THE BUDGET 3 MARCH 2021

TODAY’S BLOG

THE BUDGET 03 MARCH 2021

The House of Commons was unusually civil during the Chancellors Budget Statement largely because hardly anyone was there due to social distancing and making the task rather easy to identify who is behaving like a spoiled child. Normally the Speaker has a harder job. As for the Budget – well, it’s a good job I am not a betting man.

The Chancellor believes that support over the pandemic will run to £407bn in various forms. This needs to be repaid if future generations are not to be saddled with debt forever, thereby hampering how future Governments can help them.

I did warn that taxes would rise, I thought capital gains tax would be the most obvious tax to increase. It has not. The only actual increased tax rate is Corporation Tax, which impacts business owners running profitable businesses (with profits over £250,000). Corporation tax will rise from 19% to 25% – that’s an increase of 31%. It may surprise you to learn that only 10% of businesses claim to make profits over £250,000.

Almost everything else stayed the same – but staying the same really means changing. Of course, this knock-on effect means reduced profit to share out in the larger businesses (like those you invest in via a fund) so returns may be dampened – but then this is simply a UK issue and most of your equity holdings are not in the UK now (your portfolio is global).

SOLOMONS IFA FROZEN ALLOWANCE BUDGET

THE SAME DOES NOT MEAN NO CHANGE

Pensions, Capital Gains, Inheritance tax all remain unchanged, which means that as incomes or the values of assets rise, the excess taxes begin to hurt rather more.

Those approaching retirement have the spectre of a 5-year freeze of the Lifetime Allowance at £1,073,100. Anything above this sees the excess taxed at 55% – so more likely. How much and how you can contribute to pensions is also frozen, as it is for ISAs and Junior ISAs. These are probably the “nice to have” problems if you are running a business that is struggling or have an income that has fallen dramatically due to the pandemic.

Your Personal allowance (income you can have at 0% tax rate) rises by £70 on 6th April to £12,570 but then stays at that level for 5 years. Higher rate and Additional Rate tiers also remain frozen. What this really means is that if your income rises due to inflation or promotion etc, you will pay more tax.

The most notable help to younger generations is the Apprentice Scheme and the re-opening of 95% mortgages by lenders, who have been given Government guarantees. There may be some window dressing here, a borrower will still be made to jump through a variety of hoops to prove that they can become an owner (or more accurately, a borrower) rather than a renter, with a 5% deposit. Those that have taken advantage of the reduce Stamp Duty ending in March, have a little longer to complete their purchase.

If you are asking me what I would have done differently, (you aren’t) well there is a very long list and most of it involves simplifying pensions and tax rates. Complexity enables some to thrive and others to become rather entangled. HMRC are due to have a whopping £180m spent on further technology to help ensure you report your taxes correctly with fairly dire consequences for those that do not. I do hope that the track and trace lot are not “awarded” the HMRC technology contract.

DETAIL IS A DEVIL

Politicians rely on our short-term memories, they must do otherwise so few would ever be re-elected. When you cut through the words it is best to look at the numbers. These are some key forecasts that I have pulled from the Budget Statement (which you can see here).

SOLOMONS IFA BLOG BUDGET ASSUMPTIONS

How you view life will likely influence how you select data from the table above (which is all lifted directly from the Budget) I have only shown the year on year changes as a percentage and drawn attention to some of the data (of which there is a lot!). Long story short, we will be paying more income tax. The Chancellor seems to be expecting unemployment  to increase by 500,000 over the next 2 years before reducing, but still above current levels. Inheritance tax receipts peak in the coming tax year perhaps reflecting the consequences of the fatalities from the virus.

The property market looks predicted to return to normality shortly, but really picking up next year. Council tax looks likely to increase rather faster than inflation. Fuel duties will begin to rise, and oddly over the next 12 months, once hopefully this is over, duties from alcohol actually fall in 2021/22 (which I think is odd unless you have all been knocking back the booze over the last year or so more than normal with a plan to cut back).  Air Passenger duty has rather obviously collapsed and will likely return to pre-pandemic levels in 4-5 years time, that’s quite a slow recovery.

Corporation tax will really bite in 3-4 years time. Business rates also begin to pick up, which when combined with loan repayments and more VAT, I imagine that some business owners may be looking at cost reductions. There may well be “pent up demand” and a good supply of labour, the Chancellor is understandably encouraging investment in growth, through new technology and digital business combined with Apprenticeships. It (business growth and development) is certainly what needs to happen, but whether it will remains to be seen.

Every Budget has lots of assumptions about the future, but you will be paying more tax, so use the allowances you can.

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

GET IN TOUCH

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The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

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Call – 020 8542 8084

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THE BUDGET 3 MARCH 20212021-03-03T19:02:17+00:00

TAPERED ANNUAL ALLOWANCE – NHS

TODAY’S BLOG

TAPERED ANNUAL ALLOWANCE – NHS

The Tapered Annual Allowance was introduced from 6 April 2016. It has caused considerable problems for members of the NHS pension scheme in terms of excess tax charges due to the formulas used in the calculations.

Admittedly having a good pension is a nice problem to have, but when faced with an excess of say £60,000 (by calculation) this generates a tax bill of typically £27,000. I have seen some that are much higher.

Therefore, many Consultants and senior NHS staff have really been forced to reduce their sessions (NHS pay) or take a break from or leave the pension scheme entirely – which is nuts. This is essentially a tax charge on money that has not yet been paid (it is paid at retirement).

After much badgering, a compromise has been reached for the current tax year 2019/20. In that a political promise has been made that the excess tax charge will permit the pension scheme to pay the charge and the employing NHS Trust will pay now compensate for this when the pension starts (my short version). This has now been confirmed for the English and Welsh NHS Pension Scheme.

NHS Annual Allowance 2019/20

Superficial Fix

There is as yet, nothing NEW stated about the 2020/21 tax year (there are restrospective juggling adjustments that can be made towards the end of the year, but these are daft) – but we do have a Budget coming in March, so we hope the ludicrous Tapered Annual Allowance will be scrapped then. However, this ought to apply to everyone, not simply NHS employees.

The Annual Allowance – Simplified, Quick Overview

In very simple terms the Annual Allowance is a maximum of £40,000. This is the total that can be paid into pensions by you and your employer. It reduces by £1 for every £2 of income over £150,000.  The allowance reduces to a minimum of £10,000 once an income of £210,000 is earned. In short, you can invest more into your ISA. However, for those in final salary schemes and the NHS in particular, the calculation is not really about how much is paid in, but how much the pension grows by and then multiplied by 16. So, if your pension increased by £1500 for the year that’s £24,000. Not the 14.5% of salary you must pay to be in the scheme. Its way more complex than this, but to save time, go with my summary.

It Is Political – Government and the NHS always are

In view of the impact that pension rules are having on senior NHS staff and their ability to work their normal hours, and with winter bringing the usual rise in demand for NHS services, NHS England and now NHS Wales and NHS Improvement have decided to take exceptional action. An extract from the announcement is given below:

‘This action will mean that:

·         Clinicians who are members of the NHS Pension Scheme and face a tax charge in respect of work undertaken this year (2019/20) as a result of breaching their annual pension allowance will be able to defer this charge (by choosing ‘Scheme Pays’ on their pension form) meaning that they don’t have to worry about paying the charge now out of their own pocket.

and:

·         The NHS employer will make a contractually binding commitment to pay them a corresponding amount on retirement, ensuring that they are fully compensated in retirement for the effect of the 2019/20 Scheme Pays deduction on their income from the NHS Pension Scheme in retirement.

Watch Out For…

Clinicians are therefore now immediately able to take on additional shifts or sessions without worrying about an annual allowance charge on their pension for 2019/20.

Local NHS employers are being asked to actively promote this development to affected staff as they plan for extra capacity and staffing over the winter period.’

This measure will only apply to the 2019/20 tax year as new flexibilities are being introduced from 2020/21.

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

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

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GET IN TOUCH

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The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

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TAPERED ANNUAL ALLOWANCE – NHS2020-01-21T10:33:00+00:00

ANNUAL ALLOWANCE EXCESS

The Annual Allowance Charge

Arguably the most dreadful bit of recent pension changes is the annual allowance charge. This arises for anyone that contributes more than the annual allowance towards pensions during a tax year. To most people £40,000 a year into pensions is a lot of money so on the surface this is nothing short of yet another raid on higher-earners.

The annual allowance is really £40,000 or 100% of your earned income, whichever is lower. However, if your income is over £150,000 then the allowance reduces gradually down to £10,000 for anyone earning £210,000 or more, this is termed the Tapered Annual Allowance. Just for some context anyone earning over £150,000 has lost their personal allowance (income before any tax is paid) and pays a tax rate of 45% on income above £150,000.

Excessive Tax? Not Enough Voters

You can exceed the annual allowance in various ways – the amount for those investing money to build a pension is straight-forward. If you and your employer pay more than your annual allowance into pensions, you suffer an income tax charge on the excess at 45%. Easy, maybe not fair, but easy.

However, if you are a member of a good old-fashioned final salary (defined benefit) pension, well it’s a little more complex. The annual allowance is not calculated based upon how much you paid into a scheme, but on how much your pension improved by. So if you had a pay rise… this makes life more complex. If your pension increased by more than £2,500 a year (which admittedly is a very good pension for another year of employment) then you are likely to exceed the annual allowance of £40,000. If you have the minimum annual allowance as a high earner, then your pension only needs to improve by probably £527 – £625 a year.

£561m Extra Tax

This all became the new norm from the 2015/16 tax year. HMRC collected £179m in extra tax revenue as a result. However, this has now jumped massively as the reality sinks home for many high earners, rising to £561m for 2016/17.

Some people can get their employer pension scheme to pay the “fine” (tax) most cannot. In 2016/17 only 2,340 people achieved this which accounted for £44m (8%) of the tax however the clear majority had to pay up themselves – all 16,590 of those that realised!

I might call this a disincentive to save for your retirement, or daylight robbery…. Take your pick, but fair and sensible is most certainly is not.

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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ANNUAL ALLOWANCE EXCESS2018-10-02T16:42:39+01:00

DOCTOR, DOCTOR… IN THE TELEGRAPH

TODAY’S BLOG

DOCTOR DOCTOR… IN THE TELEGRAPH

You may have come across my details in a piece in The Telegraph on Monday 10 September 2018 by financial journalist Laura Miller. Laura outlines a problem that is being observed in hospitals around the UK, in that some doctors are in the ludicrous position of effectively being forced to reduce their available hours due to the additional taxes that they will suffer for additional income. This has the inevitable potential to create longer waiting lists.

Before we go any further, let me say that Laura asked me to check some sums from a Consultant doctor who was making the point about the annual allowance excess taxes. I have made no secret of the fact that I believe the tapered annual allowance is an utterly stupid Government policy. It isn’t the first and of course will not be the last.

THIS IS GOING TO HURT

My only concern is that some may interpret the information as “greedy doctors worry about tax and so work less”. So I wish to make one point crystal clear. I have advised medics for over 25 years. I have met hundreds of them. I have never, NEVER, not even once met one that was motivated by money as a career choice. The early career of a junior doctor is particularly traumatic and frankly the NHS and Department of Health should be ashamed of the working pressures and timetables that they put them under. If you need any convincing, simply have a look at Adam Kay’s Book – “This is Going To Hurt”. Yet the system continues, because it is always under strain and there are not enough doctors to do the work within “normal” working hours or shifts.

DOCTORS EARNINGS

It is true that some doctors can earn very good incomes. The £10,000 annual allowance only applies to those with income over £210,000 – which is a lot of money by most standards. However, these are people that are highly skilled and at the top of their profession, have given way more than their pound of flesh and are constantly scrutinised for errors and lambasted by politicians and media whenever it suits. For the record, this is not Laura’s intent.

The rather ludicrous rules also impact any doctor whose pension income improves by more than £2,106 in a year. This too would push them over the standard annual allowance and potentially suffer excess tax charges. The tax charge is treated effectively as income tax at the highest rate, despite the fact that the pension has not actually been paid to them, conceivably might never be paid to them if they were to die before retirement. In essence a tax on future, yet to be received income. This sort of rise in pension benefit could come from something as innocuous as moving up the grades, or perhaps for impressive work in the form of Clinical Excellence Awards – or even returning to a full-time post.

HEARING PROBLEM

This is all to do with the way in which the Annual Allowance is calculated for those in final salary schemes. I wrote to the previous Chancellor, twice, without reply on this subject when he presided over the introduced rules. Perhaps Laura will have more success.

Suffice to say this is a complex piece of pension planning, a headache that neither the doctor, nor the NHS really should have to waste time on. Yet my advice is to all doctors is to request a Pension Annual Savings Statement as well as their Total Rewards Statement and ensure all payslips are carefully retained – as well as information about any and every form of income they receive from all possible sources. This is more unpaid work, increased stress and bureaucracy to satisfy some utterly numpty thinking at HM Treasury…. Nothing new in that though is there.

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

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

WHAT WE’RE ALL ABOUT

If you would like a no-nonsense one page document explaining what financial planning is all about please enter your email here.

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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

WHAT WE’RE ALL ABOUT

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DOCTOR, DOCTOR… IN THE TELEGRAPH2018-10-10T16:44:32+01:00

Public Sector Pay Rise

Public Sector Pay Rise

The Treasury announced yesterday that various people will be getting an increase in their salaries. This is due to come into effect in October 2018. This is heralded as the biggest public sector pay rise in quite some time, which is probably the case, but that is largely due to the fact that most have had their salaries frozen or pegged below inflation as a result of the austerity measures. Remember that austerity was brought in to reduce the amount of overspending (spending exceeds income) each year.

Anyway, whatever your political persuasion, finally around a million people will be taking home a larger salary… or will they? Well most probably will. However some higher earners are more likely to be exposed to the problems of the annual allowance. This is now about pensions, but directly impacts income.

Since the start of the 2016/17 tax year, the annual allowance has become more complex. Those earning over £150,000 in all forms of income (rent, earnings, savings interest etc) have a reduced annual allowance (the amount that they can put into a pension). The standard annual allowance is now £40,000 but this is “tapered” down to just £10,000 at a rate of £1 for every £2  over £150,000. There will be some, perhaps many that say, something to the effect “you have lots of money, so what if you cannot pay more into your pension”.

NHS Pension, Teachers Pension and similar..

These big State pensions were (and still are) brilliant for most people. You get a guaranteed income for life, that rises broadly in-line with inflation. Its based as a proportion of how long you are an employee and member of the pension and your final salary. The original NHS pension was a 1/80th scheme. You work say 36 years (24 to age 60) and suppose you are a top of your game NHS Consultant, earning around £120,000 from work with the NHS, then you would expect 36/80 (45%) of your final salary (hence the term) for life. That’s £54,000 a year in this example.

However, all these schemes became too expensive, successive Governments mucked up the calculations, getting members to contribute more to the pension and also changing the terms. Moving the goalpost further to 65 and then later to the State Pension Age (SPA). They also changed the rate at which the pension builds up from 1/80 and removed the lump sum as standard.

So what?

Well, if you are a high earner or have other sources of income that push you over £150,000 you start to have a reduced annual allowance. As no Government in recent history has been truly keen on simplicity or transparency, matters get complicated. So despite the term “annual allowance” this only applies to investment based pensions, not Final Salary (sometimes called Defined Benefit) pensions. No. These have a different sum. I won’t go into great detail, but in essence, the calculation looks at how much your pension has increased by over the course of the tax year. So just suppose you are in the old NHS scheme still (if over 50 that is entirely possible). You earn say £110,000 from the NHS and have Private Practice which adds considerably more. Your pension increased by 1/80th or £1,375. The way you work out your annual allowance “value” is this figure x16 and then add the increase in the lump sum value. So that makes £26,125.

OK, it isn’t quite this simple – you actually calculate the opening and closing values of your total pension, make an allowance for the Government approved rate of inflation, subtract one from the other and hey presto, there is your “pension growth”. So now that you have a pay rise half way through the tax year (October)… your final salary will be higher on 5th April, so will the sums.

Exceeding the Annual Allowance?

Well, if you do, you can use up any unused allowances from the 3 prior tax years. If not, any amount above your tapered annual allowance, or even standard one, will be taxed at your highest rate of tax. So you pay tax on money you have not had… quite a lot. This has got more financially engaged Consultants wondering if they should stay in the scheme at all. Kerboom…

Oh and just for good measure, you are responsible for reporting your excess to HMRC under self assessment rules. Naturally this really requires lots of advice and this is one area where data is needed. So all those payslips you’ve been keeping are needed. All the Total Rewards Statements (NHS) are needed and to keep the theme going, if you are in the NHS, you really ought to request a Pension Annual Savings Statement (PASS)… which you will need every year going forwards, or until the rules change.

So yes, you have a pay rise….

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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Public Sector Pay Rise2018-07-24T16:46:11+01:00

Conference Season

Conference Season

It is conference season and I my diary is suitably full of my selection of those that I believe merit attention. I’m not attending any of the political conferences and have recently returned from what might be best described as the Premier League of Financial Planners Conference – the annual CISI conference at Celtic Manor.

Yes Minister

Whilst being a non-political conference, clearly insight from the occasional politician or a former one can be valuable. Step forward Steve Webb, who was a LibDem MP and the Minister for Pensions in the Coalition Government, back in the day when politics offered some semblance of common sense.

The Autumn Budget – 22 November 2017

Whilst understandably providing various caveats to his talk, Mr Webb made clear that given the Queen’s Speech, the current Government have essentially given themselves a 2-year timeframe.

 

Not Enough Hours in the Day

He explained that due to the workings of Parliament, this means about 40 weeks in the year that is given over to Parliamentary work. However, 1 day a week is set aside for the Opposition to make their case and another is for MPs to actually work with their own constituents. Given the amount of time that Brexit will consume, there is precious little likelihood that anything significant will change, unless it is populist, garnering all-party support within the available 120 days a year.

Why Tax Rules Are Daft

Aas tax legislation does not have to go via the House of Lords, unlike other acts (for approval or sense check) much can be altered quickly, even with a tiny majority. He made the point that it is precisely because tax legislation bypasses the House of Lords, that so much of it is so complex and poorly thought through. So that in mind, what could the Government possibly muck around with?

What you can pay in

The Annual Allowance – could be reduced further from the current £40,000, despite acknowledging the complexity of the Tapered Annual Allowance, he thought it more likely that this would be extended rather than abolished, perhaps bringing it in for those earning £100,000 rather than £150,000.

What you can get out

Whilst the Lifetime Allowance has already been thrashed to £1m and is meant to now be linked to inflationary increases, he said that cutting it further is an option as “it passes the Daily Mail test – where people think a £1m pension fund is a lot”. He made the point that the Treasury appears to hate pensions (see all recent changes over the last 15 years) but love ISAs, for which they attempt to invent a new one almost each year now.

Employer’s beware

Whilst he thought it unlikely, he also proposed that the Government could apply employers National Insurance contributions to their pension contributions, which would effectively end salary sacrifice arrangements. He also felt it improbable that the tax-free cash lump sum from pensions would end or be reduced, due to the complexity it would create for those that have had, are having or due to have it and rules are difficult to apply retrospectively.

No F-Bombs

Without a single interruption from anyone handing in a P45 or the stage falling apart, the room of delegates was impressed with his delivery and rationale, but sanguine about the prospect of further pension meddling. Everyone I spoke with conceded that ISAs certainly seem to be the favoured investment vehicle for the Treasury as they only give up future tax revenue, rather than current tax revenues. However, reliance on any future Government to maintain promises about ISAs seems probably unwise.

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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Conference Season2017-10-05T15:52:58+01:00

2017 Budget

2017 Budget

The 2017 Budget from the Chancellor Philip Hammond will take place this Wednesday. In practice, few are expecting him to deliver anything significant. He has already publicly stated that there will be no “spending sprees” which is a rather unhelpful relative term, but would imply that there is unlikely to be a considerable amount of money for sectors that probably need it.

There are lots of things that I wish he would change, but I am sounding rather like a broken or at least well-worn record, that the rules around pensions are more than a little bit daft, but utterly insane – but hey, this is Government policy not common sense.

Pension Insanity

As a brief reminder of the pensions insanity. You are restricted to how much you can pay into a pension each tax year (called the annual allowance). This is currently £40,000 or 100% of your actual earned income, whichever is the lower figure.

The UK has a system where you are penalised if your pension pot exceeds a certain value (now £1million) this is called the Lifetime Allowance. You are also penalised if you earn more than £150,000 and begin to see the reduction of your annual allowance from £40,000 to £10,000. This is called pension taper relief, catchy sounding term isn’t it! Tax penalties are ready and waiting should you mess up, many will – through nothing deliberate, other than earning and income and being a member of a pension scheme, something that one would normally think were good things to do. Just for good measure your pension is valued at the point you “retire” (though in their infinite wisdom this is now called a crystallisation event) and then again at 75 with assessment against the Lifetime Allowance, which may well result in a significant tax payment – or rather it will if you exceed the Lifetime Allowance of the day.

Doctors, Teachers and Measure for Measure

Those that are members of final salary pensions like the NHS, Civil Service or Teachers Pension Schemes – basically anyone that works for a State service, which is likely to benefit us all. You possibly know someone who works within in the NHS or a Teacher, who has had increasingly pressurised workloads, with extended hours and utterly pointless assessments, form filling (for which read, Government department bureaucrats need to measure something, so let’s try this) all simply to justify their non-inflated salaries, which on occasion they have to reapply for…  all because a Government can. Anyway, as these people are clearly coping too well and not leaving in the numbers that Government hoped, they are asked to calculate their annual allowance rather differently and constantly guess if they will overpay for the year, which results in a tax fine that on money that they might not receive when then retire. I am not kidding – this is not fake news.

Hollow Words, Smoke and Mirrors

When Chancellors and Prime Ministers or indeed any politician talks about serving people, one is  always left suspicious as the words are invariably bereft of any action plan or follow through. There are few like the Duke, in Measure for Measure, who survey the detail of the way their citizens are governed. We all plod on regardless because the problems are apparently “just too big to fix” and “we must all have a grown-up debate”… hmm..

If Government was a business it would be in an even worse shape, for failing its customers so frequently and so outrageously. Yet whichever one is elected, they make the same empty promises and simply meddle along, tinkering at the edges hoping that everyone will quickly forget, which they will…

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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2017 Budget2017-03-06T13:21:11+00:00

The Autumn Statement 2016

The Autumn Statement 2016

With a few hours to go Philip Hammond will be delivering his first Autumn statement, perhaps his last too if reports are to be believed that he will scrap them… who knows. In any event here is my quick wish list for the Autumn Statement

My Autumn Statement Wish List

(from a financial services perspective)

Abolish the Lifetime Allowance, which is currently £1m – if you hold more than this in pensions and you haven’t already “protected it” you will suffer an excess charge. Utterly pointless and discourages people from saving for their financial independence. This would also imply scrapping all previous protections.

Abolish Taper Relief – the new rule that has caused a raft of problems for those earning over £150,000 who can end up able to pay less into a pension (and still may suffer a penalty) than can be invested into an ISA. Utter lunacy, creating enormous headache for some.

Abolish Higher Rate Tax Relief – not what you might expect me to say and on the caveat that the two previous points are met. This saves the UK considerable sums, yet continues to offer an incentive to save for a pension.

Abolish Tapered Personal Allowance – either everyone gets one or nobody gets one. At the moment if you earn over £100,000 your personal allowance reduces by 50p for every £1 over £100,000.

Scrap the new Main Residence IHT allowance – just give everyone an allowance of £500,000 and have done with it. What former Chancellor George Osborne created is a shambles of smoke and mirrors.

Re-establish the different systems for Final Salary (Defined Benefits) pension schemes without any annual allowance, restricting total contributions to any pension to a fixed % of income by the employee (it used to be 15%). Vast sums and energy is used by departments in the NHS, Teachers, Local Government etc all creating utterly pointless, time sucking reports about the Annual Allowance and Lifetime Allowance. This is completely unnecessary.

Abolish LISA – another attempt to hit pensions with the high exit charges and daft array of decisions. Scrap this and other utterly pointless versions of an ISA. Have the single ISA allowance of £20,000 invest it however you like.

Stamp Duty – introduced to calm the property market which is now largely locked up with anxiety about Brexit etc. Huge tax take by Government and feels like a mugging. This needs reduced dramatically.

Fair Taxation

Earn it and tax it here. If you or your business generate income here in the UK it should be taxed at UK Corporation tax rates. Take note Google, Starbucks and Mr Green (et al). So all that nonsense for cross transfer pricing must end.

Genuinely Seeking Transparency and Tax Simplification? Have three rates of personal tax 0%, 20%, 40%. Whatever the source (dividends, capital gains, income etc). Huge sums are wasted on preparing numbers for a system that is designed to confuse. People break the rules deliberately or without knowing.

Corporations

Businesses pay corporation tax, this could be the same rates, with different allowances as personal taxation… this might mean busineses would use their revenue to reduce profits, either through inward innovative investments, expenses, employing people or redistributing to shareholders. More innovation creates more value, wealth, jobs….more tax take.

Means-Testing

If you are retired and have an income in excess of say £100,000 you forefeit your State Pension. You also forfeit free travel on public services and also the Winter fuel allowance…. come on, if you have a £100,000 income and don’t work any more, you aren’t going to need it or miss it and a relatively small number of retired people have £100,000 pension.. but really if you are a celeb you can give up your State pension and bus pass.

Landlords

Being a landlord is just like being a business. You have power over where people live. Some vetting is clearly needed (obviously not all landlords are bad). Landlords should have to apply to be a landlord license and register properties and all those living in them. Property has to be inspected every 3 years to ensure it is suitable for real people to live in. The new rules introduced about CGT, Stamp Duty and interest relief need reviewing, fair rents and fair offsets.

Ok, highly unlikely these will happen, but I really think some better ideas from Chancellors are required…

Our APP will be updated by the end of the day with all the relevant changes. It is FREE to have simply search for Solomons Financial Planning on either APP platform. There are loads of free tools and calculators to try out including an expenses tracker.

 

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 Autumn Statement 20162017-01-06T14:39:12+00:00

The Future of Pensions

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 Pensions2017-01-06T14:39:13+00:00

When in Rome

When in Rome..

I recently visited Rome for the first time. It was one of those places that I have been meaning to visit but simply had never found the time. I have always had good holidays in Italy and am happy to report that Rome more than lived up to expectations.

All roads lead to Rome

Being something of a film fan, I was keen to ensure that a few of the locations used in Roman Holiday, La Dolce Vita …were included in my visit. Having studied Latin at school (which dates me) I was also interested to see the ancient sites, many of which were part of the translation exercises that I sweated through somewhat reluctantly…. the Appian Way.

The experience of Rome reminded me of the story of the man that went to Africa and saw a huge opportunity to sell shoes, given the number of people without them. Business school suggested that this could be seen two ways – an opportunity to sell shoes or evidence that most people didn’t see the need or have the desire for them. Anecdotal observation is insufficient for making any solid business plan.

Opportunity discussion forum

Today, I might suggest opportunity of such a nature exists in Rome for driving instructors, graffiti removers and retail space designers. The driving in Rome is something to be seen to be believed. Opportunity or dead horse?

Tempus Fugit MMXVI

The Budget is now just a couple of weeks away. There is plenty of opportunity for speculation as you may have gathered. There is rumour that tax relief might be axed entirely or reduced (more likely). Supposed leaks suggest that perhaps the 25% tax-free cash lump sum will be scrapped (so some are now rushing to take theirs whilst they can). However this is in the context of the option of a pension income that is not taxed. Changes to the Lifetime Allowance, Annual Allowance and the prospect of a pension ISA.…. But by doing so, this would likely require a pre and post 2016 pension regime– just to add further complexity.

Veritas

The truth will not be known until some time after the Budget (not the Budget itself) which needs clarifying, checking and approval, is generally a promise, not a guarantee. Indeed assuming that anything that any Government says about pensions is “guaranteed” is best probably thought of only within the very short-term nature of a Government… the most obvious example being the “triple lock” guarantee for the State Pension.

Which reminds me again of Rome, and wondering how many in our political system or media would have survived the mouth of truth…. When it comes to pensions it would appear that many will simply be flung to the lions.

MouthofTruth

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

When in Rome2017-01-06T14:39:19+00:00
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