So was it the Coronavirus Budget, or the Infrastructure Budget? Or was it, as the Chancellor declared at the end of his speech, the ‘people’s Budget from a people’s government?’ It was certainly a Budget that was high on spending commitments and one that the Chancellor declared would ‘get things done.’ Now where have we heard that before..?

Almost three months to the day after the General Election, new Chancellor Rishi Sunak delivered his first Budget speech. He delivered it, not as he might have expected, against a backdrop of optimistic economic forecasts and the opportunities of Brexit, but against the growing threat of the coronavirus outbreak, and the impact it might have on the UK economy.

The political background

On 12th December 2019, Boris Johnson won a decisive 80 seat majority for the Conservatives in the UK General Election. He promised to ‘unlock Britain’s potential’ and ‘level up opportunity’ through a huge programme of investment in the country’s infrastructure, covering road, rail and 5G connectivity.

The man charged with paying for all this and honouring the Conservative election pledge not to raise the rates of income tax, national insurance or VAT, was Chancellor (and former leadership rival) Sajid Javid. He duly announced that the first Budget of the new ‘People’s Government’ would be on Wednesday 11th March.

And then, in the cabinet reshuffle of February 2020, Javid dramatically resigned. He was swiftly replaced by his effective second in-command, Rishi Sunak, the Chief Secretary to the Treasury.

For a while there were rumours that the Budget might need to be delayed but, with Sunak impressing officials with his grasp of the details, 11th March was confirmed and, after the usual Prime Minister’s questions, the new Chancellor stood up to deliver his first Budget.

The economic background

When Sajid Javid announced the date of the Budget in early January, virtually no one had heard of coronavirus. When he resigned in mid-February, it was something largely confined to China – there were just two cases in Italy. At the time of writing, there are more than 9,000 known cases in that country, with a mortality rate of nearly 5%.

Chinese exports are down 17% in the first two months of the year as the impact of the virus is felt and, closer to home, the airline Flybe collapsed last week. It is simply impossible to say what the economic consequences of the virus will be: it could, for example, deal a significant blow to the already fragile Italian economy with a knock-on effect throughout Europe. It may do further damage to the UK high street, which saw a 7.8% drop in footfall in February.

The Federal Reserve had cut US interest rates early in the month and, on the morning of the Budget, the Bank of England followed suit, cutting the UK base rate from 0.75% to 0.25% in a bid to shore up the economy amid the virus outbreak.

So Rishi Sunak could hardly have delivered his first Budget in more difficult circumstances. Never mind coronavirus, there was also a looming oil price war: the two together had meant that Monday 9th March was the worst day on world stock markets since the economic crisis of 2008, with the UK’s FTSE100 index down by nearly 8% on the day. The US S&P 500 was down by more than 7% on the day and there were similar falls in other major world markets.

The new Chancellor faced a very difficult balancing act, described as ‘like juggling water,’ according to the BBC’s Laura Kuenssberg. He had to react to the crisis, protecting the UK economy against the worst impact of it and giving the NHS the money to cope with it, while at the same time presenting a vision of life after coronavirus.

He also needed to honour the Conservative manifesto pledge to borrow only to invest, and to limit public sector net investment to 3% of GDP. Many commentators, however, suggested that he might loosen the ‘fiscal guidelines’ to give himself some ‘wiggle room.’

Speaking ahead of the Budget statement, Sunak said, ‘This is a Budget for people right across the country – no region will be left behind.’

He added that he would ‘not let coronavirus cripple the UK economy, but we simply do not know what impact it will have.’ The usual slew of forecast growth rates in the Budget will certainly need to be taken with a very large pinch of salt. Equally, you would not rule out a second Budget in the Autumn, when the economic consequences of the virus and the steps needed for recovery can be more accurately assessed.

The speech

Opening remarks

Rishi Sunak rose to speak at 12:35 and immediately addressed the issue of coronavirus which would, he said, have a ‘significant impact’ on the UK economy. The government needed to deliver ‘stability and security’ and he wasted little time in promising that the NHS would have whatever resources it needed to tackle the threat from the virus.

However, while coronavirus was a ‘key challenge facing our country today,’ it was ‘not the only challenge,’ as he promised a Budget that would deliver ‘economic change and geographical change’ as well as ‘security today and prosperity tomorrow.’ It would be, he declared, ‘a Budget from a government that gets things done.’

The response to coronavirus

The Chancellor conceded that the virus would have a significant temporary impact on the UK economy, disrupting both the supply chain, confirming the forecast that up to 20% of people could be off work at any one time at the height of the virus, and demand in the economy, as people stay at home. That meant he would need to deliver a ‘bridge for business’ and he confirmed that he was working closely with the Bank of England to deliver a response that was ‘temporary, timely and targeted.’

The response would come via a £30bn ‘three point plan,’ the first part of which was effectively a blank cheque for the NHS to give it the resources it needed to tackle the threat.

His second point was a ‘safety net for people,’ bringing forward the payment of Statutory Sick Pay for all those advised to self-isolate, making it quicker and easier for the self-employed to access benefits if they were ill and removing the requirement for those receiving benefits to attend a job centre. There would also be a £500m hardship fund for local authorities to support vulnerable people in their local area.

Economic growth and the numbers

The Chancellor conceded that coronavirus would have a significant impact on the UK economy, with the Office for Budget Responsibility expecting that growth would be 1.1% in 2020, down from an earlier OBR forecast of 1.4%. However, as the economy recovers, growth should be 1.8% in 2021 (from an earlier forecast of 1.6%) followed by 1.5% in 2022 and then 1.3% in 2023 and 1.4% in 2024.

By 2025, it is expected that there will be an extra 500,000 people in work, with inflation forecast to be 1.4% this year and 1.8% next year. He said it will “remain at target” for the next three years, which presumably means the Bank of England’s target rate of 2%.

As you would expect, the Chancellor was bullish on the UK economy. There were more people in work than ever before, inflation was stable, and the economy was growing. Essentially, that was the whole point of the Budget. How are we going to pay for the significant investment in infrastructure? The economy will grow and tax revenues will go up.

Let’s hope the Chancellor is right: his Budget committed to the ‘largest sustained fiscal boost in 30 years’ as he outlined a 2.8% increase in public spending in real terms. The OBR expects a budget deficit of 2.1% of GDP in 2019/20, increasing to 2.4% in the next financial year.

Personal taxation and allowances

Pensions and savings

Business investment and taxation

The Chancellor unveiled a raft of measures to support UK business, both in the short term as they deal with the impact of coronavirus and in the medium to long term.

Companies employing fewer than 250 employees can reclaim the first 14 days of Statutory Sick Pay (SSP) from the government.

The Chancellor announced a £2.2bn grant scheme to support small businesses. In addition, HMRC will scale up its ‘time to pay’ service and there will be a new £1bn business loans scheme for small businesses, with 80% of the loans guaranteed by the government.

There was also the promise of a £3,000 cash grant for any firm that is currently eligible for small business rates relief or rural rate relief. ‘This is a £2bn cash injection direct to 700,000 of our smallest businesses,’ said the Chancellor.

The Chancellor also announced an £18bn ‘fiscal loosening’, better understood as ‘more credit.’ Like many other countries, it appears that he will encourage the banks to be more flexible with loans for small business during the current crisis.

He stated that there will be the largest and fastest increase in R&D spending in decades, with investment increasing to £22bn a year by 2024-25.

Other measures

The UK’s infrastructure

The Chancellor announced £2.5bn of funding over the next five years, pledging that up to 50m potholes ‘would be filled by the end of this parliament.’

In total, there was a huge £640bn commitment to infrastructure over the next five years, with the National Infrastructure Strategy setting out more specific details in the coming months. However, plenty of measures were announced in the Budget.

The most headline-catching has been the commitment to create a new ‘economic campus’ for the government in the North (it is widely rumoured to be heading for Teesside) which will ultimately see 22,000 civil servants moved out of London.

There was more money for cities and towns, with £640m going to Scotland, £360m to Wales and £210m to the Northern Ireland Assembly. On top of this, the eight ‘metro mayors’ (including a new one for West Yorkshire) will receive new ‘London-style funding settlements,’ giving them £4.2bn for transport.

There will be a £5bn investment in ‘gigabit-capable broadband’ as 5G is rolled out, plus an extra £510m to ensure that 95% of the country can access 4G broadband within the next four years.

There will be a big investment in the railways and an equally large commitment to the road network. Inevitably, there will be significant investment in flood defences, with the Chancellor committing an extra £120m for this year and £200m more for ‘flood resilience,’ as well as committing to doubling the amount spent on flood defences, taking it up to £5.2bn over the next six years.

Housing

Along with the promised review of the business rates system, the Chancellor also promised a review of the planning system: clearly the UK is going to need many more homes.

In the interim, he announced £400m for building on brownfield sites, and a £12bn commitment to building affordable homes which will, in part, be paid for by imposing a 2% stamp duty levy on non-UK residents buying property in England and Northern Ireland, which will be introduced from April 2021.

There was also a commitment to spend £643m on moving rough sleepers into permanent accommodation, and an additional £1bn will be provided to remove unsafe cladding from buildings over 18m high in the wake of the Grenfell Tower disaster.

Excise duties

The Chancellor acknowledged the impact US tariffs were having on the Scottish whiskey industry and announced £1m to promote Scottish food and drink overseas, plus £10m of R&D funding to help the industry ‘go green.’ In addition, the planned increase in duty will be cancelled for this year.

He also cancelled the planned increase in beer duty, making this only the second Budget in the last 20 years that has not seen an increase in alcohol duty, acknowledging that small pubs were often at the heart of local communities.

To the surprise of many, he also kept fuel duty frozen. It had been generally expected that fuel duty would increase as part of a measure to encourage greener forms of transport.

Education

The Chancellor announced further investment in education, including an increase of 4% in pupil funding and an extra £29m per year by 2023-24 for primary school PE teaching. He also managed to find £8m for more football facilities up and down the UK.

His biggest commitment, though, was an extra £400m for age 16-19 education and £1.5bn for further education, making good on a promise made by the previous Chancellor.

He also removed VAT on e-publications. This change, which will come into effect in December 2020, will mean that there will be no VAT to pay on books you read on your e-reader.

The environment

As had been anticipated, there were a number of measures on the environment although, perhaps, not as many as might have been expected from a government that is firmly committed to making the country carbon-neutral by 2050.

The Chancellor announced that the government ‘will increase taxes on pollution.’ From April 2022, the climate change levy on electricity will be frozen, but increased on gas.

There will also be a new plastic packaging tax introduced at the same time, charging manufacturers and importers £200 per tonne on packaging made of less than 30% recycled plastic. The Chancellor claimed that this would increase the use of recycled plastic in packaging by 40%.

He then turned his attention to ‘red diesel’ which, he said, currently enjoyed a £2.4bn tax break despite causing pollution. This relief will be abolished in two years’ time although agriculture, rail, fishing and domestic heating will continue to be given the relief.

In total there will be a £1bn commitment to clean energy, and the Chancellor promised that ‘you will never be more than 30 miles from a charging hub’ in your brand new electric car. Finally, he announced that £800m will be invested in carbon capture and storage, creating 6,000 jobs in the industry.

The NHS

The Chancellor ended his speech where he’d begun, with a commitment to give the NHS whatever it needs to fight the effects of coronavirus. He confirmed an overall funding settlement of £6bn for the NHS which will, he said, deliver on the manifesto commitment of 50,000 new nurses, 40 new hospitals and 50m more GP appointments.

Conclusion

By the time the new Chancellor sat down, after speaking for just over an hour, he was being loudly cheered by his own side, with backbenchers leaning over the seats to congratulate him.

Most commentators were in agreement that his ‘temporary, timely and targeted’ fiscal response to the coronavirus outbreak won’t prevent UK GDP from falling sharply over the next two to three months. Together with the Bank of England’s response earlier today, however, it greatly improves the chances that the UK economy will rebound in the second half of the year. More acerbically, Andrew Neil drily commented that Rishi Sunak had certainly ‘splashed the cash’ and that a ‘huge increase in borrowing’ was on the cards.

If people were in any doubt as to who Rishi Sunak was before the Budget, they will be in little doubt after it. As and when Boris Johnson decides to step down, then on today’s evidence, the Conservatives may not have to look far for his successor.

The post Budget 2020 Overview appeared first on Creative Benefits.

Here are some of the allowances that you should consider: 

The Marriage Allowance

You can transfer £1,250 of your Personal Allowance to your spouse or civil partner if they earn more than you and pay tax at the basic rate. This could yield a potential tax saving of £250. You need to make sure that you have income within your Personal Allowance of £12,500. An application to HMRC needs to be made for this allowance. It’s also worth noting that you can backdate your claim to include any tax year since April 5th 2015. 

The Tapered Annual Allowance

For higher income earners, the tapered annual allowance will apply. For every £2 of adjusted income, including employer pension contributions, as well as income over £150,000, your annual allowance is reduced by £1. The Government has a comprehensive guide for working out whether your income will have the allowance applied. You may only be able to assess this accurately as you get closer to April 5th. If you can assess the figures accurately in time to make a pension contribution, then ensure you do so. If not, as soon as the most accurate figures become available, you can take steps to make up any shortfall by carrying it forward to the next year.

The Money Purchase Annual Allowance

You can get tax relief on pension contributions of up to £40,000 per year or 100% of your income from employment. However, if you have already started drawing income from a defined contribution pension scheme, the amount you can pay into a pension without suffering a tax charge reduces. 

The allowance for the 2019/2020 tax year remains unchanged from last year at £4,000 and applies if you have taken any taxed income from a money purchase or defined contribution pension. This extends to personal pensions, SIPPs and workplace pensions.

Expenses

If you’re an employee, you may be able to claim for expenses not reimbursed by your employer, such as travel mileage (not including home to work), the cost of buying small essential items or equipment needed to do your job, such as tools or professional subscriptions. 

If your employer reimburses you at a rate lower than the current standard mileage rate of 45p per mile for the first 10,000 miles and 25p per mile thereafter, you can claim the difference back in your tax return. 

Taking the time now to make sure you’re maximising your allowances can yield notable tax savings at the end of the tax year on April 5th. If you require any help with your tax planning, don’t hesitate to get in contact with us and we will make sure that you’re on the right track. 

The post Ready for the end of the tax year? appeared first on Creative Benefits.

According to a recent survey by Ameriprise Financial, only 13 per cent of American millionaires classified themselves as wealthy. Even those who had over $5 million (£3.8 million) spread across their accounts, investments and funds said that they didn’t feel like they were rich.

Elizabeth Dunn, psychology professor at the University of British Columbia, said that this could be due to ‘social comparison’, meaning that a person only feels rich if he is richer than the people he is comparing himself with. A 2005 case study in Germany compared people who were similar in terms of age, education and region of residence, finding that “individuals are happier the larger their income is in comparison with the income of the reference group.”

Another more recent study in America found that those with middle-incomes were less satisfied financially if they lived in a place with higher levels of income inequality. Interestingly, research in Canada found that neighbours of lottery winners were likely to run up debts and to go bankrupt.

But what should you make of all this? 

Elizabeth Dunn commented that people tend to overrate the importance of earnings when it comes to feeling financially satisfied. “All of this talk about ‘income, income, income’ overlooks the fact that it matters a lot what you do with your money.” Spending money in certain ways, for example on memorable experiences rather than possessions, can make people feel better.

Maggie Germano, a financial coach in the States, notes that “people who feel the best about their financial situation […] are people who are fully aware of what their financial situation is.” She explains how she has clients who get a surprise when they realise how much they are spending on online shopping and Uber rides. “I do think it is less about how much is actually coming in and more about how they’re consciously using the money,” she emphasises.

Another financial coach, Michelle Tascoe, mentioned how setting specific goals can help to give you financial peace of mind and cause you to have a more positive outlook on your finances. Rather than just saying, ‘I want to retire early,’  a more focused goal, such as, ‘I want to retire by the time I’m 55’ will help you plan more effectively.

From the experiences outlined, it’s been shown that taking the time to work out what you want your money to achieve will give you a greater sense of clarity. You can measure your progress against a defined plan and improve your emotional and financial wellbeing for the future.

The post It’s not about how much you have, but what you do with it… appeared first on Creative Benefits.

We have reached the point where being ‘over the hill’ should mean something quite different to what we might have thought when we were younger, about older people. Time has not caught up with us, but we have now captured it – it will be ours to do with what we will. If we are ‘over the hill’ then it is more a case of picking up speed and looking for what we can open up in front of us, further down the line.

What’s your concept of a later life plan? Is it a path along which you plan to travel, a bit like Dorothy setting off down the Yellow Brick Road, in the Wizard of Oz? Or should we view our future and plan from the perspective of Willie Wonka’s Great Glass Elevator, quite unlimited in its potential to travel up, down, sideways, forwards or backwards. For most of us, later life can be a period of opportunity.

Making sure we’re prepared for all of the above is about more than financial planning. Quality of life concerns, desire and purpose come before finance, which is there to support the manner of living to which we would want to become accustomed. There is little doubt that we will need to cut our cloth accordingly, but not everything in later life comes with a price tag attached. Maybe your planning needs to err on the side of non-materialistic things, affordable opportunities: doing rather than owning!

The later life planning process is as important as the outcomes. The emerging plan will always be open to revision. Tinkering with your plan, bucket-list, short-term calendar and one-page plan will become part of the adventure. Satisfying needs in your plan will not be enough: go for the wants and desires, and hopefully these won’t all be about spending money!

If you are ready for planning around retirement and holistic later life planning, here are five priority components which should inform your thinking and your plans:

1 – Health and Wellbeing – thinking about how to sensibly exercise, keep fit and not over-abuse your physical body. With later life comes physical decline and it’s best to slow this down. Bits of you will sag or fail you eventually, but an active lifestyle is a major part of a quality life.

2 – Social Life – most of us need a social life and in retirement this becomes more important, replacing a work orientated lifestyle. See what’s available, plan to renew relationships, join in things and investigate local opportunities.

3 – Breaks, Holidays and Adventures – plan to punctuate your later life with these, which often bridge the longer quieter periods, and become highlights. This is where the ongoing bucket-list approach to planning is so useful. Cross them off and find more!

4 – Work – being gainfully occupied late in life might be a nice earner and could be a focus for your planning if you have long hankered to do something different as work or in a business. Otherwise, and in addition, consider getting involved in the world of voluntarism.

5 – Learning Activities – these can be any part of the other components, where you learn within each. You could pursue formal learning or plan to learn as you go along, from your enriched later life and the opportunities and experiences you have planned for.

The post Planning around the retirement threshold appeared first on Creative Benefits.

Unfortunately, they are victims of the irresponsible lending which was prevalent in the years leading up to the financial crash in 2008. It’s become apparent that some people were given mortgages which were far too large for their circumstances, up to 125% of the value of the property or loan to value in some cases. Such deals would never be authorised today.

The majority of those affected took out mortgages with Northern Rock or Bradford and Bingley in the late 2000s. When the bank was taken into public ownership after the crash, their mortgages were transferred to Northern Rock Asset Management (NRAM), owned by UK Asset Resolution.

What has been the problem?

Customers were not offered a new fixed rate mortgage when their existing mortgage came to an end as the NRAM is what is known as a ‘zombie lender’. This means it is only licensed to handle the mortgages it already has in its portfolio but can’t issue new mortgages or adjust customers’ current terms.

As a result, many customers have had no choice but to pay expensive standard variable rates; the rates anyone else would make every effort to avoid. Some customers have been paying more than 5% interest over the last 12 years, more than double the best rates on the market. This can make an astronomical difference over time, with one customer estimating he had paid over £32,000 more.

Regrettably, people in this position can’t just switch to a cheaper mortgage with a different lender. As they were given mortgages that were too large, the loans make it look like they’re in negative equity, so they fail the Financial Conduct Authority’s strict affordability criteria. This also means they’re unable to sell their properties because they wouldn’t get enough to pay off the mortgage.

What is being done?  

The Treasury has commented that it has “worked with the Financial Conduct Authority (FCA) to introduce new rules that remove barriers preventing some customers from accessing cheaper deals and will continue to work on this matter.”

In line with this, the FCA is relaxing its affordability criteria so that lenders can carry out more lenient checks. In future, the tests will be less stringent for customers who have made their payments on time, are not looking to move house or to borrow more.

Due to the changes, the regulator estimates that between 2,000 and 14,000 mortgage holders will be able to move to a fairer deal. However, this is likely to still leave more than 100,000 trapped on high rates. For many it is a desperate situation, with some facing the prospect of having their homes repossessed. Yet the FCA cannot force banks and building societies to take on unattractive customers.

The UK Mortgage Prisoner Action Group is adamant that something must be done and so it is in the process of bringing legal action. It believes mortgage companies have a duty to offer customers a fair rate, describing the innocent victims as ‘collateral damage’ after nationalisation.

The post What can be done to free mortgage prisoners? appeared first on Creative Benefits.

Given all the to-ing and fro-ing, you could be forgiven for being unclear as to what it actually includes. It has, in fact, remained largely unchanged and has met with widespread cross-party support.

The main initiatives include:

• The introduction of the framework for pensions dashboards
• Legislation to establish collective defined contribution (CDC) schemes
• Greater powers for The Pensions Regulator

The government said the purpose of the bill was to “support pension saving in the 21st century, putting the protection of people’s pensions at its heart.”

Pensions dashboards

The long-awaited pensions dashboards are designed to allow savers to view all their lifetime savings in one place through a digital interface. Data will be retrieved directly from pension providers and updated in real time. The Pensions Bill has introduced new rules that will provide a framework so that providers will be compelled to provide accurate information. State pension data should also be visible.

Experts warn, however, that primary legislation will take most of 2020 to reach the statute book and it could be several years before much of the older data from company and private pensions is accessible. Research has shown that 65.8% of respondents would like to use a dashboard to see how much their pension is worth and what type of income that would translate to in retirement. 54% of those surveyed, though, said they would be unlikely to use the system if it only contained partial information.

It’s clear that dashboards have the potential to revolutionise retirement planning but the industry wants to ensure early users are not put off by incomplete versions.The Bill is really only the beginning.

Collective Defined Contribution schemes

The Bill also announced its commitment to the creation of a ‘framework for the establishment, operation and regulation of Collective Defined Contribution (CDC) schemes.’ Currently, employers can offer either a Defined Benefit (DB) scheme or a Defined Contribution (DC) scheme but both have their disadvantages. DB schemes can present significant risks to the employer while DC schemes may give a less predictable income for scheme members. As a result, the Government has decided to offer this new type of scheme, the CDC, also known as a Collective Money Purchase scheme.

As the name suggests, both the employer and the employee would contribute to a collective fund from which the retirement funds would be drawn. The scheme does not produce individual pension pots and the funding risk would be shared collectively by the individual investors.

Unlike DB schemes, CDC schemes do not guarantee a certain amount in retirement. Instead, they have a target amount they will pay out, based on a long-term mixed risk investment plan.

Greater powers for The Pensions Regulator

The other key part of the proposed Bill is that The Pensions Regulator (TPR) will be given stronger powers to obtain the correct information about a pension scheme and its sponsoring employer in a timely manner. This will ensure it can gain redress for members when something goes wrong. Any company boss found to have committed ‘wilful or grossly reckless behaviour’ in relation to a pension scheme will be guilty of a criminal offence, which will carry a prison sentence of up to seven years.

The post What has survived from the original Pension Schemes Bill? appeared first on Creative Benefits.

We think they do. And here’s why.

A little thing called human behaviour gets involved, you see. Only it’s not so little.

Human beings are highly complex systems, motivated by many different factors and emotions. This makes us volatile, unpredictable and irrational. We also hold values and beliefs that drive our behaviour; some logical and valid, others not quite so much.

But despite being so important, human behaviour is often one of the most frequently overlooked aspects of financial decision making.

Factors that influence us

Our financial behaviours are influenced in many ways, from sensational media headlines about the next downturn or star fund to family members telling us they know best. You know the type of thing: ”It worked for me, so you should do the same.”

Your situation, your objectives and the current market could be very different, so it’s important to draw your own conclusions.

Beware of the biases

You may think your decisions are based on sound, rational judgement, and sometimes they may be, but equally, the framework in which you are making the decision could be distorted. And that’s not helpful.

This is where you need to be aware of bias. It’s all part of what makes us who we are, but it’s not always useful when making decisions.

We suffer from two common biases that can cloud our judgment and impede us from achieving our financial goals:

• Cognitive bias
• Emotional bias

Cognitive bias generally involves decision making based on established concepts that may or may not be accurate. Emotional bias typically occurs spontaneously and is based on the personal feelings of an individual at the time a decision is made.

These types of bias can be particularly significant in relation to risk. For example, being either overconfident or excessively cautious could each have a damaging effect on your financial well-being.

If you’re an optimist, you may tend to take too much risk, managing your money in a way that may have severe consequences in the future. On the other hand, if you’re risk averse, you may be holding yourself back from achieving true financial independence.

If you’re what’s known as ‘loss averse’, you may fear losing money to such an extent that you avoid making a loss more than trying to make a profit. So your financial decisions may be driven by the desire not to lose £2,000 rather than to make £3,000. Such a bias can be reinforced so that the more losses you experience, the more loss averse you become.

Another common issue is inertia. This may cause you to put off making a decision altogether. Maybe the whole process just feels too difficult. Maybe you don’t have the time. Maybe you fear making the wrong decision. Whatever the reason, inertia is the enemy of financial well-being, because it gets in the way of action.

An objective eye

Whether your financial decision-making is being impeded by an incorrect bias, be that cognitive or emotional, or an unwillingness to move forward at all, working with an independent financial planner can help. Our role is to help you make clear, objective decisions, free from clouded judgment. Those decisions could help you secure better financial outcomes, whether that be retiring on your own terms or passing money to the next generation.

So the next time you think of financial planning as ‘boring’ or ‘disappointing’, think of the ‘human behaviour’ element. We think you’ll find it a great deal more enjoyable and emotionally rewarding if approached in this way.

The value of your investment may go down as well as up, and you may not get back what you initially invested.

The post The link between human behaviour and investing appeared first on Creative Benefits.

A report, published in January 2019 by the London School of Economics, found that around half of the funds provided were for deposits for house purchases, with the remainder being used for associated costs, such as stamp duty and legal costs.

While the name contains the word ‘bank’, most parents don’t actually act like one. Few take legal or financial advice on either side of the exchange. There is rarely a written record of the transactions and families tend not to discuss arrangements for repayment. That’s because people, in general, are uncomfortable talking about money.

So, how do we remedy this?

Gifts

It’s natural for parents to lend a helping hand financially to their children and one concern for those making gifts is that they go to the intended recipient.  Though it can feel overly official, preparing a Living Together Agreement (LTA) with the advice of a solicitor is one of the preventative tools available. Creating a legal framework will help to give you peace of mind, knowing that the gifts will remain in the hands of intended beneficiaries.

Stamp Duty Land Tax (SDLT)

There is a higher rate of SDLT for property purchases when the buyer is already a property owner. Tax equal to 3% of the total purchase price will be added to the standard rate of SDLT. Although the rate is nil on the first £125,000 of the purchase price with the standard rate, the same does not apply for higher rates. So it’s worth thinking about who is actually going to  make the purchase of the property if you’re planning to help your children out this way.

Buying with a friend or partner

If your child is unmarried and buying with a partner, it’s worth considering an LTA. This provides an opportunity for all parties involved to discuss and record any third party contributions from the Bank of Mum and Dad. An LTA also creates a safety net should the relationship breakdown.

If the child intends to allow another person to live in the property, it’s a good idea to make sure a Tenancy Agreement is also drawn up alongside the LTA in order to set out the exact responsibilities of both parties.

Joint mortgage

Many parents are turning to joint mortgages between themselves and their children, however it comes with financial implications for Mum and Dad. The property would be taxed as a second home and the additional 3% SDLT would be applicable. If the house was sold in the future, the parents could be landed with a Capital Gains Tax bill of up to 28% on the increased value.

It may be worth considering a Joint Mortgage Sole Owner Arrangement (JSMO) instead, meaning that borrowers can call upon the support of their parents by combining family resources in the short term to achieve home ownership with less difficulty than if they were to apply alone. In short, a JSMO means that the family members join the mortgage in support of the owner, and will not be counted as joint owners, therefore avoiding the additional SDLT charge.

It isn’t easy being part of one of the largest lenders in the country and it’s a given that you’ll want to support your children as they grow up and fly the nest. But by thinking ahead and carefully considering the options, you can give yourself greater peace of mind. If you’d like to discuss any of the issues mentioned, please do not hesitate to get in touch.   

The post What can go wrong with the Bank of Mum and Dad? appeared first on Creative Benefits.

If one of your main aims is to realise your dream of retiring early, take a look at these five steps. It may not be as unattainable as you first thought.

1. Take control

Retiring early won’t just happen. As life expectancy increases and governments raise the age at which you can take the State Pension, you could find yourself working for much longer than you’d anticipated. So if that‘s not in your game plan, you need to take positive steps to build up a pot of your own money. The State Pension should just be seen as an added extra.

2. Set realistic goals

Once you’ve decided you’re serious about retiring early, you need to draw up a plan with attainable goals. A yacht and a penthouse suite might sound idyllic but if such a lifestyle is not  achievable then it’s no good setting yourself up for failure.

Instead think about the net figure that will give you enough to live on each year, with a lifestyle that suits you. Everyone is different. Some people may want to eat out frequently, some may be keen to travel the world, others may prefer more time at home with the family.

3. Crunch the numbers

Now’s the time to get down to the nitty gritty. It obviously depends on how early you are going to retire but if you are planning on retiring in your forties, a good rule of thumb is that you need to accumulate a pot of money worth 25 times’ your annual living expenses before you give up work. As well as thinking about what level of luxury you’re going to allow yourself, don’t forget to also factor things in such as insurance and care costs.

4. Start early

Save as much as you can while you’re working and start investing early. Compound interest  can have a significant impact on your original investment over time. In fact, when you start saving can be even more influential than how much you save. For example, if you started saving when you were 25 you could accumulate 35% more over the length of your career than somebody who started saving the same amount at 35. It’s also important to make sure you’re investing with the right level of risk depending on what stage of life you’re at.

5. Don’t be led by FOMO

The ‘fear of missing out’ or FOMO can make us do things because everyone else is doing them. But making large purchases or taking on a large mortgage could steer you off course if your real goal is to retire early and travel the world. So keep focused on your goals. Remember, it’s your retirement plan, unique to you, not a colleague, neighbour or relative.

If you’d like to talk over your goal to retire early in more detail, do get in touch with us.

The value of your investment may go down as well as up. You may not get back what you initially invested.

The post 5 steps to bring your dream of early retirement closer appeared first on Creative Benefits.

Research from the Office for National Statistics has revealed that although 65 has traditionally heralded the beginning of old age, 70 is now a more accurate figure.

65 used to be seen as the gateway to old age because it was when people began taking their state pension. But with the pension age for men and women moving up to 66 in 2020 and 67 by 2028, there is no longer such a marked distinction. Working patterns are also changing, with some people going part-time, some retiring early and others working past the usual retirement age.

Staying young

The good news is that people’s life expectancy has increased due to medical advances and improved living conditions. Many people who reach 65 can expect to live at least another 15 years, with a significant number surviving into their late eighties or beyond.

In fact, it’s not uncommon to see octogenarians keeping young in body and spirit through all manner of activities. The University of the Third Age even held its first ever robot constructor’s challenge recently.

There’s also the example of Charles Eugster, who took up bodybuilding at the age of 87 and started sprinting for the first time in his life at 95, becoming World Masters Champion at 200m indoor and 400m outdoor. He may be an exception but the general pattern is shifting in that direction.

Increased life expectancy

So if the percentage of older people in the UK is increasing, it could be more relevant to look at the number of years someone has left rather than their chronological age. The Centre for Ageing and Demography at the ONS found the point at which the average person would reach the ‘15 years of life remaining’ marker has changed over the last century.

In 1951, men and women aged 60 could expect to live another 15 years. By the 1990s, this had increased to 65 and today’s figure is 70. By 2057, it is expected to have risen even further to 75.

It’s all very well living longer but are those years lived in good health?

While health by chronological age has improved over time, health by prospective age (or how much time someone has left to live) has declined in some cases and improved in others.

Overall, Libby Webb, senior research manager at Age UK, said: “People at age 70 now have the same life expectancy and similar health to people aged 65 in the past so, on average, we are definitely seeing people doing better than they did in the past.”

Not surprisingly, most people will still experience a period of poor health at the end of their lives and can have quite complex care requirements.

What does it mean for your finances?

In terms of your finances, the findings mean that you need to ensure you’ve got enough money to last for a longer retirement period than in previous generations. If we’re all likely to live longer, it’s important to make sure you can enjoy as much of your retirement as possible while you’re fit and healthy.

Also consider funding life in your later years, such as care home costs. Make sure your financial planning takes each phase of retirement into account, so whether you’re 65, 70 or 80 you can live life as you want.

The post What’s in a number? Is 70 the new 65? appeared first on Creative Benefits.

Triodos Bank’s annual impact investing survey has found that nearly half (45%) of investors say that they would be keen to move their money to an ethical fund as a result of news surrounding the environment. When asked, investors state that they would put an average of £3,744 into an impact investment fund, marking an increase of £1,000 when compared with 2018.

53% of respondents believe that responsible investment is one of the best ways to fight climate change and 75% agreed that financial institutions should be more transparent about where their money is invested.

Gareth Griffiths, head of retail banking at Triodos Bank UK, said: “Many investors are no longer waiting for governments to take the lead in our transition to a fairer, greener society – they are using their own money to back the change they want to see.”

Ethical investing isn’t a new practice by any stretch. In fact, some ethical funds have been available for the past 30 years, though they still only make up 1.6% of the UK industry total, according to research carried out by Shroders.

That then poses the question, why haven’t they earned popularity in the past?

The old consensus was that investing ethically meant you were sacrificing performance for morality. A thought which seems to be changing, however, as research conducted by BofA Merrill Lynch found that a strategy of buying stocks that ranked well on ethical, social and governance metrics would have outperformed the S&P 500’s yearly result for the past five years.

Further to this, a survey conducted by Rathbone Greenbank Investments found that over 80% of the UK’s high net worth individuals are interested in investing ethically. Many want to back the fight against climate change and plastic waste reduction but say that due to a lack of choice they still end up investing in fossil fuels or mining companies.

The investment industry has recognised the change in attitude, leading to more and more fund management companies including ethical, social and governance factors in their core investment strategies. However, with the movement only just beginning to gain true momentum, it seems that time will tell when it comes to the mass adoption of ethical investment practices.

If you have any questions about ethical investment and the impact it might have on your portfolio, feel free to get in contact.

The value of your investment may go down as well as up. You may not get back what you initially invested.

The post The impact of climate change fears on ethical investing appeared first on Creative Benefits.

A Freedom of Information request by Hargreaves Lansdown revealed that 13,000 girls aged 15 or under had money paid into a pension for them in 2016/17 compared with 20,000 boys. The disparity means the pension gap can actually start from birth onwards.

This only exacerbates the situation as women are likely to have less in their pension due to the gender pay gap. Nest found men are twice as likely to be in the highest income bracket and women are three times as likely to be earning less than £10,000 per year, which is the auto enrolment threshold for a single job.

Women are also more likely to take career breaks or work part-time to bring up a family. Added to which, they are more likely to live longer and spend longer in retirement so, in reality, will need more in their pension pot than men.

Research in 2017/18 by the union Prospect found that the pensions gender gap equated to 39.9 per cent or a £7,000 gap in retirement income between women and men.

Hargreaves Lansdown has calculated that paying £100 per month into a child’s pension until the child reaches 18 can increase their savings by as much as £130,000 by retirement. Yet the cost is only £21,600 plus tax relief of £5,400. Forward planning pays off!

Someone without any earnings can pay up to £2,880 each year into a pension and receive 20 per cent tax relief (up to £720) so it’s possible for parents and grandparents to make a significant difference to a young person’s financial future by starting a plan early. An added advantage is that once the money is in a pension, it can grow without attracting capital gains tax.

It’s unclear why the anomaly between paying into boys’ and girls’ pensions has existed in the past. Some feel it may be because gifting has traditionally come from the baby boomer’s generation where men were more likely to have had the greater share of pension in retirement.

Whatever the reason historically, the current message is to use children’s pensions to give the younger generation a helping hand but to do it equally.

The post How the gender gap even affects children’s pensions appeared first on Creative Benefits.

The FCA estimates that around 6 million policyholders are paying high prices and aren’t getting a good deal on their motor and home insurance. They estimate that if those policyholders paid the average premium, as opposed to their current higher one, they could be in for total savings of £1.2 billion per year.

They also discovered that insurers often sell new customers a discount policy and then increase the premium when it comes to renewal. And the longer you stay with your insurer, the more you will pay on average. Many providers even factor in the likeliness of a customer switching when they set prices, which is not made clear to the customer. Providers then target those less likely to switch with higher prices.

Christopher Woolard, executive director of strategy and competition at the FCA, has said that the “market is not working well for all consumers.” The FCA has set out a package of potential remedies to ensure these markets are truly competitive, including:

• Stopping practices that discourage switching by imposing restrictions on the ways firms use automatic renewal.
• Making sure firms are clear and transparent in their practices, including how they communicate with customers.
• Banning practices that raise prices for consumers who renew each year, or introducing a requirement that makes firms automatically move customers onto cheaper equivalent deals.
• Creating an environment that encourages innovation, so that the insurance market can benefit from technological developments, such as Open Finance.

A final report is set to be published in Q1 2020 following a consultation period on the proposals. In the meantime, it may be worth taking a look at your current insurance policies and carrying out a little bit of market research. It could be that you’re one of the 6 million policyholders who are paying too much for insurance. There are quite a few price comparison sites out there that can serve as a great tool when it comes to choosing an insurance provider.

We recommend that you review any auto-renewals and make a note of your expiry dates, so you can prepare appropriately.

If you would like to discuss any of what we’ve mentioned above, don’t hesitate to get in contact with us.

Do not cancel any cover until a new plan is in force.

The post Why it pays to shop around for insurance appeared first on Creative Benefits.

Savers who already have an account will be able to keep saving into it until 30th November 2029, regardless of when the ISA was opened, but accounts will close to additional contributions after the 2019 deadline.

What is the Help to Buy ISA?   

The Help to Buy ISA was introduced to help first-time buyers over the age of 16. Individuals receive a bonus of 25% of their savings when it comes to purchasing a property, up to a value of £3,000. They can put £1,200 into the ISA in the first month, while subsequent payments are limited to £200 a month. The final criteria is that the property purchase cannot exceed £250,000 (£450,000 for London) if the buyer wants to receive the 25% boost.

How does the Lifetime ISA differ?

The Help to Buy ISA is not the only option available. The Lifetime ISA is designed to help people aged between 18 and 40 to save towards their first home or for later life. The Government will again give a bonus worth 25% of what is paid in, up to a maximum of £4,000 per year. Savers can then receive a maximum of £1,000 per year as a government bonus. This can be used to buy a home worth up to £450,000 anywhere in the country.

Both ISAs can be helpful when it comes to saving for a first-time property purchase, although there are some marked differences between the two.

The Lifetime ISA rules mean that savers have to wait at least a year before they can use it to buy a home. With the Help to Buy ISA, individuals have to have saved £1,600 before they can claim the minimum government bonus of £400 but this can be done over a period of three months: £1,200 in the first month followed by two subsequent deposits of £200 in the next two months.

It is possible to spread deposits across multiple ISAs. However, the maximum that can currently be saved in ISAs is £20,000 for the 2019-2020 tax year.

Helping your children get their first house 

Given the struggles the younger generation face to get on the property ladder today, you may be wondering the best way to give financial support. If you’re considering giving your child enough money for a deposit, there are no immediate tax implications. You can give as much money as you like to your children tax free, but if you were to pass away within seven years of the gift, they could be faced with an inheritance tax bill if your estate was worth more than £325,000. You can gift up to £3,000 a year without paying inheritance tax.

If your children or grandchildren are interested in taking out a Help to Buy ISA, remind them to do so as soon as possible before time runs out. If you would like to know more about the options around gifting money to your children to help with a deposit on a house, don’t hesitate to get in touch.

The post The Help to Buy ISA deadline is looming appeared first on Creative Benefits.

But times have changed significantly since the state old age pension was first introduced in 1909. In those days, it was paid to those aged 70 or more and people weren’t expected to live many years beyond that.

The UK Government is in the process of raising the state pension age to 66 (from the current 65), with an expected completion deadline of October 2020. These rises in the state pension age roughly correlate with the rise in life expectancy. People live on average at least another fifteen years beyond their ‘three score years and ten’.

Back in 1948, a 65-year-old would expect to take their pension for about 13.5 years, equating to 23% of their adult life. This has risen steadily. Figures in 2017 showed that a 65-year-old would expect to live for another 22.8 years, or 33.6% of their adult life.

A significant number of people even live to 100 these days. So much so that the Queen has had to expand her centenarian letter writing team to cope with the number of people requiring a 100th birthday message from the Palace.

According to the Office of National Statistics, the number of centenarians in the UK has increased by 85% over the last 15 years.This trend is set to continue so that by 2080 it is anticipated there will be over 21,000.

In recognition of the fact that people are living longer and spending a larger proportion of their adult life in retirement, a government review will consider increasing the state pension age to 68 between 2037 and 2039.

Currently, if someone retires at 65 and lives to 100 it makes for a long retirement. Not only is it  expensive for the state to maintain, the individual is worried about outliving their finances rather than being able to get on and enjoy their retirement. The state pension was not designed to support a long period of limbo.

Against such a backdrop, it makes sense for some individuals, if they are fit, healthy and capable, to consider working beyond their pension age. There is no longer any default retirement age at 65, so it is perfectly possible to do this.

The older generation also have a great deal to contribute to an employer in terms of experience and commitment. In addition, it’s well known that going to work each day gives some people a reason to get up in the morning and also to keep young. There are many unfortunate cases where someone has worked all their life, looking forward to their retirement, only to fall seriously ill or die the moment they stop work.

The number of 70 year olds in full or part-time employment has been steadily increasing year on year for the past decade, according to data from the Office for National Statistics. This hit a peak of 497,946 in the first quarter of 2019, an increase of 135% since 2009.

So rather than just worry about whether you will have enough for your retirement, maybe it makes sense to keep working a little bit longer.

The post Would more people actually like to retire a little later? appeared first on Creative Benefits.

Care from the NHS is free, but if you need social care because you are physically or mentally frail, you will have to pay for it yourself.

Over recent years, fees for care homes have risen rapidly. Research has found that Britons pay £10.9 bn of their own money into privately funded care a year. According to market intelligence provider, LaingBuisson, the average bill was £844 a week in 2018, compared with £445 a week in 1998.

If you have more than £23,500 (in England) in property, savings and investments, you will have to pay the full cost of care yourself during your lifetime and, if necessary, from your estate after you have died. This may not leave much for your family to inherit. Help from the local authority is available but it is strictly means tested, which results in very few people qualifying for financial help. (The value of your home is not considered in your means test if you or your spouse or a dependant is living there).

To avoid paying for their social care in the future, some people take steps to get rid of all their assets but this may mean they could end up in a less luxurious care home than they had hoped for.

Is using a trust an option?

You may have heard of people protecting the value of their assets and property by putting them into a trust. If this is done before they go into care, the home is not part of their capital and they cannot be required to use it to fund their care fees. Great care needs to be taken, however, around the timing of this.The Local Authority can view such a step as ‘deprivation of assets’ if they feel the intention is to avoid paying care fees and refuse funding as a result.

If you are considering using a trust, it is vital to get professional advice from a solicitor and make sure it is suitable for your individual circumstances. In some cases, there might not have been much benefit. Your income might have been enough to pay most or all of your care fees anyway. The level of your other capital may have been enough to meet the shortfall between your income and the fees for the length of your stay in care.

There were plans for the government to bring in a cap of £72,000 for care home costs in 2020, but these have been scrapped. In the recent Spending Review, an additional £1 billion for adult and children’s social care was announced by Sajid Javid, although it is yet to be seen what that will mean in practice.

The post Protecting your home from care home fees appeared first on Creative Benefits.

Olympic sports, Beatrix Potter characters and even Paddington Bear have graced the tails side of the coin, leading to a whole host of different coins for collectors to get excited about. As with many collectible items, the rarer the item, the more value it holds. This then begs the question, which coins are the most valuable?

Kew Gardens 2009

The rarity of the original 2009 coin has only increased since the coin’s re-release this year as part of the Royal Mint’s celebration of 50 years of the 50p. Many collectors have sought to get their hands on this rare find as they can now fetch around £100 when sold to the right buyer. A mere 210,000 of these coins were produced in 2009 to mark the botanical garden’s 250th anniversary. Just be sure to check the date if you happen upon one.

Sports coins

There are many different sports-themed coins out there, with a large number produced for the 2012 Olympic Games in London. The rarest and most sought after of all the sports coins depicts an explanation of the offside rule. Other sports coins have been valued by the Scarcity Index as follows:

• Triathlon – around £10
• Wrestling – £7
• Judo – £7
• Tennis – £4
• Goalball – £3

Character coins

The Royal Mint released another large collection of commemorative coins on what would have been author Beatrix Potter’s 150th birthday. The title of the rarest in the collection belongs to the Jemima Puddle Duck coin, which can fetch around £15 online.

The other coins, however, hold little resale value, as there are a large amount of them in circulation. The next rarest in the collection is based on the character Squirrel Nutkin, which can sell for between £1 and £3, depending on the buyer.

The rarest of them all

Although the Kew Gardens 2009 50p is considered one of the most sought after coins, it is by no means the rarest. While political relationships with Europe are currently frosty, back in 1992, a new 50p was released celebrating Britain’s entry into the Single European Market – which would later become the European Union. 109,000 of these coins were released into circulation before the decision was made to replace the larger 50 pence piece with the smaller, lighter design we know and love today.

And there you have it… 

Of course, as with many collections, the value of a particular item is based purely on the value attributed to the item by the buyer. For some, the sentimental worth of a particular collectible may vastly outweigh the numerical value attached to it. But still, it may be worth checking behind the sofa or in a few lesser worn jackets, as you never know what hidden treasures you may find.

The post Why the humble 50p could be worth investigating appeared first on Creative Benefits.

So what is the marshmallow test? 

A marshmallow is placed in front of a child, they are told that they can have a second one if they can go 15 minutes without eating the first one – then they are left alone with the marshmallow.

As you can imagine, many children ate the marshmallow as soon as the door closed, others fidgeted and wiggled as they tried to restrain themselves, eventually giving in. A handful of children managed to wait the entire time.

Following the experiment, the children were monitored as they grew up and it was found that those who waited for the second marshmallow performed better in exams, had a lower likelihood of obesity, lower levels of substance abuse and their parents reported that they had more impressive social skills.

In other words, it could be said that the ability to delay gratification is a trait that leads to valuable rewards in the future.

So how does this relate to financial planning?

The results from the experiment can easily be applied to the way you save and invest money. Simply put, if you save rather than spend now, you’ll gain greater rewards in the future.

How do you delay gratification?

Cutting out frivolous and impulsive purchases are a good start. Think to yourself: ‘do I really need this?’ Do you have to buy a coffee from the coffee shop near work? Do you have to eat out twice a week? Small acts of restraint can lead to a big pay off in the future.

When it comes to building a financial plan, it’s important to identify the levels of savings required for achieving goals in the future. Are you aiming for an early retirement or buying a holiday home? Setting out these goals early and developing a plan will help you to streamline your saving strategies so that you remain on track. Just remember, one marshmallow now or many marshmallows later.

Whatever you want to purchase: a boat, a house or a car, delayed gratification is an extremely valuable skill to learn when it comes to achieving your financial milestones. The more you see your savings grow, the more motivated you will be to keep going. It’s good to see your hard work pay off and over the span of a few years, you could see dramatic increases in your wealth and financial security.

The post Marshmallows and financial planning appeared first on Creative Benefits.

Tuition fees and student loans are usually top of the agenda. Most universities charge £9,250 for tuition fees but the financial help available to students for their living costs will differ. Maintenance loans are calculated according to where the student is going to study, where they plan to live and how much their parents earn.

As an example, the maximum maintenance loan is £11,672 if the student is an undergraduate,  studying in London and not living at home, but this would only apply if the gross household income was below £25,000 (after pension contributions). If the household income is greater than £67,000, the maximum a student can borrow for their living costs is £5,812. You would be expected to provide a parental contribution of £6,000 to make up the shortfall.

A recent survey revealed that parents of students could be found to be contributing an average of £360 a month. Half of them said they had not anticipated that they would have to give as much financial help. Luxury items such as new cars and exotic holidays were sacrificed while six per cent of respondents said they had taken a second job.

Despite this, students faced an average monthly shortfall of £267, according to the 2019  National Student Money Survey. Although some had taken part time jobs, 49 per cent relied on  overdrafts and 14 per cent on credit cards.

Not surprisingly, the main expense is accommodation.This has soared in recent years due to the increasing amount of university accommodation being provided by commercial operators, which costs significantly more than traditional halls of residence. Students can find themselves paying up to £9,000 a year on rent in London and £6,366 elsewhere.

Students also get tied into lengthy commercial tenancies of up to 46 weeks. Some landlords may even charge for 51 weeks. To make things even more difficult, the rent may be due before the maintenance loan arrives.

Despite the high costs, demand is high so students may be expected to start a tenancy in June for the forthcoming academic year. That can mean deposits of three months’ rent need to be paid in advance before the Easter term.

Parents are often called in to meet these costs and act as a rental guarantor. One advantage is that large providers like the Unite Group will allow you to pay by credit card so you can stack up lots of loyalty points.

It’s an exciting new chapter of life and with a bit of careful ongoing planning and budgeting, you can make sure you minimise any surprises.

Please get in touch with your appointed financial planner here if you would like to discuss planning for education costs further.

The post Financial lessons for parents of students appeared first on Creative Benefits.

10 SEPT 2019 | LONDON

Creative Pension Trust, the workplace pension scheme chosen by over 15,000 UK employers, has today received Master Trust Authorisation from the Pensions Regulator (tPR) under the Pension Schemes Act 2017.

Creative Pension Trust’s all-in-one solution provides employers guaranteed auto enrolment compliance, member communication and scheme governance, with a streamlined offering for micro employers and start ups and a sophisticated option suitable for SMEs and large national employers.

Commenting on the authorisation of Creative Pension Trust, David White, Managing Director of Creative Auto Enrolment, said:

“The successful introduction of auto enrolment means more people than ever are taking positive steps to save for a retirement they can look forward to. In working with tPR and meeting these very high new regulatory thresholds we can reinforce confidence in this industry and continue to demystify pensions for employees so they can take charge of their long-term financial wellbeing. That makes this new regulatory regime absolutely the right thing to do and we’re pleased to work with tPR in the drive for higher industry standards.”

– ENDS –

About Creative Pension Trust

Creative Pension Trust is a leading UK workplace pension scheme chosen by over 15,000 employers to guarantee their auto enrolment compliance and provide their employees with a low-cost, consumer-friendly way to save for their retirement. The Master Trust provides employers of all sizes with an all-in-one solution, built from the ground up to provide employers all the tools they need in one place to comply with auto enrolment and support positive member outcomes whilst saving the, time, money and resource.

The Master Trust provides 2 solutions for employers of all sizes: a streamlined scheme designed for start-ups and micro employers seeking a low-cost, high-quality auto enrolment pension for their employees; and a sophisticated, consumer-friendly workplace pension scheme designed for SME and large national employers designed to complement employee benefits programmes with a range of value-added consultancy services such as member financial education and guidance.

Creative Pension Trust is sponsored by Creative Auto Enrolment, part of the Creative Group of Companies, which offer auto enrolment, employee benefits consulting, wealth management and workplace pensions.

Media & Press Enquiries

Daniel Simmonds, Group Head of Marketing: +44 (0)738 4541545 | +44 (0)203 7254157 | Contact Us

The post Creative Pension Trust Authorised by The Pensions Regulator appeared first on Creative Benefits.

Keep software up to date

Make sure to keep installing software updates for your devices and programs. You can turn on automatic updates for many devices and applications for those of you with busy schedules. Staying up to date with security updates helps to protect your data from the newest digital threats out there.

Avoid phishing scams

Phishing is a fraudulent attempt to obtain your sensitive data such as usernames, passwords or credit card information. They can be carried out by phone, text or through social media – but, most commonly, email. As a rule of thumb, financial institutions or governmental agencies will not ask for your personal passwords or credit card information via communications. Be suspicious of any official looking email, message or phone call that asks for personal or financial information.

Practice good password management

Lots of us have too many passwords to manage, so it’s easy to cut corners like reusing the same password. We recommend that you try to have a different password for each account you have online and if you cannot remember them, it may be best to download some password management software or to keep a hard copy of them somewhere secure.

Here are general rules you’ll want to follow when it comes to passwords:

• Use long passwords – 20 or more characters is recommended.
• Use a strong mix of characters, numbers, punctuation marks and letters.
• Don’t share your passwords with anyone.
• Update your passwords periodically, at least once every six months.

Use mobile devices safely

Mobile devices have become an integral part of our lives and, more often than not, we use them regularly to communicate and stay up to date with our business. A few tips for securing your mobile device include:

• Only install apps from trusted sources
• Keep your device’s operating system updated
• Lock your device with a PIN or password
• Never leave it unprotected in public

Be careful what you click

Avoid visiting unfamiliar websites or downloading software from untrusted sources. These sites often host malware that will automatically, and often subtly, compromise your computer.

If attachments or links in an email are unexpected or suspicious for any reason, don’t click.

Install anti virus software

Only install an antivirus program from a known or trusted source and make sure to keep it up to date. There are plenty of anti-virus programs out there to choose from, so it’s best to do some research in order to choose one that’s right for you.

Back up, back up and back up again

Back up your data regularly – if you are a victim of a security incident, sometimes the only way to repair your computer is to erase and reinstall the system. Many cloud based programmes will do this automatically but if you store everything on a local device, regular back-ups are very important.

Some additional tips 

• Use public wireless hot-spots wisely – make sure to connect to trusted networks and not share any personal data
• Be wary of what you plug into your computer – flash drives and mobile devices sometimes may contain malware
• Be careful of what you share on social media websites
• Monitor your accounts for suspicious activity
• Use a firewall – Mac and Windows computers have basic firewalls installed as part of their operating system that can help to protect your computer from external attacks
• Bank or shop online only on trusted devices and networks and log out of these websites when you’ve completed your transactions.

So there you have it. A quick rundown of how to stay safe online. We hope that these tips helped. For more information on keeping your money safe, both online and in the long run, feel free to get in contact.

The post How to stay safe online appeared first on Creative Benefits.

Here’s some more detail of the cash versus bonds debate.

The benefits of cash

The main benefit, of course, is that you maintain complete control over your money. You simply deposit it into your bank account and there it remains. You can then review your balance and transaction history easily, knowing that no one else has access to those funds.

Cash is available for those rainy days or times when emergency funds are required – it gives you flexibility.

The risks of cash

Inflation is one of the biggest risks to cash. According to the ONS, the 12 month inflation figure as at June 2019 was 1.9%. This is the rate your savings require just to maintain their buying power, anything less than this and you are, in effect, losing money.

The second risk surrounds what are referred to as ‘opportunity costs’. These are the potential profits that could have been acquired if your money had been used differently. Since holding cash generates relatively little profit, the opportunity cost could be quite high.

It is generally prudent financial planning to always hold some cash for quick access and ‘emergencies’. Understanding just how much will be dependent on personal circumstances. Like all investments, there can be a risk of holding either too much or too little cash.

The benefits of bonds 

Unlike cash, investing in bonds offers the benefit of consistent investment income. Investing in a bond is similar to making a loan in the amount of the bond to the issuing entity – a company or government. In exchange for the loan, the issuing entity pays the bondholder periodically. The income generated by bonds is generally stable and quite predictable, allowing for robust financial planning. Once a bond matures, the issuing entity pays the bondholder the par value of its original purchase price.

The risks of bonds 

The main risk of bond investing comes when the investment loses value. If the issuing entity defaults, you may lose some or all of the investment. It’s important to note, however, that bonds are rated to measure the credit quality of any individual bond. The higher the rating, the lower the risk. Government bonds tend to receive the highest ratings.

A bond might also lose value if interest rates rise. However, this is only a concern if a bondholder is looking to trade it in before the bond reaches maturity.

If you enjoyed this quick comparison of cash versus bonds and require more financial advice or planning, feel free to get in touch. Our highly qualified advisers are here to help.

The value of your investment may go down as well as up and you may not get back what you initially invested.

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Dark green

Dark green funds refer to funds that hold international ethical values at the heart of their investment strategy. Funds such as Kames Ethical Equity excludes certain areas completely. Tobacco and alcohol, oil & gas, munitions manufacturers and companies that utilise animal testing will not be found in such a portfolio. Another fund by Kames is their Ethical Cautious Managed fund which excludes energy stocks, tobacco and banks with investment banking operations. It also excludes government gilts on the bond side.

Focused green

This is how we refer to ethical funds that only focus on a couple of particular areas for investment. Investing Ethically’s WHEB Sustainability fund has three focuses: health and population, climate change and resource efficiency. Legal & General’s Gender in Leadership fund is about investing purposefully without compromising returns – they believe that responsibly run, diverse companies will benefit both society and the investor.

Light green

Funds within the lighter shade of green have ethical focus; they may invest in companies that are responsible in their practices, but might still be part of an industry deemed to be less than ethical. Such a fund would invest in an oil company aiming to move over to greener sources of energy. One such fund is Vanguard’s SRI Global Stock Fund which only invests in companies that meet the UN’s Global Compact Standards on environmental protection, labour standards, human rights and controversial weapons (it also excludes tobacco companies).

Ethical investing offers the possibility of growing your wealth whilst benefiting society and is becoming more popular with investors of all ages. The ethical value of a particular fund, however, lies solely with the individual’s own personal values, as what is seen as ethical to one person may be deemed not so by another. That’s why it’s best to make sure each fund’s investment portfolio is consistent with your personal views before you invest.

With all investment opportunities, there can be no guarantee of returns regardless of the fund’s ethical objectives. There will always be a degree of risk involved. It’s clear that investing ethically is becoming an increasingly important consideration for investors. Reflecting this, the sector has developed to offer a much wider range of funds and opportunities to meet a broad range of investor needs. The growth of the sector can only be seen as a positive step for investors and the broader society.

If you’re interested in finding out more about investing ethically, do drop us a line.

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Annual management fee

As the title suggests, this is the charge that covers the management of your fund, usually attributed to administration costs. It’s common for many providers to hide fees in the small print of their service document, so it’s worth pressing your provider on the finer details of your annual management fee and what it covers. One of the most common of these ‘small print fees’ is an underlying fund fee that’s used to pay money managers, usually added on top of the annual management fee.

Inactivity fee

This is one to watch out for if you have several dormant pensions from jobs you’ve had in the past. Many people forget the brief pensions they were auto-enrolled in when they started their first jobs. It’s worth checking up on these funds and consolidating them into your current fund as many providers charge a fee if you stop paying into your pension. This is often referred to as losing your ‘active member discount’ to keep the fee in a positive light.

Contribution charge

Though the fee seems to be dying out, a few providers still utilise it and it’s worth checking with yours. Contribution charges are taken out every time you pay into your pension and can even cost you up to 2% of each contribution. So it’s safe to say that these charges can easily stack up on a month to month basis.

Exit fee

An exit fee is what you’d expect – a fee to withdraw or transfer your funds from your pot. The current cap is set at 1% of funds removed from the pension fund, however, there are certain providers that offer lower exit fees. Your provider may also offer a range of different investment funds where you can invest your contributions. If you want to transfer your funds from one fund to another, there could be a charge. However, your provider may offer a certain number of free switches each year. A way to avoid this fee is to select a different fund for investing your future contributions, though it’s worth checking with your provider whether there’s a charge to redirection contributions.

As you can see, there are a lot of different fees that could be applied to your account: we highly recommend you contact your provider to get a clear picture of how your money is being handled.

The value of your investment may go down as well as up and you may not get back your initial investment.

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This year it is impossible not to put the Spring Statement in a political context. On Monday night, the Prime Minister flew to Strasbourg and yet another meeting with Jean-Claude Juncker. She claimed to have secured a ‘legally binding’ agreement on the Northern Ireland backstop, but by Tuesday lunchtime, Attorney General Geoffrey Cox was delivering his opinion that ‘nothing had changed.’ With the ‘Star Chamber’ of Brexit lawyers advising MPs not to vote for May’s deal, it seemed impossible that it could get through the Commons, and that duly proved to be the case, as Theresa May lost her second ‘meaningful vote’, this time by 391 votes to 242.

As we write this introduction on the morning of Wednesday March 13th, the Prime Minister has promised the Commons a free vote this evening on taking ‘no deal’ (effectively leaving the European Union on March 29th and defaulting to World Trade Organisation rules) off the table. This seems likely to be approved by the Commons, who will then presumably pass a further motion asking for an extension to Article 50.

Whether the motion to remove ‘no deal’ has any force in law and whether the EU will agree to an extension of Article 50 are both subjects that are yet to be endlessly debated. It may be that by the time you read this, the situation will have changed again – but the practicalities of getting a report on the Spring Statement to clients quickly means that we had to settle on a cut off point. As we all know by now, with Brexit there is barely a day that goes by without the situation veering one way or another, but the Spring Statement waits for no man or woman.

Download here…

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As we have stressed many times, saving and investing is a long term commitment: there will be occasional bad years and the year just ended reinforced that point – but rest assured that whatever happens, we are always here to answer your questions and make sure your longterm financial planning remains on track.

So what did happen?

Click below or download here.

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Budgets, as we all know, take place on Wednesdays. After the excitement of Prime Minister’s Questions, the Deputy Speaker calls ‘the Chancellor of the Exchequer’ and he – so far we have not had a female Chancellor – bounds to his feet, delivering an upbeat message about the nation’s finances and pouring scorn on Her Majesty’s Opposition in equal measure.

Most people had been expecting this year’s Budget to be in November. The Budget has been brought forward to avoid being enmeshed in the latest rounds of Brexit negotiations. So why not Wednesday, October 31^st?

The newspapers are convinced that Philip Hammond did not want to give their headline writers an open goal by presenting a Budget on Hallowe’en and so Monday it was.

Download here…

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The US has now placed tariffs on a wide range of Chinese imports, with the latest list including electronic products and consumer goods such as handbags. Beijing has not been slow to retaliate, especially targeting agricultural imports – a move likely to hit Trump’s Republican base as the US mid-term elections approach.

Let’s take a look at the detail…

Click below or download here.

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DB schemes promise savers a certain level of income after retirement, this is also known as a ‘final salary’ scheme. Usually this income increases in line which means it offers some protection against the effects of inflation. Typically, you could expect to be offered in excess of 20 times your annual pension value as a lump sum to transfer out of the scheme. However, in some cases it could be much higher and cases where the lump sum offered is more than 40 times are not unusual. For instance, someone on a £10,000-per-year pension might be offered between £200,000 and £400,000 as a lump sum to transfer to another pension.

As life expectancy has risen, the cost of DB schemes, widely considered the ‘gold standard’ of pension schemes, has risen. Indeed, the default position of the Financial Conduct Authority (FCA) is that to transfer away from a DB scheme is not in an individual’s interests. Companies now tend to provide less generous direct contribution schemes to newer employees.

Why would you consider transferring out?

DB pensions are very rigid in their structure. You receive X amount of money every month until you die. This doesn’t give you an enormous amount of flexibility if you plan initially to have a few years of activity after retirement before settling down into a more frugal life in your later years.

Transfer values have really shot up recently. Pension firm Xafinity claims that a 64-year-old entitled to a £10,000 yearly pension starting at 65 would get £31,000 more today than they would have received in June 2017. This is making an increasing number of people explore the possibility of transferring out, but it is a complex subject and important to consider all the implications.

What downsides are there?

First and foremost, on a DB pension you are guaranteed steady earnings which will increase every year for the rest of your life.

Transferring out means you need to take responsibility for your own savings, so If your circumstances change in later life and you don’t have enough savings left to cover these changes, you could find yourself in a rather difficult scenario.

DB pension schemes offer real peace of mind – something that is hard to match when managing your own pension as a lump sum., If you transfer away, you take responsibility for your own investments.

Secondly, think about what it is you are offered. A large sum of money paid out in one can often seem more valuable than it is. Think about how the amount you are offered compares to the regularity and consistency of a DB scheme’s income.

What’s more, if you transfer out you could be faced with a large tax bill. The current lifetime saving limit for pensions is £1.03 million. If the value of your pension is in excess of this amount, you may face a tax charge of up to 55% tax at the time you take your benefits. Bear this in mind, if you are offered a payout which will take you close to the threshold.
If you are considering the option to transfer out, you should see a financial adviser. In fact, if your pension is worth more than £30,000 it’s the law to receive financial advice from a suitably qualified adviser before transferring out of your scheme.

If you are a member of a DB scheme and would like to hear more, please contact us.

The post What do you need to consider regarding a defined benefits pension transfer? appeared first on Creative Benefits.

This lengthy bull market has been caused by a number of factors. First of all, it was supported by a recovery in the US economy and growth in company earnings, which is always an important driver in share price growth. In addition, valuations, investor confidence and low competition from other investments also contributed.  

Donald Trump also did his bit to help by announcing a $1.5trn tax cut which boosted corporate earnings even further and encouraged more share buybacks. With interest rates being so low, companies have had plenty of spare cash to buy back their own shares.        

The obvious question is how long can this bull market realistically last? Is it nearing the end of its run? Will the contributing factors above run out of steam? On the face of it, with US interest rates still low by historic standards and corporate earnings rising, conditions for further growth remain good.

The UK stock market has also performed strongly since 2009, despite one or two blips in 2015 and 2016 which were relatively short-lived. In fact, it is more reasonably valued than the US one at the current time.

As ever, there are risks to the global economy which could mean the bull run could be coming to an end. Back to Trump, the talks of impeachment or the potential escalation of the Trade War could damage the healthy economic outlook. A strong Democratic performance at the forthcoming midterms could create uncertainty which markets tend not to like.

So as an investor, what is the most sensible course of action? It’s impossible to predict the future and trying to time the market is notoriously difficult. Instead, it is better to take a long-term view and ride out any short-term volatility or market correction. Protect your wealth by diversifying your assets and consider setting up a monthly investment plan to keep your savings ticking over while benefiting from any dips in the market. Underlying all the hyperbole and speculation, there are certain markets that remain undervalued by historic standards and so present the opportunity for further growth.

If you’d like to talk to one of our consultants about your current investment strategy, do get in touch here.

The value of your investment may go down as well as up and you may not get back what you initially invested.

Sources

https://www.investmentweek.co.uk/investment-week/analysis/3061443/us-set-to-hit-longest-bull-market-in-history

https://www.yourmoney.com/investing/longest-bull-market-us-history-means-investors/?ac=9&as=124&ag=14

https://www.yourmoney.com/investing/longest-bull-market-us-history-means-investors/?ac=9&as=124&ag=14

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As a result, the Financial Conduct Authority (FCA) and The Pensions Regulator (TPR) have launched a joint advertising campaign to highlight what to look out for.

Be wary if you’re contacted out of the blue

Cold calling was found to be the most common approach employed by fraudsters so be on your guard if you receive an unexpected offer regarding your pension. In all likelihood, it will be a scam. In particular, exercise caution if you‘re offered a free pension review. The ban on cold calling for pensions will help with this but it is still currently under consultation due to the complexity of the issues – at least it has already come into force for PPI and personal injury.

Make sure you know who you’re dealing with

Check the Financial Services Register (www.register.fca.org.uk) to make sure that anyone offering you advice or other financial services is FCA-authorised. This ensures that you will have access to the Financial Ombudsman or Financial Services Compensation scheme if things go wrong.

Avoid being rushed or pressured into making a decision

Do all the checks you’d normally carry out regarding anything to do with your finances. Don’t be tempted to take any shortcuts for fear of losing out on an ‘amazing deal’. If something sounds too good to be true it probably is. Remember, nothing is guaranteed so if you’re promised guaranteed high returns, alarm bells should start ringing, especially if they are pressurising you to act quickly. Another tell-tale sign that it’s not a legitimate offer is if they offer you access to your pension before the age of 55.

Get impartial information and advice

There are various reputable sources you can go to for help. The Pensions Advisory Service (TPAS) (www.thepensionsadvisoryservice.org.uk) provides impartial information and advice. If you’re over 50 and have a defined contribution (DC) pension, Pension Wise (www.pensionwise.gov.uk) offers pre-booked appointments to talk through your retirement options. Or consult a financial adviser, such as ourselves, to discuss the best option for your personal circumstances but always make sure they are regulated by the FCA. If you do suspect a scam, hang up and report it to the FCA on 0800 111 6768 or to Action Fraud on 0300 123 2040.

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In effect, this would mean that higher rate taxpayers would lose out on £44,000 in pension tax relief, while that figure could be as high as £66,000 for top rate taxpayers. In contrast, lower earners would get a boost of £44,000. The current rate of tax relief enjoyed by higher earners is 40%.

The MPs report was called ‘Household finances: income, saving and debt’ and was prompted by a belief that the government’s current incentive for long term saving was not as effective as it could be in encouraging people to save into pensions. They felt the proposed change would promote a better understanding of tax relief as a bonus or additional contribution.

Under the current system, you receive tax relief on your savings as they enter the pension pot, at your marginal tax rate, while savings are taxed as you withdraw them for your retirement.

Here are a couple of examples of what the changes might mean. Imagine if you were a higher rate taxpayer, 40%, (with an income up to £46,349) getting tax relief on a gross sum of £10,000 per annum. Under the adjusted tax relief, this would be £3000, net cost £7000, as opposed to £4,000, net cost £6000, currently. If you take it that your fund after 30 years would have grown at a mid growth rate, this would be £308,000. However, after 30 years of reduced contributions under the tax relief change it would be £263,986 – a drop of £44,016.

Similarly, if you were a top rate taxpayer, 45%, (with an income over £150,000), the adjusted tax relief on a gross sum of £10,000 per annum would be £3,000, net cost £7,000, as opposed to £4,500, net cost £5,500, currently. Your fund after 30 years would have grown to £308,000, yet under the tax relief change it would be £241,995 – a drop of £66,005.

Not everyone agrees with the Treasury that tax relief isn’t a good incentive. In some quarters, it’s felt that reducing the top rate won’t increase savings but instead will create a cash flow problem for higher and top rate taxpayers.

Nonetheless, from a positive point of view the report has generated a lot of good debate and analysis. There have been some welcome recommendations such as the need to simplify the tax on pension savings by scrapping the lifetime allowance. It was also suggested that the money purchase allowance, i.e. the amount a person who has already begun drawing from their pension can pay back into their retirement fund without a penalty, be returned to £10,000 rather than the current figure of £4000.

One thing is for sure – pension tax relief is a complex area, which at the moment is in a state of flux. If you’d like to talk to one of our consultants about your particular situation, do get in touch here.

Sources
https://www.ftadviser.com/pensions/2018/07/30/higher-earners-to-lose-44k-under-mps-plans/
Example – Quotes obtained from the lowest cost platform and adjusted for inflation of 2.4 per cent over 30 years so that fund values are real terms figures. (Source: LEBC)

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With just eight months to go until the UK leaves the EU, just what is going on?

In our special report on Brexit, we’ve attempted to untangle the mess, explain the issues in simple – and unbiased – language and predict what might happen.

Will we have a new Prime Minister by the time we leave the EU? What does the current uncertainty mean for business and your savings and investments?

To read our special report, simply click here – and rest assured that we will be on hand to answer any questions you might have.

The post Brexit – a brief summary of where we are appeared first on Creative Benefits.

Hosting a dinner at the Great Hall of the People, Chinese premier Xi Jinping said that the potential for cooperation between the US and China was limitless. “The two countries will be able to open a new page of bilateral ties and make a new contribution to the future of all humankind,” said Xi.

Let’s take a look at the detail…

Click below or download here.

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In January, there was good news on growth in China and the World Bank issued a bullish forecast as it looked ahead to 2018. Reporting that global economic growth had been stronger than expected in 2017, the Bank forecast growth of 3.1% for the coming year. The Bank’s president, Jim Yong Kim, said, “The broad-based recovery in global growth is encouraging.”

Let’s take a look at the detail…

Click below or download here.

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The study, conducted in February, consulted 657 working adults over the age of 18 and 227 retired people. 14% of workers said their biggest regret was not making a financial plan for their pension.

Other responses included 12% who said they wished they had taken the opportunity to be more engaged with their pension, joined a scheme or took more interest in the pension funds available to them – this was particularly true in the case of women (17% as opposed to 11% of men). 38% of those who had already retired said their biggest regret was putting off making a savings decision, followed by 18% who said it was down to poor planning. Respondents also expressed regret as to how they had used their pension pot, including:

• accessing a tax-free lump sum when they didn’t need it
• taking too much income too soon from their drawdown policy
• buying an annuity
• not buying an inflation-linked annuity

By contrast, 42% of those surveyed said the best savings decision they had made was joining their workplace pension or saving into a personal pension. This was true for under a quarter of men and just under a fifth of women.

With the state pension being unable to provide an adequate income for most people, it’s becoming increasingly important that individuals don’t delay saving into a pension scheme. As Aegon Pensions Director, Steve Cameron, puts it:

“For many of us, it’s the most important saving pot we’ll ever have, so you want to give yourself the best chance of building it up over as a long a period as possible. By starting to save for retirement as early as possible, with time on your side, you have a better chance to avoid future regrets.”

It’s all too easy to think retirement is a long way off and put off making any decisions about pensions until ’next year…’ After all, there can always seem a more pressing need for disposable cash. The research, however, gives a clear message that many people wish they had taken responsibility for their financial future earlier.

At Creative Benefits, we work with a wide range of employers and employees to provide them with innovative and tax-effective pension schemes that suit their particular needs. If you’d like advice on how to make the most of your workplace pension, please contact one of our consultants here.

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Five months later, Hammond stood up to deliver his first Autumn Statement and immediately announced it would be his last. “No other major economy,” he said, “has two financial statements in a year.” Thus the Budget was moved to Autumn and, from 2018, the Spring Budget would become the Spring Statement.

And here we are… Eighteen months on from Mr. Hammond’s first announcement, the UK continues along its road towards Brexit and the Chancellor continues to be a man who will “choose our course and stick to it” (or words to that effect).

Download here…

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On the world’s stock markets the last three months of the year were good ones: only one of the markets on which we report fell, and that only marginally. Two markets – the US and Japan – enjoyed double digit growth in the last quarter of the year, the former despite being battered by Hurricanes Harvey, Irma and Jose. However, good as their performance was, it wasn’t enough to secure our ‘stock market of the year’ title.

Let’s look at all the various regions and countries in more detail.

Download here.

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At almost the same time, the DWP also announced the results of its review into the initial rollout of automatic enrolment, a review which the DWP described as being intended to “maintain the momentum achieved so far”.

The master trust consultation, which will run until January 12th 2018, has been called to gather opinions on proposed draft regulations that will see the introduction of authorisation and a supervisory framework for master trust pension schemes under the Pensions Scheme Act of 2017.

The automatic enrolment review, entitled ‘Automatic-enrolment review 2017: maintaining the momentum’, suggests changes to the initial rollout, to take effect from the mid-2020s. Both the consultation and the report contain significant insight into the direction the pensions landscape is heading.

The Pensions Regulator (TPR) and Master Trusts

Under the proposed draft regulations, The Pensions Regulator (TPR) will be responsible for the authorisation and supervision process. TPR will assess potential master trust schemes against a predetermined set of criterion, including the financial sustainability of the scheme and whether the scheme is beneficial to employees.

Any suggested draft regulations aim to ensure that members of master trust schemes have equivalent protections to members in other types of schemes, and that any risks are proportionately and proactively regulated.

Changing the automatic enrolment landscape

The headline findings in the DWP review of automatic enrolment include a recommendation to lower the age of enrolment from 22 to 18, bringing an extra 900,000 young people into workplace pension schemes.

At the same time, the DWP proposes changing the framework of workplace pension calculations to remove the lower earnings limit of £5,876 and instead calculate contributions on the first pound earned. The report calculates that this could add £2.6 billion to pension saving and encourage those with multiple jobs to opt-in.

The report also sounded a note of caution on a long discussed challenge, namely the inclusion of the self-employed in automatic enrolment. The DWP believes that, after careful review, there is “no single or simple and straightforward mechanism” to include self-employed workers in automatic enrolment and propose a number of “targeted interventions” next year to assess the situation better.

The Belief of The Creative Pension Trust

As a master trust, The Creative Pension Trust supports increased regulation of workplace pensions. We hold ourselves to the highest professional standards, actively ensuring that all our financial products comply with all financial regulations.

The Creative Pension Trust welcomes the outcome of the DWP’s consultation regarding master trust pension schemes. Increased regulation only serves to provide a better experience for employers and pension scheme members, providing them with greater pension security, flexibility and choice.

The fact that master trusts are being reviewed by the DWP, alongside The Pensions Regulator (TPR), only serves to reinforce the continuing commitment of regulatory bodies and the UK government to securing a better future for the entire UK workforce.

In a similar vein, the changes to automatic enrolment, which will see more people saving for their future, are also welcome, though most of these suggestions are some way off becoming policy. The continued efforts to find a solution which suits self-employed workers and helps them to save for their own future is also welcome.

David White – Managing Director of Creative Auto Enrolment, the sponsor of The Creative Pension Trust, said: “Auto enrolment into regulated company pension schemes gives employees peace of mind that their financial future is secure. We would like to see the Government take forward the new proposals to have more people saving more for their retirement at the earliest opportunity.” To learn more about The Creative Pension Trust and understand how master trusts affect you or your business, visit us here today or call: 0345 463 7932.

The post Government Announces Master Trusts Consultation and Auto Enrolment Review Findings appeared first on Creative Benefits.

The Prime Minister and the government remain committed to delivering Brexit on March 29th 2019 and currently appear ready to offer the EU more money in the ‘divorce settlement’ to kick-start the talks on trade. But with negotiations on the coalition government in Germany having failed over the weekend, it is difficult to see how any talks can make much progress with the EU’s largest net contributor facing what the BBC’s Andrew Neil called the “biggest political crisis since the 1940s.”

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So, what can we expect from the Chancellor when he delivers the Autumn Budget in just under three weeks time? Reports indicate that this is likely to be a ‘bold’ budget which the Tories hope will attract younger voters to the party. Whilst the government has arguably already begun attempting to do this through the recent freezing of tuition fees at £9,250 and raising the threshold at which student loans begin to be repaid to £25,000, it’s likely that the budget will outline further reforms which offer incentives for graduates.

Pensions have also been widely predicted to feature significantly in this budget. As the government has pledged to maintain the triple lock on the state pension – meaning that pensions rise in line with inflation, earnings, or by 2.5%, whichever is the highest – many have forecast that pensions relief will be targeted on 22nd November. It has been suggested that the Chancellor may be preparing to announce a move from the current system of 20% tax relief for basic rate taxpayers and 40% for those on the higher rate, to a new flat rate for all. Some believe this may be set at 20%, whilst others have predicted a higher 33% rate, a move which would see those on middle incomes hit the hardest.

Other areas expected to feature in the first Autumn Budget include stamp duty, corporation tax, and further reforms to tax and national insurance contributions for the self-employed. We will have to wait until 22nd November of course to see exactly what Philip Hammond has planned in his attempt to reaffirm his currently somewhat unstable position as Chancellor.

Sources

https://www.accountancyage.com/2017/10/18/autumn-budget-2017-loans-savings-stamp-duty/
https://www.accountancyage.com/2017/10/25/autumn-budget-2017-pensions-self-employed-corporation-tax/
https://docs.google.com/document/d/1LSOACZqSwK2J0c1d1jiYI8USALbwVQ4rxOBMdSxJfeY/edit?ts=59fae86c#

The post What will be in the Autumn Budget? appeared first on Creative Benefits.

To find out more, and see the team, click here.

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Nevertheless, Philip Hammond will present his Autumn Budget speech on 22nd November, having moved the Budget from its traditional spring date. Any Chancellor’s speech is always a mixture of politics, economics, showmanship and sleight-of-hand: we can expect plenty of the first two ingredients in a month’s time. ‘Showmanship’ is probably not a word that is in Philip Hammond’s dictionary and the rumours suggest it will be a ‘safety-first’ Budget. Sleight-of-hand? We will have to wait for the small print of the actual speech to judge that.

The Political Background

Not long after Hammond delivered his final Spring Budget speech, Theresa May announced a General Election. The Chancellor must have rubbed his hands in glee: a sure and certain Conservative majority of between 80 and 100, giving him five years to sort out the nation’s finances, steer the UK through Brexit and perhaps think, as he stared steadily into his shaving mirror, Goodness me, Theresa might have had enough by then. Who better to pick up the reins of a strong and stable government…?

As we now know, the General Election did not go according to plan. No doubt the inquest is still being held at Conservative Central Office. No senior Conservatives emerged from the campaign with credit. Philip Hammond further blotted his copybook with his forgettable speech at the Conference, and then made a leaden-footed intervention in the Brexit debate. First he was seen dining with George Osborne and then he over-compensated by describing Europe as ‘the enemy’. Small wonder that former Chancellor Nigel Lawson and pro-Brexit Tory backbenchers are now calling for his sacking, with Monday morning’s Times headline proclaiming ‘Hammond faces Tory rebellion over Budget’.

So in roughly four weeks, Philip Hammond will get to his feet, take a sip of water and try to save his career. Perhaps he should drink something stronger? Chancellors are the only politicians allowed to drink in the Commons chamber: William Gladstone drank sherry and a beaten egg. Even the equally uncharismatic Geoffrey Howe reached for a G&T.

The Economic Background

Whatever he chooses to drink, at least the Chancellor has some recent good economic news to fortify him.

Unemployment was down by 52,000 in the three months to August, falling to 1.4m, with the jobless rate remaining unchanged from the previous quarter at 4.3%. The unemployment rate is the lowest since 1975: the problem for the Chancellor is that it is not being perceived as good news while the squeeze on wages continues. The Office for National Statistics (ONS) said that wages rose by 2.1% for the June to August period: with inflation now up to 3%, you don’t need to be a mathematician to work out that real wages are falling.

The figures for September from the ONS confirmed that the budget deficit for the month – the gap between what the government spends and what it collects in taxes – was the lowest September figure for the last ten years. The deficit was £5.9bn, down 11% on September 2016. Many economists had forecast a deficit of £6.5bn, so the news was a real boost ahead of the Budget, especially as the deficit for August was revised down by £1bn to £4.7bn.

September was the third straight month in which the public finances had been better than the analysts had predicted – but public sector net debt (excluding the state owned banks) has still increased by £145bn since September last year and – you may want to sit down – now stands at £1,785bn. That’s equivalent to 87% of the UK’s gross domestic product.

That figure sounds alarmingly high, but how does it compare? According to figures from the CIA World Factbook and the IMF, the equivalent figure for Germany is 69%, France is 96% and Italy an eye-watering 132%. Net debt in the US is 73% of GDP: in China it is just 20% – so the UK is by no means as bad as some of Europe’s weaker economies. Clearly, though, there is a lot of work to be done in reducing Government debt – and the interest we all pay on it – to much more manageable levels.

But as always with the British economy, the glass can also be seen as half-empty. Inflation has just risen to 3%, its highest level since 2012, fuelling the possibility of the first rise in interest rates for more than a decade. Perhaps more worryingly for the Chancellor though, the Office for Budget Responsibility has reined back its earlier optimistic predictions about UK productivity.

In March, the OBR predicted that productivity in the UK would grow by 1.7% this year, theoretically giving the Chancellor an extra £26bn for the public finances. After a review, the OBR discovered that it had over-estimated UK productivity for the last seven years. Hourly output declined by 0.5% in the first three months of the year and by 0.1% for the April to June period. Small wonder that two-thirds of the £26bn windfall has now vanished into thin air.

What do people want from the Budget?

As you might expect, the Chancellor has not been short of advice as he prepares his speech. Sam Bowman, Executive Director of the Adam Smith Institute says the Chancellor must fix the housing market: “[The Conservatives] wonder how to connect with young people: the answer is simple … give them somewhere to live.”

The Institute of Directors want ‘serious measures to boost the economy’ and the TaxPayers’ Alliance want a reduction in the overall tax burden – which is now approaching levels not seen since the 1960s.

Politically, Hammond’s colleagues in the Commons also want to see more measures to help young people. Why did the Conservatives do far less well than they expected in the General Election? In part, because young people voted in far greater numbers than they previously had, and they voted for Jeremy Corbyn and his message of hope.

That is hardly surprising – as one commentator put it, ‘The Conservatives cannot expect young people to vote for them as they are giving them nothing to conserve.’ But in trying to woo the young, Hammond has any number of concerns to address: their inability to get on the housing ladder, the way rents are rising as a percentage of income, the number of young people with debt problems, the student loans fiasco and – in the longer term – the growing threat to jobs from robotics, artificial intelligence and low-wage economies in Europe and the Far East.

What are we likely to see on 22nd November?

If the early reports are to be believed, the answer to that last question is simple: help for those young people. The Conservatives have already used their party conference to announce extra cash for the ‘Help to Buy’ scheme, a freeze in tuition fees and more money for social housing, but Hammond will need to go further.

How is he going to do this? According to last week’s Telegraph, one of his tactics will be a raid on older people to pay for tax breaks for the young. The buzzword will be ‘intergenerational fairness’ with Hammond apparently planning to offer tax breaks – or possibly a reduction in national insurance contributions – to workers in their 20s and 30s, paid for by cutting tax reliefs for older and better off workers.

Well, as Sir Humphrey might have said, ‘That’s a very courageous decision, Minister.’ Another contributory factor for the Conservatives’ poor showing at the Election was the ill-thought plans for a ‘Dementia Tax’. Now along comes the Chancellor with plans for a ‘tax on age’. Small wonder that there are plots being hatched on the back benches…

Despite the need to be bold, the indications are that Hammond is planning a ‘safety-first’ Budget with Tory backbenchers being warned to expect no headline grabbing announcements, thanks to the pessimistic forecasts from the OBR.

Looking back to the Spring Budget, Philip Hammond introduced a ‘market leading savings bond’, cut back on ‘middle class tax perks’ and invested in the country’s infrastructure. We may well see further measures along these lines in November, together with more steps to help traditional retailers compete with online competitors. We can expect to see more money ‘ring-fenced’ for the NHS as it prepares for winter and – given the recent press coverage from Hollywood – he may earmark more money to protect vulnerable women.

Let us, though, take one guess at a measure designed to grab some headlines: the Chancellor has been extensively lobbied by the Wine and Spirit Trade Association. There have already been measures taken in the past to protect Scotch Whiskey: don’t be surprised if he freezes planned duty increases on English and Welsh wine.

All the above would be very worthy measures – but they will do nothing for the Chancellor’s own job prospects or for the popularity of a Government that gives every appearance of losing control of the political initiative.

A gloomy Chancellor may well present a gloomy Budget on a gloomy November day. That will not play well either politically or psychologically. You wouldn’t bet against it being Philip Hammond’s last Budget; neither would you bet against it being the last Autumn Budget…

The post The Autumn Budget Preview appeared first on Creative Benefits.

Well, Theresa May is still leader and has survived to deliver her Prime Ministerial speech at the conference, (despite a prankster, her coughing fit and collapsing slogan). But she is holed beneath the waterline and the sharks continue to circle – although admittedly Boris Johnson is an unlikely looking shark…

Download here.

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The Dash talks about the life of a man who has passed away, being talked about by his friend at the funeral. The friend refers to everything that he had done and achieved during his life as being represented by ‘the dash’; the space between the two dates of birth and death on his headstone.

The poem has lots of resonance outside of financial planning, of course, but it also speaks to us about what financial planning is really about and why it can be so important.

During the course of the poem, the speaker notes that what was important about the man was not what he owned, ‘the cars…the house…the cash’, but what he had done and the lives he had touched. He goes on to consider ideas of living a good life, putting things right that we know are wrong, changing how we live for the better.

There’s truth in the poem that, ultimately, your pile of cash is meaningless next to the things that you can do with it. Money is merely an enabler for things to happen and, if those things are good and lasting, they tend to have more impact on us and others than transient things we could spend the money on; a new car or house, for example.

True happiness, the poem suggests, is not about building up ‘things’, but in making sure that you have no regrets, putting wrongs right and living life the right way. Money can, of course, help to do all of those things, but it is not those things in and of itself, it is merely a way to get to the place that you want to reach.

So the next time you sit down to think about your financial planning goals, make sure that you are truly thinking about what you really want to achieve. Not increased revenue, or the next purchase, or to what accounts your money needs to be assigned; but what would genuinely make you happier; your life more fulfilled; your ‘dash’ better lived!

Sources
http://www.linda-ellis.com/the-dash-the-dash-poem-by-linda-ellis-.html

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Previously known as the Payroll World Awards, The Rewards recognises the widening remit of the payroll profession and its close association with HR, Reward, Pension and Employee Benefits.

The Rewards Gala Dinner is to be held on 02 November 2017 at the London Hilton Bankside, and so we have 7 weeks to wait until we find out if our shortlisting will translate into success on the night.

The post Awards recognition for Creative Auto Enrolment appeared first on Creative Benefits.

It’s clear that not all pension providers are ready for the challenge in terms of robust, sustainable administration systems. Inadequate processing systems not only cause frustration and anger for pension scheme members, but also potentially you as well if you are connected to the payroll and/or submission of pension contribution processes.

That’s why we feel the Master Trust Assurance Framework (MAF) is so important and that no employer should contemplate using a pension provider who isn’t MAF accredited.

The framework was developed by the Institute of Chartered Accountants in England and Wales (ICAEW) in partnership with The Pensions Regulator (TPR), and was designed to assess whether pension schemes meet all appropriate standards of governance and administration.

The Creative Pension Trust, our end to end solution, which integrates auto enrolment processing with the pension scheme, is MAF accredited and was built from scratch solely for this purpose. This ensures there are no legacy or potential IT conflicts that could interfere with the smooth administration of your auto enrolment needs.

As well as holding the very important MAF accreditation, our solution is also one of very few on TPR’s published list of arrangements open to all employers, meaning that no matter your size or employee profile the Creative Pension Trust can be the ideal solution for you and your staff when it comes to meeting your auto enrolment obligations.

Request a call-back now to find out how we can help you stay compliant and how you can benefit from the same great service currently being experienced by the greater than 13,000 employers currently participating within the Creative Pension Trust.

The post Master Trust Assurance Framework: Providing vital additional protection appeared first on Creative Benefits.

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A major contributing factor to this higher demand for DB transfers is the introduction of pension freedoms in recent years. Demand is also being fuelled by the continued uncertainty created by the DB pension scheme deficit. The latest figures suggest that the shortfall has remained stable over the past year despite the political turmoil: the deficit shrank to £183 billion at the end of May 2017, down from £194 billion twelve months earlier. That said, this is still a significant negative amount of money, which is undoubtedly contributing to many looking to ditch their DB pension in favour of something which appears to be more stable.

Employers, too, appear to be moving themselves away from DB pension schemes. It was reported at the end of May that BT is looking to close its DB scheme for current employees, a move unlikely to be popular with its workers; a similar move by Royal Mail Group following the company’s privatisation which aimed to shut the scheme to its current workforce led to strike action in April this year.

The AA has also recently confirmed that it will go ahead with proposed changes to its DB pension scheme, moving all members of the scheme to its existing career average revalued earnings (CARE) pension arrangement. The CARE scheme will also see amendments such as moving its indexation from the Consumer Price Index (CPI) to the Retail Price Index (RPI), likely to be more favourable for those receiving pension benefits.

It looks likely that the changes and discussions surrounding DB pension schemes will continue for some time. If you are a member of a DB scheme and you’re considering a transfer or you’re unsure of what to do, the most important thing to do before anything else is to seek financial advice to ensure you understand the choices available to you and which is best for you. If you have any questions around this topic, please feel free to get in touch with us directly.

The post What’s happening with DB pension schemes? appeared first on Creative Benefits.

The situation is still moving incredibly quickly but we have put together the following report to look at subjects such as:

• the result
• the arithmetic
• the personalities and who the DUP are
• what is a ‘confidence and supply’ deal?
• what does all this mean for Brexit?
• could Labour form a Government?
• what this means for the pound, shares and your investments

Download the Post Election summary here.

The post What will the result of the General Election mean for you? appeared first on Creative Benefits.

The figure is similar to that lent by the Yorkshire Building Society, the ninth biggest mortgage lender in the UK, and will help fund deposits for more than 298,000 mortgages and property purchases to the value of around £75 billion. The expected average amount lent to children by parents this year will be £21,600, an increase from the 2016 average of £17,000. Almost four out of five (79%) of the recipients will be millennials under the age of thirty.

The greatest average contribution by parents will be seen in the south-west of England, with around £30,000 lent per transaction, with London the second highest at an average of £29,400. At the other end of the scale, parents in Wales will lend an average of just £12,500.

The report has been seen as further evidence of how the housing market in the UK is currently not working as it should. The continuing rise of parental funding to help young people get on the property ladder shows that the problem is worsening, with the exponential growth of the Bank of Mum and Dad’s input in property transactions neither sustainable nor equitable for both the younger generation borrowing the money and the older generation lending it out.

The report also found that only 40% of parents financially support all their children equally: 18% only helped their first-born child, whilst 16% supported their youngest. Whilst most parents were prepared to give their children a certain amount of help towards buying a property, only one in five parents would offer greater assistance if they lived in more expensive areas. In London, however, 40% of homeowners had received financial support from their parents.

The growing strain on the ‘Bank of Mum and Dad’ has seen many people approach us for financial planning advice, both in respect of this topic and that of University fees. If either of these expense areas, or any others, are causing you concern please take the time to speak to your Creative Financial Planner, or contact us on info@creativewm.co.uk, as we’ll be very happy to explain how our process of Holistic Financial Planning may help you and loved ones now and in the future.

Sources
https://www.theguardian.com/business/2017/may/02/bank-of-mum-and-dad-lend-65bn-property-market

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The scrapping of the fees increase will be a welcome turn of events for many critics who had described the move as introducing a ‘stealth death tax’. However, any celebrations might prove premature, as plans may be brought back once the election dust has settled.

When a person dies, the executor of their estate has to pay probate charges to the government in order to be able to distribute assets to the relevant beneficiaries of their will. The current system sees a fee of £215 due, which is reduced to £155 if the process is completed by a solicitor, no matter what the value of the estate is.

The proposed changes were to bring in a sliding scale. Estates valued under £50,000 would pay no fees, with estates worth between £50,000 and £300,000 paying a charge of £300. The figure would then have increased as the estate value went up, with estates worth over £2 million being charged the proposed new maximum fee of £20,000, a figure which would have meant an increase of 9,000% on the current fees.

While plans for this new system have been shelved for the time being, don’t be surprised if they resurface at a later date as the changes would have raised an extra £300 million a year for the government.

What this continues to highlight is the need for Whole of Life financial planning, looking not just at pensions or investments but all planning aspects in a holistic way so that you and your loved ones are as protected as possible in all circumstances. We pride ourselves in delivering this form of advice to our clients and so if you feel that your plans need reviewing, or you’ve never used our services before but feel you would benefit from such a conversation, then please contact your Creative Financial Planner or contact us on info@creativewm.co.uk.

Sources
https://www.bbc.co.uk/news/uk-politics-39663204
https://www.telegraph.co.uk/tax/news/probate-fee-fiasco-always-tax-not-fee/

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The reasons why high street providers have so far snubbed the new LISA are various in nature. Some say that they haven’t been given enough help by the government to be in a position to offer the new savings product, whilst others have simply said they prefer to offer the existing Help to Buy ISA, which can serve a similar function to the LISA. The main reason given, however, is that banks and building societies are finding that customers simply find the LISA too complex to understand, putting them off the product from the start.

For those who are still confused, here’s how the new LISA works. It’s available to those aged over 18 and under 40, and a maximum of £4,000 can be deposited in the account every year. The government then provides a bonus of 25% of whatever has been saved each year, meaning that those who save the top amount available will receive an extra £1,000.

It’s a generous amount to help boost your savings, but there’s a catch: the money saved can only be withdrawn if it’s used to buy a first home or once the account holder has turned 60. To encourage savers to use their LISA to buy property or for their retirement, any money that’s taken out without meeting this criteria will be hit by a 25% penalty. While this is intended to reclaim the government bonus, it will also take a chunk of any interest or investment growth savers have seen, and so anyone requiring early access to their funds, may end up with less than they put in.

For example, say you invest £100. The Government will give you a 25% top-up which will mean you have £125 in total. If your funds have then received no growth but you need early access the 25% exit penalty means you will end up with just £93.75.

Whilst the £3,000 government bonus available from the Help to Buy ISA is potentially far lower than that available from a LISA, the fact that the new product has more intricacies as to what you can and can’t do, means that both banks and savers seem to be sticking with the more established account.

That said, more banks have indicated that they plan to begin offering LISAs in the coming months, and if you’re happy not to touch your savings until your 60th birthday you could end up with a tidy nest egg in your savings account provided that you pay as much into it each year as possible. The LISA won’t be for everyone, but there are good reasons to give it some consideration.

If you are an Employer who feels that LISA has a part to play in your workplace benefit plan, then it’s important that not only you but also your staff receive the necessary advice associated to the differences between LISA and, for example, your automatic enrolment pension scheme. At Creative we can provide both parts of this advice, and even help you source the appropriate solutions and would urge you to discuss this with your regular Creative consultant or email us on info@creativeeb.co.uk.

Note

• • The value of your investment may go down as well as up.
  • You may not get back the full value of your initial investment.

Sources
https://www.telegraph.co.uk/investing/isas/new-lifetime-isaeverything-need-know
https://www.bbc.co.uk/news/business-39506199
https://www.independent.co.uk/money/spend-save/lifetime-isa-lisa-help-to-buy-savings-account-mistake-uk-pensions-mistake-a7680126.html

The post The new Lifetime ISA is here: the pros and cons appeared first on Creative Benefits.

The old £1 coin will remain in circulation until Sunday 15th October, when it will be consigned to history along with the many other obsolete forms of UK currency that have gone before it. The round pound has been with us since 1983 when it was introduced to replace the £1 note. But what could one of the first pound coins have made you in the thirty four years since they were introduced?

Imagine that £1 coin had been left in a drawer, a piggy bank or (perhaps most likely of all) slipped down the back of a sofa in 1983 and done nothing since then. Inflation up to 2017 would mean that the £1 would have had its buying power weakened by approximately 32p.

Had the £1 been invested in gold or in a cash savings account, the return would be healthier, but nothing to write home about, delivering a real value of £1.05 and £1.33 respectively by the end of 2016. Putting the £1 into UK residential property would have seen its real value at the end of 2016 rise to £2.42 – although this calculation doesn’t assume monthly reinvestment, which makes it difficult to compare to other forms of investment calculated.

Investment in shares would have done a lot better. Had the £1 been invested and tracked the rise in the FTSE all-share index, by the end of 2016 and after allowing for inflation, its value would have risen to £11.66, assuming that any income would have been reinvested every month to make the most of compounding over time.

The above calculations offer a neat reminder of both the corrosion to value caused by inflation and of the potential rewards of investment. Whilst investing will always include an element of risk, if you’re in a position to do so then an investment is the best way to help your money grow. It’s not all about return, but doing nothing with your savings means they’re almost certainly going to be losing value over time.

So when you get your hands on one of the new £1 coins, think about what it could be worth thirty four years from now and what you need to do to make sure it works hardest for you. Most importantly think about when you last spoke to a Creative consultant about making the best use of your £1’s, or contact us on info@creativewm.co.uk to request a review of your £1’s.

Source

https://www.bbc.co.uk/news/business-39306247

The post The humble £1 coin 34 years on – what it could have made you appeared first on Creative Benefits.

November 2016 brought us the election of President Trump. Earlier this month, Emmanuel Macron became President of France. Apparently not wanting to be left out, Theresa May took to the Downing Street lectern reserved for important announcements and called for a UK General Election to be held on Thursday June 8th.

Citing political divisions in Westminster as her reasoning, Mrs May’s decision appears to have equal amounts to do with crystallising her party’s current lead over Labour into a greater majority in Parliament and her need for a greater mandate in order to progress with her desired direction on Brexit, amongst other matters. As the Prime Minister rightly said when she came back from Buckingham Palace after the formal dissolution of Parliament, there are only two people who can possibly be the Prime Minister after June 8th – herself or Jeremy Corbyn – and current polls put May well ahead.
Assuming everything goes to the Conservative’s plan then now appears to be the perfect time for them to secure a greater majority in Westminster and mandates for both May herself and her position on Brexit. General Elections though, are notoriously tricky things – especially given the current global climate when it comes to politics. What might we see over the next month or so and what impact will the outcome have on the economic and political landscape?

The Opinion Polls

At the moment the opinion polls indicate that the strategy is working. The ICM Research poll conducted on 5th to 7th May put the Conservatives on 49% (up two points on ICM’s previous poll), Labour down 1% to 27%, the Liberal Democrats on 9%, UKIP on 6% and the Greens on 3%.

These numbers line up with the result of the local elections on May 4th, which brought an overwhelming win for the Conservatives, who gained 563 seats while Labour lost 382. The much-heralded Liberal Democrat revival completely failed to happen as they lost 42 seats. UKIP were wiped out: under new leader Paul Nuttall they lost 145 seats to be left with just one seat in the whole of the UK. Brexit may have divided Britain but it has re-united the right, and it has re-united it under the banner of Theresa May.

The Prime Minister may be right to downplay these results, saying that the only poll which matters is the one on June 8th, but it is almost impossible to see any result other than a Conservative majority. Certainly the weekend newspapers were in no doubt: May on course for landslide was a typical headline.

The number crunchers at Sky were rather more circumspect, suggesting that the local election results would translate into a majority of just 48. The bookmakers are currently expecting the Conservatives to win between 380 and 400 seats: with a total of 650 seats in parliament, the lower figure would translate into an overall majority of 110. The simple fact is that whichever figure you take, short of a dramatic turnaround it will be Theresa May standing once again at the lectern outside 10 Downing Street on June 9th, with her own mandate to push through both Brexit and the policy changes she favours.

How will the new government – and President Macron – affect Brexit?

Clearly a win for the Conservatives on June 8th means that Brexit will happen: not only will Theresa May have a clear majority, a great many of the new intake of backbench MPs will be people who actively campaigned for ‘Leave’ during the Referendum.

Equally clearly though, we have a new President in France. What can we expect from Emmanuel Macron, and what will his move into the Elysee Palace mean for Brexit?

Macron’s victory (with 66% of the votes cast) was greeted with sighs of relief across Europe and the euro duly strengthened on the result. But Macron faces huge challenges – the French unemployment rate still hovers at around 10%, for example, and he has promised much.

He plans a big reduction in public spending and a relaxation of labour laws, alongside more investment in training: he’ll also need to tackle France’s unwieldy (and expensive) pension system. But any thoughts of a brave new dawn and a country united behind a new leader need to be tempered by the abstention rate on Sunday – around 25% – and the record number of spoiled ballot papers submitted by more than 11% of those who did vote. Many of those who did not vote will have been supporters of the far-left Jean-Luc Melenchon, whose high-spending, anti-EU platform had many similarities with Marine Le Pen’s message.

How will Macron’s win affect Brexit? The short answer is that we don’t know. Interviewed on Radio 4 on Monday morning, Jean Pisani-Ferry, economic adviser to Macron, said that the new President “would not seek to punish” Britain as both sides would benefit from maintaining economic ties. Other commentators have been less optimistic, arguing that Macron has already said that he considers the UK’s decision to leave a “serious mistake” and that – far from taking back control – the UK had signed up to a subordinate status, putting it “on a par with Guernsey.”

In the short term, the Brexit negotiations are going to bring plenty of words and posturing and precious little action. We have already had wildly differing versions of the recent discussion over dinner between Theresa May, David Davies, Jean-Claude Juncker and the EU’s chief Brexit negotiator Michel Barnier.

All of these spats make for great headlines: the simple fact is that there will be no substantive negotiations before the result of the General Election is known – and you would have to wonder how much can be achieved before the summer holidays and then the German elections in mid-September.

What are we likely to see between now and Polling Day?

It may be a good time to book a short break: ‘more of the same’ is the simple answer. Expect more soundbites, more carefully stage-managed appearances (especially from the Prime Minister) and endless repetition of the ‘strong and stable’ and ‘for the many, not the few’ mantras. With the election debates to look forward to, holiday booking websites should probably prepare for extra traffic…

The Conservatives would almost certainly like to bring the election forward to tomorrow. With a month to go there is plenty of opportunity for gaffes and slip-ups and the Prime Minister may have made one with her pledge to cap household energy bills. This has been roundly criticised on all sides, with many commentators saying that it will discourage people from switching suppliers and therefore reduce competition. Other experts suggest that the energy suppliers will simply push their lower tier prices up to the cap, and hit the people Theresa May is supposedly determined to help – those that are ‘just about managing.’

What can we expect to see from a Theresa May government?

As we have written above, Brexit is going to happen. Theresa May has repeatedly said that “no deal is better than a bad deal”, laying out a bullish position in the run up to formal negotiations. However, the most likely outcome is still that some form of compromise is reached between all parties over the next eighteen months or so. Should a deal not be negotiated then the UK would leave the EU without a trade agreement and – until one is negotiated – conduct its trade with Europe under World Trade Organisation rules.

At home, we may well see a shake-up in UK pensions regulations. Mrs May has already pledged to protect company schemes against ‘unscrupulous bosses’ and there is also likely to be an end to the ‘triple lock’ on pensions. The fact remains, though, that people in the UK do not save enough for their retirement: do not be surprised to see mandatory increases in pensions contributions for both employers and employees.

We will also see more government investment in the economy, with Philip Hammond – who will probably stay as Chancellor if the commentators are to be believed – already congratulating himself on the impact his first raft of investment has had on the growth forecasts for the UK.

There will unquestionably be further crackdowns on ‘middle class tax perks’ and tax avoidance schemes. Theresa May and Philip Hammond both seem to have an obsession with ‘playing by the rules’, but this may simply be tinkering at the edges. It will take more than a crackdown on gym memberships if the Chancellor is to seriously reduce government borrowing and clear the deficit.

The electoral map of the UK will be re-drawn: there will be fewer MPs and the over-representation of Scotland at Westminster will be scaled back. The Prime Minister will not be doing this to anyone’s advantage but her own, making it significantly more difficult for the other parties to stage a revival.

Will we see a second independence referendum in Scotland – the so-called ‘neverendum’? At the moment the SNP look to be on course to lose seats in the General Election which will weaken their bargaining position. It may be that they will need to turn their attentions to more pressing domestic problems such as health and education before they are in a position to demand a second bite at the independence cherry.

What will all this mean for my savings and investments?

Theresa May called the General Election last month, just as the International Monetary Fund upgraded its growth forecast for the UK, lifting it to 2% for the year from the 1.5% it had forecast in January. This is the biggest upgrade it has given to any economy and would see the UK growing faster this year than all the other G7 economies, with the exception of the US. Growth is currently expected to slow to 1.5% in 2018 as inflation slows consumer spending, but this would still see the UK growing at the same rate as Germany.

Clearly the great unknown in this is Brexit: the vast majority of the dire, pre-Referendum, economic predictions have not come to pass. However, it is early days and President Macron will undoubtedly try and tempt some of London’s financial markets and jobs across the channel.

The FTSE 100 index of leading shares started the year at 7,143: at the time of writing, it stands at 7,340 – up 2.7% for the year. In the USA, the Dow Jones index has gone through the 21,000 barrier, having started the year at 19,763: the German and French markets are also up for the year as a whole. So far, so good – but there will be bumps along the way and undoubtedly there will be days when the Brexit negotiations appear to be holed beneath the waterline.

As always, there will be good and bad news and – as Harold Macmillan famously said – “events, dear boy, events”. Whatever those events are we will be here to interpret them for you and to answer your questions: remember that we are never more than a phone call or an email away.

The post Pre-Election Summary 2017 appeared first on Creative Benefits.

Having introduced a new tax free allowance on dividend payments of up to £5,000 in April 2016, the government announced an intention to reduce this in the 2017 Budget, when it was proposed that the allowance will fall to just £2,000 from April 2018. Prior to the £5,000 tax free limit, business owners had benefited from a regime in which basic-rate taxpayers paid no further tax on their dividend income. Higher-rate taxpayers incurred an effective rate of 22.5%, whilst additional-rate taxpayers paid 27.50%. With Parliament disbanded before legislation could be approved to bring these changes into force from April 2018, the proposals remain and will be revisited the other side of the forthcoming General Election.

With the current uncertainty associated to dividend taxation, it is natural to revisit whether you are paying yourself in the most tax-effective manner. The answer to that question will very much depend upon your personal circumstances and that of your business, and we would always advise you to seek professional advice.

For example, though the new dividend taxation structure may be a bitter blow to many business owners, this may not necessarily mean that you should move away from dividends as a way to draw an income from your business. Alternatively now may be a time to consider alternative profit extraction structures such as a company pension contribution.

Dividends received in excess of the tax free allowance are taxed at set rates of 7.5% for basic-rate taxpayers, 32.5% for higher-rate taxpayers and 38.1% for additional-rate taxpayers. This compares with income tax rates of 20% for basic rate, 40% for higher-rate and 45% for additional rate taxpayers. On the face of it therefore income taken as a dividend is preferable to income taken as a salary.

Corporation tax should also factor into your decision making. While salary and pensions are paid before corporation tax is calculated, dividends are paid out after. This should be taken into account when the overall tax effectiveness of dividends is considered. The good news on that front is that corporation tax fell in April 2017 to 19% and will fall further in 2020 to 18%.

It is also worth bearing in mind pension contributions when planning in this manner. Just like salary, pension contributions made by the business are paid out before corporation tax is calculated therefore reducing the corporation tax bill. Once funds are within a pension, they are outside of your estate for inheritance tax, grow free of any income or capital gains tax and when drawing the benefits from your pension, the first 25% is tax free and tax only applies on the remaining 75%. More often than not therefore, making a pension contribution is a more tax efficient way of withdrawing funds from your business than salary or even dividends.

As you can see from the above, there are many factors to consider when addressing the income you take from your business – including many not listed here. If you would like to discuss your individual circumstances with us then please contact your Creative consultant, or email us at info@creativewm.co.uk, and we’ll be happy to discuss the options when it comes to your future plans.

Sources:
https://www.telegraph.co.uk/investing/shares/budget-2017-dividend-tax-blow-company-directors-shareholders/

https://www.gov.uk/government/publications/rates-and-allowances-corporation-tax/rates-and-allowances-corporation-tax
https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief

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Unfortunately, the recent rise means that it will be harder than ever for your savings to generate real returns. The value of any money you have in a typical high street savings account will now be eroding more quickly than before and it’s now even harder to find a savings option which will actually beat the 2.3% figure. Many of the accounts which exceed this rate are Help To Buy ISAs, but this makes them unavailable to anyone not saving towards their first home. Other options open to all savers struggle to beat the new inflation figure – even the new NS&I savings bond, which will pay 2.2% and was heralded by the Chancellor, Philip Hammond, as offering welcome respite for savers, will no longer be able to keep pace.

Away from savings accounts, investing in stocks and shares, either through an ISA or a Pension, or using such products as specialist property funds, offer higher rates of return and tend to keep pace with inflation, but equally come with an increased level of risk.

An important part of putting money into any form of Saving or Investment is to take advice whenever it is available to ensure that decisions taken are aligned with the risks and potential returns the individual is prepared to accept. Such decisions should then be reviewed on an annual basis so that as such things as inflation change then previous decisions can be reviewed and amended where appropriate to do so.

The process of advice and review is one of the important messages we tell to all employees we meet through our Financial Education and Advice services where we aim to get people to make educated and informed decisions to protect the wealth they have now, as well as that they can expect in the future. If you feel that the current inflation position is one that your staff should be factoring into their savings and investment decisions then please speak to your Creative consultant or contact us on info@creativeeb.co.uk and we will be happy to explain how our services can be extended to cover this for you.

Whilst the present situation doesn’t offer much positivity for savers, there is some hope for the future. Whilst inflation is expected to rise further in the next few months, with some predicting it will go above 3.0% before the end of the summer, it is unlikely to grow beyond this and is forecast to decrease once again towards 2.0% during 2018.

Please note that you should always seek professional advice when making saving and investment decisions and you should be aware that it is possible that some products may contain high levels of risk such that you may not get back all the money invested.

Sources
https://www.bbc.co.uk/news/business-39337909
https://www.heraldscotland.com/business/15179581.Can_you_protect_your_money_when_inflation_is_on_the_rise_/
https://moneyfacts.co.uk/news/savings/negative-interest-a-reality-as-inflation-bites/

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Delivering the statement revealing the move, Mrs May said that the early general election would further deliver the ‘certainty, stability and strong leadership’, which she said the Conservative party had offered since the referendum on Britain’s EU membership. The Prime Minister elaborated to say that, ‘the country was coming together, but Westminster was not’, a reference to the fact that, despite the referendum result, the Conservatives still face opposition within Parliament on what so-called ‘Brexit’ should look like, or even whether it should still take place at all.

The Prime Minister addressed this point directly, saying that she was ‘not prepared’ to let those who oppose Brexit ‘endanger the security of millions of working people across the country. What they are doing jeopardises the work we must do to prepare for Brexit at home.’ Mrs May went on to say that, ‘we need a general election and we need one now, because we have at this moment a one-off chance to get this [a general election] done whilst the European Union agrees its negotiating position.’

Addressing the fact that she had previously said the next general election would not be before the May 2020 date, Mrs May said that she had ‘only recently and reluctantly come to this conclusion.’ The Prime Minister said that she now felt that a general election was ‘the only way to guarantee certainty and stability for the years ahead… and to seek your support for the decisions I must take.’

Speaking directly to her political rivals, the Prime Minister said that she had a simple challenge to them: ‘this is your moment to show you mean it… let the people decide.’

Analysts were quick to point out that the election gives Mrs May the chance to increase her party’s majority in the House of Commons. The Conservative’s majority has been slim for some time now, which is causing Mrs May a level of discomfort when it comes to shaping Brexit. Though the general election does give her party the chance to make gains – against opposition which currently trails in the opinion polls – it also gives Labour and the Liberal Democrats the chance to shape their own arguments around Brexit. Many of the seats held by Labour, in particular, are still considered ‘safe’ seats which may limit the gains available to the Conservatives, though whether anything is truly ‘safe’ in political terms any more is a matter for some debate!

In the run up to the announcement, the pound fell against the dollar which helped the FTSE 100 to rise from losses made earlier in the day. After the announcement, however, the FTSE fell again, whilst the pound recovered, showing that not only is a week a long time in politics, but a fifteen minute announcement is a long time for the markets!

We will be sure to keep you fully informed of all of the details in the run up to the election and how the outcomes could impact you and your financial planning, both now and into the future.

The post Theresa May calls surprise early election appeared first on Creative Benefits.

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The Annual Allowance is currently capped at £40,000 and applies across all of the schemes you belong to, rather than being a ‘per scheme’ limit. It includes all of the contributions paid into pensions by you, your employer, or anyone else in a tax year.

Your Personal Annual Allowance

For the vast majority of pension savers their Personal Annual Allowance will be the full £40,000 described above. However, there are two circumstances when a lower Personal Annual Allowance may apply.

Firstly, if you have earnings in excess of £150,000 then your Annual Allowance may be reduced below the £40,000 cap as a result of the ‘Tapered Annual Allowance’. In basic terms, under the Tapered Annual Allowance, £1 of Annual Allowance will be lost for every £2 of ‘adjusted income’ above £150,000 per annum. Adjusted income for these purposes is income from all sources plus any employer or employee pension contribution. The maximum reduction is £30,000 meaning that anyone earning over £210,000 will have their Personal Annual Allowance capped at £10,000.

The tapered annual allowance does not apply if an individual’s income excluding pension contributions is below £110,000 (this is known as “Threshold Income”).

Secondly, a lower allowance of £10,000 will apply if you have already started drawing an income from your pension savings. This is known as the Money Purchase Annual Allowance (MPAA).

Please note that the MPAA will not be triggered if the only withdrawal from pension savings has been through the payment of a Pension Commencement Lump Sum (Tax Free Cash).

Exceeding your Personal Annual Allowance

You won’t receive tax relief on any contributions that exceed your personal annual allowance and you will be faced with an Annual Allowance Tax Charge.

In simple terms the excess amount over your Personal Annual Allowance is treated like any other income and is added to the top part of your taxable income for Income Tax calculation purposes. The part of the excess that falls within the basic rate band is taxed at 20%, that within the higher rate band is taxed at 40%, and any excess falling in the additional rate threshold is taxed at 45%.

If the resulting Annual Allowance Tax Charge is more than £2,000, you can ask your pension scheme to pay the charge from your pension fund. This means your pension scheme benefits would be reduced.

Mitigating an Annual Allowance Tax Charge

Unless you have already started drawing your pension (and are therefore subject to the lower MPAA), you may be able to bring forward any unused Annual Allowance from the previous three tax years, to either reduce, or completely remove, any Annual Allowance Tax Charge.

Annual Allowance Changes 06 April 2017

In the 2016 Autumn Statement, the government announced a proposal to reduce the MPAA from £10,000 to £4,000 with effect from the 6th April 2017. A twelve week consultation period, seeking views on the possible impact of the reduction, is currently running until the 15th February 2017. Further updates are due in future.

Assuming this proposal is implemented, anyone currently affected by the MPAA will therefore face a tax charge on any pension contributions above £4,000 per year from the 06 April 2017.

Planning Around the Personal Annual Allowance

Hopefully it is clear from the above that the whole subject of the Annual Allowance within pension planning can be very complicated for those people on relatively large earnings, those with high levels of pension savings, those people still accruing benefits in Defined Benefit Schemes and those people aged over 55 who have started to access income from their savings.

For all of these people, as well as others who feel they may fall foul of the limits in future years, it is extremely important that they consider taking Financial Advice. Such service is available to you through Creative and you should contact your normal consultant, or email us on info@creativewm.co.uk to arrange a private one to one meeting or conversation. You should contact the same person if you have any questions on the content of this document.

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What will 2017 bring? We’ve had a look into the crystal ball in one of the special sections below. It’s going to be an eventful year…

…but first, let’s look back on 2016 in general and the last quarter of the year, in particular. It was a quarter that saw the US Election and the first Autumn Statement from UK Chancellor Philip Hammond – as well as some excellent performances from the stock markets which we cover in this report.

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The new system is based on adjusted income, which includes pension contributions made by both the earner and their employer. This means that high earners may need a reduction of the contributions both they and their employer are making in order to avoid unnecessary taxation.

However, the system is made more complex through the consideration of threshold income, which does not include pension contributions. Anyone who earns a threshold income of £110,000 or less will not be subject to the tapered allowance. Both adjusted and threshold income are calculated by HMRC using net income, which takes into account all taxable income less certain reductions.

Taking into account the manner in which net income is calculated, which is then used to calculate both adjusted and threshold income, the tapering system is one which could potentially catch out high earners. It’s therefore a good idea to arrange a review with your financial planner if you think your income is likely to be affected, as adjusting your pension contributions could help you avoid becoming subject to reductions. If you have any questions around this topic, please feel free to get in touch with us directly.

“Tax treatment depends on the individual circumstances of each client and may be subject to change in the future”

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Whilst the same can be said for financial planning, there are a great deal of factors that are under our control, one of which is preparing for the eventuality that our plan ‘A’ might not come to pass. Making a plan ‘B’ is not admitting defeat, but pragmatically working on the assumption that nothing about preparing for the future is guaranteed.

When it comes to retirement planning, too many people give themselves a single plan without having an alternative they can turn to. This is most common amongst those who have made plans themselves without consulting an independent adviser. One of the most frequent mistakes made is planning for too short a retirement. It’s always better to be optimistic about how long your pension will need to last. That way, if you overestimate, your money won’t run out and can become part of your legacy.

An increasing number of retirees are planning to continue working in some capacity after they retire, either taking on a part time job or extending their previous career through taking on a consultancy role. Financial advisers, however, are increasingly recommending that any income from working in retirement should be factored in as additional income rather than something you rely on to ensure you have enough money each month. That way you have the freedom to reduce your hours or stop working altogether whenever you want.

Plan ‘B’ is not always about the worst case scenario, however. It could be that your main plan assumes a certain amount of savings in your pension, whilst your backup plan is more optimistic but less likely. If you find that you do reach retirement age with more money available than you expected, plan ‘B’ could be your way of ensuring you make the most of life after work. If you planned to move abroad, look at more expensive destinations that might offer you even greater benefits than your initial choice.

If you’re nearing retirement and would like help putting together your plans, please get in touch with us directly for further guidance.

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The effects of this announcement are clearly being felt in the financial markets. On the morning of Tuesday 4th October, the pound had sunk to a 31 year low against the dollar, while the FTSE 100 was above 7,000 and apparently heading for a record high.

In fact, the rest of the world has been quite busy while Mrs May was re-shuffling her cabinet. Hillary Clinton and Donald Trump were confirmed as their respective parties’ Presidential nominees – and have been roundly abusing each other ever since. When they lifted their eyes from the hustings they’ll have seen that the US economy continued to turn in its normal mixture of good and bad news throughout the summer.

In the Far East, there continued to be serious worries about China – both the slowdown in the economy and a potential banking crisis – whilst the Bank of Japan came up with yet another stimulus package for the economy. Even more worryingly – for the region and the wider world – North Korea claimed a fifth successful nuclear test, to inevitable and widespread condemnation.

The quarter saw a rally in the price of oil. Having been as low as $30 a barrel in February, the price briefly touched $51 a barrel in August. By the end of September, OPEC had agreed a preliminary deal to cut production for the first time in eight years and the price was hovering around $49 a barrel. We’ve probably said goodbye to very low oil prices for the foreseeable future.

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