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  • On Wednesday (25th November), the Chancellor of the Exchequer delivered his Autumn Statement and spending review. This event allows the government to outline its taxation and spending plans, based on economic projections through to the tax year 2020/21.

    The Chancellor covered a wide range of issues. Below we provide comment on news relevant to savers and those in retirement.

    1. Basic state pension updating
    2. New single state pension amount announced
    3. Personal Allowance and Basic Rate Tax bands increased
    4. ISA subscription limits frozen
    5. Buy-to-let and second home stamp duty land tax
    6. Automatic enrolment timeline changes
    7. Pension tax relief – no changes, yet
    8. Pensions annual allowance changes
    9. Pensions lifetime allowance reduced to £1m

    1. Basic state pension updating

    The basic state pension is only payable to people who reach State Pension Age on or before 5 April 2016.

    The basic state pension increases each year in line with the ‘triple lock’. The triple lock guarantees an increase each year by the higher of the rate of price inflation, the rate of wages growth, or 2.5%. The triple lock is likely to stay in place until the end of this parliament in 2020.

    From April 2016, the basic state pension will rise to £119.30 a week from its current level of £115.95 a week. This represents a rise of 2.9% in line with wage inflation, this being the highest of the three triple lock measures.

    From 6 April 2016, a new state pension will be introduced. This will combine the basic state pension and additional or state second pension (formerly the state earnings-related pension scheme) into one payment.

    2. New single state pension amount announced

    The amount of the new state pension will be £155.65 a week.

    From April 2016, the basic state pension and the additional pension, which is also known as the state second pension or SERPS (state earnings related pension scheme), will be combined into one single payment.

    Anyone who reaches state pension age after 6 April 2016 – that is, men reaching age 65 and women reaching age 63 on or after that date – will receive the new state pension.

    Everyone qualifying for the new state pension will receive a ‘starting amount’, which may be more or less than the amount of the new state pension.

    People whose starting amount is greater than the new state pension will see their pension increase each year in line with inflation, but won’t be able to build up any new entitlement.

    People whose starting amount is less than the new state pension will be able to build up further entitlement by earning additional National Insurance credits.

    3. Personal allowance and basic rate tax bands increased

    From 6 April 2016, the personal allowance – the first part of your taxable income on which you pay no tax – will increase from £10,600 to £11,000.

    The band of taxable income on which basic rate tax is paid will increase from £31,785 to £32,000 on 6 April 2016.

    This means that someone will have to have taxable income of £43,000 in the next tax year (2016/17) before they start paying higher rate tax.

    4. ISA subscription limits frozen

    ISA limits usually increase each year in line with the consumer price inflation (CPI) figure for September. The government can, of course, override these normal increases as they did in July 2014 when raising the limit by £3,480 from £11,520 to £15,000.

    However, in this Autumn Statement, the government has decided to freeze the ISA allowance at £15,240 and Junior ISA allowance at £4,080 for 2016/17.

    5. Buy-to-let and second home Stamp Duty Land Tax (England, Wales and Northern Ireland only)

    The government plans to increase the rate of Stamp Duty Land Tax (SDLT) payable on purchases of buy-to-lets and second homes in England and Wales. This will take effect from 1 April 2016 and be charged on any properties purchased for £40,000 and above.

    The new rates of stamp duty will not apply to the purchase of caravans, mobile homes or houseboats.

    The rates will be as follows:

    Property purchase price Rate of Stamp Duty Land Tax
     Up to £40,000  Nil
     Next £85,000 (the portion from £40,000 to £125,000)  3%
     Next £125,000 (the portion from £125,001 to £250,000)  5%
     Next £675,000 (the portion from £250,001 to £925,000)  8%
     Next £575,000 (the portion from £925,001 to £1.5m)  13%
     Excess over £1.5m  15%

     Scotland has its own Land and Buildings Transaction Tax.

    6. Automatic enrolment timeline changes

    Everyone who is employed and eligible will be automatically enrolled into a pension by 2018, with current minimum contributions set at 1% from the employer and 1% from the employee (before tax relief).

    These rates were due to rise to 2% from the employer and 3% from the employee in October 2017 and again to 3% from the employer and 5% from the employee in October 2018.

    These two increases will now be put back to 6 April 2018 and 6 April 2019 respectively.

    7. Pension tax relief – no changes, yet

    As expected, there was no announcement on pension tax relief, but the Autumn Statement document confirms that an announcement will be made at the March 2016 Budget.

    8. Pensions annual allowance changes

    Although this measure was first announced in the 2015 Summer Budget on 8 July, it’s worth a reminder that these new rules take effect on 6 April 2016. They only affect people with both incomes of £150,000 or more including total (employee plus employer) pension contribution, and income of £110,000 or more, net of total pension contributions.

    9. Pensions lifetime allowance reduced to £1m

    The government announced this change in the March 2015 Budget, but it is worth considering whether you might be affected. This affects the maximum amount that people can withdraw from their pension tax efficiently. The current cap of £1.25m will reduce to £1m from April 2016.

    If you think any of these changes may affect you, please do not hesitate to contact one of our planners here at FMB.

  • 16 November 2015

    Data Protection/Cybercrime

    There’s been quite a lot in the press recently about potential Data Protection Breaches and the stealing of personal information, notably the cyber-attack on telecommunications giant, TalkTalk that took place last month.

    The Data Protection Act was introduced to control how your personal information is used by businesses, organisations or the government. Everyone responsible for using data has to follow strict rules called ‘data protection principles’, ensuring that personal information is:

    • accurate
    • kept safe and secure
    • used for limited, specifically stated purposes
    • used fairly and lawfully
    • kept for no longer than is necessary
    • used in a way that is adequate, relevant and not excessive
    • handled according to people’s data protection rights
    • not transferred outside the European Economic Area (EEA) without sufficient protection

    Here at FMB we have a clear and defined policy that all employees must follow. I appreciate it can get quite annoying when you have to answer questions when you phone companies to ensure you are who you say you are, but at the end of the day this is only done to protect you. We're fortunate enough to know the majority of our clients personally so we know that we're talking to the right person, but at times these checks need to be made.

    If your data gets into the wrong hands, it is surprising how quickly the fraudsters can act. I’ve heard about a case recently (not at FMB fortunately) where a client’s email has been “hacked”, and the hacker had emailed the victim's financial adviser requesting some withdrawals from their investments with the proceeds to go into their 'new' bank account. Fortunately, the adviser was vigilant enough to double check this with the client before proceeding and of course, when phoning them, the client had no knowledge of any such email. In this case, the withdrawals luckily didn’t occur, but the email looked completely genuine and could so easily have been acted on.

    We would always conduct a secondary check when receiving any instructions from a client, especially via email. This may involve sending a written instruction to the clients home address for signature or, at the very least, telephoning the client to confirm authenticity.

    In the technologically advanced world that we live in, it's important to be as meticulous as possible when it comes to protecting your personal data. Here are some steps you can take to safeguard yourself:

    • Change your passwords regularly.
    • Limit any online banking/shopping to personal PCs only. If you have to use a public PC, ensure you've logged out correctly when finished.
    • Shred or burn correspondence that contains any personal data.
    • Act with caution when opening any links or attachments within emails. If you have any doubt, contact the company to ensure its authenticity before opening.
    • Never provide passwords/logon details via email.
    • Password protect personal documents if sending as attachments.
    • Never give anyone your passwords, and if you must write them down ensure they are in a secure place.

    We can never be 100% protected, but if we take some precautions, it will make it harder for the fraudsters to steal our data.

  • Angela at the Grand Canyon 'Skywalk'
    Caption: Angela at the Grand Canyon 'Skywalk'
    Angela with her son, Simon, and the bride, Sarah
    Caption: Angela with her son, Simon, and the bride, Sarah

    October was an extremely eventful month for me. It started with a very exciting trip to Las Vegas with my good friend, Barbara. Her son, Robert, was getting married out there on 3rd October to his partner, Samantha. It was unlike any wedding I've ever attended before, with them exchanging their wedding vows in the middle of the Nevada Desert, at a location called The Valley of Fire. The Valley acquired its name by the fact that the sunlight throws swirls of patterned colours onto the red sandstone rocks.

    It was truly exciting to attend a wedding outdoors in a geologically scenic part of the world. To add to it, the Minister who married them was a previous Hollywood Stuntman and had also been the voice of Big Bird in the 1980's children’s show, Sesame Street - which was rather surreal! After the ceremony, a limo took us back to The Vegas Strip where we enjoyed a celebratory meal at Caesar’s Palace.

    After all the wedding festivities had taken place, it was only right that I explored the sights Nevada had to offer. I went on an excursion to The Hoover Dam, an impressive feat of engineering and far more exciting than I had expected, which is always a good thing.

    No trip to Vegas would be complete without seeing The Grand Canyon, one of the world's top five must-see destinations. The sheer area the canyon covers is mesmerising, with rock formations as far as the eye can see. This is a constantly changing landscape, as the North American tectonic plate is moving west and colliding with the Pacific plate, together with ongoing water erosion. While I was there, I had arranged a ‘Skywalk’ which allows you to take in more of the landscape from a glass-floored and glass-sided walkway that juts out part way across the Canyon. Albeit a bit unnerving at first, being stood on glass looking down to the river 2,000 feet below, I thoroughly enjoyed it and would recommend it to anyone!

    After returning from my holiday, I just had one week until my son’s wedding on 17th October (cue all of the last minute preparations)! Family and friends came from many parts of England, as well as further afield, namely Germany and Italy to be with them on their special day. The ceremony took place at St Charles Church in Grange-over-Sands, and the reception was held at The Netherwood Hotel. All the meticulous planning paid off as everything went smoothly and everybody thoroughly enjoyed their day, in particular, Simon and his bride, Sarah. Even the weather was superb, and I think even warmer than what we'd had in summer!

    Now that we are well into November, life is almost back to normal - before the Christmas season begins at least. I am hoping for a relatively stress-free Christmas this year as I have invited myself to Simon and Sarah’s house. I suggested it would be a good idea for them to cook for their first married Christmas, and they took the bait!

  • So the chancellor made his Summer Budget speech on 8th July. Good News - Inheritance Tax allowances are increasing, Bad News – the new rules are by no means simple and are causing widespread confusion.
    So what is the present situation?

    Currently all individuals are entitled to pass on £325,000 of assets without any tax payable. Anything over this amount is taxed at a whacking 40% - therefore an estate of £400,000 would incur Inheritance Tax of £30,000 (£75,000*40%).

    Married couples and civil partners are allowed to pass on their estate to each other and since October 2007 the surviving partner can now use both tax-free allowances, providing one has not been used on the first death. It should be noted that this does not happen automatically and must be claimed by the personal representatives of the second spouse / civil partner to die.

    So what’s new?

    The new proposed changes will bring in a new additional allowance for home owners known as the “Residence Nil Rate Band”. This additional amount of £175,000 per individual means that the first £500,000 of an estate is tax-free. As applies to the main Inheritance Tax threshold the personal representatives of a surviving partner can use both of the new allowances providing one has not been used on the first death. For married couples and civil partners this can mean that a combined estate of £1,000,000 can be left free of tax.

    This all seems wonderful. However, as is so often with tax legislation, this is not effective immediately so you may want to delay taking your last breath for a few years yet. The new Residence Nil Rate Band won’t come in until April 2017 and even then it is being introduced on a gradual basis, as follows:-

    April 2017/18   £100,000
    April 2018/19   £125,000
    April 2019/20   £150,000
    April 2020/21   £175,000

    For any individuals who die before the new Residence Nil Rate Band is introduced in 2017, it can be transferred to the surviving spouse, whose beneficiaries can then make use of both of the increased allowances. It should be also noted the new additional allowance is only available for individuals who own their own home and leave it to direct descendants, such as children, grandchildren and foster children. Adopted and Step-children are also included.

    Larger estates worth more than £2 million will have the Residence Nil Rate Band reduced at a rate of £1 for every £2 above the £2 million threshold. The new allowance and the taper threshold will be increased in line with inflation (CPI) from 2021-22. The existing nil rate band of £325,000 will remain frozen until at least 2020-21.

    Estates that do not have a home will not qualify for the new allowance. The exception to this is whereby a home is sold on or after 8 July 2015 and the equivalent value is passed to direct descendants. To qualify the house must have been the main home at some point. For estates with more than one house only one will qualify. The value of the house is also relevant if it is worth less than the Residence Nil Rate Band. For example assume an individual dies after April 2022 when the full allowance has been introduced and the estate is worth £500,000 but the home is worth just £100,000. In this situation the new Residence Nil Rate Band is reduced to £100,000, giving a total allowance of £425,000.

    The ownership of the house is also an issue because in order to qualify the deceased must have had an interest in the property. So if a couple’s home is owned in the husband’s sole name and the wife dies, then the estate would not benefit from the increased allowance on the wife’s death. It would therefore be prudent to consider transferring a property from single to joint names to ensure both spouses qualify. It is important to note that where an individual dies before it is introduced in April 2017, the Residence Nil Rate Band is fully transferable to the spouse, regardless of whether the deceased spouse owned a share in the property.

    So this is a most welcome boost for homeowners currently caught by the Inheritance Tax rules but care needs to be taken to ensure you qualify. As always taking appropriate advice and careful planning will pay dividends.

  • As autumn blows in and the end of 2015 gets nearer, I have been reflecting on my first year at FMB; it’s been exciting, challenging and a massive learning curve for someone like me that wasn’t from this industry.

    As someone who has had ‘a bit of financial advice’ over the years, I think the biggest eye-opener for me is the massive difference between what I’d experienced when I’d had limited financial advice and what we do for our clients here at FMB.

    We provide true holistic financial planning, which if I’m honest, I wasn’t 100% sure what this meant a year ago, but the more I started to learn, the more I started to think about my own financial situation. I started to wonder how I’d got to this stage in my life and not realised how much help I needed – I think I’d been living in a bit of ignorant bliss!

    To a non-financial expert; I found the complicated jargon and the constant changes in legislation completely baffling! Yes, both my husband and I had a pension, but we had no idea what age we would realistically be able to retire or even if we were paying enough into them to be able to enjoy the lifestyle we wanted in retirement. We also had no clue as to what would happen to our pensions if either of us died before we retired - or after we retired for that matter. We had several other policies but didn’t fully understand what they were for, or even if we still needed them.

    I think we were in a similar position as many our age; we knew we needed to do ‘something’, but weren't really sure what, or even where to start. I started to feel a bit nervous – I was in my late forties and needed to be sure that my husband and I had our finances in order before it was too close to retirement to do anything about it. I also sadly lost one of my friends to cancer at the age of 40 a few years ago and despite having some life insurance in place, his family struggled financially afterwards without his regular income - this is something that had weighed on my mind since.
    I decided that I needed to do something about it and so, arranged a meeting with one of the FMB financial planners to go through it all.

    It was such a positive experience; we talked about our lifestyle now and what we would like in the future and discussed any concerns we had with protecting our income in the unlikely (but possible) event that anything was to happen to either of us. Our planner also looked at our income and expenditure and gathered some basic information about any existing policies we had.

    Behind the scenes, our planner contacted all our existing providers to obtain full policy details and after analysing this and all the notes he collected at the initial meeting, he created a bespoke financial plan to satisfy our current objectives and goals for the future. When we met a few weeks later, where he presented the plan to us and went through his findings and recommendations in detail.

    Being the Practice Manager at FMB, I now know how much time and labour goes into creating a financial plan. Yes, there is a cost to it, but I know that it’s money well-spent knowing that a qualified and professional financial planner has removed all of the worry, hassle and confusion for us. As well as providing us with a realistic and holistic plan to help us maintain the lifestyle we currently have and setting us on the right path to achieving the goals we have for the future.

    The whole thing was in an easy to understand, non-jargon language and both my husband and I came out of that meeting feeling so much more assured and confident with where we were and what we needed to do to plug the gaps. Not to mention that we found out that if we were to carry on in exactly the same way as before, we were on track to retire a whole seven years before we were expecting to – fantastic!

    Going forward, we will meet with our planner each year to review our financial plan. I feel confident knowing that if there are any bumps in the road along the way (and let’s be honest life does occasionally like to throw a few spanners in the works), our planner can make any necessary tweaks and changes to get us back on track.

    It’s so much easier getting up in the morning to come to work for a company that provides such a worthwhile and invaluable service to our clients - something I am now a big advocate for and firmly believe in.

    If you’ve never experienced this type of service before, why not have a chat to one of our advisors to see if they can help you. We offer a free, no-obligation initial meeting, so as the saying goes - you’ve got nothing to lose and everything to gain!

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