new investment portfolios for our clients. This is arguably my most important task as a financial planner because this is where I recommend my clients invest their money. It is a large responsibility, and one that I take extremely seriously.

This process has taken almost a whole month of solid work. I would approximate 130 hours in total. This is the amount of time required to conduct proper research, analysis and due diligence on the daunting amount of investment options available in the marketplace. What’s more, this is a process we will undertake every 3 months to ensure we keep up to speed with the fast changing world of investments.

Our process focuses on finding funds and investments that will meet our clients’ objectives, represent good value for money and that don’t expose our clients’ funds to excessive risk (however some risk is required in order to generate above average returns).

We repeat this process once every 3 months to ensure that our investment portfolios remain suitable for our clients’ needs. All in all then, this investment process takes up around 1/3 of my working time and even then we rely on external research and analysis conducted by experts in various fields to assist us in our endeavours.

While some people can and do “self invest”, I would suggest that they are unable to dedicate 1/3rd of their working life to such tasks. While some people feel confident taking this approach, most would feel more comfortable knowing that they have left the selection of their investments to an experienced professional, who can dedicate 1/3rd of their time to researching suitable investments and protecting their clients money.

If you would like to know more about our investment process or to find out how we could help manage your portfolio, please get in touch to request your discovery meeting, provided at our expense.