FINANCIAL ADVICE
MONEY MATTERS Chancellor of the Exchequer, Philip Hammond, presented his first Spring Statement to Parliament last month, and there are several changes introduced in previous statements that are just coming into effect now. But if you’re baffled by what it all means, you’re not alone. That’s why we’ve enlisted the help of some of Cardiff’s financial experts to shed some more light on to it…. LOWRI CLEMENT, financial adviser, mortgage broker and will writer at Evolution Financial Planning talks economic growth. What is the update? In his Spring Statement on 13 March, Chancellor Phillip Hammond stated that the economy continues to grow and has consecutively for the last five years, exceeding the 2017 expectations. The GDP (Gross Domestic Product) is now forecast at 1.5 per cent a slight increase on previous forecasts. The economy continues to create jobs with employment PHILIP PAYNE, managing director of Mulberry Wealth Management, clarifies the changes to private pensions. What’s the issue? The lifetime allowance is the maximum that you can hold in a personal pension plan, unless you have any prior protection. On 6 April, this increased from £1million, to £1.03million. The annual allowance on the other hand, which is the amount that restricts your annual contributions, could be reduced from the standard £40,000 down to only £10,000 per annum if you are a high earner. What does this mean in real life terms for those affected? A new term has entered pension’s terminology – “adjusted income.” If you earn more than the threshold £110,000 income from all your sources, including any pension contributions from you or your employer, needs to be considered.
increasing by 3 million since 2010. In the 2017 Autumn Budget an investment programme of at least £44billion over the next five years to raise the amount of homes across the UK was also announced. What is the real-world affect? More and more people are finding jobs with the unemployment rate at nearly a 40 year low. For the housing sector, more support will be pledged to the industry to help raise the supply of homes. Along with the new changes to stamp duty coming in this month this will be welcome news for house buyers. Remember though, your home may be at risk if you do not keep up your mortgage repayments. www.evolutionfinancialplanning.co.uk
This then becomes your “adjusted income.” For every £2 of adjusted income over £150,000, their annual allowance will be reduced by £1, subject to a remaining annual allowance of not less then £10,000. In other words, anyone subject to the taper whose adjusted income is £210,000 and over will have an annual allowance of £10,000. This legislation has significant impacts both for private pension members and those still fortunate to be part of a Defined Benefit final salary scheme. What’s your advice? If people believe they could be affected by this it is important they speak to a specialist pension’s advice firm as soon as possible. As present, people will have unusual relief from previous years that could be utilised. This will run out in time, though and there will be a tax and penalty consequences. A number of our clients are exploring Venture Capital Trusts (VCT) as an alternative, which have tax relief advantages similar to a pension and can be a very useful diversifying investment. www.mulberrywealth.co.uk
CRAIG PALFREY, financial planner and wealth manager at Penguin explains the Residence Nil Rate Band. What’s the issue? The RNRB is increasing to £125,000 per individual from £100,000, over time it will increase to £175,000. This is a big increase for some home owners in the overall value of their Estate before it gets targeted for Inheritance Tax. However, there are some rules around this that mean not every individual will benefit from this new allowance – the main one is that if your estate it worth more than £2,000,000 – then the new allowance starts to reduce and could end up at 0. So what does this mean for me? The government statistics show that Inheritance Tax is hitting more and more families and is hitting harder – the total amount of tax collected by government is likely to be a record figure in 2018. Those same statistics show that the hardest hit Estates are those in the region of £500,000 to £1 million. They are the ones getting drawn into the Inheritance Tax net. The RNRB allowance should help this bracket of wealth, but there is considerable evidence people are unaware of this allowance, how it actually works and – most importantly – that in many cases they need to action to make sure it is properly or fully used. There seems to be a lot of confusion around this and people affected need specialist help. What advice would you give? Simple: any individual or couple who own a home and have a total estate either close to the IHT limit or above it, should be reviewing their position – especially their Wills, whether their pensions are properly protected from tax on death, whether their life assurances are written into trust and so on. Inheritance Tax is easily the most avoidable tax of all mainstream taxes, but it normally requires forward planning to ensure this happens. www.penguinwealth.com www.mediaclash.co.uk I CARDIFF LIFE I 93