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New Which? research reveals that people aged 20 need to be putting away at least £131 a month to have a comfortable retirement, while those waiting until their 50th birthday to start a pension need to save £633 a month.

Retired couples need £18,000 a year to cover household essentials – such as food, utilities, transport and housing costs – rising to £26,000 allowing for extra treats, such as a short-haul holidays and some leisure activities.

A luxurious retirement, filled with new cars and exotic holidays, requires an annual income of £39,000. The results come from a survey of more than 1,500 retired couples, who shared their spending behaviour with Which?

Which_Retirement_Survey_0417

Valentine’s Day is traditionally a time for romance and is often associated with marriage proposals and yet Office of National Statics figures show a long-term decline in marriage rates.

Reticence to tie the knot may end up costing money in the long term as cohabitees are often not afforded the same financial planning benefits as married couples or those in a civil partnership, writes Clare Moffat.

Here are some of the ways that hearts and flowers can also deliver £££s in the long run :-

Pension death benefits

Despite the pension flexibility changes introduced in 2015, it would be wrong to assume all pension schemes allow full flexibility and individual scheme rules must be checked.

Defined benefit schemes may have very rigid rules in terms of death benefits and, although a lump sum death benefit may be payable to whoever the scheme member nominates upon their death, if there is death before retirement age, any pension income benefits will usually only be payable to a spouse or civil partner and any other dependants, such as children under a specified age.

Defined contribution occupational schemes are often similar. It is not uncommon to see a lump sum death benefit that can be paid to whomever the scheme member nominates, regardless of their relationship status, but also an annuity purchased for a dependent only. A cohabitee may be covered if they are financially interdependent on the scheme member but that is not always the case.

 

Transferable nil-rate bands

The transferable nil-rate band and transferable residence nil-rate band are only available to those who are married or in a civil partnership.

 

State pension

For those who are married or in a civil partnership, depending on when the person became entitled to their state pension, on their death a surviving spouse/civil partner may be able to increase their own state pension benefits based on the deceased spouse’s pension entitlement.

 

Marriage allowance

If a person is married or in a civil partnership, and is currently earning less than £11,000 and their spouse or civil partner earns between £11,001 and £43,000, then £1,100 of the personal allowance can be transferred to the spouse or civil partner. Although this might not seem like much, it is a saving of up to £220 per year that is not available to cohabitees.

 

Divorce

Should the relationship end, it can often be perceived that those who are married or in a civil partnership are financially worse off.

While this can be the case for the person who holds most of the assets, if a couple have cohabitated for a long time, some assets, such as property, may still be divided – especially if there are young children and one party gave up work or reduced their working hours to care for them.

For pension assets to be shared then, there must have been a marriage or civil partnership. Therefore, if a couple have cohabited for 20 years and one party has most of the pension assets, then they may be able to retain those pension assets.

 

Link:

http://www.professionaladviser.com/professional-adviser/opinion/3004553/clare-moffat-roses-are-red-don-t-let-cohabiting-clients-be-blue

Defined contribution (DC) pension contributors are saving £11.4bn less than they need to each year, according to a survey by Aon Hewitt.

The UK-wide survey also found individuals were, on average, contributing £1,400 a year too little into their pension pots and that less than a fifth (16%) of people contributing to a DC pension scheme were saving enough to maintain their standard of living in retirement.

Carried out by YouGov, the survey concluded that 8.1 million people contributed to a DC scheme, and of these, around a third (2.75 million) do not know the level of retirement income they are expecting to receive. Additionally, around half (4 million) will not have saved enough at retirement to maintain their standard of living, based on their own expectations.

The survey suggested DC contributors were out of touch with their savings requirements. Although there are now more members enrolled on DC schemes, 37% of people are saving less than 5% of their annual salary, while a further 48% are saving between 5% and 10%.

Despite low savings rates, of those who knew how they wanted to take their benefits, two-thirds told the survey they still wanted a stable income in retirement.

In real terms, this means that, to maintain his standard of living, a male DC member aged 25 and earning £22,500 a year needs to save 18% of his salary, or £4,050 per year, to maintain his standard of living if he wants to retire at age 65.

Meanwhile a male DC member aged 40 and earning £30,500 needs to have already saved a pot of twice his salary – in other words, £61,000 – and continue to save 19% of his salary to maintain his standard of living if he wants to retire at age 65.

Contact us today to discuss your pension provisions and prospects of early retirement

Interest-only mortgages differ from standard repayment mortgages because the borrower repays only the interest every month; the capital is repaid at the end of the mortgage term. Interest-only mortgage deals enjoyed considerable popularity during the housing boom as they enabled buyers to borrow a relatively large amount for a comparatively modest monthly repayment.
Over the last few years, however, interest-only mortgage deals have become much less common and new regulation has curbed their availability, restricting them only to borrowers who can demonstrate a viable repayment strategy.

According to research conducted by Citizens Advice in 2015, more than three million UK homeowners had interest-only mortgages that will have to be repaid at some point during the next 30 years.

Approximately half of these interest-only mortgage holders had no linked repayment vehicle – such as an Individual Savings Account (ISA) or an endowment plan – in place, and 934,000 of these had no repayment plan at all. Moreover, over 10% of interest-only borrowers had not considered how they would repay the capital at the end of the mortgage term, thereby running the risk of repossession.

If you do have an interest-only mortgage, you should first verify what you will have to repay and when it will become due. Second, you should make sure you have a credible repayment plan in place. Finally, you should check regularly in order to ensure your repayment plan remains on target – and, above all, you should take expert advice.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

With claim and counter-claim about the post EU Referendum economy, one thing you can pretty much bet your house on is that interest rates are going to remain low for some time.

This is good news for borrowers. Mortgage rates are at all time lows and the best rates for two-year and five-year fixed-rate loans are at around 1.15pc and 2pc respectively.

Increased competition amongst lenders and volatility in the capital markets have also seen a lowering of rates for higher risk and niche borrowers.

Of course, while banks and building societies are competing hard for mortgage business, they are awash with savers’ cash and that means miserly rates for savers.

More info:

http://www.telegraph.co.uk/personal-banking/savings/brexit-what-next-for-savings-and-mortgage-rates/

It’s never too early to start thinking about saving for the future. A Junior Individual Savings Account or ‘JISA’ gives children the opportunity to start saving early – via cash, stocks and shares, or a combination of the two – within a tax-free wrapper. According to HMRC, £582m was subscribed to JISAs in 2014/15.

The maximum amount that may be paid into a JISA in the 2016/17 tax year is £4,080 and this can be invested into a cash JISA or a stocks and shares JISA, or allocated between the two. A child can hold either type of JISA or can mix and match between the two. JISAs may be switched from cash to stocks and shares, and back again, so they offer considerable flexibility.

However, a fresh JISA cannot be opened with a different provider in each tax year – the child can have only one cash JISA and one stocks and shares JISA during their childhood, although the cash and stocks and shares components can be held with different ISA providers. A JISA automatically turns into a full adult ISA when the child reaches 18.


Although a JISA can only be opened for a child under the age of 16 by a parent or a guardian with parental responsibility, anyone can pay money into the JISA for the child’s benefit. However, the parent or guardian who opens the JISA will be the registered contact and will be responsible for managing the JISA account and making decisions about any changes to the underlying investments or providers.

The money held within a JISA belongs to the child and the child can take control of the JISA from the age of 16; however, the money cannot be withdrawn from the JISA until they reach the age of 18, (with a few very limited exceptions). Children aged 16 or 17 are allowed to open their own JISA and are also able to open an adult Cash ISA if they wish.

In order to be eligible for a JISA, a child has to be living in the UK and aged under 18. Until relatively recently, children who were born between 1 September 2002 and 2 January 2011 were only eligible for a Child Trust Fund (CTF). However, following changes that were introduced in April 2015, those CTF savings can be transferred to a JISA instead.

At Nexus Wealth Planning we are conscious of the need to ensure we don’t confuse anyone with jargon. It is very important that our clients absolutely understand what our recommendations mean for them.

In an industry which seems awash with complex and confusing terminology, this can at times feel like fighting a losing battle!

However, hope may be on the horizon with news that the Association of British Insurers plans to design a guide to simplify the language used for pensions.

It has proposed using simpler language like: “You can keep your pension savings where they are” and “You can take your whole pension pot in one go” instead of existing terms.

Yvonne Braun, ABI director of policy, long-term savings and protection, said it is vital that pension language reflects the best interests of customers.

“The industry recognises that pension language can be confusing and is working to make sure more people understand the new options available to them for their retirement.

“Customers who are engaged in their pension are better able to make decisions that suit their individual circumstances so it’s important that we make these options as clear and comparable as possible.”

A consultation will run until 19 June and it is hoped many from the industry will contribute to the guide so that it establishes a useful lexicon.

More info

 

 

Prime Minister David Cameron’s tax affairs have been in the headlines a great deal recently, including news that his mother transferred £200,000 to him in order to avoid paying Inheritance Tax (IHT) in future.

Now, not everyone has that kind of cash to throw around, but the IHT threshold is set at £325,000 for an individual and, with ever-rising property values, could more people start to be affected?

Are there some prudent steps you can take to ensure your assets do transfer fully to your loved ones on death?

The answer depends very much on your personal circumstances, as the following article explains.

How does inheritance tax work?

One of the biggest beneficiaries of the pension freedoms introduced last year is set to be Her Majesty’s Revenue and Customs as savers rush to release £6bn from pension pots.

New figures from the Office for Budget Responsibility suggest the Treasury will net a windfall of £900m by April from tax paid by people accessing their pension savings in the first year of pension freedom – almost a third more than had previously been expected.

The pension rules changed last April meaning any direct contribution savers over the age of 55 could have unfettered access to their cash.

The Association of British Insurers (ABI) calculates that £3bn was paid out as lump sums to just over 213,000 people in the first nine months following the reforms and another £2.9bn was taken through income drawdown plans.

HMRC treats any income taken as if it were an annual income, pushing some savers into a higher income tax bracket when withdrawing large chunks.

More info:-
Professional Adviser

Some of the main headlines from last week’s Budget may have been about the Sugar Tax and the proposed change to Personal Independence Payments, but there was a lot more “under the hood” to take note of for taxpayers.

The Chancellor increased the higher rate income tax band from £42,375 to £45,000 and increased the personal allowance from £11,000 to £11,500 – a boost, according to George Osborne, for around 31m UK taxpayers. 

More surprising was the announcement that capital gains tax will reduce from 28% to 20% in April. However, this excludes residential property, which is where the majority of people make their largest gains. This is another blow to second home-owners and buy-to-let landlords, following the increases to stamp duty land tax announced in the last budget. Nevertheless, it will allow investors sitting on large gains in their portfolios to realise them at a lower rate.

The situation was a little more complex for the self-employed. Those operating limited companies will receive a benefit from lower rates of corporation tax. These will fall from their current level of 20% to 17% by 2020. The self-employed will also see an annual tax cut of over £130 following abolition of Class 2 National Insurance contributions, though changes are planned to class 4 contributions in order to ensure that benefits entitlement is retained.

The Chancellor also announced a raft of savings incentives. The ISA allowance will rise from £15,240 in the 2016/17 tax year to £20,000 in 2017/18 for all investors. The Junior ISA allowance will remain at its current level of £4,080. At the same time, the Chancellor also announce the launch of a ‘lifetime Isa’ for those aged between 18 and 40.

Up to £4,000 a year can be invested alongside an existing Isa (subject to the overall £20,00 limit) and investors will receive a 25% boost on their annual contribution from the Treasury up to the age of 50. The proceeds from the Lifetime ISA can be put towards a first home with a value of up to £450,000 or set aside for retirement from age 60. Investors can use the money for other purposes, but they will lose the government contribution and associated growth, plus be subject to a 5% surcharge. Many saw the death-knell for pensions in the new boost for Isas, but for the time being, they remained untouched.

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