Our clients regularly ask similar questions. So, in case you are thinking the same, here are some of the most popular questions we get asked, along with our answers.

If you have a burning question, which we’ve not answered here, we would be delighted to answer it for you.  So please click below and use our contact form to ask away.

Click here to submit your query.

Retiring

The best way to find out how much you will receive is to apply for a State Pension forecast. You can do this online by clicking here. Alternatively, you can download a BR19 form by clicking here and send it off by post.

That depends on several factors including:

  • The income you need in retirement
  • Any lump sums of capital you need once you have finished work
  • The amount of State Pension you will receive and when this will become payable
  • The other pensions, savings and investments you have
  • Your state of health and life expectancy

Part of our job is to help our clients answer this question and to manage their resources and cashflow either when planning for retirement or when drawing an income in retirement.

If you would like specific advice about your circumstances, please get in touch with us.

Typically, most pensions are accessible from the age of 55. However, from 2028 the earliest date at which you can take your pension will rise to 10 years below the State Pension Age.

However, for some occupational schemes, especially Defined Benefit or Final Salary pensions, penalties may be incurred for taking benefits before the scheme retirement age.

It’s also worth noting that just because you can take money from your pension, it doesn’t mean you should. Some people may have planned to retire early and have built up sufficient pensions, savings and investments to do so. However, others withdraw too much capital from their pension at 55, leaving themselves with insufficient income later in life.

Introduced in April 2015, Pension Freedoms give people aged 55 and over unlimited access to their pension; previously, the amount they could withdraw each year was capped.

Perhaps the biggest single change to retirement planning in a generation, Pension Freedoms provide people an opportunity to possibly retire early or mould their retirement income to their specific needs. However, used unwisely they can also lead to people taking too much money from their pension too soon, potentially leaving them in financial difficulty later in life.

The maximum tax-free lump sum (also known as Pension Commencement Lump Sum or PCLS) available from a Money Purchase pension (Stakeholder, Personal Pension, Self-Invested Personal Pension and some workplace pensions) is usually 25% of your fund value. However, the rules for some schemes may differ.

The maximum lump sum from a Final Salary or Defined Benefit pension is calculated in a different way. You should contact your individual scheme to find out what is available to you.

If you are planning on taking the tax-free lump sum from your pension, we can help you understand the maximum amount available and provide advice on your options.

Any money you take above the tax-free lump sum (also known as the Pension Commencement Lump Sum or PCLS for short) is added to your other income in the tax year and then taxed at a rate of 20%, 40% or 45%.

Care should be taken though when withdrawing lump sums as they are taxed under the PAYE system on an Emergency Code basis. This can mean that even non-taxpayers pay tax, which could perhaps be reduced or avoided all together with careful planning.

Yes, however the rules are complex.

As a rule of thumb, you can nominate beneficiaries, including people, charities or companies, to benefit from your pension when you die. Exactly what they will receive depends on when you die and the type of pension you have.

Depending on when you die and their circumstances at the time of your death, they may also pay tax on the amount they receive.

For a more specific answer, based on your individual circumstances, please get in touch. We would be delighted to help.

The Lifetime Allowance is the maximum you can hold in your pensions before a tax charge potentially becomes payable.

Introduced in April 2006, the allowance rose as high as £1.8 million in 2012 but has since been cut back significantly. In the current tax-year, 2018/19, it stands at £1,030,000.

If you are affected you have several different options, including applying for:

  • Primary protection
  • Enhanced protection
  • Fixed protection
  • Individual protection

Using one of these options could help shelter your pension from the effect of the Lifetime Allowance. However, each has their own unique advantages and disadvantages; careful consideration should be given to the most appropriate option.

If you already have a large pension or believe you will in the future and might therefore be affected by the Lifetime Allowance, we would be happy to provide advice on your options. Please get in touch to discuss your individual circumstances.

The Annual Allowance is the maximum you can pay into your pension each year and still receive tax relief.

It is currently set at the lower of your earnings, or £40,000; although if you have started to draw your pension under the new Pension Freedom rules, this cap will be reduced to £4,000. Furthermore, if you earn more than £150,000 per year you lose £1 from your £40,000 allowance for each £2 you earn until the allowance has reduced to £10,000. However, careful planning using the Carry Forward allowance can people earning above £150,000 to maintain the full annual allowance.

If your contributions exceed the Annual Allowance in a given year, you won’t be eligible to receive tax relief on the excess contributions and you will have to pay an Annual Allowance charge.

This charge will be added to your taxable income for the tax year in question to assess the liability. As an alternative, if the charge is greater than £2,000, you can request that your pension scheme pays the charge.

In certain circumstances, you may be able to reduce the Annual Allowance charge by utilising unused Annual Allowances from previous years.

This is a complex area where professional advice is crucial. If you would like advice on your specific circumstances, please get in touch with us.

High earners

High earners have several options to reduce their tax bills, including making pension contributions, which attract tax relief. Alternatively, other investments such as VCTs (Venture Capital Trusts) may also be appropriate; however, people making such investments must be prepared to accept the significantly higher degree of risk associated with such an investment.

The options are numerous; however, it takes careful financial planning to ensure the correct one is chosen. If you are a high earner and would like to consider ways to reduce your tax liability, we are here to help.

The maximum you can pay into your pension and still receive tax relief is limited by the Annual Allowance, which is currently set at £40,000.

However, in certain circumstances it is possible to carry forward any unused Annual Allowance from the three previous years.

The rules are complex and the exact amount you can pay into your pension is dependent on several interconnected factors. If you would like to understand exactly how much you can contribute, given your specific circumstances, we would be happy to help.

Assuming you won’t meet the costs as they arise, there are several ways to save for your children’s private or higher education.

Perhaps the most obvious option is to use an ISA (individual Savings Account). Available as a Cash ISA, to meet short-term savings needs, or as a Stocks & Shares ISA for longer-term investing, each person can contribute up to £20,000 per year to an ISA.

Furthermore, in certain circumstances trusts can be utilised to allow the child’s own tax allowances to be used against gains and income from investments. Careful thought however should be given to the use of trusts as often the rules mean the child has access to any of the remaining assets personally at 18, which in some situations might be undesirable.

Whilst selecting the right vehicle is important, it is also vitally important that you understand the cost of your children’s education and how much you need to save to pay for it. We help our clients understand both by building cashflow forecasts to show how much they need and whether they are on track to build up the capital required.

That depends on several factors including:

  • The income you need in retirement
  • Any lump sums of capital you need once you have finished work
  • The amount of State Pension you will receive and when this will become payable
  • The other pensions, savings and investments you have
  • Your state of health and life expectancy

Part of our job is to help our clients answer this question and to manage their resources and cashflow either when planning for retirement or when drawing an income in retirement.

That’s a question which could have a very long answer!

There are several options which allow you to save or invest tax-efficiently, including:

  • ISAs (Individual Savings Accounts)
  • Pensions
  • Venture Capital Trusts (VCTs)
  • Enterprise Investment Schemes (EIS)
  • Offshore investments

Furthermore, certain allowances, such as the Personal Savings Allowance, will help you save or invest tax-efficiently.

Exactly which allowances you can claim, and which products you should use, depend on your own circumstances and the level of investment risk you are prepared to take.

We can help you understand the options and then create a bespoke financial plan, based on your own unique circumstances, goals and ambitions, to ensure your money is held as tax-efficiently as possible.

Business owners and company directors

One of the most popular options for reducing a Corporation Tax bill is to make pension contributions on behalf of the business’ directors.

Following the introduction of Pension Freedoms, which allow unlimited access to the amount held in a pension after the age of 55, and new rules allowing unused pension funds to be passed on after death, pension contributions as a way of reducing Corporation Tax has become even more popular.

However, there are maximum amounts which can be contributed and, naturally, there are advantages and disadvantages to making pension contributions.

If you would like specific advice, based on your own circumstances, please get in touch. We would be happy to help.

Keyman Insurance provides a lump sum or income to pay for the cost of replacing a key employee in your business should they die or become too ill to work.

Shareholder Protection is also a type of insurance, but provides a lump sum in the event of a shareholder’s death or serious illness, which can be used to purchase their shares in a business. This arrangement means that the shareholder’s beneficiaries, often their family, receive a much-needed lump sum, while the remaining shareholders retain control of the additional shares.

A Self-Invested Personal Pension (SIPP) or a Small Self-Administered Scheme (SSAS) can both be used to purchase your business premises.

The pension fund will own the property, which your business must pay rent to on a commercial basis. The pension does not pay tax on the rent it receives; however, your business can still claim it as an expense.

Pension funds can also borrow money, usually up to 50% of their assets, to help fund the purchase of a commercial property.

If you would like to discuss the advantages and disadvantages of using your pension to buy your business premises we would be happy to hear from you.

Both a SIPP (Self-Invested Personal Pension) and a SSAS (Small Self-Administered Scheme) have wider investment powers than a traditional pension.

Technically, and as the name suggests, a SIPP is a personal pension with a single member, whereas a SSAS is an occupational scheme with potentially multiple members.

Both options have much in common; for example, the tax relief rules are identical, as are the allowable retirement ages. However, a SSAS has slightly wider powers of investment compared to a SIPP; for example, in certain circumstances it can offer loans back to the sponsoring employer.

The question of whether a self-invested pension is right for you, and then a decision about which option to choose, is complex and requires careful thought. We are here to help you make the right decisions for your circumstances. Feel free to get in touch for an initial chat.

Yes, it can.

Many successful and profitable businesses accumulate large amounts of capital that aren’t needed for day-to-day operations.

Many business owners leave that capital in deposit accounts, earning little or no interest and usually losing value in real terms. However, there’s no reason why it can’t be moved to more competitive deposit accounts or, if access isn’t needed in the short / medium term and the business owners are prepared to take a degree of risk, invested appropriately. Pension contributions, which attract tax relief, are also an increasingly popular way for businesses to utilise spare capital.

A degree of care must be taken by business owners before they make decisions about their capital and consideration must be given to risk, access and taxation. However, there are certainly better options than leaving spare capital sat in current accounts.

Furthermore, the most appropriate type of investment product will depend several factors, not least the size of your company, as this can significantly affect the treatment of certain investments.

Finally, whether invested or not, care should be given to whether spare assets such as cash will affect the trading status of the company and/or the availability of Entrepreneurs Relief on sale, or Business Property Relief on death. This a complex area and you should seek advice from a firm such as ours, where we have the expertise in this area.

By law, minimum contributions must be made into workplace pension schemes.

From 6th April 2018, the minimum contribution is 5%, of which the employer must pay at least 2%. A further rise will come into effect from 6th April 2019, when the minimum contribution will rise to 8%, of which the employer must pay at least 3%.

Unless you have chosen otherwise, contributions are calculated on a band of earnings. For the 2018/19 tax year, this band is between £6,032 and £46,350 a year (£503 and £3,863 a month, or £116 and £892 a week).

Divorcing

That entirely depends on what was agreed in the financial settlement.

There are several different options open to you. The optimal option will depend entirely on your personal circumstances and objectives. In this complex area deciding which is best is sometimes very difficult for the layman and indeed choices now can have far reaching consequences upon your future financial wellbeing. It can often be hard to weigh up the difference between short-term gain and options which will be preferable in the long term.

We can help you at every stage of the divorce / separation process. Whether you have a proposed or actual financial settlement, we will help you understand the implications for your retirement.

We understand that if you are going through a divorce / separation it is bound to be an emotional time. You can rely on us to work with you in a sensitive and collaborative way.

Yes.

There are several things you should consider after a divorce or separation, including:

  • Whether existing policies, especially those held in joint names, remain appropriate
  • Who the money whether it be a lump sum or income, will be left to on your death
  • Whether the amount paid out when you die remains appropriate

Furthermore, if your former spouse or partner has agreed to pay maintenance to you, it may be appropriate to insure them so that you are not financially disadvantaged in the event of their premature death.

Finally, as an existing will is automatically revoked on divorce a new will should be made. Likewise, if you are separating from your partner, but weren’t married, it also makes sense to review your will after separating.

A mortgage broker will be able to assess your circumstances, including your income, expenditure and credit history, and then confirm the amount you will be able to borrow.

For additional peace of mind, the broker can make a Decision in Principle (DIP) application which allows the proposed mortgage lender to run certain checks and confirm, ‘in principle’, the amount they would be prepared to lend you.

We work with a wide range of mortgage brokers and can recommend you to someone who will suit your needs and has helped many of our other clients.

It is certainly something you should consider.

If your former spouse or partner has agreed to pay maintenance to you, it may be appropriate to insure them; that way, you are not financially disadvantaged in the event of their premature death.

Our financial advisers can help you to understand how the process would work and the likely costs of providing the cover you need.

Charities & trustees

Yes, certain banks and building societies offer accounts specifically to meet the needs of charities and trusts.

That depends on several factors, including your attitude towards investment risk, your short, medium and longer-term aims and specific restrictions placed on your charity or trust.

Deposit accounts are generally considered appropriate for capital to which access is needed within a relatively short time period, or where you are not prepared to see any fluctuation in value. However, where the interest rate received is below inflation, a real terms loss will be made each year.

If you are prepared to accept a degree of risk, then it may be appropriate to consider investing capital as an alternative to using deposit accounts.

Our advisers and planners are experts in working with charities and trusts and can make a bespoke recommendation once they fully understand your circumstances and objectives.

People with wealth

That depends on the size of your estate and the plans you have made to mitigate the effects of Inheritance Tax (IHT) when you die.

If the value of your estate (including savings, investment, property and other assets, minus any outstanding debts and certain gifts you may have made) is above the Nil Rate Band (NRB) (currently £325,000), then the proportion of your estate above this level will be liable for IHT, chargeable at the rate of 40%.

For example, if your estate is worth £500,000, tax of £70,000 would be payable (i.e. 40% of £175,000).

If you own your home and certain conditions are met, including that it will be passed to your children or grandchildren (including those who are adopted or fostered), then the Residence Nil Rate Band (RNRB) is added to the NRB.

The additional RNRB is currently £125,000 but will rise to £175,000 in the 2020/21 tax-year.

If your estate is more than the NRB, then you may want to consider ways in which any tax potentially payable when you die could be reduced. There are several options available, all of which have their own unique advantages and disadvantages.

We can help by calculating the tax potentially due on your death and then providing recommendations to reduce the bill. If you would like an initial chat, without obligation or cost, please get in touch.

Adults can pay up to £20,000 in the current tax year.

This allowance can be split between the four types of ISA: Cash, Stocks & Shares, Innovative Finance and a Lifetime ISA.

Contributions to a Lifetime ISA are capped at £4,000 in each tax year, allowing you to contribute a further £16,000 to other types of ISA.
Children, or parents / grandparents on their behalf, can contribute up to £4,260 in the 2018/19 tax year to a Junior ISA.

The Personal Savings Allowance (PSA) reduces the amount of tax paid on the interest you receive on your savings.

For basic rate (20%) taxpayers, the PSA means that no tax is paid in the first £1,000 of interest received each tax year. For higher rate (40%) taxpayers, the allowance is cut to £500. It isn’t available for additional (45%) rate taxpayers.

The PSA means that the majority of savers now pay no tax whatsoever on the interest they receive.

That depends on many factors and isn’t something we can definitively answer here.

To provide an answer we would need to understand more about your circumstances, objectives, tax position, existing savings and investments, and finally your attitude to risk.

If you would like to discuss your options in more detail, please get in touch for an initial conversation, held without cost or obligation.

That depends.

If your Bank or Building Society goes bust and is a member of the Financial Services Compensation Scheme (FSCS), your savings will be protected up to £85,000 per person per firm.

From 3rd July 2015, the FSCS will also provide up to £1 million protection limit for temporary high balances held with your bank or building society if it fails. More information can be found about this by clicking here.

Care should be taken here as some banks and building societies appear to be different, trading under separate brands, but are covered by the same banking licence. For example, AA, Bank of Scotland, Birmingham Midshires, Halifax, Intelligent Finance and Saga are all covered by one (HBOS) banking licence.

All savings held with National Savings & Investments (NS&I) are protected, with no upper limit.

Young families

Life insurances pays out a lump sum or income (depending on the option you selected when you took the policy out) to your nominated beneficiaries on your death.

Critical illness cover pays out a lump sum or income (again depending on the option you selected), should you be diagnosed with an illness which is covered by the policy.

The type and level of cover needed differs from person to person. We make a personal recommendation for each of our clients, helping them choose the right cover, the amount they should be insured for and the most appropriate provider for their circumstances.

If you would like more information, please do not hesitate to get in touch with us.

That’s a decision only you, perhaps in conjunction with our advice, can make.

In addition to the day-to-day costs of raising children, there are occasions in their life when they may need lump sums of capital. Examples include university education, buying a house and weddings. You may decide that you want to support them at these times by using your own capital or saving specifically for these events.

We can help you understand the amount of money you need and the options you have for building up the required amount of capital.

Everyone’s circumstances are different. However, having savings which can be used in an emergency, for example if you unexpectedly lose your job or fall ill, is hugely important.

We recommend trying to build up an emergency fund of three to six months of essential expenditure. The money should be held in a savings account and be easy to access.

A mortgage broker will be able to assess your circumstances, including your income, expenditure, the size of your deposit and credit history, and then confirm the amount you will be able to borrow.

For additional peace of mind, the broker can make a Decision in Principle (DIP) application which allows the proposed mortgage lender to run certain checks and confirm, ‘in principle’, the amount they would be prepared to lend you.

We work with a wide range of mortgage brokers and can recommend you to someone who will suit your needs and has helped many of our other clients.

Naturally, we cannot provide specific advice as we do not know your individual circumstances.

However, as a rule of thumb, it’s generally sensible to join a Workplace Pension. Not only will you be putting your own money away for your future, you will also benefit from tax relief and your employer will make contributions too.

Joining the pension is only half the job though. You should take steps, either yourself or by using a financial planner / adviser, to understand more; for example, how your contributions are invested, the income they will provide you with in retirement and how they dovetail with your other retirement plans.

A will is a legal document which allows you to express your wishes as to how your assets should be distributed after your death. It can also be used to confirm details of your funeral, nominate the person who will look after your affairs following your death (the executor) and, perhaps most importantly for families, nominate the guardians of dependent children.

If you die without a will (known as dying intestate), the state will decide how your assets are distributed and who will care for your children, which of course may not mirror your own wishes.

Consequently, if you have assets or dependents, making a will is an important job. Furthermore, by making a will you will spare your loved ones making difficult decisions or trying to second guess your wishes at what is bound to be an emotional time for them.

Making a will is something many of us have not yet done; yet is relatively simple and cheap to do. Start by speaking with a solicitor (we can recommend one if you wish) who will advise you on the steps you should take.

Companies

Keyperson (also known as Keyman) Insurance provides a lump sum or income which allows you to replace, or cope with, the financial effects of a ‘key’ member of your team becoming ill or dying.

The premiums are paid by the business, who also receives the benefit, either as an income or lump sum when the person who is insured dies or becomes ill.

If you have a key member of your team whose illness or death would cause the businesses to suffer from financial hardship, you may well decide that you need Keyperson Insurance. We can help you make that decision and also recommend the appropriate type and level of cover.

This type of protection provides a lump sum of money which the business, or other shareholders, use to purchase the shares from a shareholder who becomes seriously ill, or from their estate after their death.

Shareholder Protection is usually set up alongside an agreement which confirms what happens following a shareholder’s death, or should they become too ill to work. By setting up these agreements, in conjunction with the insurance, it provides a structure for the business to continue, as well as added financial security for the unwell shareholder or the family of a deceased shareholder.

By law, minimum contributions must be made into workplace pension schemes.

From 6th April 2018, the minimum contribution is 5%, of which the employer must pay at least 2%. A further rise will come into effect from 6th April 2019, when the minimum contribution will rise to 8%, of which the employer must pay at least 3%.

Unless you have chosen otherwise, contributions are calculated on a band of earnings. For the 2018/19 tax year, this band is between £6,032 and £46,350 a year (£503 and £3,863 a month, or £116 and £892 a week).

Both a SIPP (Self-Invested Personal Pension) and a SSAS (Small Self-Administered Scheme) have wider investment powers than a traditional pension.

Technically, and as the name suggests, a SIPP is a personal pension with a single member, whereas a SSAS is an occupational scheme with potentially multiple members.

Both options have much in common; for example, the tax relief rules are identical, as are the allowable retirement ages. However, a SSAS has slightly wider powers of investment compared to a SIPP; for example, in certain circumstances it can offer loans back to the sponsoring employer.

The question of whether a self-invested pension is right for you, and then a decision about which option to choose, is complex and requires careful thought. We are here to help you make the right decisions for your circumstances. Feel free to get in touch for an initial chat.

A Self-Invested Personal Pension (SIPP) or a Small Self-Administered Scheme (SSAS) can both be used to purchase your business premises.

The pension fund will own the property, which your business must pay rent to on a commercial basis. The pension does not pay tax on the rent it receives; however, your business can still claim it as an expense.

Pension funds can also borrow money, usually up to 50% of their assets, to help fund the purchase of a commercial property.

If you would like to discuss the advantages and disadvantages of using your pension to buy your business premises we would be happy to hear from you.

Later life

That depends on when you die and the type of pension you have.

However, following changes to the rules governing pensions and death benefits, it is now easier than ever before for your family, or indeed organisations such as charities, to benefit from your pension following your death.

It’s important to understand the rules and the options though; something which clearly must be done before death. Therefore, if passing your pensions on to your loved ones or a charity is important to you, please get in touch and we will help you understand your options.

While life expectancy is generally increasing, more of us need care in later life.

The financial support offered by the state is limited; you may well have to meet some, or all, of the cost yourself. The amount you will have to pay depends on several factors:

  • The type of care or support you need and whether you remain in your own home
  • Where you live, as costs vary throughout the UK
  • Your financial circumstances

A study by healthcare specialists Laing & Buisson in 2013/14 shows that, depending on where you live in the UK, care homes can cost an average of:

£29,270 per year for a residential care home, or

£39,300 per year if nursing is required

You may also have to pay for extras, such as trips out, hairdressing, toiletries and some therapies.

The Paying For Care website has a useful calculator, which you can use to better understand the likely fees for your specific circumstances. You can visit it by clicking here.

A Power of Attorney allows others to make decisions for you and act on your behalf if you are unable to do so; perhaps because of permanent mental incapacity (such as a degenerative disorder), or a temporary reason, such as being overseas.

A Power of Attorney can cover decisions relating to your finances, such as paying your mortgage or other bills, selling your home, and looking after investments, savings or pensions. It can also be used to take decisions about your health, for example the medical treatment you receive or the care you should be given.

There are two types of Power of Attorney:

An Ordinary Power of Attorney (OPA) covers times in your life when you still have mental capacity, but you need someone to temporarily act on your behalf.

A Lasting Power of Attorney (LPA) is set up while you still have mental capacity, for use in the future when that is no longer the case. It can be used to make decisions about your finances (known as property and financial affairs) and your health / care (health and welfare), or both.

Powers of Attorney can be set up by the individual or by a solicitor, often at the same time as making or revising a will. They are important for the smooth-running of your affairs should you become incapable of making important decisions in the future.

The Personal Savings Allowance (PSA) reduces the amount of tax paid on the interest you receive on your savings.

For basic rate (20%) taxpayers, the PSA means that no tax is paid in the first £1,000 of interest received each tax year. For higher rate (40%) tax payers, the allowance is cut to £500. It isn’t available for additional (45%) rate taxpayers.

The PSA means that the majority of savers now pay no tax whatsoever on the interest they receive.

That depends on the size of your estate and the plans you have made to mitigate the effects of Inheritance Tax (IHT) when you die.

If the value of your estate (including savings, investment, property and other assets, minus any outstanding debts and certain gifts you may have made) is above the Nil Rate Band (NRB) (currently £325,000), then the proportion of your estate above this level will be liable for IHT, chargeable at the rate of 40%.

For example, if your estate is worth £500,000, tax of £70,000 would be payable (i.e. 40% of £175,000).

If you own your home and certain conditions are met, including that it will be passed to your children or grandchildren (including those who are adopted or fostered), then the Residence Nil Rate Band (RNRB) is added to the NRB.

The additional RNRB is currently £125,000 but will rise to £175,000 in the 2020/21 tax-year.

If your estate is more than the NRB then you may want to consider ways in which any tax potentially payable when you die could be reduced. There are several options available, all of which have their own unique advantages and disadvantages.

We can help by calculating the tax potentially due on your death and then providing recommendations to reduce the bill. If you would like an initial chat, without obligation or cost, please get in touch.