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When you give up work, your pension is likely to play a key role in creating an income. So, an essential part of retirement planning is often deciding how you’ll access your retirement savings.

Last month, you read about the importance of setting out your retirement lifestyle goals and how financial planning could help. Your income will play a key role in whether you can turn many of them into a reality. So, read on to discover what your options are when you want to withdraw money from your pension.

If you have a defined contribution (DC) pension, you’ll retire with a pot of money that you can access in several ways.

While the freedom to decide how and when to withdraw money from your pension could help you create an income that suits your needs, it also means you need to understand your options. You’ll be responsible for ensuring your pension creates financial security for the rest of your life.

Your pension options explained

1. Taking a lump sum

You can withdraw lump sums from your pension as and when you choose to.

This could be a good option if you have one-off expenses. For instance, if you’re taking on a home renovation project or want to lend financial support to a loved one.

However, you should keep in mind that pension withdrawals may be liable for Income Tax. While you can take up to 25% of your pension as a tax-free lump sum, withdrawals above this amount may be added to your income. As a result, taking a large lump sum could unexpectedly push you into a higher tax band.

2. Using flexi-access drawdown

Flexi-access drawdown allows you to take a regular income from your pension that you’re in control of. You could increase or decrease the income to suit your needs.

To ensure you don’t run out of money in your later years, you might want to consider factors like life expectancy or how inflation could affect your income needs over the long term. If you take too much from your pension, there’s a risk you could run out in the future. So, thinking about how you could create long-term financial security may be important.

3. Purchasing an annuity

You could also use the money held in your pension to purchase an annuity, which would then provide you with a regular income. Retirees often choose an annuity that will pay an income for the rest of their life, but you could also select an annuity that lasts for a defined number of years.

An annuity can be valuable if you’re worried about running out of money or don’t want the responsibility of managing your pension. However, it’s less flexible than other options.

Mixing your 3 pension options

You don’t have to choose a single way to access your pension – you can mix the options.

So, you could take a lump sum from your pension to kickstart your retirement plans. Then you might use a portion of the remaining amount to purchase an annuity to create a reliable income you’ll receive for the rest of your life. The rest of the money you could access flexibly using flexi-access drawdown.

Leaving your money in a pension could make financial sense

In most cases, you can access your pension when you’re 55, rising to 57 in 2028. However, you don’t have to make withdrawals at any point during your retirement if you don’t want to.

In fact, leaving money that you don’t need in your pension could make financial sense.

A pension is a tax-efficient way to invest. So, leaving your money in your pension to be invested in a way that’s appropriate for you could help it grow further.

Money that’s held in your pension could also be passed on to your loved ones when you die. Usually, pension savings aren’t considered part of your estate for Inheritance Tax (IHT) purposes. Instead, beneficiaries may pay Income Tax on the money, which could be a lower rate depending on their other sources of income. So, holding money in your pension may form part of your long-term estate plan.

You should note that pensions aren’t usually covered by your will. You will need to complete an expression of wishes with your pension provider to state who you’d like to receive your pension if you pass away.

Contact us to talk about your retirement plan

If you have any questions about how to access your pension or other aspects of your retirement plan, please get in touch. As financial planners, we could work with you to create a plan that’s tailored to your goals and assets.

Next month, read our blog to discover how financial planning could help you bring together the different strands of retirement planning so you can enjoy the next chapter of your life.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The 2024/25 tax year is just a month away, and chancellor Jeremy Hunt has delivered his 2024 Spring Budget, outlining the government’s plans for the next fiscal year and beyond.

With a general election looming – prime minister Rishi Sunak has said he will call it before the end of the year – the chancellor claimed that the government had met the prime minister’s three economic priorities laid out at the start of 2023, having:

Halved inflation, down from highs of 11% last year to 4% in January 2024
Kept debt falling in line with fiscal rules
Grown the economy, fully 1.5 percentage points higher than expected.

Amid this backdrop, the chancellor called this a “Budget for long-term growth”, with goals to “deliver more jobs, better public services, and lower taxes”.

Read on for a summary of some of the key measures and announcements from this year’s Spring Budget, and what they might mean for you.

National Insurance will be reduced by another 2%

Arguably the biggest announcement from the chancellor’s Budget this year is that the main rate of Class 1 National Insurance contributions (NICs) will be reduced by a further 2%.

During the Autumn Statement in November 2023, the chancellor reduced the main National Insurance rate by two percentage points, falling from 12% to 10% from 6 January 2024.

Now, this main rate will fall a further two percentage points to 8%. Meanwhile, the main rate of Class 4 self-employed NICs will fall to 6%. Both changes will take place from 6 April 2024.

According to the OBR, an employed individual with average earnings of £35,400 will save £450 a year thanks to this cut, and £900 when including the previous cut in November 2023.

Furthermore, there will be no further requirement to pay Class 2 NICs from 6 April 2024, as outlined in the 2023 Autumn Statement.

However, offsetting these tax cuts is the news that the Income Tax Personal Allowance and tax bands will remain frozen until 2028.

As wage inflation increases, this could see many taxpayers pulled into a higher tax band over the next four years, an effect known as “fiscal drag”.

The High Income Child Benefit Charge will be reformed

Having been a contentious issue for some time, the chancellor confirmed reforms to the High Income Child Benefit Charge.

This tax taper effectively reduces the amount received from Child Benefit for those earning £50,000 or more. Those earning £60,000 or more must repay all Child Benefit or opt out from payments entirely.

Crucially, this rule only applies to one higher earner per household. So, a household with one person earning £55,000 and the other £10,000 would be affected by the charge, while two people each earning £49,000 would not be affected at all.

So, by April 2026, the government will introduce a household income charge, assessing both earners’ income against the threshold, rather than just an individual higher earner’s.

Furthermore, from 6 April 2024, the £50,000 threshold will be raised to £60,000, and the top taper to £80,000. According to the government, this will see half a million families gain an average of £1,260 in 2024/25.

The higher-rate Capital Gains Tax charge for residential property transactions will be reduced

To promote the housing market and encourage more property transactions, the chancellor announced a reduction in the higher rate of Capital Gains Tax (CGT) for gains on residential property, excluding main residences.

Under the current rules, the standard higher CGT rate is 20%, with an additional 8% charged on residential property transactions. This will be reduced from 28% to 24% from 6 April 2024, encouraging landlords and second-home owners to sell their properties, with the aim of increasing the housing supply for first-time buyers in particular.

The 18% charge for gains made in the lower rate band will remain unchanged.

On top of this, the chancellor also abolished the Furnished Holiday Lettings (FHL) tax regime, removing an incentive for landlords to offer short-term holiday lets rather than long-term residential lets, and Multiple Dwellings Relief, a bulk purchase relief in the Stamp Duty regime.

Changes to how and where pension funds are invested

As part of the chancellor’s goal to channel more capital into UK equity markets, the government is working alongside The Pensions Regulator (TPR) and Financial Conduct Authority (FCA) on the “Value for Money” pensions framework to “ensure better value from defined contribution (DC) pensions, by judging performance on overall returns, not cost”.

This looks to address where pension schemes prioritise short-term cost savings at the expense of long-term outcomes, as well as where savers may be prevented from receiving value because of a scheme’s current scale.

The FCA and TPR will have full regulatory powers to close schemes from new employer entrants or wind them up entirely if the schemes are “consistently offering poor outcomes for savers”.

The government will also seek to work with the FCA to increase UK equity allocations in DC pensions, asking pension funds to publicly disclose where this money is invested. These requirements will also extend to Local Government Pension Scheme funds.

Furthermore, the chancellor confirmed the government’s commitment to exploring a lifetime provider model for DC pensions, previously referred to as the “pot for life” in the 2023 Autumn Statement.

This would give pension savers the right to choose the pension scheme that their employer pays into, rather than being auto-enrolled into a scheme chosen by the employer.

Investments in UK-focused assets will be encouraged with the new “UK ISA”

As well as expanding pension investments into British businesses, the chancellor intends to create a new UK ISA, offering an additional tax-efficient allowance of £5,000 for investment in UK-focused assets. This is another move that aims to channel more investment into UK equities.

This will be on top of the existing ISA allowance, which remains at £20,000 for the 2024/25 tax year.

Other key changes

Fuel and alcohol duty remain frozen

Fuel duty will remain frozen for another 12 months instead of increasing in line with inflation, and the 5p cut to fuel duty, originally set to expire on 23 March, has been extended for a further 12 months. Government figures claim that this tax cut will save an average car driver £50 in 2024/25.

Meanwhile, the alcohol duty freeze will be extended until February 2025, benefiting 38,000 pubs across the UK.

Tax rises will bolster the government’s coffers

While this Budget has seen many tax cuts, the chancellor also announced measures that will see certain taxes increase.

Firstly, the government is abolishing the current tax system for UK non-doms, and replacing it with a “simpler and fairer” residence-based system.

From 6 April 2025, anyone who has been resident in the UK for more than four years will pay UK tax on any foreign income and gains, provided they have been non-tax resident for the last 10 years. In 2028/29, this will raise £2.7 billion. There will be transitional arrangements for those who have already benefited from the previous system.

There will also be a new levy on vaping products from October 2026, raising £445 million in 2028/29. Meanwhile, to encourage vaping over smoking, tobacco duty will also increase in October 2026, raising a further £170 million in 2028/29.

Household support fund extended

There will be an extra £500 million to extend the Household Support Fund in England from April to September 2024. This fund provides support with essentials such as food and utilities to vulnerable households.

Full business expensing extended, and increased to VAT thresholds

After initially making full business expensing permanent in November 2023, the chancellor announced plans to extend this to leased assets, when fiscal conditions allow for it. Draft legislation is to follow.

Furthermore, the chancellor increased the VAT registration threshold for small businesses from £85,000 to £90,000, and the deregistration threshold from £83,000 to £88,000 from 1 April. These thresholds are frozen at these levels.

Get in touch

If you have any questions about how the Spring Budget will affect you and your finances, please get in touch.

All information is from the Spring Budget documents on this page.

The content of this Spring Budget summary is intended for general information purposes only. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice.

While we believe this interpretation to be correct, it cannot be guaranteed and we cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained within this summary. Please obtain professional advice before entering into or altering any new arrangement.

With one eye on a forthcoming general election, the chancellor has announced a Budget aimed at generating long-term growth, with “more investment, more jobs, better public services and lower taxes”.

While the headlines will inevitably focus on Jeremy Hunt’s cut in National Insurance contributions (NICs), many less headline-grabbing messages will affect millions of families and businesses.

Read on to find out who were the winners and losers from the 2024 Spring Budget.

Winners

Working people

The chancellor said that his Budget gave “much-needed help in challenging times”, adding “if we want to encourage hard work, we should let people keep as much of their own money as possible”.

Calling NICs a “penalty on work”, Hunt announced a cut in Class 1 NICs, from 10% to 8% from 6 April 2024. These cuts follow a similar reduction in the rate of NICs announced in the 2023 Autumn Statement.

The chancellor says that these cuts, in conjunction with the reductions announced in the 2023 Autumn Statement, would mean the average worker on £35,400 would benefit from a tax cut of more than £900 a year.

He also announced that, instead of falling from 9% to 8% as previously announced, Class 4 self-employed NICs would fall from 9% to 6% from 6 April 2024. This is in addition to the removal of the requirement to pay Class 2 NICs from the same date.

He added that 2 million self-employed people would benefit, with the average self-employed person earning £28,000 seeing a tax cut of around £650 a year.

The Treasury say that this means UK taxpayers face the lowest combined basic rate of Income Tax and NICs since the introduction of the modern structure of National Insurance in 1975.

Parents earning Child Benefit

The chancellor highlighted the “unfairness” in the current Child Benefit system that means a household with two parents each earning £49,000 a year will receive Child Benefit in full, while a household earning less overall but with one parent earning more than £50,000 will see some or all of the benefit withdrawn.

Consequently, he announced a plan to move the High Income Child Benefit Charge to a “household” system from April 2026.

In the interim, from April 2024, the High Income Child Benefit Charge threshold will rise from £50,000 to £60,000 while the top of the taper will rise to £80,000. This means that the full amount of Child Benefit will not be withdrawn until individuals earn £80,000 or more.

The government estimates that nearly 500,000 families will gain an average of £1,260 in 2024/25 as a result.

The hospitality industry and their customers

In a move designed for “backing the Great British pub”, the chancellor has extended the freeze on alcohol duty. The freeze was due to end in August 2024 but has been extended to February 2025, benefiting 38,000 pubs across the UK.

The Treasury says that this results in 2p less duty on an average pint of beer than if the planned increase had gone ahead.

This measure will cut costs for breweries, distilleries, restaurants, nightclubs, pubs, and bars.

Motorists

The chancellor argued that lots of families and sole traders depend on their cars and so wanted to continue supporting motorists.

Consequently, he maintained the temporary 5p cut in fuel duty and froze the duty for another 12 months.

Hunt said that this would save the average car driver £50 in 2024/25.

Small businesses

In a boost to small businesses, Hunt announced that, from 1 April 2024, the VAT threshold would increase from £85,000 to £90,000 – the first increase in seven years.

ISA and National Savings and Investments savers

To encourage investment in small British businesses, the chancellor announced his intention to launch a new “UK ISA”.

This will enable savers to invest an additional £5,000 in a tax-efficient wrapper, increasing the total ISA subscription limit to £25,000 – assuming these additional monies are invested exclusively in UK firms.

The government will consult on the details.

The chancellor also announced that National Savings & Investments (NS&I) will launch a British Savings Bonds product that will offer consumers a guaranteed interest rate, fixed for three years.

This new NS&I product will be brought on sale in early April 2024.

Creative industries

From film to theatre and music to art, UK creative excellence is unmatched.

To support the UK’s creative industries, the chancellor announced a further £1 billion package of additional tax relief over the next five years, to boost inward investment and attract production companies from around the world.

Hunt also confirmed £26.4 million of support for the globally renowned National Theatre.

Pensioners

The Spring Budget also committed to supporting pensioner incomes by maintaining the State Pension “triple lock”.

In 2024/25, the Treasury say that the full yearly amount of the basic State Pension will be £3,700 higher, in cash terms, than in 2010.

Sellers of second homes

Capital Gains Tax (CGT) is often due when an individual sells a second home – such as a buy-to-let property or holiday home.

In a move designed to increase the number of transactions, and consequently increase the revenue from the tax, the chancellor announced he would reduce the higher rate of property CGT from 28% to 24%.

The lower rate will remain at 18% for any gains that fall within an individual’s basic-rate band.

Losers

Vapers and smokers

In an attempt to discourage non-smokers from taking up vaping, and to increase revenue for the NHS, the chancellor announced a new duty on vaping.

The Treasury says this will raise £445 million in 2028/29.

There will also be a one-off tobacco duty increase of £2 per 100 cigarettes or 50 grams of tobacco from 1 October 2026 to maintain the current financial incentive to choose vaping over smoking. The government say this will raise a further £170 million in 2028/29.

Non-economy airline passengers

The chancellor announced that rates for individuals flying premium economy, business, and first class and for private jet passengers will increase by forecast Retail Prices Index (RPI) and will be further adjusted for recent high inflation to help maintain their real-terms value.

Some “non-doms”

In a move borrowed from Labour, the chancellor announced the abolition of the “remittance basis” of taxation for non-UK domiciled individuals (“non-doms”) and a replacement simpler residence-based regime.

Individuals who opt into the new regime will not pay UK tax on any foreign income and gains arising in their first four years of tax residence, provided they have been non-tax resident for the last 10 years.

This new regime will commence on 6 April 2025 and applies UK-wide – and transitional arrangements will apply.

The Treasury says that this measure will raise £2.7 billion in the year 2028/29.

Owners of holiday lets

The chancellor said that the current tax regime creates distortion, meaning there are not enough properties available for long-term rental.

Consequently, he intends to abolish the Furnished Holiday Lettings (FHL) tax regime from 6 April 2025, meaning short-term and long-term lets will be treated the same for tax purposes.

Anyone subject to fiscal drag

Freezing tax thresholds increases the amount of tax that individuals and businesses pay without nominal tax rates actually increasing. Called “fiscal drag”, this results in additional revenue to the government as more taxpayers are “dragged” into paying tax, or into paying tax at a higher rate.

Freezes in a range of thresholds mean that millions of individuals and businesses will face “fiscal drag” in the coming years.

For example, while the increase in the threshold at which small businesses and self-employed people have to register for VAT will be welcome to many businesses, the fact that the threshold had been frozen for seven years means that more businesses will likely have been forced to register for VAT than if the threshold had risen each year in line with the cost of living.

Similarly, freezes to the Income Tax Personal Allowance and thresholds mean more people will either start to pay tax, or pay more tax at a higher rate, than if these thresholds had risen in line with inflation.

Get in touch

If you have any questions about whether you are a winner or a loser from the Spring Budget, and how it will affect you and your finances, please get in touch.

All information is from the Spring Budget document published by HM Treasury.

The content of this Spring Budget summary is intended for general information purposes only. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice.

While a new year started, many of the key factors affecting economies and markets in January were the same as those in 2023, namely high levels of inflation and recession fears.

The World Bank warned the global economy is set to slow for a third successive year in 2024 and is on course for the weakest half-decade of growth since the early 1990s. It added there was a risk that the 2020s would be a “wasted” decade following a series of setbacks, including the pandemic.

Tensions in the Red Sea are also affecting businesses and economies around the world. The German Economic Institute said global trade fell by 1.3% in December as a result of attacks on merchant ships. The volume of container transport in the Red Sea fell by more than half at the end of 2023 and could have implications for many businesses relying on goods.

Read on to find out what else affected markets at the start of 2024.

UK

There was positive news when the Office for National Statistics (ONS) released the latest GDP figures at the start of the year. November posted growth of 0.3%, after a contraction in October. However, experts warned the UK was still at risk of a technical recession – defined as two consecutive quarters of negative growth.

Yet, EY Item Club said it expects UK economic growth to rebound in late 2024 as both inflation and interest rates are predicted to fall.

Data indicates that inflation in the UK is stabilising, but it’s still above the Bank of England’s (BoE) 2% target. In the 12 months to December, inflation was 4%, a slight increase on the 3.9% recorded in the previous month.

Higher interest rates to tackle inflation have been placing pressure on both households and businesses, but they’ve also presented an opportunity for investors with government bonds becoming more attractive. The sale of £2.25 billion of 20-year bonds attracted bids for 3.62 times the volume on offer.

Chancellor Jeremy Hunt is preparing to deliver the Budget on 6 March 2024. According to reports, government borrowing halved year-on-year in December, which has reportedly given Hunt the scope to make around £20 billion worth of tax cuts if he chooses. With a general election looming, it could be an opportunity to ease the tax burden.

Businesses as well as households may look to the budget to ease some of the pressure they’re facing.

Insolvency experts at Begbies Traynor warned that more than 47,000 UK businesses are on the “brink of collapse” as the number of firms in “critical” financial distress increased by 25% in the final three months of 2023 when compared to the previous quarter.

Some other businesses plan to make cuts in the coming months too. One such firm is Tata Steel, which announced plans to cut up to 2,800 jobs by the end of the year. The news was met with strong words from union Unite, which pledged to use “everything in its armoury” to defend steel workers.

Some businesses are posting positive news though. Retailer Next saw a 10% jump in sales in the two weeks before Christmas, which led to its shares hitting an all-time high of more than £85.30 at the start of January.

Europe

As the European Central Bank (ECB) predicted, inflation across the eurozone increased in January. In the 12 months to December 2023, the rate of inflation was 2.9%, official statistics show. The ECB said it expects inflation to remain between 2.5% and 3% throughout 2024.

ECB vice president Luis de Guindos went on to warn that the eurozone may have already fallen into a technical recession and prospects remain weak.

Data from Germany’s national statistics office, Destatis, paints a pessimistic outlook. The country is on track for its first two-year recession since the early 2000s as the economy shrank by 0.3% in 2023. The decline was linked to higher energy costs and weaker industrial demand.

Low demand looks set to plague the eurozone’s largest economy into 2024 too. In December, industrial output was weaker than expected and fell by 0.7% month-on-month.

While many economies have battled double-digit inflation over the last couple of years, in many cases, they’ve now started to fall. One outlier is Turkey, which saw an inflation rate of almost 65% in the year to December 2023.

The huge rise is partly attributed to an almost 50% increase in the nation’s minimum wage. Demand from tourists is also having an effect. For example, hotel prices jumped 93% year-on-year.

US

US inflation also increased in the 12 months to December 2023 to 3.4%, compared to 3.1% recorded a month earlier. The rise was linked to higher housing and energy costs.

Similar to economies in Europe, some sectors in the US are struggling due to weak demand. The Institute for Supply Management found that US factories contracted in December for the 14th consecutive month. Yet, job data indicates that businesses are feeling optimistic, as they added 216,000 new jobs at the end of 2023.

On 22 January, the US stock market reached a record high. The S&P 500 index, which tracks the 500 largest companies listed on stock exchanges in the US, increased by 0.5% as technology stocks rallied.

US company Microsoft also started the year strong when it overtook Apple to become the world’s most valuable company on 11 January. The firm’s share price increased by 1.5% to boost its market valuation to $2,888 trillion (£2,272 trillion).

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested.

Past performance is not a reliable indicator of future performance.

As younger generations face challenges reaching milestones as the cost of living soars, you might be thinking about gifting assets to improve their finances. If your beneficiary is in a relationship, you may want to consider what would happen if they split up with their partner.

A well-timed gift could have a hugely positive effect on the long-term financial security of your loved ones.

In recent years, more people are considering gifts rather than leaving all their assets as an inheritance. There are many reasons for doing so, from reducing a potential Inheritance Tax bill to helping your child get on the property ladder.

Indeed, the Great British Retirement Survey 2023 found that a tenth of Brits aged 40 and over said they’d given what they consider to be a living inheritance in the last three years. A further 16% expect to gift money during the next three years.

Whatever your reason for passing on wealth, you likely want to ensure the assets remain within your family if a relationship breaks down. There may be steps you could take to protect the gift if there is a dispute.

Loans and gifts are treated differently in family courts

First, it’s important to understand how your gift could be treated if your beneficiary divorced. The family courts define gifts and loans differently, which could affect how assets are distributed.

Gifts, where there is no expectation that you will be repaid, are usually treated as joint assets and could be divided between both parties. As a result, it could mean the gift, or a portion of it, goes to your beneficiary’s ex-partner.

A loan may be treated differently as there is an expectation that it’ll be repaid in the future. However, that doesn’t mean it’ll stay within your family. The court is likely to consider needs. For example, if you loaned your child a deposit to buy a home and they have children that will remain with their ex-partner, the court may still award the property as housing for dependent children will often take priority.

If you’ll be giving a loan to your child, it’s often a good idea to use a solicitor to make the agreement formal, rather than relying on a verbal agreement. This could protect you and be useful in the event of a relationship breakdown.

It’s not only gifts to married family members that could be affected by a relationship breakdown either. A gift to an unmarried child to act as a property deposit if they’ll be buying with a partner could also be complicated if they break up.

4 potential options to consider if you’re passing on assets to your family

1. Ask your beneficiary to consider a pre- and post-nuptial agreement

If your beneficiary is married, or planning to get married, a pre- or post-nuptial agreement could be useful. These agreements aim to make it clear what happens to assets if the couple separates.

It’s important to note that pre- or post-nuptial agreements are not automatically enforceable in the UK. However, courts should consider the arrangements, so it can be an influential document.

2. Use a declaration of trust if the gift is being used to purchase a property

When one partner is contributing more when buying a property, a declaration of trust could provide security.

The declaration of trust will make it clear how much each party is to receive if the relationship fails. For example, if you gifted your child a deposit to purchase their home, they could use the declaration of trust to ensure they’d receive a larger portion of the sale proceeds if the house is sold to reflect this.

It’s also possible to use a deed of trust to name yourself as a “tenant in common” and entitled to a share of the property.

3. Attach conditions to the gift

As mentioned above, gifts and loans are treated differently in the courts. So, attaching conditions to a gift may be useful. For instance, you may say the money is a gift but in the event of separation, it will be repaid by one or both parties.

This should be recorded in writing and it may be useful to engage the services of a solicitor.

4. Use a trust to pass on assets

Trusts may be used as a way to protect assets and ensure they stay in the family. Assets held in a trust are managed by a trustee on behalf of the beneficiary rather than simply handing over assets. In some cases, a trust could ensure assets remain with your family.

However, it’s a common misconception that a trust cannot be taken into account when assessing how to divide assets. The court might consider when the trust was set up and its purpose when assessing the couple’s assets.

You might benefit from taking both financial and legal advice if you think a trust could be the right option for you. Doing so could help you to understand the complexities and how they relate to your situation.

It may be impossible to take assets out of a trust once they’ve been transferred. So, it’s important to make sure this is the right decision for you.

Get in touch to talk about passing on assets to your loved ones

If you’re considering passing on assets to loved ones during your lifetime, we can help.

Not only could we assess your options to ensure assets stay within your family, but we could also help calculate the short- and long-term impact passing on wealth now could have on your finances to provide peace of mind.

Please get in touch to arrange a meeting.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate trusts or estate planning.

Managing your finances effectively as a couple could provide you with peace of mind and mean you’re more likely to reach your goals. Yet, it can be difficult as you could have very different financial priorities to your partner. Read on to discover five handy tips that could help you build a financial plan that suits both of you.

1. Set shared goals you can work towards

Having shared goals you’re working towards as a couple can help ensure you’re both on the same page and understand why you’re making certain financial decisions.

For example, if you both want to retire early, you might decide to increase pension contributions. Without a reason, potentially reducing your disposable income now could be difficult to stick to.

However, with a long-term view of how cutting back now could mean you have more freedom in the future, you may find you’re in a better position to be successful.

2. Understand your partner’s attitude to money

One of the biggest challenges of managing finances with a partner is that you could have very different views about money.

Perhaps you’re a saver who feels more comfortable when you add to your emergency fund, while your partner is more likely to splurge on a treat. Or, when it comes to investing, one of you is more risk averse than the other.

Understanding your partner’s approach to managing assets and their long-term financial outlook could help you strike a balance that means you both feel confident about your finances.

3. Make your financial plan part of your conversations

Finances play a crucial role in day-to-day life and your long-term security, from managing household bills to preparing for retirement. Yet, it’s a topic many couples avoid talking about and, for some, when they do, it can cause conflict.

According to a survey from Aviva, a quarter of couples argue about money at least once a week, and 5% said they bickered about finances every day.

Making money part of your conversations could improve communication as you have more opportunities to address small disagreements before they possibly become larger issues.

4. Be clear about how you’ll manage assets together and individually

You don’t need to inform your partner of every purchase you make or share all your assets to create an effective financial plan as a couple. However, understanding and talking about how you’ll share assets and financial responsibility is often important.

Worryingly, a survey from Starling Bank found that almost a quarter of married couples and 30% of people in a committed relationship said they keep financial secrets from their partner.

Some secrets may be harmless, such as having a nest egg in case of emergency, but others could potentially negatively affect your financial security. For example, a fifth of those with a financial secret said they are hiding debt from their partner, and 16% are concealing loss of money, such as through gambling or poor investments.

Being open about money and setting out how you’ll manage assets together or individually could ensure you’re both on the same page and avoid potential conflicts related to financial secrets.

What’s important is that you find a way to manage assets in a way that suits you and your partner.

5. Arrange a meeting with a financial planner

Working with a financial planner could benefit you and your partner in many ways, from identifying potential tax breaks to setting out a plan to save for retirement. Yet, one perk you might overlook is how it could help you better manage your finances together.

Ongoing financial reviews as a couple mean that time is regularly set aside to talk about money, your goals, and financial concerns. It may mean you’re more likely to stick to your plan and provide an opportunity to update it if your circumstances change.

A financial planner may also act as a useful third party who might help you unify different objectives. By working together with a financial planner, you may create a plan that gives both of you confidence about your financial future.

If you’d like to create a financial plan with your partner, please get in touch to discuss how we could help you and arrange a meeting.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Chancellor Jeremy Hunt could have more options ahead of March’s Budget as government borrowing halved at the end of 2023. With a general election looming, Hunt may take the opportunity to ease the tax burden. Read on to discover some of the personal finance changes that could be announced.

Figures from the Office for National Statistics (ONS) show that government borrowing halved in December 2023. The lower deficit of £7.77 billion – the lowest month since 2019 – means the chancellor has more scope to implement tax cuts, increase public spending, or pay down debt.

The annual Budget sets out the government’s proposals for changes to taxation. So, the announcements could affect your finances and long-term plan. Here are three changes the chancellor is reportedly contemplating.

1. Cutting Income Tax

There’s speculation that changes to Income Tax could reduce the tax burden on households. It would follow National Insurance rates being cut for employed and self-employed workers in the Autumn Statement.

While Income Tax rates haven’t increased in recent years, the thresholds have been frozen until April 2028. While your tax bill might not rise immediately, frozen thresholds could mean you pay more in the medium term or that you’re pushed into a higher tax bracket, even if your income hasn’t increased in real terms.

Indeed, the Office for Budget Responsibility (OBR) estimates that freezing the threshold for paying the higher- and additional rate of Income Tax will raise £42.9 billion by 2027/28.

Hunt has a few options if he wants to decrease the Income Tax burden before the general election. He could opt to increase the thresholds in line with inflation or reduce the tax rate.

2. Abolishing Inheritance Tax

Ahead of Hunt delivering the Autumn Statement in November 2023, it was reported he was mulling over abolishing Inheritance Tax (IHT).

IHT is a type of tax on the estate of someone who has passed away if the value of their estate exceeds certain thresholds.

While only around 4% of estates are liable for IHT, it’s often referred to as “Britain’s most-hated tax” in the media.

The ONS data shows that between 2022 and 2023, IHT tax receipts were £7.1 billion. While that may seem like a large number, it represents just 0.28% of GDP. As a result, abolishing IHT could be viewed as a way to deliver a pre-election day boost with a relatively small reduction in the total tax collected.

Alternatively, the chancellor could increase the thresholds for paying IHT or lower the tax rate.

The thresholds for paying IHT have remained the same since 2020, and are currently frozen until April 2028. As they’re not rising in line with inflation, more estates are becoming liable for IHT as the value of assets, particularly property, may have increased.

For the 2023/24 tax year:

The nil-rate band is £325,000. If the entire value of your estate is below this threshold, no IHT is due.
The residence nil-rate band is £175,000. Your estate may be able to use this allowance if you leave certain properties, including your main home, to direct descendants.

The standard rate of IHT on the proportion of the estate that exceeds the thresholds is 40%. So, another option Hunt may consider is reducing the rate.

3. Increasing the ISA annual allowance

Again, there was speculation ahead of the Autumn Statement that the ISA annual allowance would increase. This didn’t materialise, but Hunt did announce key changes to simplify ISAs and make it easier for consumers to transfer their money.

ISAs offer a tax-efficient way to save or invest. In the 2023/24 tax year, you can add up to £20,000 to your ISA. The annual allowance has remained at this level since 2017 rather than rising at the same pace as inflation.

Money saved or invested outside of an ISA could be liable for tax. As a result, raising the allowance may provide some people with a lower tax bill overall.

The latest government figures show 11.8 million adults used their ISA to save or invest in the 2021/22 tax year. So, increasing the ISA allowance could be a savvy option before the public goes to the polls.

We can help ensure your financial plan continues to reflect policies

Keeping track of government policies and understanding what they mean for your financial plan can be difficult. As financial planners, we can help you keep your long-term plan up-to-date and explain when announcements might affect you.

If you have any questions about what the upcoming Budget may mean for you, please get in touch.

Please note:

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

If you haven’t used your ISA allowance for the 2023/24 tax year, it could be wise to review your options over the next few weeks before the 2024/25 tax year starts. Read on to discover some of the reasons why an ISA could make sense for you.

Government statistics show that ISAs are a popular way to save and invest. Indeed, the latest data shows 11.8 million adult ISAs benefited from a deposit during the 2021/22 tax year. Collectively, ISA holders added around £66.9 billion to their accounts throughout the year.

The media often dubs February and March “ISA season” as savers and investors are encouraged to deposit money into their ISAs before a new tax year starts on 6 April. Some ISA providers might also offer more attractive terms during this time, such as a higher interest rate, to entice potential customers.

In the 2023/24 tax year, you can add up to £20,000 to an ISA. If you haven’t already used this allowance, here are four excellent reasons you might want to do so.

1. A Cash ISA could be a tax-efficient way to save

One of the reasons Cash ISAs make up an important part of many financial plans is that they’re tax-efficient – the interest paid on savings held in a Cash ISA is not liable for Income Tax.

Many savers have welcomed rising interest rates over the last year. Yet, it could also mean you face an unexpected tax bill.

According to the Telegraph, 2.7 million savers will pay tax on their savings in 2023/24 as a result of frozen thresholds and higher interest rates. The findings suggest that almost 1 million additional savers could face a tax bill on their savings when compared to just a year earlier.

Around 1.4 million basic-rate taxpayers are expected to pay tax on their savings this year, a figure that has quadrupled in the last four years.

If the interest your savings earn exceeds the Personal Savings Allowance (PSA), you might be liable for tax on the portion above the threshold. Your annual PSA depends on the rate of Income Tax you pay:

Basic-rate taxpayers: £1,000
Higher-rate taxpayers: £500
Additional-rate taxpayers: £0

As additional-rate taxpayers don’t benefit from a PSA, an ISA could be a useful way to manage your tax bill.

Even if you’re not an additional-rate taxpayer, the amount you can hold in your savings account before you could face a tax bill might be lower than you expect.

According to MoneySavingExpert, if your savings account had an interest rate of 5.22%, assuming the account balance was constant, you might need to pay tax if your savings exceed:

£19,158 if you are a basic-rate taxpayer
£17,242 if you are a higher-rate taxpayer.

So, placing your savings into a Cash ISA could reduce your potential tax liability.

2. A Stocks and Shares ISA could help you invest efficiently

Similarly, Stocks and Shares ISAs could also be tax-efficient if you want to invest. The returns your investments deliver when they’re held in a Stocks and Shares ISA are free from Capital Gains Tax (CGT).

Investments held outside of a Stocks and Shares ISA could be liable for CGT if they exceed the Annual Exempt Amount, which is £6,000 in the 2023/24 tax year for individuals. You should note the Annual Exempt Amount will halve to £3,000 for the 2024/25 tax year.

The rate of CGT you pay depends on which tax band the gains fall into when added to your other income. In 2023/24:

Higher- or additional-rate taxpayers have a CGT rate of 20% (28% for residential property)
Basic-rate taxpayers may benefit from a lower CGT rate of 10% (18% for residential property) if the gains fall within the basic-rate Income Tax band.

According to the Financial Times, the latest HMRC figures show that a record £16.7 billion was collected through CGT in 2021/22. As the Annual Exempt Amount has fallen since then and will be cut again in 2024/25, it’s likely the amount collected through CGT will rise further.

As a result, if you’re investing, doing so through a Stocks and Shares ISA could be efficient from a tax perspective.

3. You’ll lose your ISA allowance if you don’t use it before the start of a new tax year

An ISA could reduce your potential tax liability whether you want to save or invest. So, why should you review your ISA over the coming weeks? Simply, the allowance will reset when a new tax year starts.

If you don’t use the current tax year’s allowance before 6 April 2024, you’ll lose it.

Not reviewing whether to use your ISA allowance could mean you overlook an opportunity to reduce your tax bill.

4. You could receive a government bonus with a Lifetime ISA

For some people, a Lifetime ISA (LISA) could prove a valuable way to save or invest thanks to a government bonus.

You must be aged between 19 and 39 to open a LISA, although you can continue to contribute to a LISA until you’re 50. You can deposit a maximum of £4,000 each tax year into a LISA, and can choose between a Cash LISA and a Stocks and Shares LISA.

Where a LISA is different to traditional ISAs is that deposits benefit from a 25% government bonus. So, if you deposit the annual maximum of £4,000 into a LISA, you’d receive £1,000 as a bonus.

However, if you take money out of a LISA before you’re 60 for a purpose other than buying your first home, you’ll be charged 25% of the amount withdrawn. This means you’d lose the bonus and a portion of your own deposit, equivalent to a loss of just over 6%.

Get in touch to talk about your ISA and long-term plans

If you have any questions about how to use the ISA annual allowance to support your financial plan, we’re here to help. Please contact us to arrange a meeting.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested.

Past performance is not a reliable indicator of future performance.

When you start thinking about the steps you need to take when retiring, your focus might be on the financial side. Yet, it’s often a good idea to start with your lifestyle aspirations.

Last month, you read about the different options when deciding how you’ll retire. Now, it’s time to consider what your ideal retirement lifestyle would look like.

Setting out your retirement lifestyle may be useful for several reasons, including:

Giving your retirement plan a focus
Helping ensure your financial plan reflects your aspirations
Informing the financial decisions you make.

So, if you’ve yet to think about what your life will look like once you stop working, it could be a rewarding task.

3 useful questions to answer when setting out your retirement lifestyle

Being clear about what you’d like your retirement to look like could help turn it into reality. These three questions may be a useful place to start.

1. What are you most looking forward to about retirement?

One of the main reasons people often look forward to retirement is that they’ll have more free time – so it’s worth thinking about what you’re most looking forward to spending time on.

According to an Aegon report, more than half of those nearing retirement are hoping to spend more time with loved ones. In addition, 45% plan to use retirement to see more of the world by travelling, and a third are looking forward to having the free time to pursue new hobbies.

Focusing on what brings you joy can help you build a life after work that is rich and fulfilling.

2. What does your ideal daily retirement routine look like?

When you set out what you’re looking forward to, you might focus on the larger aspects, like exploring a new destination for several weeks each summer. Yet, you shouldn’t overlook daily life that will make up much of your time – how do you want to spend your average day?

3. How will you maintain social connections?

According to Age UK, 1.4 million older people in the UK are often lonely. Social connections are important for wellbeing and could help you enjoy the next stage of your life much more.

Your working relationships might play an important role in your life now. So, it may be valuable to consider how you’ll maintain existing social connections and forge new ones.

For example, you could arrange to see your grandchildren after school each week or provide childcare during the school holidays. Or you may want to join a social club that allows you to meet new people who have similar interests.

Clear lifestyle goals could help ease the emotional challenges of retiring too

When you assess the retirement challenges you could face, financial matters could once again top the list.

You might be concerned about running out of money in your later years, or the effect inflation could have on your spending power. Indeed, in a Legal & General survey, 94% of people said their most important retirement dream was to feel financially secure for the rest of their life. Money worries were also the biggest cause of pre-retirement angst.

Yet, the emotional side of retiring can present obstacles too. It can be difficult to step away from the routine and social side of work that may have played an important role in your life for decades.

It’s normal to feel some apprehension about the milestone or to face emotional challenges once you retire. Putting your lifestyle goals at the centre of your retirement plan could ease some of the concerns you might have.

Contact us to talk about turning your retirement plans into a reality

Financial plans often start with understanding your goals and lifestyle aspirations. If you’re approaching retirement and want to create a plan you could have confidence in, please contact us to arrange a meeting.

Next month, read our blog to learn more about the financial decisions you might make, including how to use your pension, as you approach retirement.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.