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Huge changes to Pensions

Please find enclosed an overview of the proposed changes to pensions following the recent statement by the chancellorTHE PENSIONS REVOLUTION.doc2

Cautious Optimism From Chancellor’s Fifth Budget

For the first time since he entered No11 Downing Street, the Chancellor of the Exchequer has been able to give a budget speech that contained some welcome news.
After four years of bleak economic forecasts and a stagnant economy, George Osborne yesterday announced that in the next 12 months Britain’s GDP will grow by 2.7 per cent, faster than originally forecast.
In addition to this there has been some slight improvement in Britain’s deficit, now predicted to be 6.6 per cent of GDP, as opposed to the previous prediction of 6.8 per cent.
Inflation, currently at 1.7 per cent, is well below the official Bank of England target of 2 per cent, meaning that the British public will have more spending power in the next 12 months as the economy improves.

Borrowing and the Budget
The government was elected on a pledge of debt reduction but the national debt will actually increase for a further two years, according to the government’s own predictions, peaking in 2016 at 78.7 per cent of GDP.
The interest rates that the government pays on this debt will be lower in the coming 12 months, enabling the government to save the equivalent of £2,000 per household in the UK.
Whilst these big economic statistics are important to understand, what does this budget have in store for families, savers and employers across the UK?

Gifts and Giveaways
Every budget twelve months before an election contains enough incentives and inducements to keep swinging voters thinking favourably about the incumbent party.
This budget has not seen huge financial gifts to the public, rather small giveaways in terms of tax breaks and thresholds.
The personal tax allowance has risen by £500 to £10,500, meaning that more lower-income earners will be exempt from taxation altogether, and others will have a reduced overall tax burden.
In addition to this the threshold for those paying the top rate of tax has risen by £415 to £41,865, with the changes commencing in April this year.

Taxing Guilty Pleasures
As ever it has turned out to be a bad budget for smokers, with duty on cigarettes increasing by two per cent above the rate of inflation. Duty on alcohol will remain at the rate of inflation with the exception of whisky and ordinary cider, where duty has been frozen.
Gamblers have faced a mixed budget, with a ten per cent cut in duty levied on bingo and a huge twenty five per cent increase in tax on the controversial fixed odds betting machines. Clearly this taxation strategy has been designed to encourage more responsible betting and gaming.

A Saver’s Budget?
Supporters of the government have been quick to hail today’s announcements as a saver’s budget, one which is long overdue after years of low interest rates and poor returns on investments for many families.
Three measures have been introduced to make saving more worthwhile and to reward prudence, the first of which is an increase in the tax free limit on cash savings in ISAs from £5,760 to £15,000 on 1st July 2014.
This threshold also applies to stocks and shares ISAs as well as their cash equivalents and savers will be able to move funds between both types of ISA freely.
Pensioners will be better off as they will no longer be required to purchase annuities and they will be able to draw down on their pension without risking incurring charges. Tax restrictions on access to pensions will be completely removed in April and taxed at normal marginal tax rates.
The ten pence tax rate on interest earned on pensions will also be axed. This has been a particularly unpopular measure for several years and its abolition will do much to endear the government to savers nationwide.

Help for Homeowners
The government has put a renewed housing boom at the heart of their strategy for recovery and the Chancellor indicated today that he continues to see housing as a vital tool in the recovery and a vote winner.
He has extended the Help To Buy Scheme for a further six years until 2020, meaning that home owners can continue to access interest free loans to help with up to 20 per cent of the cost of a mortgage.
However, following recent controversies over mansions in London that have been bought by foreign investors seeking to avoid tax and that stand empty, the Chancellor has levied a fifteen per cent stamp duty on properties of more than £500,000 which are purchased through certain corporate structures.

The Chancellor has also announced that the first ‘garden city’ in a century will be built at Ebbsfleet in Kent. Some fifteen thousand new homes will enter the overheated property market of the South East of England and take some of the pressure out of the housing market in London.

Infrastructure Projects
After the wettest spring on record, it is hardly a surprise that the government has turned its attention towards flood relief. Flooding from January onwards devastated large parts of the South of England and caused tens of millions of pounds worth of damage to homeowners and their communities.
The Chancellor has devoted £140 million to flood relief, though the extent to which this is new money, or even an amount that will make a difference to reducing flood risks, is unclear at this stage.
That other less catastrophic but perennially annoying side effect of rainier winters, the pothole, was also addressed in the budget; local authorities will be given £200 million to repair potholes in road surfacing.

For Business
Planning will be relaxed in order to help the building industry to recover and for new homes to be constructed.
The government hopes in the end to see over 200,000 new homes built and this is particularly good news for people who are hoping to build their own homes, as planning can be a major obstacle in this regard.
The tax free threshold for investment in businesses has been raised to £500,000, doubling the amount that companies can spend in training and infrastructure.

Motorists and Holiday Makers
The ever increasing cost of fuel and driving has been a bone of contention for motorists for the last few years and perhaps mindful of the need to remain popular in 2015, the government has good news for drivers at last.
A planned rise in fuel duty that was due to take effect in September has been cancelled, meaning that unless commodity prices for oil increase in the next year, there should be no significant hike in petrol costs.
A uniform approach to air passenger duty has been announced, with all long haul flights carrying the same rate of tax as those to the USA, making long distance air travel fairer.

Makers, Doers and Savers
The Chancellor has prided himself on creating a budget for ‘makers, doers and savers’, and this budget certainly favours the last of these three categories, but will it benefit you?
The budget will certainly help you if you are looking to get a foot on or move up the property ladder in the next few years.
If you live in the South East the new plans to build more houses at Ebbsfleet might not bring house prices down, but it might possibly stop them from rising at quite the same rate.
Adding 15,000 houses to the overall housing stock will inevitably help to bring prices down, as with any increase in supply of a much sought after commodity.

Wait Until 2015….
If the tax breaks and allowances announced today didn’t apply to you circumstances, it is highly likely that you will get a much better offer in twelve months time.
On the eve of the 2010 election the Governor of the Bank of England Sir Mervyn King said that dealing with the country’s problems would require such tough economic medicine that the party of government would be out of office for a generation.
Mindful of this, in twelve months time George Osborne will have to offer the British public enough sweeteners to guarantee a re-election, so the next budget might be for many people an exceedingly beneficial one.

Every year HMRC gives away tax relief – make sure you get your entitlement

How pension tax relief works…
UK investors under age 75 can benefit from up to 45% pension tax relief this tax year.
The higher your rate of tax, the more tax relief you could receive. Even non earners, including children,
and those with an income under £3,600 can benefit, but can only contribute up to £3,600 this tax year (2013/14)
● Basic-rate tax relief of 20% is added automatically. For instance, you contribute £8,000 to your
pension and the government adds £2,000,to make a total investment of £10,000.
● Higher-rate taxpayers can claim back up to a further 20% through their tax return –another £2,000 in
this example. So the cost of a £10,000 contribution is as little as £6,000.
● Top-rate taxpayers can claim back up to a further 25% through their tax return – another
£2,500 in this example. So the cost of a £10,000 contribution is as little as £5,500.
Contact your independent financial adviser to act now

85 and dying

The following piece was written by an eighty five year old man who learned that he had but just a few days to live…

“If I had my life to live over again, I’d try to make more mistakes next time.

I wouldn’t be so perfect. I would relax more. I’d limber up.

I’d be sillier than I’ve been on this trip.

In fact, I know very few things that I would take seriously.

I’d be crazier. I’d be less hygienic.

I’d take more chances.

I’d take more trips, I’d climb more mountains, I’d sail more seas.

I’d swim more rivers, I’d go to more places I’ve never been to.

I’d eat more ice cream and fewer beans.

I’d have more actual troubles and fewer imaginary ones!

You see, I was one of those people who lived sanely and sensibly hour after hour, day after day, year after year.

Oh, I’ve had my moments, and if I had it to do over again, I’d have more of those moments – moment by moment by moment.

I’ve been one of those people who never went anywhere without a thermometer, a hot water bottle, a raincoat and a parachute.

If I had it to do all over again, I’d travel lighter next time.

If I had it to do all over again, I’d start out earlier in the spring and stay away later in the fall.

I’d ride more merry-go-rounds,

I’d watch more sunrises,

I’d play with more children,

If I had my life to live all over again…

But you see…

I don’t.”

Jorge Luis Borges

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