The return of "Carry Forward"

HMRC have now confirmed that an individual can carry forward unused annual allowance from any year (2008/09, 2009/10 and 2010/11) during which they were a member of a registered pension scheme, regardless of whether they made any contributions during that year or had a nil pension input amount during that year.

They have also confirmed that contributions must be paid into the same pension scheme and to obtain tax relief, earnings must support the contribution in the tax year that it is made.

UK Treasury tax relief review.

Under the microscope are 1042 tax reliefs, which include  inheritance tax relief and capital gains tax relief options. Which will survive only time will tell.

Trouble at Gartmore?

A familiar story of defecting star fund mangers and a falling share price. You can almost see the vultures circling above. Read all about it.

Compulsory pension contributions - NEST

From 2012, millions of workers will be auto-enrolled into pension schemes to which employers and employees will have to contribute.

State Pension Age Increases

As a part of the 2010 Spending Review, the Government has formally announced a number of changes to state pension benefits, which include:

The pace at which the State Pension Age is equalised for women will be increased from April 2016 so that the female State Pension Age reaches 65 in November 2018, as opposed to April 2020. Full details concerning this will be issued by the DWP in the near future.

The State Pension Age will then increase to 66 for both men and women from December 2018 to April 2020.

Pension contribution tax relief and lifetime allowance

From tax year 2011/12 tax relief on pension contributions will be restricted to an annual allowance of £50k pa. The annual allowance will be "frozen" until at least 2016/ 17. Tax relief will be available at your highest marginal rate of tax. You will be able to "carry forward" unused annual allowance from the previous 3 tax years, including 2008/09, 2009/10, 2010/11 (£50k pa).



The new lifetime allowance (LTA) of £1.5 million will start from tax year 2012/13. Transitional provisions will be introduced for those individuals who:

• Have primary protection
• Have no transitional protection, but have pension benefits currently valued in excess of £1.5 million
• With pensions currently valued at less than £1.5 million, but who feel that the investment growth/benefit revaluation may take their pension value over £1.5 million
• Enhanced and primary protection will be retained, but enhanced protection will no longer be exempt from the AA test.

The rules relating to trivial pension commutation will be de-coupled from the LTA, therefore the existing limit of £18,000 will not be reduced.

Goodbye to Clerical Medical

Clerical Medical and Clerical Medical International investment products for new business will be re-branded to Scottish Widows.

Extending Disclosure of Tax Avoidance Schemes

A package of five measures revising and extending disclosure of Tax Avoidance Schemes (DOTAS) was consulted upon following PBR 2009 and primary legislation was included in Finance Act 2010 (FA 2010). HMRC expect to be able to implement the package on 1 January 2011. However, some of the hallmarks (descriptions of schemes requiring disclosure) consulted upon will be implemented at a later date in 2011-12.

ISA limits 2010/ 11

The new limit is calculated by reference to the RPI figure for the September before the start of the new tax year. The RPI for September 2010 was 4.6% so the 2011-12 limits (suitably rounded) will be an overall ISA subscription limit of £10,680 of which up to £5,340 can be subscribed to a cash ISA.

Tax allowable pension contributions reduced from April 2011

From April 2011 the limits on tax allowable pension contributions will reduce from £255k to £50k. From 2013 the lifetime allowance will reduce from £1.8m to £1.5m. Hopefully, the Treasury will publish the details behind their proposals shortly.

Double taxation Digest

Information from HMRC on double taxation agreements and in particular personal allowances for non-residents,

Transferable nil rate bands

FAQs (and answers) with regard to the transfer of the inheritance tax (I.H.T.) nil rate band.

Performance fees - devastating impact

A look at the devastating impact of performance fees on investment returns.

HMRC PAYE tax blunder

Advice on challenging a demand.

UK Tax resident?

An interesting article from The Telegraph on international tax matters.

RBS and NatWest (Scotland) Accounts transfer to Santander

RBS account holders will have their accounts transferred to Santander find out more.

Treasury consult on tax relief for pension contributions

Looks like the annual contribution allowance of £255k pa will be phased out in favour of a simpler but less generous limit of £30k - £45k per annum. The treasury will also consider the complicated issue of valuing defined benefit pension schemes. The changes are most likely to be implemented from April 2011.

Counting the cost of following fund fashions

Interesting article from The Telegraph. Why you can't always believe the Investment Manager's hype. 

International Adviser :: The Overseas Pension launches online tracking tool

International Adviser :: The Overseas Pension launches online tracking tool

NS&I (National Savings and Investments) makes changes to product range

• NS&I withdraws Savings Certificates from general sale

• Interest rates on NS&I Direct Saver and Income Bonds reduced

NS&I (National Savings and Investments) has withdrawn from general sale its current Issues of Savings Certificates (both Fixed Interest Savings Certificates and Index–linked Savings Certificates). The interest rates on the NS&I Direct Saver and Income Bonds have also been reduced by 0.25% with immediate effect.

Government launches consultation on removing requirement to annuitise by 75

Financial Secretary to the Treasury, Mark Hoban MP, yesterday announced the start of an 8-week consultation on removing the effective requirement to annuitise by age 75, following the announcement in the June Budget that these rules will end from April 2011

The consultation document sets out proposals that will simplify the treatment of retirement savings and reduce complexity for individuals as well as for pension and annuity providers. The reforms will give individuals greater flexibility to choose the retirement options that are best for them, with more choice over how they can provide a retirement income for themselves.

From April 2011, there will no longer be a specific age by which people effectively have to annuitise. This will give people who wish to buy an annuity greater flexibility in the timing of their annuity purchase. The Government will also create more flexibility for people who do not wish to buy an annuity. USP currently allows individuals to take a tax-free lump sum at the beginning of their retirement if they wish, keeping funds invested in a tax-exempt environment while drawing down an income from their remaining pension pot in line with their needs, subject to a prudent drawdown limit. The Government will allow capped drawdown - equivalent to USP extended beyond age 75 - for the whole of an individual’s retirement. This means that individuals will be able to choose how much to draw down annually from their pension pot throughout their retirement (subject to a capped limit), or whether to draw any income at all.

The Government will go further than capped drawdown by creating additional flexibility for individuals who wish to draw down more than the capped annual limit. Under this flexible drawdown model, individuals will be able to draw down unlimited amounts from their pension pot, provided that they can demonstrate that they have secured a sufficient minimum income to prevent them from exhausting their savings prematurely and falling back on the state. The requirement to demonstrate a minimum income will apply at the point at which an individual wants to exceed the annual capped drawdown limit. The Government wants to ensure that the requirement to secure a minimum income is transparent and fair and can be implemented without undue complexity or burdens on individuals or business.

Both capped and flexible drawdown will increase flexibility for private pension savers before and after age 75. This will make it unnecessary to continue to offer ASP as an option after age 75. ASP will therefore cease to exist when new rules come into effect. The new capped and flexible drawdown limits and rules will apply to existing members of ASP from April 2011.

Further detail on proposed tax charges will be published in draft legislation later in the year.

The consultation document Removing the requirement to annuitise by age 75 is available on the HM Treasury website via this link. Responses to the consultation can be sent to: age75@hmtreasury.gsi.gov.uk. The consultation period started yesterday and closes on the 10 September 2010. Draft legislation for the reforms will be published in the autumn.

Emergency Budget "Highlights"

Following last month’s Emergency Budget, we have put together some observations and planning points related to pensions, based around the following areas:

- Why put money into pensions

- Why do it now rather than later

- How do the new rules affect those taking pension benefits

Our Pensions Team can advise on  these and a wide range of other pension and pension-related issues.  Please feel free to contact us.

Why put money into pensions

- Capital Gains Tax (CGT) changes

CGT has increased from 18% to 28% for higher rate taxpayers. Investments held within a pension are exempt from CGT, so this strengthens the argument to invest via pensions rather than personally.

- Accelerated Increase to State Pension Age

The move to age 66 for the State Pension has been accelerated (April 2016 for men and April 2020 for women); as State Benefits diminish, the need for private provisions increases.

- Pension contributions for those with earnings between £100,000 and £130,000

Individuals with earnings in this bracket will see an effective rate of tax relief of up to 60% on personal pension contributions.

- Pension contributions for those with earnings between £130,000 and £150,000

Those with earnings in this bracket can make a pension contribution and mitigate anti-forestalling measures, which restrict the tax relief on the contribution. You can reduce relevant income by up to £20,000 by making a personal pension contribution potentially removing you from the restrictions altogether.

Why make contributions now rather than later

- Restrictions to higher rate tax relief

These had been mooted, but have been rejected. Instead, the proposal is that the Annual Allowance (currently £255,000) will be lowered to around £30,000-£45,000 per annum from April 2011. There is a window of opportunity for those with income levels above £30,000 but below £130,000, to make significant contributions that are above the new proposed annual allowance between now and next April.

Rules affecting retirees and those about to retire

- Under 55, in Unsecured Pension (USP) and considering a transferring your pension?

HMRC had ruled that those over 50, but under 55, who had entered USP could transfer to another USP scheme without this being treated as an unauthorised payment. However, the ruling said that any income drawn after such a transfer and taken before age 55 would be an unauthorised payment.  HMRC have just issued an announcement confirming that they will introduce legislation, backdated to 6 April 2010, to allow those in USP to transfer and draw income without penal taxes applying.

- Reaching (and going beyond) age 75

The requirement to secure an income e.g. buy an annuity or use Alternatively Secured Pension provisions by age 75 has been scrapped. New rules will be introduced; in the meantime anyone who turns 75 on or after 22 June 2010 can defer their decision until the rules are finalised.

Pension death benefits for anyone in unsecured pension age 75-77 will be treated the same as the under 75s, i.e. a taxable dependent's pension can be taken from the fund or a lump sum less 35% tax. Note that there are still actions to take by age 75 so it is not a question of “doing nothing”.

Marc Stemmer joins REFP

Marc Stemmer studied Law and Politics at Guildhall University graduating in 1996.

He spent several years with city institutions ABN AMRO and JP Morgan Chase where he had roles in management and trading and investment positions on a convertible bond desk.

In 2005, Marc joined Hurst Independent Financial Services in the niche area of new build property finance before moving to M&N Insurance Service Ltd where he ran their mortgage and financial insurance department. In June 2010, Marc joined Re-Financial Planning where he is involved in Business and Financial  Protection in addition to tax and retirement planning. Marc has attained all the requisite qualifications in this area to date.

Money is debt..

Ever wondered how money is created? Watch this video.

Santander brand replaces: Abbey, Alliance & Leicester and Bradford & Bingley

Anyone with accounts in more than one of these institutions should be aware that the financial protection currently offered may be reduced. The maximum possible protection, £50,000 x 3, will be reduced to £50,000 x 1.

Emergency Budget 22 June 2010

Coalition financial planning highlights

The following are some of the interesting points arising from the Conservative - Liberal coalition Government:

• Emergency budget within 50 days.
• Substantial increase in the personal income tax allowance from April 2011
• Taxing non-business capital gains at rates similar or close to those applied to income, with generous exemptions for entrepreneurial business activities
• Possible restrictions on higher rate tax relief on pension contributions
• Unlikley to be immediate substantial changes to Inheritance Tax
• An increase in Employer National Insurance thresholds
• Phasing out the default retirement age, set the date at which the state pension age starts to rise to 66, although it will not be sooner than 2016 for men and 2020 for women
• End to the rules requiring compulsory annuitisation of pensions at 75.
• Expectation that VAT will increase to 20%
• Limitation to the Child Trust Fund
• Fair and transparent payments to Equitable Life policy holders, for their relative loss as a consequence of regulatory failure

Free guides available from the REFP website

Download our latest guides to:

• 2010 Budget
• Inheritance tax planning
• SIPPs
• Wealth planning

"Fryer and Ors v HMRC" - tax on pension death benefits

The recent ruling in the case of “Fryer and Ors v HMRC” is another example of HMRC tightening the screw.

The case of “Fryer and Ors v HMRC” concerned an individual who deferred taking her pension benefits at the notional retirement age of 60 and died age 61. The lady in question had no need for the income at that time having sold her business.  

HMRC successfully contended that the deceased, by deferring pension benefits, had made a disposition for inheritance tax purposes and that the pension death benefits should be chargeable to inheritance tax.

Anyone who has deferred starting benefits from a UK pension may wish to reconsider their position. For those with pensions who have not reached retirement age it may be appropriate to extend the normal retirement age to 75 (assuming that no penalties apply).

Bereavement lump sum payment and Bereavement Allowance

When the death of a spouse happens, thinking about money is the last thing we want to do. But funeral costs can vary from one funeral director to another and can end up being quite expensive. This is where the Bereavement payment can help. If your husband, wife or civil partner has died you may be able to get Bereavement Payment, a one-off, lump-sum payment of £2,000 that's tax-free. This is payable if you were under State Pension Age (60 for women and 65 for men) when they died. However the payment must be claimed within 12 months of date of death or is lost.

The Bereavement Allowance is a taxable weekly benefit paid to you for up to 52 weeks from the date of death of your husband, wife or civil partner. Claims can only be backdated three months for Bereavement Allowance and this starts from date the office gets them.

2010 Budget Update

All the news from the budget.
Review of EFRBS & EBTs announced with potential changes from April 2011.
HMRC has said it is looking into proposals to extend trivial commutation rights to personal pensions funds worth up to £2,000 and allowing couples to pool small pension pots in order to achieve better value by buying a joint life annuity.

New reduced QROPS fees at The Overseas Pension

Leading QROPS provider "The Overseas Pension" from Fairbairn Trust Company Ltd announces new reduced fee schedule.

Tax exiles under the spot light.

The recent Gaines-Cooper ruling brings tax residency in to question.

Enterprise Investment Schemes

Worth another look? £1m investment over 2 years, 20% tax relief, C.G.T. free, I.H.T. free after 2 years, C.G.T. deferral.

Gilts: who owns the UK's Gilts

As the Bank of England's quantitative easing programme comes to an end, what will this mean for gilts?  This BBC article looks at who owns the UK's gilts.

Savers are losing our by not utilising their ISA allowance

The Yorkshire and Clydesdale Group have found that savers have lost a total of £13billion by not using their ISA allowances over the past eleven years! Read more about ISAs by clicking on the link...

Northern Rock to lose 100% deposit guarantee

The removal of the 100% guarantee will take place on 24 May.

Tax schemes too good to be true?

The new edition of the HMRC 'Spotlights' publication includes an article on loss relief schemes that in HMRC's view do not have the intended effect. Individuals considering investing in these schemes need to be aware that the relief claimed may be challenged and repayments withheld.

Coporate bonds and Gilts available on the London Stock Exchange

The London Stock Exchange (LSE) launched a new electronic order book for retail bonds on 1 February.

Private investors can now see on-screen prices for bonds and deal in increments of £1 for gilts and £1,000 for corporate bonds. The idea makes bond dealing much the same as share dealing for the individual investor.

Initially the system only offers 49 gilts and 10 corporate bonds (3 of which are from BT) with further bonds, specifically tailored to the retail investor, expected soon.

Fidelity becomes the first UK asset manager on Facebook

Last week, Fidelity launched its Facebook page in an effort to increase communication with existing and potential investors. The page - www.facebook.com/fidelityuk - will offer tips from investment advisers as well as exclusive offers on funds and tools to help manage portfolios. Webcasts and events to be held in the future will also be promoted.

Re Financial Planning Limited has had its Facebook Group set up for many months now, and it is heartening to see investment houses following suit. As time goes by and technology and online media becomes more and more the norm, it offers an opportunity to reach people that traditionally would not have thought about their financial planning and ensures that a wider audience has access to the information that affects their own personal finances.

Search Re Financial Planning Limited on Facebook and join up now!

Re Financial Planning nominated as IFA of the Year by Citywire!

Everyone here at Re Financial Planning was delighted to learn that we had been shortlisted to receive the prestigious IFA of the Year award at the recent Citywire Annual Conference. Will Greenwood, former England and Harlequins rugby player, was on hand to help dish out the awards. Unfortunately, we were just pipped to the post! Disappointing though it of course was, this only gives us even more motivation to go back and bring home the trophy next year!

The conference itself was very interesting, with former Monetary Policy Committee member David Blanchflower speaking about his views on the economy: what has happened and what we can expect next.

Is the nil rate band trust/ will trust still relevant?

On first sight there doesn't look to be many reasons for retaining the nil rate band trust (Will trust) but the following are some of the issues that mean that a nil rate band trust might still be desirable:
Avoiding the local authority change

There may be a desire to avoid assets being available to the local authority in the event of the survivor going into care. By leaving assets to a trust on the first death those assets will not count as part of the surviving spouse´s resources for the purposes of the local authority charge. Indeed, the split ownership of certain assets between the trust and surviving spouse may reduce the value of the assets in the hands of the surviving spouse- for example in the case of a private residence.

Using Loans

Further IHT savings could be secured by the trustees of the Will trust making loans to the surviving spouse if and when funds are needed which create debts and so reduce the taxable estate of the survivor on his/her subsequent death.
Expected high increase in asset value
It may be felt that investments made subject to the Will trust on the first death will increase in value at a greater rate than the increase in the nil rate band.

Concern over widow/ers future re-marriage

The testator may wish to ensure that his or her assets (in this example at least to the value of the nil rate band) pass to his or her children after the death of the widow/er.

Even if a discretionary Will trust does come into existence on the first death and, after the first death, this is not required there would, within 2 years of death, be scope to appoint absolutely out of that discretionary trust and achieve the same IHT results as if the asset had passed directly under the Will. Care must be taken that such appointment is made at least three months after the death.

NS&I Income Bond payments delayed

Eight thousand savers who bought income bonds from National Savings & Investments have not received their interest payment for this month because of ‘technical issues’, the government-owned institution has said. Read more by clicking on the heading above...

Investment wisdom from CNN Money

Interesting article from CNN, naturally it's from a US perspective but with relevance to the UK.

Can you better the pension offered by your pension provider?

Pre Retirees who shop around for an annuity are around 50 times more likely to get a better income than those who stick with their existing pension company, says the Association of British Insurers. To read more, click on the heading above...

Fixed Rate Bonds - Best for the year ahead

Reading through the FT last weekend, my attention was caught by the article about Fixed Rate Bonds. With the Bank of England Base Rate predicted to be on hold at current levels for most of 2010, are they are still an attractive investment??

FTSE 100 - Best guess for 2010?

From 3,980 through to 6,748 the experts agree the paramaters or at least the normal distribution.