If you aren’t sure what terms such as annuity or drawdown mean, this should help!

As always we try & educate you here at Reeves Independent.

If you aren’t sure what terms such as annuity or drawdown mean, this fantastic article from Your Money should help ease the confusion.

Jargon buster: pension terminology explained

Do you fully understand all the definitions in the article? If not, then please do seek advice & speak to a pensions specialist.

It is imperative you speak to someone to ensure you make the right decisions with your respect to pensions in the build up to & throughout your retirement!

Speaking to someone about your pension is easy with Reeves Independent, just use our contact form or call us on 0191 281 9862 for a FREE initial conversation!

Do you fully understand what your options are at retirement?

Today I read the Scottish Widows Retirement Survey for 2015. It was an interesting read but I picked out a couple of alarming figures!

  • Only 22% of the 60-64 year old fully understand what an annuity is & only 14% fully understand income drawdown
  • Only 13% of 50-59 year olds fully understand what an annuity is & only 9% fully understand income drawdown

These figures astound me as choosing how you take your pensions at retirement is one of the most important decisions in your life!

Do you fully understand your options?

It is imperative you speak to someone to ensure you understand ‘ALL’ the options available to you to enable you to make the right choices when planning for your retirement!

Speaking to someone about your pension options in retirement is easy with Reeves Independent, just use our contact form or call us on 0191 281 9862 for a FREE initial conversation!

For further information please do read our Blog – Your four-point checklist for investing for retirement

What happens to your pension when you die?

One of the most common questions we get asked here at Reeves Independent by clients is what happens to my pension when I die?

There are of course a number of different scenarios when answering the above question. One thing is for sure is that the new rules since April 2015 now make it possible to pass pensions on to loved ones in a more tax-efficient manner.

If you’ve money in your pension but you haven’t retired

If you die before you take anything from your pension, it will usually be paid as a lump sum to your beneficiaries tax-free.

As long as it is less than the lifetime allowance (£1.25million in tax year 2015/16) it will be paid tax-free, unless you die at age 75 or older.

The Government has announced changes to the way death benefits from pensions are taxed:

  • If you die before age 75 – your pension can be paid to your beneficiaries tax-free, either as a lump sum, an annuity, or through flexible drawdown.
  • If you die age 75 or older – your pension can be paid as a lump sum which will initially be taxed at 45%. Or your beneficiaries can use flexible drawdown and will then only pay tax at their marginal rate.

There will normally be no inheritance tax to pay.

If you’ve money left in flexible drawdown

If you die before age 75 with your money in flexible drawdown your spouse, partner, dependant or beneficiary can:

  1. Stay in the flexible drawdown plan and take income tax-free
  2. Take the pension as a lump sum tax-free
  3. Buy an annuity, where income will be paid tax-free

If you die after age 75 with your money in flexible drawdown your spouse, partner, dependant or beneficiary can

  1. Stay in the flexible drawdown plan and take income subject to tax at their marginal rate
  2. Take the pension as a lump sum tax-free which will be taxed at 45%
  3. Buy an annuity, where income will be subject to tax at their marginal rate

If you have an annuity

If you chose a guaranteed period and die within this period then the annuity will continue to be paid until the end of the guaranteed period.

If you bought a joint life annuity the annuity payments will continue to be paid to the second person, at the level you chose, until they die. If you die before age 75 the annuity payments paid will be tax-free, if you die after age 75 then any payments will be taxed as income at their marginal rate.

In all other cases your money dies with you so no further payments are made.*

Speaking to someone to ensure your loved ones don’t lose out after your death easy with Reeves Independent, just use our contact form or call us on 0191 281 9862 for a FREE initial conversation!

* Scottish Widows Fact Sheet – http://www.scottishwidows.co.uk/retirement-planning/retirement-explained/pension-tax/inheritance/index.html

Reeves Independent– 10 most read articles this month!

Here are the 10 most read articles from our social media mediums over the last month

As always we have included a range of articles on different financial matters to provide you with as much information as possible;

Stick or twist? Why you might trade in a final salary pension!

Your four-point checklist for investing for retirement

Can you afford NOT to work your Investments?

Tax-free savings: Double up your pension relief

Understanding Pension Tax Relief!

‘My wife passed away in 2005. What will my IHT allowance be under the new rules?’

Two million cohabiting couples at risk of leaving finances in legal limbo!

Will your pension be big enough for you to retire at 55?

8 steps to Inheritance Tax Planning heaven

The insurance that can pay the bills if you can’t work – experts warn too many people still lack a safety net!

We hope that you find some of the above useful. If there are any areas that you would like more articles on please let us know as we welcome any feedback

If you would like to discuss any of the above articles & how they may affect you then please contact us NOW on 0191 281 9862 or e-mail info@reevesifa.com to arrange a FREE initial appointment

Additionally please have a look at our core services document or visit our website www.reevesifa.com for further information

Your four-point checklist for investing for retirement!

I’m sure you are aware pensions changed in April this year. As result of these changes people now have more choices about how & when they can access their pension pot from the age of 55.

People can take cash, a flexible income (drawdown), or a fixed income (annuity), or indeed a mix of these. Drawing from our experiences since April we can say that drawdown has become a lot more popular as a choice due to the flexibility of accessing funds for the plan holder & their family after the plan holder’s death.

So what should you be thinking about when it comes to the money in your pension?

1. Think about your pension early - this allows you choose the investments that suit what you’re planning, whether that’s buying an annuity, taking a flexible income, taking your cash as a lump sum or a mix of all three. You can find more about this in our Are you ready for the pension freedom changes? blog.

2. Once you’re retired – stay invested – for example if you’re taking a flexible income from your pension it can be tempting to leave all your money as cash – but this may not give you the best results. Obviously cash is less likely than other investments to fall in value, however on the other hand it’s growth potential is also less. Therefore careful planning is required with respect to your investments during your retirement.

3. Balance your income goals – life expectancy is rising & therefore this means you will have to fund your retirement for much longer. One of the biggest challenges is making your money last over time; taking the income you need to today as well as making your money last through your retirement. In addition the new rules that reduce tax when inheriting pensions, reducing it to zero in some cases means you may want to make sure you have enough left to pass onto your loved ones. All these different goals need to be looked at & taken into account.

4. Take care of the early retirement years – If you’re taking an income, you need to ensure you manage & analyse how much your investments move up & down in value. A pro-active management of these funds is vital as it becomes much harder for your pension to recover its value after any early falls in the stock market.

Here at Reeves Independent our service is designed to help you make the right decisions at & during retirement. Please take a look at our Retirement Options Service Proposition

Speaking to someone about your pension options in retirement is easy with Reeves Independent, just use our contact form or call us on 0191 281 9862 for a FREE initial conversation!

Reeves Independent Market Outlook

Recent news 

  • Consumer Price Index (CPI) hits zero again but Wages growth up
  • UK wages accelerated from 2.7% to a five-year high of 3.2%.
  • Euro still weakening against the pound’
  • Bank of England Governor Mark Carney commented that ‘the point at which interest rates may begin to rise is moving closer with the performance of the economy’.
  • British unemployment rose unexpectedly from 5.5% to 5.6%
  • Reduction of pension life time allowance to £1million is a massive change and will impact on a surprising number of people. Anyone with a significant amount of time in Final Salary schemes should seek advice.
  • Volatile equity markets continue, especially in China which has seen significant loses

Key Matters

Bonds – What do we do with clients that hold bonds within their portfolio? Traditionally an asset class that is held as a more cautious holding, however they are now under pressure with the threat of rising inflation and interest rates. We will be emailing clients with proposed changes.

Greece – Where now for our European equity holdings? Last few weeks has seen significant movements downwards & now upwards again. We are currently monitoring our portfolio position and will continue to recommend appropriate changes.

Property – Corporate action announced for Threadneedle, and we will be assessing the impact on our portfolios and recommending change if appropriate.

Are there any opportunities right now?

Oil – There are options. The price of Brent Crude continues to fall as some of our clients will know. Is this the time to add or start investment in this area?

ETFS Brent 1mth (OILB) is designed to enable investors to gain a total return exposure to movements in the price of ICE 1 month Brent crude oil futures contracts plus a collateral yield. The exposure is obtained through fully funded uncollateralised swaps with Shell Trading Switzerland AG, a member of the Royal Dutch Shell Group. Basically if prices rise you will make money.

What Next?  Look out for our specific advice emails to follow.

If you would prefer a chat now about your portfolio please contact us now on 0871 271 1280 or e-mail dianne@reevesifa.com to arrange an appointment!

Sources:

We gain our information from a range of sources including seminars, webinars, industry publications and general media comments.

Disclaimer: This email is not intended as advice and no investment decisions should be made solely on the back of this email. Past performance is no guide to the future. All investments carry the risk that you will not get back what you have put in.

Case Study! Life Changing Advice – Life Changing Decisions – Life Saving Solutions!

An old Blog but I thought I would share it with you again

I know the title of the Blog sounds particularly ‘cheesy’ but it is a genuine response from a new client after the service we provided her in the last few weeks.

What was the client’s position when we met?

  • 58 year old single female
  • Has had a varied career history
  • Due to economic downturn is facing no regular job for the first time in her life
  • Had been looking forward to retirement at 65 when she could start drawing her occupational pensions
  • Last 18 months has seen a decrease in job prospects & savings
  • She was desperately worried about her income & her lifestyle had become restricted

What was the result of Reeves Independent’s Advice?

  • She now faces a ‘certain’ financial future were she does not have to work unless she want to
  • Stress & worry has now been removed
  • Happy & able to pursue open ended life time opportunities through a secure financial situation
  • Accessibility to significant cash that she didn’t have before which she can use for any purpose – whether it be fresh investment or to subsidise luxury travel
  • Adequate & secure income for the rest of her life
  • Significantly reduced running costs

How has Reeves Independent achieved this?

  • Reviewed all the options on her property assets & unused pension funds
  • Produced solutions which she previously didn’t know were possible
  • Helped her step by step through all the issues to enable her to make the best decisions for her

This has resulted in one very happy secure client!

If you would like to speak to someone about the Reeves Independent Retirement Planning Service please contact us NOW for a FREE initial chat on 0191 281 9862 or e-mail your enquiry to info@reevesifa.com

Summer Budget 2015 – A Detailed Summary!

George Osborne delivered his seventh Budget as chancellor today, the first for a majority Conservative Government since November 1996.

“A Budget for working people” and moving “Britain from a low wage, high tax, high welfare economy to a higher wage, lower tax, lower welfare economy.”

Here are the key announcements;

INCOME TAX

Personal Allowance: £11,000 in 2016/17, aiming at £12,500 by 2020, the threshold rising in line with the minimum wage*.

Higher rate income tax band: £43,000 2016/17, targeting £50,000 by 2020.

*Introduction of a new National Living Wage, from April 2016 £7.20 an hour for over 25s, rising to £9 by 2020 based on 30hours per week.

There will be introduced by legislation a tax lock to rule out increases in the main rates of income tax, VAT or National Insurance over the course of this Parliament.

INHERITANCE TAX

A new transferable nil-rate band is to be introduced from April 2017. This will apply when a main residence is passed on death to direct descendants, eg, children or grandchild. The allowance will be up to £100,000 in 2017-18, up to £125,000 in 2018-19, up to £150,000 in 2019-20, and up to £175,000 in 2020-21. This is in addition to the inheritance tax nil-rate band of £325,000, which will remain at this level until the end of 2020-21. Any unused main residence nil-rate band will be transferred to a surviving spouse or civil partner and means the effective inheritance tax threshold will rise to £1 million in 2020-21 for a qualifying couple.

The new main residence nil rate band will also be available when a person downsizes or ceases to own a home on or after 8 July 2015 and assets of an equivalent value, up to £175,000 in 2020-21, are passed on death to direct descendants.

PENSIONS

The Finance Bill 2015 introduces a tapered reduction in the annual allowance from 6 April 2016, for those with an ‘adjusted income’ of over £150,000. The ‘adjusted income’ definition adds-back any pension contributions, to prevent individuals from avoiding the restriction by exchanging salary for employer contributions.

For those in defined benefit or cash balance arrangements, the value of the employer contribution will be calculated using the normal annual allowance methodology i.e. the pension input amount for the scheme, less the amount of any contributions made by or on behalf the individual during the tax year.

To provide certainty for individuals with lower salaries who may have one off spikes in their employer pension contributions, a net income threshold of £110,000 will apply. If the individual’s net income is no more than £110,000 they will not normally be subject to the tapered annual allowance. However, anti-avoidance rules will apply so that any salary sacrifice set up on or after 9 July 2015 will be included in the threshold definition.

The rate of reduction in the annual allowance is by £1 for every £2 that the adjusted income exceeds £150,000, up to a maximum reduction of £30,000. The carry forward of unused annual allowance will continue to be available, but the amount available will be based on the unused tapered annual allowance.

All pension input periods (PIPs) open on 8 July 2015 are closed on that date, with the next pension input period running from 9 July 2015 to 5 April 2016. All subsequent pension input periods will be concurrent with the tax year from 2016-17 onwards.

There is a new 30-page Green Paper on pensions tax relief released today, as announced in the Chancellor’s Budget speech. Further information in due course.

DIVIDENDS

From April 2016 the Government will remove the Dividend Tax Credit and replace it with a new tax-free Dividend Allowance of £5,000 a year for all taxpayers. Dividend tax rates above this amount are going up from zero to 7.5% for basic rate income tax payers, from 25% to 32.5% for higher rate taxpayers, and from 30.56% to 38.1% for additional rate payers.

BUY-TO-LET INVESTORS

Buy-to-let mortgage interest tax relief is reducing to 20% by 2020 and “wear and tear allowance” to be replaced by allowance on actual improvement costs.

In addition, the Government will increase the Rent-a-Room relief from £4,250 to £7,500 a year from April 2016.

RESIDENCE & DOMICILE

From April 2017, anybody who has been resident in the UK for more than 15 of the past 20 tax years will be deemed UK-domiciled for tax purposes.

From April 2017 the Government will also introduce new rules so that everybody who owns residential property in the UK and would otherwise pay inheritance tax on that property cannot avoid paying it by holding it in an offshore structure.

CORPORATION TAX

Reducing to 19% in 2017 and 18% in 2020.

NATIONAL INSURANCE CONTRIBUTIONS

Small firms’ NI contributions will fall, with a £3,000 employment allowance, no longer applicable to companies where the director is the sole employee.

INSURANCE PREMIUM TAX

Increasing from 6% to 9.5% from November 2015.

CHILDCARE

From September 2017, free childcare entitlement will be doubled from 15 hours to 30 hours a week for working parents of 3 and 4 year olds.

EQUITABLE LIFE

The Equitable Life Payment Scheme, which began making payments in 2011, will close to new claims on 31 December 2015.

STUDENTS

From the 2016-17 academic year, maintenance grants will be replaced with maintenance loans for new students from England, paid back only when their earnings exceed £21,000 a year.

SUPPORT FOR MORTGAGE INTEREST

Currently, those who receive benefits to help to pay their mortgage interest are able to do so indefinitely with no need to pay anything back. This Budget takes action to convert the Support for Mortgage Interest scheme into a loan, so that homeowners repay the financial support they receive.

Further information is available on the following link to the HMRC Executive Summary:

https://www.gov.uk/government/publications/summer-budget-2015/summer-budget-2015

Those of you in need of a drink after reading all this will be happy to know it won’t cost you anymore as a result of this Budget!

If you have any questions on how the Budget affects you please do call now on 0191 281 9862 or e-mail info@reevesifa.com to arrange a call with one of our advisors!

 

July’s most read articles – Summer Budget Special!

Hello from Reeves Independent

We thought we would leave our monthly newsletter until after George Osborne’s Summer Budget yesterday, and whilst there weren’t too many immediate issues, many experts agree with our expectation that Pensions will remain a major focus and ‘radical’ changes may remove planning opportunities in the future.

Here are a couple of the best articles we have found on the Budget from yesterday;

Summer Budget 2015: What it means for people like you!

2015 budget roundup: what effects will the announcements have?

Additionally this is a useful calculator from the BBC website that shows how the Budget will affect you!

Finally as always we have tried to include many of the other areas involved in financial planning in our most read articles in the last month below;

How to pass on your pension savings to your loved ones!

Case Study – Creating a legacy for your family!

BLOG: Help your children to secure their financial future!

Are you ready to make the most of your #PensionFreedom? Advice is the way to be confident of making sound choices!

‘I’m so glad to be alive – and £400k richer’: James paid £26k over 13 years for a policy he hoped he would never need – but his foresight paid off

Do you have Powers of Attorney – SIMON LAMBERT: You need this essential safety net for your family finances – however old you are!

Case Study – A growing household!

A guide to paying taxes in retirement!

Incredible! Expats have lost pensions worth £850m An estimated quarter of a million UK pensioners overseas are missing out on benefits as pension scheme trustees can’t trace them!

How to make a financial safety net. Death, illness, money troubles… You can’t prevent the first, you can’t do much about the second, but you can protect against the financial problems that both of those can bring!

As always we hope that you find some of the above useful. If there are any areas that you would like more articles on please let us know as we welcome any feedback

If you would like to discuss any of the above articles & how they may affect you then please contact us NOW on 0191 281 9862 or e-mail info@reevesifa.com to arrange a FREE initial appointment

Additionally please have a look at our core services document or visit our website www.reevesifa.com for further information

Summer Budget 2015 – a very quick guide to the key announcements!

Taken from the Professional Advisor

A quick guide from @scottjsinclair

1 The tax-free personal allowance will increase to £11k to 2016-17 (eventually, the Conservatives have promised, it will rise to £12,500). A law will also be introduced so that once it reaches  this level in 2020, people working 30 hours a week on the minimum wage won’t pay any income tax.

2 The dividend tax credit (which reduces the amount of tax paid on income from shares) will be replaced by a new £5,000 tax-free dividend allowance for all taxpayers from April 2016. Tax rates on dividend income will be increased.

3 A ‘family home allowance’ of £175k per person will be added to the existing £325k (pp) inheritance tax threshold, meaning the total tax-free allowance for a surviving spouse or civil partner will be up to £1m in 2020-21.

4 The amount people with an income of more than £150k can pay tax-free into a pension will be reduced from April 2016.

5 The higher rate income tax threshold will increase from £42,385 in 2015-16 to £43,000 in 2016-17.

6 The main rate of corporation tax (already cut from 28% in 2010 to 20%) will fall further to 19% in 2017 and 18% in 2020.

7 Permanent non-dom status will be abolished from April 2017. From that date, anyone who’s been resident in the UK for 15 of the past 20 years will be considered UK-domiciled for tax purposes.

If you would like to discuss how any of these announcements affect you please email info@reevesifa.com or call us on 0191 281 9862 for a FREE initial conversation!