Public Sector Pay Rise

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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 RiseDominic2018-07-24T16:46:11+01:00

Three Billboards

Perhaps Three Billboards Outside Ebbing Missouri is the ultimate signposting movie ever made. It certainly doesn’t do much to alter any preconceptions about certain segments of American society, however it is a work a fiction, albeit with an alarming gritty realism. However, despite the gasps of shock within the audience at some utterly backwards attitudes. The most striking aspect about this film for me was the lack of any action.

In the film various characters are assaulted, verbally and physically, yet witnesses basically remain as bystanders, doing absolutely nothing, apart perhaps, from a disapproving “tut”. I comfort myself that this is fictional, it’s a movie, people don’t’ stand and gawp, doing nothing… do they? I mean I know we are all able to witness terrible scenes from around the world in a voyeuristic sense, but we aren’t right there on the spot, we are unable to immediately intervene… but if that happened within our own home, street or park, we would intervene right? To me, the lack of engagement or outrage was worse to witness than the racism or violence itself.

Engage with Other

It is surely our involvement and engagement, that provide us with a sense of our humanity. This was demonstrated in a CCTV clip that I saw this week of a person saving the life of a man about to throw himself in front of a train. Many do care and do get involved, but some seem to be happy to be mere bystanders in life. Maybe this is what the Director intended, given the politics of the day, perhaps this is a commentary on those that make claims about a President and turn a blind eye, frequently, to the continuous blatant hypocrisy. The movie certainly has the title and whiff of a “based on true events” tale. In short, I guess they could be, which is deeply worrying. Indeed, the very premise of the story is around the lack of action by the local police.

This is Hollywood, not Missouri… right?

As for the film itself, there are two very strong performances. The lead character Mildred (Frances McDormand 60) gives a very “real” depth to the characterisation and Sam Rockwell (49) nails his performance of Dixon, the cop you hope to never meet. There are some notable choices for the cast, Abbie Cornish (35) plays the wife of Police Chief Willoughby, (Woody Harrelson 56) she was 3 when he started his role in the bar sitcom “Cheers”. The white middle-aged men are hopefully too clichéd with Mildred’s former husband (wife/probably anyone-beating) Charlie, (John Hawkes 58) now with Penelope, (Samara Weaving 25) a woman considerably younger and more the age of their murdered daughter Angela (Kathryn Newton 20). Perhaps this too is deliberate characterisation of men unable to cope with ageing.

One of the talking points of the movie will likely be the actions of the Police Chief Willoughby, who takes a view on terminal illness and sets his mind to dealing with loose ends. His words to Dixon and the subsequent events seem unlikely and have caused controversy in various circles. However plausible, clearly each character is responding differently to stress, turning to their known and learned patterns from some rather poor parenting, at least that is what I assume it is.

Serious Stress Test

How we respond to stress when it arrives is hard to predict. However much we plan or prepare, the reality can be different. Life can provide us with unrelenting strain, serious illness, financial ruin, loss of a loved one – much of our ability to control these things is as fictional as the movies. Yet, we can plan, doing so in our more thoughtful moments, so that we can fall back on who we are, not what our surging biology deems us to be in the crucible of the furnace. It is easy to put off difficult things in life, we may get warning signs – even billboards, but sometimes even three at once isn’t enough in this modern twist on “don’t kill the messenger”.

So here I am…. have you got your stuff together?

Here’s the official trailer, the movie is tipped to do well in the award season, partly because it seems to reflect the moment in America today. Oh… and the language is certainly….. colourful.

Dominic Thomas
Solomons IFA

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Three BillboardsDominic2018-01-19T16:14:06+00:00

Not So Keystone Cops

Not so Keystone Cops

The danger of watching videos on social media or indeed many films or TV shows is that you can easily form the impression that the Police are fumbling in the dark without much of a clue. Whilst errors or judgement and malpractice are often correctly brought to light, it is rather foolish to assume that this is indicative of the majority.

It would appear that Abid Hussain was under the illusion that the Police were simply not up to the task of catching him for the crimes he committed – namely money laundering and fraud (at the least). Mr Hussain contacted the police in May 2016 claiming that a property that he owned in Acton had been sold without his knowledge or permission for £480,000. The case quickly landed on the desk of officers from the Complex Fraud Squad (FALCON).

The Backfire

The Police soon established the truth, that in fact Mr Hussain had sold the property through a legitimate, albeit complex process. Perhaps hoping to create a web of intrigue, Mr Hussain then told the Police that he had received £770,000 into a bank account, which bore his name, but of which he had no knowledge. However, this was money from a re-mortgage on another property that he owned – that he had initiated (which he had denied in an attempt to further deceive the lender). CCTV evidence of Mr Hussain meeting a solicitor to sign the paperwork was used to disprove his version of events.

Money Bags

It also transpired that CCTV was also used to confirm that he used some of the money that he took from the sale and mortgage to buy a reasonably heavy 15kg of gold bullion, (20kg is the typical airline hold baggage allowance) which it is alleged he took with him to Pakistan shortly thereafter. Having been arrested in the summer of 2016 he was found guilty and finally sentenced on Friday to 5 years and 9 months in prison. The investigation into what happened to the gold bullion continues.

In essence, Mr Hussain has provided a false witness statement to the Police (who presumably he believed to be inept) and then reported transactions as fraudulent (when they weren’t) in order to make them void and leave the property company and lender at a loss. Long story short – he blew the whistle on himself, assuming that the UK police were more Keystone Cops than Sherlock Holmes. So congratulations to DC Richard Kirk who led the investigation of the £1.25m fraud… probably rather elementary.

Dominic Thomas
Solomons IFA

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Not So Keystone CopsDominic2017-08-22T11:56:17+01:00