THE SPRING BUDGET 2023

Dominic Thomas
March 2023 • 10 min read

Pension reforms of sorts…

If you are under 75 and have a pension, today is a better day than yesterday. You may breathe a sigh of relief; the Chancellor has done something to directly benefit you. As with all Chancellors, there is of course some politics at play. Whatever your view of the rabble at the House of Commons, we finally have a Chancellor who seems to both understand maths and has an ability for some long-term thinking as well as valuing the concept of financial independence in his Spring Budget 2023.

As a reminder, it was the Blair Government who introduced the Finance Act 2004 which ushered in new pension rules from April 6th 2006 known as A-Day and termed “Pension Simplification”. The basic premise was to simplify pension funding, enabling anyone to make payments and get tax relief, restricted by a maximum annual contribution allowance and a lifetime allowance for the value of your pensions, be they final salary or investment based. It sounded so simple, something akin to the battery level on your mobile phone.

Next month, “pension simplification” turns 18 years old. Simple is certainly not a term that anyone would consider in the same breath as pension rules. A veritable smorgasbord of metrics are needed to monitor if you fall foul of the rules.

A-DAY TURNS ADULT

Today though, Mr Hunt has abolished the Lifetime Allowance, a welcome and grown up but unexpected move (it had been hinted that it would return to the level at which the Conservative Government inherited it at £1.8m. No, it’s abolished, completely! The Lifetime Allowance, which is something everyone had to assess pension benefits against will be gone from 6th April 2023. Do not retire before then – or more accurately do not crystallise any pension until then.

ANNUAL ALLOWANCE – UP BUT STILL TAPERED

He has not however returned the Annual Allowance to the 2010 level of £255,000 but has increased it from £40,000 to £60,000. In addition, the Tapered Annual Allowance has not been scrapped, but increased from £240,000 to £260,000 from 6 April 2023. The threshold test at income of £200,000 has not been altered. In theory therefore the new standard annual allowance of £60,000 will still reduce by £0.50 for each £1 over £260,000 but stopped at £360,000 when you will get the minimum maximum annual allowance of £10,000.

By way of example, someone with income of £300,000 would be £40,000 over the £260,000 threshold and thus see the annual allowance reduce from £60,000 to £40,000.

Those of you that have taken income from a personal pension (not a defined benefit/final salary pension) will be able to continue towards a pension under the Money Purchase Annual Allowance (MPAA) which is being increased from £4,000 back to £10,000. I understand this will double up as the minimum maximum (if you see what I mean) that anyone with income over £360,000 can also contribute (gross).

NEGATIVE TURNS POSITIVE

Medics (and a few others) that on occasion have a negative pension value for the year will now be able to offset this, something that was not possible previously.

25% TAX FREE CASH IS GOING FOR BIG PENSION POTS

There is a slight “fly in the ointment”. Under pension rules tax free cash is capped at 25% of the fund value, buried in page 100 of the Budget is the statement that advisers understand but most investors do not. “The maximum Pension Commencement Lump Sum for those without protections will be retained at its current level of £268,275 and will be frozen thereafter”. In other words, the tax free cash lump sum (PCLS) link is to be broken. 25% of the current lifetime allowance is £268,275 and this is therefore being retained, meaning that whether your pension fund is more than this, you cannot withdraw more than £268,275 as a tax free lump sum. In plain a pension fund of £2m does not produce tax free cash of £500,000 (25%) but £268,275.

One other “minor” point is that those with Primary, Enhanced, Fixed or even Individual Protection from 2006, 2012 (max £450,000), 2014 (max £375,000) and 2016 (max £312,500). Therefore some people will have a higher tax free cash entitlement than the new limit of £268,275).

ISAs, JISAs, VCTs, EIS, SEIS

All as previously.

INCOME TAX, CORPORATION TAX, CAPITAL GAINS TAX, INHERITANCE TAX

As previously announced for 2023/24.

On occasion, Budget plans get revised (remember the glove puppet of a PM?) so there is a possibility that after a little more thought, pressure and checking, some of the points in the Budget might need a tweak, but in general this is a rarity.

If you have questions, that I have the realistic possibility of answering (not “where is Cloddach Bridge?” which gets a sum for refurbishment…. which I imagine is one of those times we may remark, “what, a million pounds?” (actually £1.5m) is either a lot or a little, that old price and value thing… much like the criticism that will inevitably be made of the abolition of the lifetime allowance, which is, from my perspective of working with you, a very good thing indeed.

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THE SPRING BUDGET 2023Dominic2023-12-01T12:12:35+00:00

Changing of the guard

Dominic Thomas
Dec 2022 • 5 min read

Changing of the guard

I know that football isn’t everyone’s cup of tea, but it often provides useful metaphors. Whether you love or loathe it, I suspect that you have heard the name Cristiano Ronaldo, who is one of the sport’s true superstars, with a career that has made him extraordinarily wealthy as his prolific goalscoring has resulted in team successes and trophies. At the age of 37 he is representing Portugal at his fifth World Cup (starting in 2006). His latest contract pays him £26m a year.

Yet on Tuesday evening, he was left ‘on the bench’ and watched as his team beat the Swiss 6-1 with a hat-trick from his replacement, Ramos some 20 years his junior. Few of us will contemplate retirement at 37, but in sporting terms, that is ‘getting on a bit’. Ronaldo and his many millions of admirers will have mixed feelings about seeing someone else take centre stage and provide an extremely good performance that threatens the possibility of Ronaldo’s normally guaranteed place in the starting line-up for the next match against Morocco on Saturday for a place in the semi-final. Those who know football, will observe that this is a normal experience for all players but rare for the superstars of the sport, but something that Ronaldo has only recently begun to experience at his club (or no longer his club).

PLAN, PURPOSE, PREPARATION

There is no obvious way to prepare for retirement, for some it is a very sudden change of pace and evokes questions about purpose and meaning, for others there is a sense of relief, as though a great burden has been lifted. A recent webinar presented by researchers from academia, has found that most retirees are not very well prepared for the transition. Whilst finance and having enough money is a significant element of retirement, it certainly isn’t the sole consideration.

Researchers found that most people do not consider how a change in health may create problems where they live, if they are unable to drive, use public transport or have a hospital reasonably nearby. They also pointed to the underappreciation of social contact and community and how a once pleasant ‘get away from it all’ location becomes increasingly isolated from valuable personal connection.

One question that seems to be understood and answered differently in different countries is “when does middle age end? And when does old age begin?”. This reminded me of a clip that I saw recently in which it was argued ‘middle aged’ is between 35-50, being typically the mid-point in most people’s lives…

65 IS THE NEW 45…

Often, we hear “you are as old as you feel” I’m not convinced by that, but I do think having connections, community involvement, friends and family all help make life invigorated and outward looking. Pop star, material girl, Madonna will turn 65 in August 2023 (next summer) and if she had been a UK resident for long enough, paying her NI, would be eligible for her State Pension in 2024.

As for people who have already turned 65 in 2022 – Stephen Fry, Jo Brand, Nick Faldo, Jayne Torvill, Frank Skinner, Timothy Spall, Daniel Day Lewis, Siouxise Sioux, Fern Britton, Dawn French, Billy Bragg and Steve Davis are all part of the cohort that will collect their State Pension at 66 in 2023. As for Ronaldo, if he was eligible to claim a UK State Pension, under current rules he could do so when he is 68, which is in 2053, some thirty years time during which he would see a further seven World Cup tournaments.

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

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Changing of the guardJemima Thomas2023-12-01T12:12:40+00:00

Getting enough state pension?

Dominic Thomas
Dec 2022 • 12 min read

Are you getting enough state pension?

This item is relevant to women aged at least 69 and men 71 or older.

The State Pension is regularly in the news, yet it is widely misunderstood. It has not helped that Government policy over the decades has altered it considerably as society has changed, both in terms of equality and longevity. As a result there are layers to the State Pension, not everyone gets the same amount.

In recent years it came to light that some pensioners had not been receiving what they were due. According to the DWP this dates back at least as far as 1985. Initially in March last year the DWP estimated that about 134,000 pensioners had been underpaid, but by July this year the figure rose to 237,000 with underpayments worth about £1.4bn.

The main challenge is accurately assessing all the data and making recompense and in practice the DWP have flagged a possible 400,000 cases that require a review. To complete the review process alone along the original timescales is by the end pf 2024 (which will be too late for many) means reviewing 19,000 cases a month, at the last count only 4,000 cases were being reviewed each month. The DWP is hoping that increasing staff from 500 to 1500 and better automated systems will help them get on track… errm, good luck with that. Let’s remember that the problem is one of poor data in the first place with errors going unspotted for many years, there is already concern that even the solutions will contain errors.

At the time of writing around £200m has been paid of the estimated £1.46bn and many suggest the process may well take 5 years to complete.

According to the DWP, those impacted are people that claimed their pension before April 2016 and do not have a full National Insurance record, largely impacting married (or widowed) women. Tracing people is problematic but around 118,000 that could be traced were underpaid by an average £8,900 each. Some payments are much larger.

The DWP advise that they will be in touch, frankly I would not wait for them to contact you if you think you may be affected. You can and should check your State Pension here: www.gov.uk/state-pension. Please note this problem really relates to the older State pension, not the one that superseded it in 2016. In reality that means if you are a man and born before 6 April 1951 or a woman born before 6 April 1953. Today (December 2022) you would therefore be at least 69 if a woman 71 if a man. If it helps, Liverpool football legend Kenny Dalglish and pop veteran Chris Rea (On The Beach and Driving Home for Christmas) were both born 4th March 1951 or American Mary Steenburgen (of Back to the Future) in February 1953 or our own Jenny Agutter (The Railway Children and Logan’s Run) who was born in December 1952.

THOSE PROBABLY SHORT-CHANGED

The DWP focus on these main categories

Someone already getting State Pension who got divorced or had their civil partnership dissolved.
A married woman whose husband reached State Pension age after them and who became entitled to his State Pension before 17 March 2008
A husband, wife or civil partner in a couple where both had reached State Pension age and the other person has died and not yet claimed their State Pension, or
Someone aged 80 and over who has either no State Pension or Graduated Retirement Benefit, as they need to make a claim to get any Category D State Pension.

APRIL 2023 – THE INCREASE for 2023/24

I was asked recently if everyone’s State Pension will be increased by the inflation rate of 10.1% announced in the November Budget. I can confirm that according to all the Government website information this is the case. I have used this link as the source: https://www.gov.uk/government/publications/benefit-and-pension-rates-2023-to-2024/benefit-and-pension-rates-2023-to-2024 but to save you the trouble, the salient information is shown below. The new State Pension has a much later retirement age and this is likely to be extended further. A small footnote in the Budget showed that the Government would set out its intention in 2023.

THE “OLD” STATE PENSION

Category	Rates for 2022/23	Rates for 2023/24
Category A or B basic pension	£141.85 / £7,376.20	£156.20 / £8,122.40
Category B (lower) basic pension – spouse or civil partner’s insurance	£85.00 / £4,420	£93.60 / £4,867.20
Category C or D – non-contributory	£85.00 / £4,420	£93.60 / £4,867.20

THE NEW STATE PENSION

New State Pension	Rates for 2022/23	Rates for 2023/24
Full State Pension	£185.15 per week / £9,627.80 per year	£203.85 per week / £10,600.20 per year

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

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Getting enough state pension?Dominic2023-12-01T12:12:40+00:00

ANOTHER FINE MESS

TODAY’S BLOG

ANOTHER FINE MESS

New movie Stan and Ollie is a real treat to those who have an affection for Laurel and Hardy. What could have been “another fine mess” was a moving tribute to one of the ground-breaking comedy double acts of cinematic history. As a child, in the 1970s I watched their films often on a Saturday morning on the 3-channel television. Whilst the cars were a bit odd and shot in black and white, they didn’t seem particularly dated, at least no more than others – as the television diet for children also included a fair amount of black and white 1950s American syndicated shows like Whirlybirds, Champion the Wonder Horse, Flash Gordon, Zorro and Lassie.

I have to admit I had reservations about the film but Steve Coogan’s performance or perhaps impression of Stan Laurel was fantastic. John C Reilly also provides an impressive performance of Oliver Hardy. The movie itself is charming and shouldn’t disappoint any fans. It reveals a deep friendship between the pair and provides an insight into their working partnership and some of its difficulties. Notably the different manner in which they approached their contracts at work and the way money should be handled.

SOLOMONS IFA - STAN AND OLLIE MOVIE REVIEW FOR BLOG

Wrong end of the contract

Mr Hardy seemed to have something of a gambling habit, it isn’t clear from the story if this was problematic, but it is inferred. What I had not realised was that unlike the movie stars of today, they were employees of Hal Roach. He was a ground-breaking film maker of the day, but also a shrewd businessman. there was no bonus scheme or royalties and if a film failed or succeeded, they were paid the same. Laurel was clearly more financially astute, demanding that his contract be properly revised, Hardy’s contract still had time to run. The contracts were deliberately established this way by Roach, precisely to prevent them from negotiating together. Hardy seems not to have appreciated the implications and also lacked the courage to stand up to Roach, perhaps (I don’t know) because his gambling required the certainty of a regular income, not least to provide for his 3 ex-wives.

Here today, gone tomorrow

Laurel and Hardy movies were shown around the world and Roach made them shoot each in several major European languages. They were coached and read from out-of-sight blackboards, phonetically, all to maximise revenue for Roach. Laurel and Hardy were consequently never financially secure, at least not by today’s Hollywood standards. The movie picks up at the end of their career, when they are mainly forgotten and having to earn a crust. Many are surprised that they are not retired, but this is a case of having to work.

Genius at work?

As much as Laurel and Hardy loved their work and working together, clearly, as a financial planner, the aim is to ensure that you have the choice about whether to work or not. Retirement is a poor word; a better phrase is “financial Freedom Day” – the day you choose to work because you want to rather than have to.

In any partnership, speaking the same language and having shared goals is vital to financial wellbeing. Your financial planning really doesn’t need to be comedic, it is your life’s work so invest in the right counsel with a proper financial planner.

Here is the trailer. I’m confident it will make you smile.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

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Email – info@solomonsifa.co.uk
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GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Take Survey

PRIVACY POLICY | DATA PROTECTION

ANOTHER FINE MESSDominic2023-12-01T12:17:38+00:00

THREE DECADES OF RETIREMENT

Solomons-financial-advisor-wimbledon-blogger

Three Decades of Retirement

Three decades of retirement is the prospect that many people face if you believe that longevity is improving in general. That’s three decades to live off your investments, pensions and savings combined with any other forms of income from your State Pension and perhaps an employer’s final salary (defined benefit) pension which typically begin payments at 60, 65 or 67.

Three decades is a long time, with a lot of living to be done. To put this into perspective, it is now 2018, 30 years ago was 1988, which frankly does not seem that long ago does it? You remember 1988. It was the year the SDP merged with the Liberals, Margaret Thatcher became the longest serving PM and Comic Relief was launched. Nurses went on strike over pay. Red Nose Day raised £15m within a month the £1 note became obsolete and the Chancellor of the day Nigel Lawson cut the basic rate of tax to just 25%.

If you are into your sport, well Liverpool were beaten in the FA Cup final by Wimbledon. Graeme Hick scored a record 405 runs in a county match. Sandy Lyle won the US Masters. “Gaza” became the first £2m footballer moving from Newcastle to Spurs. The Seoul Olympics saw Team GB win 5 gold medals (hockey, swimming, rowing, shooting and sailing).

Released in 1987, Faith was the top selling album of 1988.

Another year, just like any other…

As with every year, it had its share of horror and disaster, Piper Alpha, Pan Am 103 exploding over Lockerbie, killing 207 people and a train crash at Clapham Junction killed 35 people. Edwina Currie managed to create an egg crisis. British films released included “Buster”, “A Fish Called Wanda” and “A Handful of Dust”. Michael Douglas won best actor for his role in “Wall Street” ad “The Last Emperor” picked up a stack of awards. Kylie Minogue started her pop career with “I Should Be So Lucky” (she was) and life was “Perfect” for Fairground Attraction. I was one of 80,000 at Wembley for the “Free Nelson Mandela Concert” and his 70th birthday. He was still imprisoned (not released until 1990).

Then and Now

If you are over the age of 40 this may jog a few memories of 30 years ago. The UK population was about 56m today its about 66.5m. There were about 55,000 first-time graduates, now the number is around 414,000. The Bank of England’s base rate began 1988 at 8.37% but ended at 12.87% (yesterday the Bank increased the rate from 0.50% to 0.75% and some got worried). The FTSE100 closed the year at 1,793 yesterday it closed at 7,575 and that excludes all income from dividends over 30 years. A 10-year UK Government Bond paid about 9.79% in 1988, today around 1.23%. In short equities have gone up, Bonds have gone down. £100 in 1988 would need to be £260.44 in 2018 simply to be “worth” the same because of inflation. That’s an average rate of about 3.24%, in short, the value of your pound has more than halved.

Multiple Choices, Make them Count

This is history, a version of it. If you are now in your mid 40s or older, this is time spent. Who knows how long any of us have left but making the most of life and getting our money to last, whatever it brings is the prospect that you face. We work with clients taking a long-term perspective of life and money. We regularly review progress and make adjustments to ensure that your financial planning remains on course. Change is the constant that we all live with, but many investment principles are timeless, knowing what to adjust is probably more important than knowing you need to.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

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THREE DECADES OF RETIREMENTDominic2023-12-01T12:17:53+00:00

FREEDOM BRINGS RESPONSIBILITY

Freedom Brings Responsibility

I hope that you are aware that since April 2015 pensions have had considerable improvements. Rather than having to buy an annuity anyone with a pension can simply take income from age 55 however they want (note that this age is gradually rising to be within 10 years of your State Pension Age which you can check here). As income it is taxable, but your pension fund has the benefit of 25% of anything “crystallised” being tax free. This you may remember, concerned some that there would be a rush on Lamborghini’s… which didn’t materialise. Mind you at £270,000 for a new Aventador, you would need to withdraw around double that to be able to pay the net price.

Many of you have been accessing your pensions under these new conditions. According to the latest HMRC data in Q2 (April to end June) of 2018 the number of individuals to whom payments were made reached 264,000. A total of £2,269m was paid out to them. The system has now been in place for 3 years and the value of all payments is now nearly £20,000m (some would say that’s £20bn).

gone-in-60-seconds-movie-poster-2000-1020192927

Gone in 0-60 Seconds?

The basic caveat is that once your pension fund is spent, well… its gone. There have been many mistakes made – particularly in terms of taking too much money out and paying tax unnecessarily. As the income from the pension is assessed as income, those that believe that they can simply have their money are right, but invariably forget that the amount means that they must pay 40% or 45% income tax. Clever, or rather sensible planning can keep tax at 20% or less.

The Government and HMRC are probably rather pleased with this, it means that they are taking way more tax than they would have done, particularly as many of those drawing money from pensions are doing so before they are even retired.

Tax First, Ask Questions Later

HMRC also apply their own brand of logic, which is tax first, ask questions later. In other words, you must reclaim tax when too much has been taken. Despite lobbying by financial advisers and the pension industry generally, HMRC aren’t budging on changing their approach, claiming that people are better off paying too much than too little and then having to find money to pay their tax. Since the start of pension freedoms this “over-taxing” has amounted to more than £280m. So hardly a surprise that they won’t budge. Of course, this ought to be reclaimed… but therein lies the problem of theory and practice and in any event the Office of Tax Simplification recently warned that pension freedom withdrawals are poorly understood… one might be forgiven for wondering what on earth the OTS achieve.

To put your mind at ease, you need to complete the snappy titled “P55”to reclaim overpaid tax on your flexible pension. You can find the form here.

Here’s a video of an Aventador being tested by Autocar… no need to form a queue.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

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FREEDOM BRINGS RESPONSIBILITYDominic2023-12-01T12:17:54+00:00

The Leisure Seeker

Those that are not retired have many rather cliched ideas about retirement. Invariably these involve lots of leisure, cruises, golf and gardening. Most of the retired people I work with often voice that they are busier than ever, its simply that they don’t have to turn up for paid work.

The Leisure Seeker is a gentle movie about the Spencer’s, John (Donald Sutherland) and Ella (Helen Mirren) who decide to take one last once in a lifetime trip together in their recreational vehicle, a leisure cruiser. Their adult children are left confounded at what they perceive to be irresponsibility, given that John is clearly suffering from signs of dementia.

Memory Lane

The couple take a trip down memory lane, with mixed results. Johns dementia creates a scenario where his confusion about who, where and when he is, leads him to expose some deeply buried secrets. He is also paranoid that Ella is having an affair with Dan Coleman, who he believes is the secret motivation for their trip together.

The cruel irony of John’s dementia means that he is not even aware of the loving nature of their trip, a special excursion to Hemingway’s house in Key West, John’s literary hero, of whom he has recounted many insights to his English students throughout his career.

How does it End?

Any good financial planner will inevitably address the question of your life expectancy. All planners work on the basis of attempting to ensure that your money lasts just a little longer than you do. Naturally, this is educated guesswork and requires regular reviews. However, we also need to be mindful of the difficulty of an ending of a life. Simplifying arrangements where sensible to do so, without ruining years of sensible investment strategies and estate planning.

The film exposes the need to discuss these issues with someone trusted, certainly it would make sense for your planner to have an idea or awareness of your intentions, as it would be for your family, though the emotional dynamic of family relationships makes such a conversation problematic and rich material for drama.

The truth is that all of us face an ending, it’s simply a question of how, why and when. Here is the trailer for the film, which being small, is now reaching the end of its run in selective cinemas.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

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The Leisure SeekerDominic2023-12-01T12:18:08+00:00

Are Annuity Rates on the Rise?

Annuities may be starting to improve again. Why is this relevant to you? Well, if you plan to retire you would be wise to consider an annuity as an option for all or part of your retirement income. If you are already retired and using a Drawdown arrangement, improvement in rates may also be worth your attention.

New Rates

I recently received an email from one of the UKs largest insurance companies advising of change to their annuity rates. In general rates have begun to increase upwards. As an example, a 65 year-old with the maximum single life annuity from £100,000 would now receive £4,944 a year rather than £4,896 a year, an increase of about 1%.

How long is a lifetime of income?

Anyone wanting to build in a spouse’s pension of 50% (i.e. once the “owner” (annuitant) of the annuity dies, income would reduce to 50% for the remainder of the spouse’s life) can expect the same fund to buy an annuity of £4,420 up from £4,375. These are for level annuities (the income remains the same). You could build in a degree of inflation-linking, doing so would reduce the initial income for a joint life annuity £2,818 a year increasing by 3% each year.

The crossover point

The alarming detail is that it would take 17 years (in my example) for the inflation (rising) annuity to match the annual income of the level annuity, at which point it continues to pay out more each year (i.e. a 65-year-old would be 82). It takes a total of 30 years before the total income paid out would exceed that of the level annuity. Remember that this is for someone that started their annuity at age 65.

In truth, there are better annuity rates out in the market. You should also note that if you have any form of health problems, or smoke, you would probably qualify for an enhanced annuity. However most people would look at a pot of £100,000 and think an income of £4,420 is not terribly much and any “bells and whistles” added just make it worse. Hence pension freedoms and the abolition of the requirement to buy an annuity.

However, despite appearances annuities offer a guaranteed lifetime income, no other alternative really does that, but instead relies upon investment returns, which obviously means risk. Since pension freedoms (April 2015) many people have chosen not to buy an annuity and have taken their income from a drawdown pension instead. Unfortunately, according to recent research, many will run their pension pot dry within 12 years. Most people take too much it would seem, or at least an unsustainable amount. Almost everyone under-estimates their life expectancy, which is a crucial discussion to have and one that needs regular reassessment.

So now you know that:

There are different and better (higher) annuities available in the market
Health issues might provide a better (enhanced) annuity
Drawdown pensions carry risk
Life expectancy is a key factor
Most people are expected to run out of money
Review, review, review – especially if you have a Drawdown pension

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

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Are Annuity Rates on the Rise?Dominic2023-12-01T12:18:18+00:00

The Eye of Truth – Mindhorn

It seems that we are living in a time of “alternative facts” of course we aren’t it is merely that certain politicians and business leaders wish us to believe their point of view rather than reality. So perhaps there is a certain sense of good timing for a bionic eye that enables truth to be seen. However, as with most things, the irony in this instance, is that the possessor of the bionic eye, (Mindhorn) is blind to his own shortcomings.

Mindhorn is a new comedy about a TV actor “Richard Thorncroft” (Julian Barratt) playing a detective “Mindhorn” in the 1980s. Now many years later, the type cast, washed up actor is struggling to maintain his dignity in a world that has forgotten him. He is rescued by a serial killer; whose own delusions mean that he believes that Mindhorn is real. As a result, reluctantly the local Police call in Mindhorn for one last performance to entrap the villain.

Bodie & Doyle meet Steve Austin and Knight Rider

Being comedic, this has the potential to be a rip take of any and every TV detective since Bodie and Doyle at CI5 with references as broad as the lapels. How one man is stuck in the past of his glory days and failing to embrace the present, or indeed the uncomfortable truth of reality. Sadly, the film, like many, has all of its best bits in the trailer. There are some funny moments, but this is a fairly tame affair which could have been so much better, despite being rammed with an impressive collection of actors, who all must have also thought that the concept was good, but the final delivery…. Hmm. Take comfort in the fact that there are as many twists as there are in a straight piece of wood, which certainly could not describe the acting, but recycled pulp is probably not far off the truth about the script.

Former Glories

On occasion, we all meet people that are an echo of their former greatness. Whilst I can accept that with age limitations do apply, particularly the laws of physics! It seems such a missed opportunity to not live fully irrespective of age. I’m sure that like me, you meet many that do. Retirement can seem like a fairly scary subject for some people. What on earth will they do with their time? Just endless rounds of golf and bridge? Well, I can assure you that the retirees that I advise all have very active lives, in fact most are more active than ever before. I’d argue that retirement is nothing to fear at all – infirmity however, well, that’s a different thing entirely.

A Vibrant Retirement

So any financial plan, should really be set up for a full and vibrant retirement, one that reflects what you wish to do and how you intend to spend your time. Of course things may change over time and for some, infirmity may become an unwelcome compatriot, so some thought also needs to be given to the “what if?” of this prospect…. Which may or may not occur.After all, even the Duke of Edinburgh has only just annoucned that he will “retire” later this year – and he’s 96 in a few weeks time! Financial planning is very much about taking a look into the future and making some changes now, if you don’t like what you see (albeit with loads of assumptions). It is never a sense of constantly trying to restart the glory days like Mindhorn. There are some things that need to grow, some that need to die and some that simply need to be tried.

Here’s the trailer for Mindhorn. It makes a compelling pitch as a comedy, but sadly lacked the final punchline.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

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The Eye of Truth – MindhornDominic2023-12-01T12:18:33+00:00

The Future of Pensions

I am currently at my annual conference in Wales – the Chartered Institute for Securities and Investments (CISI) with whom the IFP – Institute of Financial Planning merged last year. Yesterday we covered a number of valuable topics, but the talk that resonated most with me was from former Pensions Minister MP Steve Webb, who talked about the future of pensions – amongst other things.

I had to admit that my BS radar is usually on hyperdrive when listening to any politician these days, which is probably a sad reflection on me, however I was very impressed by what he had to say, albeit he did not paint a terribly pleasant picture of the future. Of course, only time will tell if his predictions come about and in fairness, he was quick to remind us of the problems with predicting the future, particularly in a climate where since the last general election all of the major political parties have changed their leaders and the country has voted to leave the EU.

Book cover of Yes Minister - A Very Courageous Decision

Play it again Sam…(or Phil)

Webb was clear that changing pensions is pretty difficult and appears to be a low priority to either the Government of Civil Service. He gave an insight into the slow turning wheels of Whitehall, sounding much like an episode from Yes Minister. Given all the change that we have had (State Pension, Auto Enrolment, Pension Freedoms, Annual Allowance Taper, Lifetime Allowance…) he suspects and urges a period of quiet inaction from the Chancellor, Philip Hammond. This is particularly pertinent to those concerned about the loss or reductions of tax relief on pension contributions or changes to the tax free cash entitlement. He made the case that the public and financial planners could not plan ahead in confidence if the rules are changed every year, yet warned at Chancellors are easily tempted by ideas to collect more tax, however short-sighted.

Whilst on the subject of tax he made it clear that the Treasury are naturally inclined to taxing now rather than in the years ahead, so there is a very real pressure to take the view that tax relief reductions in the short-term outweigh the advantages of taxed incomes in the future, so by inference, a system of loss of tax relief and no taxation of pension income is a genuine prospect. He argued that this was evidenced by the Treasury’s love for ISAs and obvious contempt for pensions with the Lifetime Allowance reductions (and associated tax penalties) and the new tapered annual allowance. Personally he would scrap the LTA but retain a cap on annual pension contributions (which I certainly agree with). He did point out that of course putting trust in future Chancellors to honour a commitment not to tax pension income in the future required a high degree of faith, which deliberately provoked some mirth from the audience.

Turning to Brexit, he simply outlined his view that interest rates are likely to be very low for a long time, which would place pressure on people to look for better returns than the puny sums they achieve from their savings. He argued that this would likely lead to yet more scams as people fall for yet more illusory promises of high returns. He also warned of the impact on final salary pension schemes which, because of the assets that they hold and the way calculations are performed, would have larger deficits in their pensions (due to low interest rates) probably leading to some, or perhaps a majority of companies trimming their dividend payments.. which in turn makes the task of achieving investment income harder still.

He seemed to have little regard for our regulator of whom he said was “not fit for purpose” and thought the new LISA was perhaps the most badly constructed investment idea for years. If you follow me on social media, you will know my thoughts on this already.

So, whilst Steve Webb found a receptive audience, I was left with the sinking feeling that there was little hope for common sense to return to the Treasury… but who knows… we all get to find out in a few weeks time for the Autumn Statement.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

The Future of PensionsDominic2023-12-01T12:19:06+00:00