Become a Reeves Advocate and Reap Your Reward

"We will always do our best to help anyone that deals with us.’’ -  Owner and founder, Nigel Reeves

At Reeves Independent, that is our company policy. We think it is only fair that we ensure that everyone is dealt with in the best possible manner – even if they don’t become a client.

Reeves has been in operation since 1996 and over those 25 years, we have always been eternally grateful to have been introduced to friends, families, and colleagues by our existing clients.

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Life Stage Appropriate Tax Planning

For more experienced savers there’s always a danger that they look at the approaching end of the tax year with a degree of complacency.

Understandably, they take the view that they’ve had the advice before about using allowances and meeting deadlines and they know exactly what to do by now.

That may well be the case, but we would urge you to guard against falling into the trap of thinking that what was appropriate for your circumstances last year might also apply for this year end.

There are four different client life stages at Reeves and the way in which you should approach tax planning can vary for each one.

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Tax Planning

Several deadlines are approaching in the coming days and weeks, which investors need to meet to take advantage of tax allowances.  Potentially save yourself some money this year and act now. The example below illustrates the financial benefit of meeting those deadlines.

Two different clients who planned to retire in April . Dave Waters and Andrew Noble were both self-employed and earning about £25,000 a year and both had £20,000 in cash savings apart from their pensions.

Dave took our advice and paid his £20,000 into his pension in March and received another £5,000 from the taxman by way of income tax relief, which gave his retirement a good start. It was important that he make this payment in March while he was still earning, as this allowed him to pay in up to £40,000 or 100% of his income (whichever is lower).

Andrew, however, missed the deadline and, as he had already given up work, could only pay in £2,880, bringing him tax relief of just £720. By missing the deadline, Andrew was worse oft to the tune of £4,280.

To avoid Andrew’s mistake, take careful note of some of the key deadlines for some of the major investment platforms.

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Reeves successfully launches Graduate Scheme

At Reeves Independent we believe in investing in exceptional homegrown talent, and that is why we have launched our new graduate programme, employing eight new graduates right here in the North-East.

Established in 1996, Reeves Independent has gone from a high street pension advice specialist based in Gosforth, Newcastle Upon Tyne, to a country wide financial firm that boast a 99% client retention rate. We are committed to achieving excellence, which includes the ongoing investment and development of our staff. 

Our new graduate training programme, launched at the start of 2021, sees talented trainees joining us to ultimately achieve Level 4 Diploma in Regulated Financial planning.

From the day they begin at Reeves Independent, our graduates are a central part of our team working across all aspects of the business on a quarterly basis. Benefiting from working alongside our team of qualified and expert financial advisers to understanding the day-to-day working of our in-house investment services, each graduate is guaranteed to gain an exceptional breadth of knowledge.

As the business continues to grow, and whilst there are a number of different departments across the firm, we pride ourselves on the close working relationships we maintain, and we look forward to our graduates becoming an integral part of the team.

Michael Warmington, Head of People at Reeves Independent, had the following words to say upon the launch of the new graduate programme:

“We are delighted to welcome our 8 new graduates to Reeves Independent and look forward to seeing the impact they have across the company. The business is focused on bringing the best talent into our team to not only provide exceptional service to our clients, but to future proof the delivery of the high standards our clients have come to expect from Reeves Independent.

It is truly our intention to be the scheme of choice for graduates looking to kick-start their career in the financial sector, not only working for one of the FT Adviser top 100 firms in the UK, but to becoming a qualified Financial Adviser.

As one of our new recruits described it as their ‘dream job’ we are thrilled to be able to offer this exciting opportunity to young talent, helping them begin their career”.


Tax allowances: Use them or lose them

If you’re a saver, the next few weeks are extremely important for the health of your finances.

As we approach spring and – fingers crossed – emerge blinking into the post-Covid sunlight, the Chancellor will be casting a critical eye over the state of public finances.

As we pointed out in last month’s newsletter, thanks to the pandemic, the government has had to run up our national debt to more than £2 trillion. That’s not sustainable, the books will have to be balanced and that suggests tax rises, perhaps in the form of reduced allowances. This could come as soon as the next tax year, which begins in April. There has been speculation, for example, about the reduction of relief on pension contributions by higher rate tax payers, or dropping the annual tax free amount for Capital Gains Tax, or double-taxing heirs on both CGT and Inheritance Tax.

Therefore, as part of our end of year tax planning campaign, we are urging clients to go through the annual tax check list. This year in particular you should be taking advantage of any valuable tax reliefs before the end of March, or you risk losing them and, potentially, thousands of pounds.

Here’s our usual annual checklist for you, whether you’re still working, or retired.

In work

If you’re still working, maximise your pension allowance as much as you can afford, up to the £40,000 annual limit. The generous tax relief immediately grows your pension in a way that would otherwise take years. For a basic rate taxpayer, this relief is 20%, so the government will add £8,000 to a £40,000 contribution – double that, if you’re a higher rate taxpayer.

If you have unused allowances from three years ago, this is your last chance to use them. Someone who hasn’t paid in anything this year or the previous three could pay in up to £160,000.

If you’re worried that you might need access to cash, bear in mind, if you’re 55 or are approaching that age, in making these contributions, you’re not putting that money beyond your reach. You can start to access your pension from the age of 55.

If you own your own company, pension contributions made to you by the business as your employer are a tax efficient way of extracting profits - useful if you’ve accumulated cash in the business, as you’ll not only save yourself 19% in corporation tax but also benefit from the pension relief.

Under the exchange salary for pension contributions scheme, by mutual agreement with their employer, an employee can exchange some of their remuneration, whether that’s salary or bonus, in return for a larger pension contribution from their employer. This saves on National Insurance that would have been paid by both the employer and employee.

Also, don’t forget your ISA, your own personal tax haven, where dividends and capital growth are income tax and capital gains tax free. You can contribute up to £20,000 to your ISA or ISAs in any tax year, but these allowances can’t be carried forward. Again, it’s a case of use it or lose it.

Retired

Don’t forget to ensure that you and – if married - your spouse are making the most of your personal allowances. Tax allowances aren’t transferable and those of both partners should be used to the full. By using both personal income tax allowances, two people can have a joint income of £25,000 a year tax free.

Couples who are drawing income from their pension funds, can top up the tax free element by using ISAs which are tax free.

Also, remember, if you have reached retirement and have no earned income, you can still contribute up to £3,600 gross a year to your pension and benefit from the tax relief.

Conclusion

As you endure lockdown, take some time out from the jigsaws and baking banana bread and talk to your Reeves adviser to go through the end of year tax checklist.

The content of these articles are for information only and should not be seen as advice or recommendation to act. If you do wish to take action, seek independent advice first as your circumstances may be different to what has been discussed in these articles. When investing, your capital is at risk and it may go down as well as up. You may not get back the original capital invested. Pension investment should be seen as a long term investment. Please note that pension legislation can and may change in the future.


How Reeves can help you save tax.

Jim Carlton joined us as a client when he was aged 58. He was still working as a freelance software engineer but was hoping to retire within a few years and he was on track to fulfil this ambition, having built up a reasonable pension fund.

However, like many people, Jim had also put by significant cash savings – in his case, about £25,000 – as a rainy day fund. After reviewing his situation and plans, we decided together that he was unlikely to have to call upon this much money and we pointed out to him that, with extremely low interest rates, these savings, for which he had no management and no plan, were not working for him as they could. In fact, with the rate of inflation being higher than interest rates, keeping these funds on deposit was costing him money.

Our advice to Jim was that, while he was still working and earning, it was crucial that he fund his pension as much as possible. The allowance for how much can be paid into pension is determined in part by earnings. Once you stop working, your annual pension allowance drops significantly.

So, following our advice, Jim paid £16,000 from his personal savings into his pension fund. This was immediately boosted by 25% as the taxman gave him £4,000 by way of income tax relief to further add to his pension. This was even before the funds were put to work by the pension fund manager to achieve further – tax free – growth.

If Jim had been a higher rate tax payer, he could have received up to an additional £4,000 refunded back to him by HMRC, so the £20,000 added to his pension, would only have cost him £12,000.

As a result of this decision, Jim brought his retirement ambitions closer, while still retaining £9,000 cash for any emergencies.

Another Reeves client was Mary McAndrew. Mary, who retired when she was 63, had also built up a respectable sum in cash, in addition to her pension fund. When she became a client, she explained that her plan was to live off these cash savings for a couple of years to allow her pension funds to grow before she needed to draw on them.

This is a common attitude and it’s not unreasonable, as it’s a good thing to allow our investments to work for us, for as long as possible, to allow them to build up momentum under the powerful force of compounding.

However, in Mary’s case, she wasn’t taking into account her tax position. Like any other adult, she had a personal income tax allowance of £12,500 a year – that is the amount she could earn without paying any tax. But, as she was retired, she wasn’t receiving any taxable income and so her allowance was unused and going to waste. The personal income tax allowance cannot be carried forward to another year, you either use it in the current tax year or lose it. This same income, drawn later in life, may have fallen into the basic rate tax bracket, meaning Mary would have lost £2,500 when accessing it from pension.

We advised her to draw £12,500 from the taxable element of her pension. Even though she didn’t need that money to live on, she could reinvest it, so that the money could still continue to work for her, while she was making full use of her personal allowance. A case of making the best of both worlds.

Leigh and Rita Collinson were in their fifties. Leigh was a manager for a packaging firm who had worked his whole adult life, during which he had built up a reasonable pension pot. Rita, on the other hand, had given up her career as a hotel receptionist in order to bring up their two children. She had worked in retail once they both reached school age and, while she had saved a modest pension, it was significantly smaller than Leigh’s.

So, when they first consulted us, they had the view that in retirement they would largely be relying on Leigh’s pension, as he had been the traditional `breadwinner’, to provide their required joint income of £24,000 after tax.

We pointed out that the income tax allowance of £12,500 can be doubled for a couple retiring together, that’s £25,000 drawn from taxable environments tax free.

If the income Leigh and Rita wanted was £24,000 a year, by using both of their pensions, they could draw that from a taxable environment, so 25% of their pensions could be drawn tax free. They didn’t have to touch this but it could be saved for when needed and when it was more tax efficient to access it. We used these income tax allowances to pay them their income and the £1,000 surplus was reinvested to continue working for them.

These are just three examples to underline how Reeves has helped people to use the tax rules and allowances to boost their savings.

The content of these articles are for information only and should not be seen as advice or recommendation to act. If you do wish to take action, seek independent advice first as your circumstances may be different to what has been discussed in these articles. When investing, your capital is at risk and it may go down as well as up. You may not get back the original capital invested. Pension investment should be seen as a long term investment. Please note that pension legislation can and may change in the future.

**Names have been changed from real client case studies, with written consent. All other names and studies are fictional to highlight our advice.


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