Resources from New England Financial Services
With us, it's personal
It’s not just those in retirement that may need extra care. There are many clients in a potentially vulnerable situation that we recognise may need greater flexibility and support:
• Those that are younger who may not have the experience to understand financial products
• Those who have communication, literacy, or learning issues
• Those who have either a short term or long-term illness
• Those with memory issues
• Those who have just had an event such as a bereavement or a divorce
• Those with mental health issues
• Those who may be care reliant or physically impaired in some way
This is not a full list but it does indicate the extent to which due concern and consideration must always be given when we are looking after our clients.
We take the inclusive, sensitive approach encouraged by the Financial Conduct Authority and embedded in our “Treating Customers Fairly” charter.
Be assured, flexible support will always be provided to those clients who need it.
At the end of 5 years, your savings account will have grown to £1,200.
Using the same example above, using compound interest, each year, interest would also be earned on the interest already earned. So, at the end of 5 years, your savings account will have grown to £1,216.65.
It doesn’t sound a big difference but over time, and with daily compound interest, the differences can be significant.
For example, Anna started a pension savings account at age 30 of £200 per month. She also received £50 tax relief on the contribution so her gross contribution each month was £250.
Daily compound interest has been applied to her savings.
At age 50, Anna had £135,659.38 averaging a growth rate of 5% per annum.
At age 65, Anna had £455,380.37 averaging a growth rate of 5% per annum.
Starting early made a significant difference to what Anna’s pension savings account looked like when she wanted to change her working hours at age 65. And all this without changing the contribution levels.
Whilst we cannot ever guarantee rates of return and all investment carries risk, we do know that the longer you can invest for, the more likely that you will have a larger savings pot.
For more information on how a savings plan could work for you, contact Cameron at New England.
When the Tories wrote their manifesto a few short weeks ago, they did so in the hope, and probable expectation, of an increased majority. The reality is very different, we can therefore expect some of the more controversial elements of their manifesto to perhaps be tempered a little.
But here’s our best guess:
All eyes will be on sterling and the stock markets over the next few days.
Both remained relatively stable in the wake of the result; the FTSE 100 even rose. However, if sterling does weaken over the coming weeks, it could make it less likely that interest rates will be pushed up. That’s good news for borrowers and homeowners, but bad news for savers.
The key point to remember, as always, is that you should never change your long-term financial plans based on short-term ‘events’.
Brexit: Full steam ahead
In her speech after seeing the Queen, Theresa May made it clear that the Brexit timetable will remain unchanged.
Whether though, the ‘type’ of Brexit will change, remains to be seen; without a working majority, the Prime Minister may be forced to soften her stance on certain issues.
Two measures, announced in the Budget, failed to make it on to the statute book due simply to parliamentary time running out after the snap election was called.
The first was a cut in the dividend tax allowance. This would have seen shareholders; investors and business owners, have their tax-free allowance cut from £5,000 to £2,000 from April 2018.
The second was in relation to the Money Purchase Annual Allowance (MPAA).
The MPAA is the maximum people who have withdrawn money under the new ‘freedoms’ can continue to pay in to their pension and was set at £10,000. In his Budget, on 8th March, Philip Hammond announced that it would be cut to £4,000 from 6th April; giving pensioners less than a month to plan for the change.
Whilst paying in to your pension after you have taken money out, may seem illogical, there are many reasons why it might be the right thing to do. The change would have affected thousands of pensioners, including those who continue to work on a part-time basis, who have previously retired and subsequently returned to work or who have taken money from their pensions under the new ‘freedoms’ and continue to work.
However, the proposal never became law, leaving thousands of people in limbo, unsure as to how much they can legitimately pay in to their pension. Over the coming weeks it will become clearer whether these two changes will be quietly discarded, or become law.
Income Tax and National Insurance
The future of both Income Tax and National Insurance is unknown.
In the run up to the election, Mr Hammond made an ill-fated attempt to increase the amount of National Insurance paid by the self-employed. Following a media backlash, a quick U-turn was executed.
The Conservative manifesto confirmed the existing commitment to raise the tax-free personal allowance, from £11,500 to £12,500 by 2020. The manifesto also pledged to raise the threshold for higher-rate taxpayers, to £50,000 by 2020.
Figures from AJ Bell show that these changes would make 24 million basic-rate taxpayers £33 a year better off, with higher-rate taxpayers saving £208. But, with no majority, and a reliance on other parties, the commitment to raise the higher-rate tax band could be at risk.
Many people also believe that the Chancellor could also revisit the level of National Insurance contributions paid by the self-employed. Again, without a majority, that must be questionable too.
What will change with Corporation Tax?
The Conservative manifesto promised to cut Corporation Tax to 17% by 2020. The rate is currently set at 19%, for all companies, irrespective of the profits they make.
A promise to review the business rates system has also been made, with the aim of more frequent reviews and lower rates for smaller businesses.
Value Added Tax (VAT)
The Conservative manifesto states: “We will not increase the level of Value Added Tax.”
The ‘triple lock’ currently guarantees that the State Pension will rise by whichever is the highest out of: •Average earnings
•The rate of inflation as measured by the Consumer Price Index (CPI)
The Conservatives have committed to maintaining the ‘triple lock’ until 2020. After which point, the State Pension will rise in line with the higher of earnings or inflation; effectively a ‘double lock’, without the guaranteed 2.5% annual increase. This could be another policy proposal which could be altered; especially if inflation remains relatively high, which negates the cost of the 2.5% minimum increase.
The age at which we get our State Pension is already set to rise for both men and women, to 66 by 2020 and then to 67 between 2026 and 2028. Whilst the other main parties pledged to keep increases to a minimum, the Conservatives have committed to increasing it in line with life expectancy. So, expect to wait longer for your State Pension in the future.
Unlike those of the other major parties, the Conservative manifesto made no mention of relief for the so called ‘WASPI’ women affected by increases to their State Pension age.
Certain benefits that pensioners are currently entitled to, such as free bus passes and TV licenses will be kept. However, the Conservative manifesto stated that winter fuel payments, which are currently universal and worth between £100 and £300 each year, will be means tested in the future.
Again, with one eye on the next election, whenever that may come, the Conservatives may be tempted to row back on this change.
National Living Wage?
The manifesto pledges to increase the National Living Wage, which applies for anyone aged 25 or over, from £7.50 to £8.75 by 2020.
This was one of the most controversial topics of the whole election campaign.
The Conservatives initially stated that in future, people would be expected to use their capital, including their home, to pay for the cost of care, until their assets fell below £100,000. This is actually a significant increase on the current level of approximately £23,000; however, that seemed to be overlooked in the heat of the campaign. They also, initially at least, ruled out a cap on the fees you can be expected to pay personally for care.
After being dubbed the ‘dementia tax’ a swift U-turn was performed and the Conservatives have now committed to a cap, and a consultation, on the level it would be set at.
If there’s one policy that may be taken straight back to the drawing board after the result, it’s the amount we all pay for our care in old age.
Wait and see
There’s no doubt, it will take longer than usual for the dust to settle.
Policies and promises that were made during the campaign aren’t necessarily guaranteed to happen. So, for now, we’ll have to wait and see before we know who the real winners and losers are.
For more information on how the General Election will affect your personal finances, please don’t hesitate to get in touch with us in the normal way.
Do I have to be enrolled into the new scheme?
If you are aged between 22 and State Retirement Age and earning at least £192 per week or £833 per month, you will be enrolled.
Does the company contribute to the new pension scheme?
Yes, all companies must make a minimum contribution based on either your salary or qualifying earnings (Qualifying earnings is the income between the lower earning and upper earning limit - £5,824 to £43,000 per annum in the 2016/17 tax year).
Do I have to contribute to the new workplace pension scheme at work?
Unless your employer is contributing the minimum for you, yes. You will be expected to contribute.
• The minimum total contribution from your staging date is 2% of which 1% must be from your employer
• From 6th April 2018, the minimum total contribution is 5% of which 2% must be from your employer
• From 6th April 2019, the minimum total contribution is 8% of which 3% must be from your employer
If I leave the company, what happens to the pension?
It’s your pension and not the company’s’. You can either stop paying contributions or transfer it to your new employer’s pension scheme or a personal pension arrangement. We always recommend you get some advice when transferring a pension.
What if I don’t want to be in the company pension scheme?
You do have the option to opt-out of the company pension scheme. You can’t do this until you have been enrolled and you should receive information on how to opt-out from the pension scheme provider. If you opt out you will receive no further contributions but you will be re-enrolled three years after opting out.
For more information about pensions and investments, please contact us at firstname.lastname@example.org.
This information is based on our understanding of HM Revenue & Customs guidance and relevant for 2016/17 tax years. Any reference to tax is subject to your personal circumstances and is subject to change.
The Financial Conduct Authority does not regulate workplace pensions.
At the time of writing, the world’s major stock markets; US, Japan, UK, Germany etc, have all avoided a sharp fall. In fact, most are showing a slight rise, which may, or indeed may not, have anything to do with the election result.
However, over the coming months and years, as the Trump presidency takes shape, we may see market turbulence. Positively, his promise to invest in infrastructure could well be good news for company earnings and therefore shareholders. On the negative side of the ledger, his relationship with China is poor and much of his foreign policy remains unclear.
Whenever large stock market fluctuations occur, for example in the days following Brexit, many investors will naturally become nervous.
But, for clients of New England Financial Solutions, it is important to remember two things:
Firstly, that if I am your adviser, I am here to listen to you concerns and explain more about how any market turbulence will affect you.
Secondly, some investment fundamentals:
• Stock market investments are by their very nature long term; volatility is to be expected and from time to time large falls will occur
• Investors should remember that they are, in general, rewarded for sitting tight and riding out stock market falls; this was certainly the case in the weeks following Brexit
• You are usually investing to help meet long-term objectives, unless these have changed over the past few days, making immediate changes to your investments based on the election result is unlikely to make sense
• Selling investments, immediately following a fall in value, crystallises the loss and should be avoided where possible
• Remember, in all likelihood you are invested in a diversified portfolio which will includes other types of investments, often called asset classes, and not just shares
If you are worried, I hope this helps to calm your nerves and if you would like to discuss your investments, please get in touch.