Have you been scammed?

Dominic Thomas
Sept 2024 • 2 min read

Have you been scammed?

According to a recent report for LV, roughly one in seven adults have been the subject of an attempted pension scam in the last 12 months! That’s an enormous number, translating into about 7.3 million people.

A staggering 14% were encouraged to transfer money from their pensions by text message. It may interest you to note that about 4 million British adults lost money to such scams over the same period. That is an awful lot and begs the question – are the regulators really focussing on the right things?

Pensions are both simple and complex. Simple in the sense that they are a savings plan that you access to provide income in your retirement. Ideally this needs to last for the remainder of your lifetime, which then presents the inevitable question “how much is enough?” which of course is subjective and dependant on your expectations and lifestyle.

Pension rules are ludicrously complicated, made by successive Governments, each of which has been utterly lacking any long-term thinking. Complexity is perhaps a double-edged sword. Most people know enough to realise that they probably need advice, but the cost of this is prohibitive. A lot of the cost is due to regulation, but in fairness most of the regulation is well intended.

A problem we all face is that scammers are getting better. Deepfake technology makes a decent scam difficult to spot. It is relatively easy to set up an email, phone number and website that all look perfectly legitimate. Something like 36% of scams were reported as fake HMRC emails and text messages.

Regulators, pension companies and advisers would all likely say the same thing – please seek advice. The scam rate amongst regulated advisers is very low (contrary to press-driven opinion). The majority of scams take place through the everyday technology you use at home. If you come across friends or family who you suspect may be about to make a catastrophic blunder, please (please!) get them to call us. Certainly not everyone is going to be a suitable client for us, but if we can save someone from self-destruction, we are happy to take calls or emails.

Don’t wait for a friend to get scammed, get them in touch with us, so that we can ensure that they don’t get caught out.

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Have you been scammed?Jemima Thomas2024-09-10T15:48:43+01:00

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 30^th 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:

You must have received tax-free cash from a pension
Received more than £7,500 in tax-free cash over 12 months
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)
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)
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.”

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Recycling: The possibilities are not endlessJemima Thomas2024-08-23T16:20:43+01:00

Are you taking too much?

Dominic Thomas
June 2024 • 3 min read

Are you taking too much out of your pensions and investments?

It would seem that many people are. According to research conducted by NFU Mutual, over half of people accessing their pensions for the first time cleaned the entire pension pot out. If that is even half-true, it’s a concern.

A dig into some of the data suggests that 739,535 pensions were accessed for the first time in 2022/23 up from 420,727 the year before. The research found that over 75% of people taking their pensions were not advised, so will have no recourse. Many will likely have paid emergency tax and failed to reclaim it if they had been over-taxed.

It seems that on one hand the former Chancellor Mr Osborne (I cannot now remember how many we have had since) would be pleased that people are using their own money to fund their lifestyle. However, this sort of data, when viewed in conjunction with the regulator’s concern about ‘retirement income’ and a heavy, detailed questionnaire that seeks ‘big data’ rather than the nuance of real life, leaves me concerned. Osborne made pensions rather like a bank account. Prior to his changes, there were limits on how much people could access, which whilst often seemingly at odds with reality, at least was a sense check. Today you can blow your life savings as quickly as you can say Ferrari.

The problem is that this might lead to a return to restrictions, in a world where pensions are already ludicrously complex. I hope not, but certainly some reimagining of what a pension pot could and should do for us all is required.

Here at Solomon’s, we plan income withdrawals very carefully for our clients. Many people are lucky enough to have decent old-style final salary pensions (NHS, Teachers, Local Government and old large companies) which provide a good base income. For all its problems, the State Pension begins at an individually specific time and often there is a gap in the need for income between retirement and the State Pension starting. Of course, some will need and want more and so we plan with all the options in mind on an individual basis.

We model scenarios, attempting to build a plan that has a very high chance of success, which in plain English simply means ‘not running out of money’. However, we don’t know how long you will live and what the future holds (we are neither magicians nor fortune tellers). We use historic data and run multiple scenarios. We stress-test the plan and just as importantly review progress and make adjustments. There are no absolute certainties, but we do our best to ensure that your plan is set up to pay minimal fees and taxes, so that your money has the best chance of lasting as long as you do.

If you know someone who could use our help with this, please send them along. We specialise in working with people approaching retirement and those in it, who have two key questions – will I have enough? And will I run out? (which are much the same).

There are limitless things to spend money on, but not having enough to turn the heating on is a problem no-one should ever have.

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Are you taking too much?Jemima Thomas2024-05-31T14:44:49+01:00

Lost pensions

Dominic Thomas
July 2023 • 8 min read

Lost pensions

The world of pensions is ever changing, a phrase that three decades ago I thought could never be uttered with a straight face, such was my naivety. The last three decades have seen a vast amount of change which has left most of us attempting to follow a paper trail of who took over who, a bit of head scratching, trying to remember who took over Clerical Medical or Friends Provident, Sun Life, Equity and Law, Norwich Union and hundreds of others.

KNOW YOUR EAGLE STAR FROM YOUR COMMERCIAL UNION

Today, the pension provider landscape looks nothing like it did. Indeed, traditional pension companies have largely disappeared or sold their legacy of pension funds to someone else. This has often not been a spectacular success, with constant promises that you (and we) are important, but evidently not important enough to answer the phone before a change of Chancellor.

1 IN 4 PEOPLE HAVE LOST A PENSION

Add in the regular movement of investors as their careers unfold and you have such a mess that not even an angry teenager’s bedroom would surpass. A recent survey (warning with them all about extracting data from a small sample to 66m people, but that said..) showed that 1 in 4 people believe that they have a missing or lost pension. I’m a little surprised it isn’t a higher proportion.

There are a multitude of small pots of pension benefits, sometimes pennies but sometimes thousands of pounds. Many of you may remember “contracting out of SERPS” in the late 1980s or early 90’s… some of these pensions have had several decades of growth and worth a princely sum. It is certainly worth checking.

PROCRASTINATION WILL COST YOU INCOME

Too regularly good intentions to “sort out my pensions” is deferred until a better time. I understand this very normal reality but it carries a cost. A lot of old pensions are very expensive by today’s standards and those charges are eating away at returns. Then of course, there is the issue of the returns themselves – are the funds appropriate, suitable to your long-term ambitions?

The good news is that even the Government have a service for lost pensions. You can find the link in our conveniently entitled “useful links” page – Lost Policy Finder. Of course, if you already have the details and they are sitting in a drawer somewhere, send us a copy so that we can assess it for you, don’t leave it until you take your retirement more seriously, we want to help you avoid using the phrase “if only I had got this to you earlier”.

GETTING READY FOR RETIREMENT… THE SOONER THE BETTER

As a not very aside, side note…. Do also have a go at our “Retirement Ready?” quiz if you are yet to retire, and please SHARE this information with people you care about, helping everyone to become more financially informed as well as financially independent, is one of our reasons for being here.

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Lost pensionsJemima Thomas2023-12-01T12:12:30+00:00

Flat pack fever

Daniel Liddicott
March 2023 • 4 min read

Flat pack fever

Flat pack furniture – a phrase that strikes fear into the hearts of most people, and often for very good reason – the poorly labelled pieces; the multitude of supposedly vital fixtures and fittings; the cryptic instructions seemingly written with the sole purpose to confuse and annoy.

I am delighted to say that my wife and I are expecting our first child at the end of March! This is, and has been, an extremely exciting and often anxiety-inducing time. I am sure that I am describing a period of time that is familiar to many of you. In amongst all of the preparations, baby book reading and antenatal classes, there is the inevitable task of assembling our unborn bundle of joy’s nursery furniture. Unless, of course, you wisely paid for the outsourcing of said assembly process – alas, we did not.

So began an entire Sunday of unpacking boxes, organising various pieces, deciphering assembly instructions and good old elbow grease – not to mention dusting off our toolbox that is used so sparingly. It took a great deal of patience, persistence and a coffee or three – but my wife and I ended the day proud that we had persevered, feeling that little bit more prepared for our baby’s arrival.

Financial planning requires persistence and perseverance. It requires all of those vital ‘fixtures and fittings’ – your savings, investments and pensions. Whilst sticking to the plan can feel painful at times, particularly through the current cost-of-living crisis and the adverse market conditions that we have seen over the past 12 months; enduring through the difficult moments will help you to achieve what you set out to do at the beginning.

I would be lying if I told you that the mental and physical strain of piecing together those jigsaw puzzle-esque pieces of furniture didn’t give me pause, but the sense of achievement from staying the course and completing the task at hand gave me a great sense of achievement at the end of the day. The increased preparedness that I felt for our baby’s arrival after having set up the nursery was profound – and a welcome, cathartic surprise.

If you feel the need to reach out during these testing times, please don’t hesitate to get in contact with us. We are here for you when you need us, to guide you and be the reassuring voice that encourages you to stick to your well-made plans.

And speaking of testing times, I am due to be extremely busy in both my personal and professional life in the very near future – tax year end baby on the way!

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Flat pack feverJemima Thomas2023-12-01T12:12:35+00:00

Inflammatory budget?

Dominic Thomas
March 2023 • 10 min read

Inflammatory budget?

These are the days of being offended. It seems that, unsurprisingly, opposition parties and in particular the Labour party are having kittens about announcements around pensions in the Budget. The criticism is that this helps the rich and not the poor. There is some truth in this of course, but this goes to the political heart of wealth redistribution. In case you are concerned about my political bias, I don’t like any of them.

A million pounds seems like a lot, (it is!) but it’s not as much as it was. The sense we have of £1m is due to ‘anchoring’ as most of us grew up believing that £1m was a lot of money; a millionaire was a very rich person. Search for a home online in the south east and quickly you appreciate that perhaps a million doesn’t buy very much. The TV show “Who Wants to be a Millionaire” with the prize of £1m was first aired in April 1998, almost 25 years ago. £1m then bought you rather more than the same prize fund does today. In fact in real terms, the prize should be adjusted to £1,776,802 … but that doesn’t really fit with the show’s title.

An adult approach is of course to recognise the impact of inflation. I’m going to speculate that politicians know this, but are always selective about the things that vex them. Your house is worth more perhaps because you have done some refurbishment, but also due to inflation. Anyone living in the South East (or indeed swathes of the country) knows that house prices are eye-watering and this is a problem for those trying to buy and for those paying inheritance tax. Inflation in house prices has been higher.

THE PENSION REFORMS WERE REALLY ABOUT NHS CONSULTANTS

The main thrust of the pension reforms are aimed at NHS Consultants, because they have been leaving in droves, because simply by working a normal week they end up owing tax on income that they have not had, in a pension they dont get until 67 at best. Ask any doctor. If we assume health and the NHS is important, it would seem that Labour politicians suggesting that they will reverse pension changes announced in the Spring Budget 2023 have not understood very much at all. If Labour are serious about looking after the health of the nation, we need to rethink pension rules that basically punish them from working. Sadly, few politicians understand the true impact of pension rules.

An alternative would perhaps be to have a simplistic approach, cut doctors and those in similar schemes out of the annual allowance tax calculations entirely. I suspect this would make them happy, it would certainly make my life easier. However the NHS pension is a Defined Benefit or Final Salary scheme, what you do for one, legally you have to do for others. The only other group of people with excellent “old school” final salary pensions are people with long service in big companies or institutions and almost certainly on high incomes – precisely the sort of people that Labour seem to loathe along with their multinational employers. So such a “cut out the problem” isnt actually a solution.

Reality is always an irritation for an MP or political party of any persuasion. A few non-partisan (I hope) facts for you to consider. The last time Labour won an election was in 2005. David Cameron formed a Coalition Government following the election in May 2010 (tax year 2010/11).

Under the new proposals, those earning £200,000 or more do not get an automatic allowance of £60,000 into pensions. This is the threshold at which a lot of calculations need to be done, some doctors will still have to do this. As a result, they may well suffer a reduced annual allowance (how much they can put into a pension).
Those earning £260,000 or more will certainly have a reduced (tapered) annual allowance from £60,000 and will need to do some sums.
Those earning £360,000 or more can only contribute £10,000 gross into pensions, which is less than they can pay into an ISA. So these three facts would suggest that Labour are not happy that people paying 45% tax and have no personal allowance are somehow able to load pensions like a kid in a sweet shop. Its not true.
The tax-free cash from a pension is capped at 25% of today’s lifetime allowance (£268,275). That means those retiring in the future have an allowance that does not keep pace with inflation, meaning in real-terms lower tax-free cash sums will be available. Tax-free cash of 25% of £1.8m or Primary/Enhanced protection, was higher under the last Labour Government than at any point since. Pension income is taxable, it is a future revenue for HMRC. It is also a possible solution to care costs rather than the State paying, I digress.
The last Labour Government had an annual allowance (how much can be paid into a pension) of £255,000, there was no Tapered or reduced Annual Allowance.
The main gripe of Labour about salary austerity wage inflation would appear not to apply to pension benefits being inflation/austerity-repaired since 2010. In short, the LTA would be £1.8m+ inflation, the Annual Allowance would be £255,000+inflation. Tax-free cash from pensions would be higher at a minimum of £450,000+ inflation. Additionally, the £100,000 income threshold for loss of the personal allowance has reduced in real terms. In short they are using the same facts to argue for higher wages, but not higher allowances that benefit… well, taxpayers.
A-Day was introduced by Labour and will turn adult (18) on 6/4/2023. Perhaps adults should be allowed to save for their own financial independence rather than penalised/restricted on both what you can pay in and what you can take out. The original intention of pension simplification and A-Day was to increase the Lifetime Allowance, it started at £1.5m and increased substantially each year until 2010.
The current Government will, from 6/4/2023 take more tax, starting the 45% rate of tax at £125,140 rather than £150,000. There are more people are paying additional rate tax.
The personal allowance is currently £12,570 (up substantially from 2010 but removed from those earning over £100,000. In tax year 2009/10 it was £6,475, the rule to gradually remove the personal allowance for those earning £100,000+ came into effect in 2010/11 set by Labour, in the likely event of a change of Government and in light of the credit crunch.
According to the Bank of England’s own inflation calculator, £100 in 2010 would be £141.10 now. If this were applied the following might be observed.

The £6,475 personal allowance would be lower at £9,155.82 (its actually £12,570, so brownie points for Conservatives?)
£100,000 income before loss of personal allowance would be £141,402 (it’s still £100,000)
The Lifetime allowance of £1,800,000 would be £2,545,248 (its currently £1,073,100 and about to be abolished, this is what they are complaining about)
25% tax free cash would be £636,312 but it is not even half that amount, capped at £268,275, reducing in real terms every year.
The annual allowance of £255,000 would have become £360,576, yet apparently it is act of serving the wealthy to increase it from 6/4/23 from £40,000 to £60,000. Note that those “rich people” earning over £360,000 will be able to put in £10,000 as opposed to £4,000 into their pension, which has been the case for several years now. Just for the record someone earning £360,000 pays a lot of income tax.
In Labour’s last tax year, the basic rate of income tax (20%) applied to £37,400 if this had been linked to inflation, it would now be £52,885, the higher rate extended up to £150,000, which would otherwise be £212,104. In short, Conservatives have evidently cut allowances and increased tax

Chancellors of all persuasions have a knack are implying positive changes are their own doing all whilst completely ignoring the impact of inflation. You think you have been paying more tax? Well, clearly you have. We all have paid for the mismanagement of the economy by our underqualified political masters. Despite what is said in the media, even by supposed pension experts, if you earn more than £360,000 you can only place £10,000 into a pension and get tax relief, for the record a minor (child) can place £9,000 into a tax free Junior ISA.

We will have to see if Labour really will win an election and then change the lifetime allowance again. It seems entirely unhelpful to keep messing around with people’s planning for retirement and financial independence, apparently this is democracy in action. It would seem that politicians from both parties do not really like you benefitting from earning more, particularly if you earn between £100,000 and £200,000 or have I missed something? As for the media, well they don’t like you either unless you own the newspaper you are reading.

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Inflammatory budget?Jemima Thomas2023-12-01T12:12:35+00:00

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

Tax year ending

Dominic Thomas
Feb 2023 • 12 min read

Tax year ending!

There are not many weeks left of the 22/23 tax year, which ends on Wednesday 5^th April. As a brief reminder of the key issues, I have done a quick summary … if you are not sure of what you have used or what you can use, please get in touch with us as soon as you can.

PENSIONS

Everyone under the age of 75 can contribute £2,880 into a pension and get basic rate tax relief, irrespective of any income. This is as close as it gets to ‘money for nothing’
The annual allowance of £40,000 applies to those with incomes of £3,600 – £240,000. You and an employer may contribute up to 100% of your earned income (capped at £40,000) between you
Those earning over £240,000 need to be careful; your allowance reduces by £1 for every £2 of income over £240,000 until it reaches £4,000 – which includes any employer payments

ISAs – INDIVIDUAL SAVINGS ACCOUNTS

Any adult can invest up to £20,000 over the course of the tax year into an ISA which grows free of income tax and capital gains tax
Those aged 18-40 can use a Lifetime ISA allowance of £4,000 if this is for a deposit on a first ever home. The Government will add £1,000

CAPITAL GAINS

If you are selling an asset / investment (which would include rebalancing them) this triggers capital gains. The 22/23 allowance is £12,300 of gains before you pay any tax, but this is falling in 23/24 to just £6,000 and then £3,000 the following tax year. So if you are going to do this anyway, I would encourage you to get on with it – perhaps you have some shares that you don’t really want …
Trusts also pay capital gains, but only have half of the personal allowance, so even more incentive to take profits and rebalance
You can delay payment of capital gains tax using some investments (ask/see below)

INCOME

If your income exceeds £100,000, you begin to have your personal allowance of £12,570 reduced by 50p for every £1 above £100,000. The personal allowance is the amount of income taxed at 0%. So it would be prudent to have bonuses paid into pensions for example
Dividends – the first £2,000 of dividends is tax-free in 22/23
Interest for non or basic rate taxpayers is 0% on the first £1,000 of interest (savings allowance) and £500 for higher rate taxpayers. Additional rate (45%) taxpayers don’t get the allowance. As some deposit accounts now pay 3% or 4%, you may be drawn into this (a higher rate taxpayer only needs £16,666 in savings earning 3% interest of £499. You need to declare all income to HMRC through self assessment
If you really must insist on a cash ISA (please only for ‘short-term parking’ of money) then this would ensure the interest is tax-free, but rates on cash ISAs are much lower than savings accounts now
If you are not using your full personal allowance and have investments that provide taxable income, this may be a sensible moment to trigger income that uses your allowance
If you rent a room in your home, there is a tax-free rent-a-room allowance of £7,500

ANNUAL GIVING

You can gift £3,000 to any individual without recourse to tax by the recipient or your estate. If you do any substantial giving please put a scan of a signed note of this on our portal
If you are feeling generous, you are also permitted to gift your newlywed children £5,000 or grandchildren £2,500

SPOUSE ALLOWANCES

If you have a spouse who does not earn up to the personal allowance of £12,570, you can elect to have 10% of this (£1,257) added to your own allowance
Spouses also can benefit from sharing assets and effectively doubling exemptions and allowances

ALTERNATIVES & HIGH-RISK INVESTING

It is generally thought that VCTs, EIS and SEIS are really for more sophisticated investors, about 3% of the population. All are long term in nature – meaning 6-10 years. Unlike your portfolio elsewhere (which – if we are managing it – will be an enormous portfolio of global equities), these are very small by comparison. Do not do these on your own unless you know your Sharpe ratio from your Beta. Unlike the above, the investments below can experience permanent loss:

Venture Capital Trusts

Tax-free income from your investment
Tax-free capital gains
Tax relief of 30% on your initial investment (tax reducer)

Enterprise Investment Schemes

30% tax relief on your investment
The ability to defer owed capital gains tax
Loss relief
Exempt from inheritance tax

Seed Enterprise Investment Schemes

50% tax relief on your investment
Reduce your due capital gains tax bill by 50% immediately
Exempt from inheritance tax

DON’T FORGET

Income taxes are tiered. Each slice of your income is taxed at a different rate.

Band	Taxable income	Tax rate
Personal Allowance	Up to £12,570	0%
Basic rate	£12,571 to £50,270	20%
Higher rate	£50,271 to £150,000	40%
Additional rate	over £150,000	45%

Please remember that HMRC will apply penalties for late payment and fines for non-payment which can result in the very worst of punitive measures – a custodial sentence.

As ever, be sure of two things – death and taxes. Neither are terribly welcome.

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Tax year endingJemima Thomas2023-12-01T12:12:37+00:00

PENSIONS AND DIVORCE

TODAY’S BLOG

PENSIONS AND DIVORCE

In 2020 something like 10,500 people shared their pension as part of divorce settlements. Obviously, those finally settling in a divorce last year are likely to have started the process before 2020, so the impact of pandemic lock-ins on marriages is not yet observable with data.

Pensions used to be a regarded as pretty dull, often a “last on the list” of a divorce, but of course their value has been greatly underappreciated.

As global equity markets have risen, the value of a pension fund has also reflected this (or should have) and they have become an increasingly important asset in divorce settlements, second only to the family home.

If you do receive a spouse’s pension as part of a divorce settlement, it would be wise to make some contributions to your own personal pension rather than using for using it for day-to-day expenditure. As the value of pensions has surged in recent years it has become much more difficult to use spare cash to buy an ex-spouse out of their share of a pension. This is a major reason for 2020s high number of split pensions in divorces.

TWO WAYS TO LEAVE YOUR LOVER

There are two different ways that a pension can be shared in a settlement. Firstly, a Pension Sharing Order will mean a direct transfer between one pension pot and another. The second, a Pension Attachment Order will mean the pension pot remains in the same hands as before, but the income derived from it is split.

Sadly, in an understandable attempt to save money many have turned to DIY law and divorce is no exception. Where settlements are undertaken without legal representation, is often likely to create problems. This is because agreements made today may be reopened tomorrow if paperwork is filed incorrectly or is incomplete.

58% TRY A D-I-Y DIVORCE

Naturally, this is more likely than when professional lawyers are involved in proceedings. The caution expressed is warranted because these DIY divorces accounted for 58 percent of all divorce settlements in 2020/21 according to the Ministry of Justice. A striking example of the problems that may arise after DIY divorces came in 2016 when a successful green energy entrepreneur was ordered by the Supreme Court to pay his ex-wife £300,000 years after their split. This was the case because both parties had earlier neglected to waive the right to make more claims against each other. While not so bad for the party receiving £300,000, many may be startled to realise that they may be vulnerable to such claims themselves if they went through a DIY divorce.

I certainly sympathise with the intention to save money, but there is a good reason why there are professionals. DIY is not without significant risks and complete responsibility.

That said, I remain confounded by the lack of attention to cashflow modelling in a divorce settlement. It would make the agreements easier to achieve with clarity about the needs of each party.

If you have a friend that is contemplating divorce suggest they get a proper cashflow done for them. You know where I am!

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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PENSIONS AND DIVORCEDominic2023-12-01T12:13:03+00:00

ARE YOU BEING SCAMMED?

TODAY’S BLOG

ARE YOU BEING SCAMMED?

OK I admit that I am often sceptical about surveys, the sample sizes are often too small to infer anything of significance. However, in this instance, even if the survey is bogus it is certainly worth reminding you about scams – and something that you can and ought to pass on to your friends.

A survey for Liverpool Victoria (LV) found that about 14% of the adult population (about 7.6m adults) have been hit by a pension scam. Double this number were concerned that they might fall prey to a scam (a pension scam to be precise). Half admitted that scams were hard to spot and around 41% wanted help knowing how to do so and how to prevent being scammed.

WHY TARGET A PENSION?

Aside from your home, your pension is probably your largest or most valuable asset. Scammers know this, they also know that the majority of people don’t know much about pensions, find them very dull and full of jargon. They often don’t realise how much they are worth and rarely treat them as though they are the family heirlooms that they are.

As your adviser (if not yet, then get in touch) I have been explaining the importance and value of your pension for many years. You know that we focus on using the most modern pensions to take advantage of pension freedoms and evidence based low-cost investment strategies. It is your future source of income (or a current one) and may well be something you leave to your beneficiaries.

BEWARE THE FREE LUNCH (REVIEW)

However, for those that do not want an ongoing relationship with their adviser, minimising costs is a significant appeal, having a “free” pension review – well music to their ears rather than any recognition of alarm bells. For most of my working life financial advice has been generally touted as free. It isn’t, it never has been and that is frankly the biggest source of all the problems.

COLD CALLING

A friend of mine, Darren Cooke started a lobby in 2016 to end cold calling. Most advisers joined the movement which resulted in the banning of cold-calling about pensions from 2019. Yet it still happens. It is banned, but there you are.

PENSION LIBERATION

There is no such thing, unless you consider liberating your pension from you a form of liberation – I call it theft. You cannot access your pension before age 55 except for a very, very rare number of instances. Safer to assume you cannot.

Moving your pension to a SIPP (Self-Invested Personal Pension) is absolutely fine BUT only if you are using properly regulated funds within it. Not offshore weird stuff like teak farms or storage boxes, car parks or some other daft “asset” that I can actually set on fire.

NEW FREEDOMS, NEW TEMPTATIONS

Taking your pension is much easier than it used to be. There are new (2015) pension freedoms which have made pensions much better than they were. However, with greater freedom has come greater choice and increased responsibility – yours (and mine). A crook will exploit some basic knowledge (rules have changed) pander to misinformed opinions about stock markets “they are risky and lose you money” and will offer something that sounds altogether better – guarantees, no stock market involvement, high returns -much better than your cash and sometimes money now…. All for free.

Sadly, many do not remember the adage “if its too good to be true, it probably isn’t”, fewer still seek out a financial adviser and if they do, may well be befuddled by what restricted or independent means (invariably a restricted adviser will not mention it, even though they are meant to do so clearly). When a regulated adviser provides advice, he or she is liable for it. I can assure you that we take this very seriously as the liability rather unreasonably, extends beyond the grave.

HANG UP

If you have a friend that you think is being scammed or you are approached yourself, hang up the phone and get in touch with me. I have seen too many people get scammed for one lifetime. A good site to check out is the FCA SCAM SMART site.

Dominic Thomas
Solomons IFA

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

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

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

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

ARE YOU BEING SCAMMED?Dominic2023-12-01T12:13:05+00:00

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