Pension Freedoms

Pension Freedoms.

There is an old adage that “Just because you can, doesn’t mean you should” however, according to the Association of British Insurers,  over £3 billion has been paid out in lump- sum cash payments from British pensions. If you choose to access your pension- pot ‘as a lump sum’ then 25% of it is paid tax free which means the remaining 75% you will be paying tax at your standard marginal income tax rate.

It is important to remember that, if you are still earning, then any extra pension monies you take out will be included in your total tax liabilities before working out your tax levels.

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Protection Planning

It is that time of year when we meet up with our families, over eat and catch- up with relatives who, perhaps, we only see once a year. As a Financial Advisor, one of the things I ask people is what is most important to them and eventually, after mentioning their car or their I Phone, I get the answer that it is their loved ones, of course! However, interestingly, our families and our dependents, generally, are the very areas of our lives that we insure least! The health and the financial well-being of one’s family cannot be overstated yet the truth is that many of us are more willing to insure our pets, our cars, our  possessions and even  the’ Sky ‘satellite dish instead of spending a few pounds a month on a Life, Critical Illness or on an Income Protection Plan.

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New Life together in a new home

Often when people get married the thought of saving for a home is not far behind. As both an Independent Mortgage Broker and a Financial Advisor I am often asked about the best way to save for a new home and deposit. The government has just announced the launch of the ‘Help to Buy ISA’. This means that the government will boss your savings by 25% so for every £200 you save you will receive a government bonus of £50. The maximum amount of bonus you can receive is £3000. The ISA’s are available to each first time buyer so if you are planning to buy with your partner you could receive a government bonus of up to £6000 towards your first home! To kick start your savings you can save up to £1200 in your first month and then up to £200 per month after that.

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Millions of people still unaware of ISA changes.

I read an article the other day that said that 77% of British adults have no idea of the new Isa rules that came into effect in July 2014.

The changes were supposed to make ISA's more attractive to investors and simpler however there is a general feeling that the changes have not been explained well enough. Perhaps the radical changes in pensions and the Lamborghini effect has played its part in distracting us!

Here is a summary of what has changed:

    •     New ISA annual allowance- the ISA allowance (the amount you can invest each tax year) has risen to £15,240.

    • Improved flexibility- historically there were restrictions on how you could split your allowance between Cash ISAs and Stocks & Shares ISAs. Now you can split your allowance as you choose.

    • New death benefits- investments are normally subject to Inheritance Tax (IHT) of 40%, if the total value of your estate exceeds the 'nil-rate band'. This is currently £325,000 for individuals, or up to £650,000 if you inherit your spouse's or civil partner's unused allowance. Changes announced in the Autumn statement mean that surviving spouse's will have an additional ISA allowance, equal to the amount the deceased spouse had in their ISA.

    • Improved transfer options- you can now transfer from a Stocks & Shares ISA to a Cash ISA, and vice versa. Under previous rules you could only transfer from a Cash ISA to a Stocks & Shares ISA. This removes one of the biggest barriers to transferring Cash ISAs to Stocks & Shares ISAs - that you couldn't transfer back again. With interest rates remaining at historic lows, we are seeing increased interest from investors who are happy with the risks and are looking to transfer their Cash ISAs to Stocks & Shares ISAs

    • Earn tax-free interest in Stocks & Shares ISAs- you have always been able to hold cash in a Stocks & Shares ISA, but interest was, in effect, paid net of basic rate tax. Under the new rules interest on cash in a Stocks & Shares ISA is paid gross and is completely tax-free.    Cash ISAs remain unchanged.

If you are interested in making the most out of this new flexibility please do not hesitate on give us a call.

Chris Dixon Dip PFS


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