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Would you be hit by a Wealth Tax?

Dominic Thomas
July 2025  •  4 min read

Would you be hit by a Wealth Tax?

We live in a world that is lurching towards fascism, which is largely due to the failure of centrist Governments to address the inequalities in our society. Whilst evidently aware that the UK overspends and hasn’t enough income each year to continue to provide the services that we expect, sadly this Government, much like those before it, is adamantly refusing to tax the very wealthy (those with more than £10m of assets). Instead, they are taking a wrecking ball to the working and middle classes and small businesses with tax upon tax.

Plans to raise even more from inheritance tax (IHT)

We know that inheritance tax is unpopular and probably not because of the amount it raises (which is a fraction of taxes, accurately less than 1% of the total £857,821m) but rather more to do with the approach that Government simply taxes you again, taking bites out of the same money. Your savings have already suffered income tax, capital gains tax and possibly stamp duty and VAT, yet also finally succumb to inheritance tax.

The Fake Exodus

The failure of the current Chancellor, who in fairness is just as ineffective as all her predecessors over the last 40 years or so, is unable to appreciate the biases that she has – an inability to believe that taxing a few people more will not cause them to leave the UK with a proper wealth tax. Pandering to right wing reports of an “exodus” of millionaires from the UK, which is an utterly inflated and bogus interpretation of the available data, we, like the Chancellor and most politicians, are being fed the lie that we must allow the very rich to pay minimal taxes or risk their departure and then share the burden between those who remain here. In fact, our tax system is deliberately structured this way. The firm touting the narrative, seized upon by billionaire media moguls, is Henley and Partners – a company that basically specialises in servicing the ultra-rich. Its equivalent is a gun manufacturer distorting violent crime data resulting in fear and widespread gun ownership (ker-ching!) and … more violent crime.

Reality Check – Millionaires care about a thriving society too

The reality is that only 0.2% (zero point two percent) of millionaires migrate. This rate has barely altered. The Tax Justice Network and Patriotic Millionaires UK have both attempted to address this grossly deliberately misleading narrative, providing data and facts, but UK and global media outlets are rarely concerned with anything other than sensationalism and stoking division. It wouldn’t be a surprise if you had never heard of either organisation. It might surprise you to learn that 80% of UK millionaires support a 2% wealth tax. These are people who have at least £4m of net assets, which does include some of our clients.

Chancellor Rachel Reeves, like those before her, has fallen for it and is pressing ahead with frozen allowances, increases to NI and tax rises for inheritance taxes in particular, impacting anyone with an investment-based pension fund (you) or a farmer (we have a few farmer clients but not many). Whilst Henley and Partners have backtracked on their false and inflammatory statements about an “exodus”, the media has not caught up and neither has Reeves.

As a result, the gradual reduction of the welfare state, the sense of distaste that most of us have for our ever-rising bills and taxes, the billionaires and ultra rich continue to build wealth and remain largely outside of scope. The constant failure of the UK Government and in particular Kier Starmer, leaves the door open for an irate electorate to vote for change, sadly the party that garners attention (thanks to a more than willing media) is that of Reform and the duplicitous Nigel Farage, who is a Trump mimic and fans the flames of fascism. For some people he is a protest vote; but the evidence suggests that he is not merely a protest. His rhetoric (backed by very wealthy individuals like Elon Musk and businesses) calls for dismantling the welfare state (including the NHS) and taking an authoritarian approach – threatening our democracy. On the rare occasions that he and his supporters admit that Brexit has failed, he states this is due to Government not going far enough (by which he means far right enough). Whilst the focus may initially be on “illegal immigrants”  and abandoning plans to save our only planet, his “policies” or words will inevitably fail to address any real problems; his argument will always be that centrists (the vast majority of the electorate) didn’t allow him to go far enough, and so we are, in my view, at a crossroads. He also advocates “relaxing” gun laws and defended fascists (laughably calling them “concerned families”) attempting to burn down a hotel which may have housed asylum seekers. You know your history.

When new information comes to light, I am forced to rethink and change my mind – how about you? My role as your adviser is not to tell you how to vote, but to advise you about your wealth and how this aligns with your lifestyle and the general sense of wellbeing when contextualised within our society.  Successive Governments have all largely failed most of us except the very wealthy which doesn’t include you (or me) despite our combined efforts to save, invest, grow, innovate, employ, repay debt and minimise taxes.

Instead, an employed person earning say £120,000 will have tax rates of 62% whereas I can assure you that someone with sufficient capital will be able to generate the same level of income with tax rates no higher than 28%. Taxing income and taxing wealth are not even vaguely comparable. You will note that in the diagram about tax receipts, most of those taxes are paid by working people under State Pension age.

I’m actually of no particular political persuasion, I attempt to vote for who I believe will serve our country and planet best, not necessarily my own interests. The choices today are highly influenced by media bias and false representation. Somehow, we have to pick our way through the noise and vote for decent people who hold everyone’s interests; not simply those who have a particular distorted view of monoculture, a faux respect for the protection of women and children (look at what they vote to cut) and conveniently forget our history whilst at the same time portraying a distorted view of the past. It is time for hope, not hate.

Would you be hit by a Wealth Tax?2025-08-13T10:19:38+01:00

TTAFC Allowances

Daniel Liddicott
March 2025  •  3 min read

TTAFC Allowances

Following the well-publicised removal of the Lifetime Allowance (LTA) for pensions from the beginning of the 24/25 (6th April 2024), two new allowances related to pensions were created in its place. Trust the Government to remove one allowance, only to introduce two more!

Before we get ahead of ourselves – a brief reminder. The LTA for pensions was the amount that an individual could save into pensions, and subsequently take from pensions, before being hit with an additional tax bill. Potentially up to 55%! The last LTA figure before it was abolished was £1,073,100. This remains an important figure, even with the removal of the LTA.

The maximum tax-free lump sum that could be taken from pensions (those without any protected tax-free cash entitlement) was £268,275. This is 25% of the old LTA figure.

Now, rather than allowing tax-free lump sums from pensions that are greater than this figure, the Government has brought in the Lump Sum Allowance (LSA). This allowance is also £268,275, effectively maintaining the same maximum tax-free lump sum amount as if the LTA was never abolished.

The second new allowance is called the Lump Sum & Death Benefit Allowance (LSDBA). This allowance essentially mirrors the last figure for the LTA (£1,073,100) and limits the amount that can be paid out to beneficiaries as a lump sum on death of the pension holder. Any amount greater than the remaining LSDBA is potentially liable to income tax. Any tax-free cash taken from pensions during life will gradually reduce this death benefit allowance over time.

Claiming what you are entitled to

As a result of the rule changes over the years, you may be entitled to greater LSA and LSDBA amounts than HMRC currently have on record for you. This will likely be the case if you took tax-free lump sums from your pensions at times when the LTA figure was different from £1,073,100. It has changed 10 times since its introduction in the 2006/2007 tax year.

HMRC calculate your remaining LSA and LSDBA allowances using £1,073,100 as the starting figure as this was the last LTA amount. However, their calculation will be incorrect if you took tax-free cash in any of the years shown above in which the LTA was not £1,073,100.

If you think that you might be one of those people, please let us know. We are working through our records to determine and get in touch with those of you who may need to apply for a certificate to reinstate the tax-free cash allowances that you are entitled to. These are called Transitional Tax-Free Amount Certificates (TTAFC). Apologies for all the acronyms throughout this piece!

Whilst the LTA has officially been abolished, it still casts a relatively large shadow over the pension planning landscape.

TTAFC Allowances2025-03-28T14:53:23+00:00

PENSION DEADLINE – YOUR STATE PENSION

Dominic Thomas
March 2025  •  3 min read

PENSION DEADLINE – YOUR STATE PENSION

I’ve had a few enquiries from people who have seen something in the news but aren’t clear about what it is. There is a sense of urgency and the information seems to be coming from reliable sites, so what is it?

‘BOOST’ YOUR PENSION

The tax year ends on 5th April 2025 a few weeks away now. This is a deadline for people who wish to make up (backfill if you will) missing or incomplete years of national insurance contributions. The timeframe is closing, it’s a use it or lose it situation.

Why would you?

Firstly, this only applies to people under State Pension Age (SPA). To get a full State Pension, you need 35 years of National Insurance contributions, which for the record, technically can begin when you are 16 until you are 67 or older. So most people will have a ‘working career’ of 51 years to build 35.

If you have had breaks in your employment (maternity, child care, working abroad, redundancy, sickness) then you will likely find that you don’t have a full record. So on the assumption (red flag) that you work and pay NI until your State Pension Age, then you can estimate how many years you will have.

If you build more than 35 years, you do not get a bigger pension.

Time is Running Out

Until 5th April 2025 you can buy the missing years (for a price) all the way back to 2006. Once the new tax year starts, you will only be able to make up incomplete years in the last six tax years.

You are smart enough to know that ‘the system’ is under some strain, so getting the data and paying for the missed years is going to be arduous.

So the first thing to do is check your NI record. You get a list of every tax year since you were 16 (fairly enlightening as an experience). If you spot missing years, perhaps there has been an error? If not, then estimate how many more full tax years you are likely to work for yourself or someone else until State Pension age.

WARNING: Estimating Your Lifetime

You have to give this some thought, a State Pension pays out for your lifetime, so if you die before getting one, well, that’s lost. As a warning, from both experience and research, most people underestimate how long they will live, so beware of that. You may also have a condition that shortens your life expectancy. So to pretend that this is an easy calculation is misleading.

The State Pension is very good value, it provides a guaranteed income for life, it is taxable but for most will fall within the current personal allowance for 0% tax.

Check your NI record, get a State Pension forecast – but remember that they assume you work until your State Pension age. Whilst you are there check the date of when that is for you. You can find the links in our resources section or start by clicking here.

Link to your NI records: https://www.gov.uk/check-national-insurance-record

PENSION DEADLINE – YOUR STATE PENSION2025-03-07T16:05:43+00:00

Will Reeves Slash Cash ISAs?

Dominic Thomas
Feb 2025  •  2 min read

Will Reeves Slash Cash ISAs?

Hopefully you will know that I am a fan of having cash, we all need it for ‘liquidity’. In plain English – that means having money easily available without needing to sell anything. This is usually best for your emergency fund. This is a number (sum) that helps you to sleep well at night and quite frankly depends on your life stage. A measure of 3, 6 or 12 months of normal spending is helpful plus planned spending projects (not normal spending) over the next three years.

Keeping more than this in cash will likely erode the value of your spending power. You are likely to be going backwards. You might say “backwards, but at least with certainty – compared to investments” well, that is true in the short term but in the long term, whilst nothing is certain, we have yet to see a period when cash beats shares over 10 years or longer.

So, the news that the Chancellor (Rachel Reeves) is contemplating either scrapping or reducing the Cash ISA allowance from £20,000 to £4,000 may be a surprise for some of you. It’s because in theory holding cash doesn’t really serve anyone very well, least of all the economy, but investing in businesses … well that helps create wealth. That’s why she is considering it.

It would seem that this will only start from the new tax year (if at all) and nobody is expecting her to tell us that you can only hold £4,000 in total in Cash ISAs – which would be highly unlikely. Whilst you may find this an unwelcome change, it’s worth remembering that Cash ISAs always had a lower allowance until the 2015/16 tax year when the allowance became £15,240.

As we are still in the 2024/25 tax year data isn’t up to date, honestly in this digital age, I don’t understand why HMRC are so behind. Anyway, interest rates obviously improved over the last couple of years and more people used Cash ISAs, 63% of contributions to ISAs in 2021/22 were into Cash ISAs. People forget the impact of inflation which is still not within range, and Cash ISAs continue to provide a negative return. Quilter did some research and found that £10,000 into a Cash ISA in December 2012 would now be worth £11,955 but when adjusted for inflation that’s really £7,918. In contrast, the same amount invested into a global shares index fund would be worth £33,526 (£22,221 after inflation).

You may have seen my inflation diagram about a first-class stamp, something we can all relate to and perhaps why there are fewer Christmas and Birthday cards being sent.

  • 1985: 17p
  • 1995: 25p
  • 2005: 30p
  • 2015: 63p
  • 2025: £1.65

Your money has to keep pace with inflation.  10 years races by, but holding your hard-earned money in cash that provides a negative return is only good for short-term projects and emergency funds.

The current ISA allowance for 2024/25 is £20,000.  The Junior ISA allowance (for those under 18) is £9,000.

Will Reeves Slash Cash ISAs?2025-02-27T11:05:24+00:00

Smaller pension, larger lump sum

Dominic Thomas
Feb 2025  •  3 min read

To take a smaller pension and a larger lump sum

Most old-style pensions (Final Salary or Defined Benefits) tend to offer the ability to take a tax-free lump sum in exchange for a reduced pension income. Everyone is different, and advice should always be tailored to your personal circumstances and requirements. However, here I simply wish to outline the issues for consideration.

As an example, John is due to receive a pension of £23,195pa from his old employer. Alternatively, he could take a reduced pension of £17,583pa with a one-time tax-free lump sum of £117,224. That’s a difference of £5,612pa to his pension income (but with £117,224 ‘in the bank’).

If he were to die, the widows pension remains at 50% of the original pension (not always the case, but often) which is £11,597.50pa for the remainder of his spouse’s life.

Pension income is subject to income tax. In this case, his other pensions including the State pension (£11,500pa) would mean that he pays basic rate tax on total pension income (20%). In reality then, his gross income of £23,195 is really £18,556pa.

At face value, the tax-free lump sum is equivalent to 20.8 years’ worth of the lost income (£5,612pa). However, this is taxed income and really the net amount (after tax) lost is £4,489.60 which would be roughly 26 years of income in exchange for the tax-free lump sum of £117,224.

The same rate of inflation applies to whatever level of income is taken, but of course over time this will gradually compound.

If he were to die after five years of retirement, the pension would reduce by 50% whether he has taken the lump sum or not. However, if he hasn’t spent or used it, then the lump sum would have remained in his estate, and if invested, it should have grown. In the worst case scenario, if he and his spouse had both died shortly into retirement, there would be no ongoing income, but had he taken the lump sum (and not spent it) at least that would be left within his estate.

Naturally more income tax will be paid on the higher income and if he has a full State pension it would take around 10 years before he becomes a 40% taxpayer or 16 years if he takes the reduced income. We can obviously calculate the tax in more detail, but this is meant to be a simplified example.

Whilst it might be obvious, if the client has other taxable income, then taking the lump sum makes even more sense due to the reducing amount of net income received after basic rate, higher rate and potentially additional rate tax.

If you want to talk this through so that you get a better understanding of how this relates to your personal situation, please get in touch.

Smaller pension, larger lump sum2025-02-14T15:54:58+00:00

Pensions and Inheritance Tax

Dominic Thomas
Jan 2025  •  2 min read

Pensions and Inheritance Tax

In the first Labour Budget of the current Government, Rachel Reeves announced that from 6th April 2027, pension funds (investment-based pension funds) would form part of an estate for inheritance tax assessment. This made a number of folk choke on their gin and tonic as they considered their estate in light of this pension reform.

Despite only being elected on 4th July 2024; now barely six months on and only about three months since her Budget on 30th October, the Government has been facing growing criticism for lack of economic growth since they took office. To be candid, I’m not sure who is so vexed about this; as any reasonable person would appreciate that the impact of a new Government and policy decisions generally take a while to have any impact on economic growth. So this has probably rather more to do with sentiment than fact (all political bias aside).

Anyway, some of the biggest companies have collaborated to tell the Chancellor that her plans to include pensions within inheritance tax assessments are “bonkers” (my word not theirs!). This includes AJ Bell, Quilter, Hargreaves Lansdown and Interactive Investor, who between them manage £430bn of pensions across around 3.4m people.

I’m not sure how much attention will be given to their pleading, however meritorious, as there is a rather obvious conflict of interest (if the funds are not taxed, then investment firms continue to manage the higher amount).

It would certainly seem that the UK needs some serious spending on its infrastructure, healthcare, education and welfare – so the money has to come from somewhere, but so far the billionaires seem to have been able to reside in their silos like Bond villains and declare that they will move outside the UK should they be required to pay any more tax – perhaps Mars.

There is obviously some unfairness about the Government proposals. It punishes those who saved and didn’t spend it all. There is ample opportunity for not simply one tax (IHT), but the likelihood of further double taxation. One might add that this doesn’t help the younger generations to finally buy a property either. Frankly the complexity of tax rules and pensions will make any adviser (let alone Executor of an estate) squirm with uncertainty when totting up all the assets and calculating the liability (failure for doing this accurately can result in a custodial sentence).

In short, a week is a long time in politics, the few months since the Budget already feel like a lifetime and there may well be a lot of changes before April 2027. So before you panic and blow your retirement planning into some irrevocable strategy, please do consider that change is possible and may be probable.

Pensions and Inheritance Tax2025-02-17T17:01:29+00:00

The Nucleus Retirement Confidence Index 2024 

Daniel Liddicott
Dec 2024  •  3 min read

The Nucleus Retirement Confidence Index 2024

Our survey says…

The Nucleus Retirement Confidence Index 2024 is an annual survey designed to give an overview of how people feel about their preparedness for retirement. Around 4,300 UK adults were surveyed, across all age groups.

This is only the second year that Nucleus have carried out the survey, with 2023 marking the inaugural attempt to gauge the sentiment of UK adults towards their retirement outlook.

The key findings of this survey include:

Low Confidence Levels:

The overall retirement confidence score dropped to 4.6 out of 10. This is down from a score of 6.9 out of 10 from the survey in 2023. Only 34% of respondents feel confident they have sufficient savings to live comfortably in retirement, while 60% expressed doubt about meeting their financial needs.

Saving Challenges:

  • 39% of participants are not contributing to any pension
  • A fifth of respondents have not saved anything for retirement
  • Rising costs, such as housing and childcare, are major barriers to saving

Gender and Generational Disparities:

  • Women remain less confident than men about retirement prospects.
  • Confidence is highest among 18 – 24 year-olds and declines significantly among those aged 35 – 44

Perceived Income Needs vs. Reality:

  • Most adults believe they need £20,000-30,000 annually for a comfortable retirement, but this falls far short of the £43,100 estimated by the Pensions & Lifetime Savings Association (PLSA) for a “comfortable lifestyle”

Impact of Economic Conditions:

  • Public confidence has been affected by broader economic uncertainties, including the 2024 Autumn Budget. Over a quarter of respondents reported feeling less confident after its release

Calls for Systemic Change:

  • The report advocates for enhanced financial education, early savings plans, and systemic reforms to improve retirement preparedness
  • These findings underscore the urgency of early financial planning and seeking quality advice to secure a stable retirement future

Where do we come in?

Our aim is to give you the confidence that you need to enjoy retirement by planning ahead and helping you to put appropriate provisions in place, giving you the freedom to go ahead and live the lifestyle of your choosing once you ‘hang up your boots’.

As advisers, we are also keen that both parties in a couple are present and engaged in the planning process. This is just one way that we can help to bridge the gender gap, which the Nucleus Retirement Confidence Index unfortunately revealed remains present. This helps to provide the full picture, gives clarity to all involved and enables both members of a couple to educate themselves on the options that they have.

Lastly, we strive to look after families up and down the generations. As mentioned above, the 35 – 44 age group was found to have some of the lowest confidence levels when considering their retirement outlook. At that point in life, retirement may seem (and probably is) some way off. However, the earlier plans are put into place, the longer they have to cultivate and grow into something robust. If your child or grandchild is in this age group and you think that they would benefit from a conversation with us, please do get in touch.

The Nucleus Retirement Confidence Index 2024 2025-01-21T15:50:46+00:00

Government Pension Reforms

Matt Loadwick
Dec 2024  •  5 min read

Government Pension Reforms

Chancellor Rachel Reeves recently announced plans for major reforms to UK pension schemes, described as “the biggest pension reform in decades”, with possible implications for both UK public sector pension funds and private sector pensions.

These plans formed a key part of her first Mansion House speech as Chancellor, which is the annual address given by the incumbent Chancellor to senior bankers and financial industry leaders at the Annual Financial and Professional Services Dinner.

Typically, this speech is used to indicate future plans for the industry and is closely watched by those wanting to keep a close eye on the Government’s next steps.

What is the Government trying to achieve?

Through these reforms, it seems that the Government is seeking to achieve two objectives in particular;

  • To increase investment in UK projects / businesses to help stimulate economic growth; and
  • To increase returns on savings for UK pensioners

It is understood that the Government will not mandate where the funds will be invested, but it is hoped that a significant proportion will naturally end up invested in UK-based projects and growing businesses.

Some savers may find the framing of these reforms unsettling, as in the first instance they appear to be promoted as a vehicle for economic growth, rather than looking primarily at the needs of savers.

What are the plans?

According to the official Government press release, the reforms, (which will be introduced through a new Pension Schemes Bill in 2025) will merge the 86 Local Government Pension Scheme assets, and consolidate defined contribution schemes into ‘megafunds’.

It is understood that smaller defined contribution schemes from private businesses across the UK would also be pooled into funds of £25bn to £50bn

These megafunds would reflect set-ups in Australia and Canada, where pension funds take advantage of size to invest in assets that have higher growth potential. The Government hopes that this could deliver £80 million of investment in new businesses and critical infrastructure, while boosting the pension pots of defined contribution savers.

Are these new ideas?

It should be clarified that these plans are not exactly ‘new’ ideas from a UK government perspective, with the previous Conservative Governments proposing similar reforms in the last decade, most notably so with David Cameron in 2015, and Chancellor Jeremy Hunt as recently as Autumn 2023. It would seem that the fact that these reforms have cross-party support, at a time when UK politics is increasingly polarised, this would suggest that this is not altogether a terrible idea.

What opportunities might Megafunds offer?

The idea is that the larger the fund, the larger the sums of money that can be invested, into a wider range of both higher risk and longer-term assets, increasing the chances of improved returns for savers.

These pooled funds would be managed by professional investors, which should in turn help to cut costs by reducing fees paid to the various teams of advisers / lawyers / asset managers employed by individual firms each year.

What are the issues?

Risk and reward is inherent in all investments, and any investment decision should be defined through the investor’s attitude to risk, capacity for loss, and their need for returns.

Pension savers across the UK will all wish to see good returns on their investments in order to support a comfortable retirement, and in this regard the proposed reforms could be seen as a positive move.

However, not all savers will have the same attitude to risk, and an individual’s capacity for loss on their pension funds will change throughout their working lives. For instance, a saver in the early part of their career would be more likely to accept their funds taking a significant hit, as there would be plenty of time for them to recover before they retire. Conversely, a saver who may be looking to retire imminently would have less capacity for loss, as there would be less time for their funds to recover in the event of any significant losses.

These Canadian / Australian models often have a higher proportion of their funds invested in higher risk assets such as private equity, with a lower proportion held in assets that are typically less volatile, such as Government bonds or shares in listed companies.

Such investments come with particular risks, that not all savers have an appetite for. A key example of such investments going wrong is the Ontario Municipal Employees Retirement Scheme, who invested into utility provider Thames Water.  Well-documented financial issues have led the pension fund to reduce the value of its 31.7% stake in the parent company of Thames Water to zero.

Undoubtedly, there will also be plenty of examples of success stories of these funds, whereby investments into higher risk assets provide the returns that investors hoped they would. But given the nature of our news and media cycle, which tends to focus on the negative, we are less likely to hear about such stories.

Implications?

As ever with these things, the devil will be in the detail, and given that the Bill will not be officially introduced to Parliament until next year, there is time for some of this detail to change.

Solomon’s will be on hand to support all our clients through whatever comes of these reforms; so if you have any questions or concerns – please let us know.

Government Pension Reforms2025-01-21T15:02:04+00:00

Recycling: The possibilities are not endless

Daniel Liddicott 
Aug 2024  •  3 min read

Recycling: The possibilities are not endless

There has been a great deal of speculation on potential changes to pension rules, amongst others, as we lead up to Labour’s Autumn Budget on 30th October. However, one rule that we do not expect to change is the ability to take 25% of your pension pot as a tax-free lump sum.

Whilst Sir Keir Starmer did insinuate during the pre-election process that this current tax-free cash entitlement may not be safe from alteration, it was fairly swiftly followed by various Labour spokespeople claiming that this was “an old-fashioned mistake”.  It does not appear therefore that this will change – after all, removing the 25% tax-free lump sum entitlement from pensions would be something akin to political suicide.

So, with this likely to remain for the foreseeable future, it is a good time to remind you of the rules on ‘recycling’ the tax-free cash from your pensions. Recycling in this instance is the act of paying any tax-free cash taken from your pension back into the same or another pension in order to benefit from additional tax relief. There are rules in place to prevent people from exploiting this loophole; otherwise it would be possible to repeatedly withdraw tax-free money from a pension and reinvest it to unfairly boost your pension savings.

When might you break pension tax-free cash recycling rules?

In order to break these recycling rules, ALL of the following must have occurred:

  1. You must have received tax-free cash from a pension
  2. Received more than £7,500 in tax-free cash over 12 months
  3. As a result, pension contributions must have increased by more than 30% of what was expected (e.g., you paid in £10,000 each year before and are now paying in more than £13,000)
  4. The additional amount you are contributing must be more than 30% of the tax-free lump sum received (e.g., you received £30,000 in tax-free cash and are now paying £9,000 or more into pensions)
  5. The recycling was pre-planned

If only one of the above did not occur, you will not have been deemed to have broken the rules.

If all five points had occurred, you will have been deemed to have broken these rules and would likely be forced to pay tax on what would have otherwise been a tax-free lump sum.

In reality, it is not easy to hit all of the above criteria and break the recycling rules. However, it is useful to be aware of these rules to help to avoid paying unnecessary tax on those precious tax-free lump sums from your pensions. We are also, of course, here to help you to avoid such pitfalls. Please get in touch should you have any concerns about the above.

In direct contrast to, and to paraphrase a national TV advertisement campaign from the early 2000s, the message here is this – “Recycling: The possibilities are not endless.”

Recycling: The possibilities are not endless2024-08-23T16:20:43+01:00

ISA ISA, Baby

Daniel Liddicott
April 2024  •  2 min read

ISA ISA, Baby

It came to our attention recently, after a number of queries, that there may be some confusion around when an ISA provides interest and when it provides investment returns. If you are unsure or have been wondering about this yourself, then I hope that this short blog is of interest to you (pun intended, of course).

Cash ISAs produce interest. Stocks & Shares ISAs provide investment returns.

Most Cash ISA providers are able to tell you ‘up front’ what your interest rate will be.  In contrast to this, the growth rate in a Stocks & Shares ISA is not known at the outset – it’s only by looking back at performance that you know what it has been over a period of time.

All ISAs that are held by our clients on the Nucleus or Fundment platforms are Stocks & Shares ISAs and, as the name suggests, the funds held within these are invested in stocks/equity. Therefore, these provide investment returns, unlike their Cash ISA counterparts.

We have also received some queries about the investment term for ISAs. For Stocks & Shares ISAs, it is essentially however long you are willing to leave the funds invested for. And the longer the better! This way, you give your investments time to recover from all of the expected fluctuations in value that the stock market is subject to, providing the prospect for real growth of your ISA funds over the longer term.

Cash ISAs do often come with a particular term attached and, as a general rule, the longer you are willing to leave your money ‘locked away’ in one of these ISAs, the better the interest rate that you will be able to obtain.

As an example, you might opt to place your funds into a Cash ISA with Nationwide for the fixed term of one year, with the agreement that Nationwide will pay you a certain amount of interest over that time period. The interest that you receive on the one-year fixed term is highly likely to be greater than if you were to opt for an ISA that you can dip in and out of as you please without any restrictions.

If you would like to read a more detailed blog on ISAs, you might find this helpful:

What is an ISA?

ISA ISA, Baby2025-01-28T10:04:09+00:00

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