The Coalition Government has now confirmed details of the long awaited savings plan analysts had been expecting since the withdrawal of Child Trust Funds (CTF) last year. The Junior ISA will be launched in November and will extend to under 18s the same tax benefits which parents (and all adults) already enjoy.
The Junior ISA will allow parents to open up a specific account in their child’s name, into which they, their family and friends can contribute a total of up to £3,600 a year. These contributions will then be invested in a chosen mixture of cash and/or stocks and shares and the benefits locked up until that child reaches 18. Anyone under 18 born before September 2002 or after January 2011 (i.e.: those who do not have a CTF) will be eligible for a Junior ISA (and for those with CTFs, the annual limits are expected to be brought in line).
The Junior ISA could provide a significant step up for children whose family and friends get together for their benefit. Final values will always be subject to the funds you choose and the environment, both of which can have an impact on how much - or little - the investment returns. However, as an idea of what 18 years of saving might offer, assuming an average of 5% pa (net of charges), that £3,600 pa could leave the lucky beneficiaries with a contribution of over £100,000 towards their world trip, first house or hotly debated tuition fees.
Monday, 17 October 2011
Monday, 10 October 2011
Update on NEST
UK individuals who do not belong to a pension scheme could face an uncomfortable and penurious retirement. At present, not every employer provides a workplace pension scheme for workers and, even if such a scheme were available, employees are not obliged to join it. According to consumer group Which?, only 50% of UK employees were enrolled in an employer-sponsored pension scheme during 2009, and membership of pension schemes varies widely from one industry to the next. Membership of pension schemes is relatively high in sectors such as energy, financial services, manufacturing and the public sector, but is lower in areas such as construction, retail and administration.
However, from 2012, firms have to provide a qualifying pension scheme. Every employee earning more than £7,475 per year will be automatically enrolled in a scheme from October 2012 if they work for a large company and by 2016 if they work for a smaller company. Companies can set up a qualifying pension scheme of their own, or they can enrol their employees in the National Employment Savings Trust (NEST).
NEST is a major component in the government’s reform of occupational pensions. Aimed at employees with low-to-moderate salaries, it is intended to provide a simple, inexpensive, accessible pension scheme that will increase individuals’ savings for their retirement. NEST members will use their accumulated pension pot to buy an annuity that will provide their retirement income. NEST has selected a panel of five providers – Canada Life, Just Retirement, Legal & General, Partnership and Reliance Mutual – but members are also able to look elsewhere, although they will need to seek professional advice. A Which? pensions expert commented, “The NEST panel... offers less choice than a whole-of-market search but should deliver good outcomes to most members.”
Looking ahead, a House of Commons Work & Pensions Committee has been set up to examine how automatic enrolment into NEST will work, and how it will affect smaller firms. It will also review the current ban on transfers in and out of NEST, and examine the possible effect on NEST of lower-than-expected membership. Approximately four million individuals are expected to join NEST, although they will be able to opt out after enrolment. Meanwhile, pensions consultant Hymans Robertson has warned that many employers are not preparing adequately for the cost or the implementation of the process.
However, from 2012, firms have to provide a qualifying pension scheme. Every employee earning more than £7,475 per year will be automatically enrolled in a scheme from October 2012 if they work for a large company and by 2016 if they work for a smaller company. Companies can set up a qualifying pension scheme of their own, or they can enrol their employees in the National Employment Savings Trust (NEST).
NEST is a major component in the government’s reform of occupational pensions. Aimed at employees with low-to-moderate salaries, it is intended to provide a simple, inexpensive, accessible pension scheme that will increase individuals’ savings for their retirement. NEST members will use their accumulated pension pot to buy an annuity that will provide their retirement income. NEST has selected a panel of five providers – Canada Life, Just Retirement, Legal & General, Partnership and Reliance Mutual – but members are also able to look elsewhere, although they will need to seek professional advice. A Which? pensions expert commented, “The NEST panel... offers less choice than a whole-of-market search but should deliver good outcomes to most members.”
Looking ahead, a House of Commons Work & Pensions Committee has been set up to examine how automatic enrolment into NEST will work, and how it will affect smaller firms. It will also review the current ban on transfers in and out of NEST, and examine the possible effect on NEST of lower-than-expected membership. Approximately four million individuals are expected to join NEST, although they will be able to opt out after enrolment. Meanwhile, pensions consultant Hymans Robertson has warned that many employers are not preparing adequately for the cost or the implementation of the process.
Monday, 3 October 2011
ANOTHER GOVERNMENT WHITE ELEPHANT?
A COMPULSORY WORKPLACE PENSION
Regardless of political party, you can almost guarantee that each Government will change the pension rules when they come into office. This has been the case consistently for the last 40 years or so. New ideas are introduced, then changed, and then dropped completely. A good example is what was originally called the State Earnings Related Pension Scheme (SERPS) started in 1978. Its purpose was to augment the Basic State Pension for those who were employed. After some years it was found to be too expensive, and the Government sought to lure people out of it by making it possible for them to contract out of SERPS. This proved to be of little use in cutting costs and is now being wound up in the current tax year. By 2002 SERPS had been replaced by what is called the State 2nd Pension.
Confused? We do not blame you. So are the legislators.
So now what is around the corner? Now in their wisdom we have a compulsory pension scheme being introduced from 2012 which requires all employed persons to join it, and requires all employers to make it available to all of their staff AND CONTRIBUTE TO IT! This is called NEST (The National Employment Savings Trust).
Why? Certainly the average worker in the UK is not now making adequate pension provision, and the Government is seeking to do something about it because, otherwise, it knows that the costs of providing income assistance to the elderly is going to increase hugely. One of the main reasons that we have reached this point is that successive Government actions have made it too expensive for companies to continue to offer the good pension schemes they were able to provide in the 60s, 70s and 80s. The other factor is that people move jobs much more often now than they did in the past.
How will this affect you?
Self-employed? – It does not affect you. You can pay into a pension for yourself, or not, as you choose.
Employed? – If you are aged 22 or older and under age 75 earning approximately £6000 or more per annum, you will be automatically enrolled into the pension scheme of your employer (unless your employer is already providing a scheme at least as good). Both you and your employer will be required to contribute into the scheme. It will take a few years to phase in, but eventually it is intended that the employee contribute 4% of his wages and the employer adding the equivalent of another 3%.
Employer? – You will have no choice. Unless you have an alternative scheme in place providing benefits at least as good as the NEST scheme, you will need to set up a pension plan and deal with collecting the payments and automatically enrolling all of your eligible employees into it. You will be responsible for it being done correctly and there will be penalties for failure to do so.
To find out more you can go to www.nest.pensions.org.uk or www.thepensionsregular.gov.uk
We will be automatically assisting those companies whose pension schemes we look after and those individual clients whose pensions we look after. Those employers who will want assistance are welcome to contact us to explore how we may be able to assist.
Regardless of political party, you can almost guarantee that each Government will change the pension rules when they come into office. This has been the case consistently for the last 40 years or so. New ideas are introduced, then changed, and then dropped completely. A good example is what was originally called the State Earnings Related Pension Scheme (SERPS) started in 1978. Its purpose was to augment the Basic State Pension for those who were employed. After some years it was found to be too expensive, and the Government sought to lure people out of it by making it possible for them to contract out of SERPS. This proved to be of little use in cutting costs and is now being wound up in the current tax year. By 2002 SERPS had been replaced by what is called the State 2nd Pension.
Confused? We do not blame you. So are the legislators.
So now what is around the corner? Now in their wisdom we have a compulsory pension scheme being introduced from 2012 which requires all employed persons to join it, and requires all employers to make it available to all of their staff AND CONTRIBUTE TO IT! This is called NEST (The National Employment Savings Trust).
Why? Certainly the average worker in the UK is not now making adequate pension provision, and the Government is seeking to do something about it because, otherwise, it knows that the costs of providing income assistance to the elderly is going to increase hugely. One of the main reasons that we have reached this point is that successive Government actions have made it too expensive for companies to continue to offer the good pension schemes they were able to provide in the 60s, 70s and 80s. The other factor is that people move jobs much more often now than they did in the past.
How will this affect you?
Self-employed? – It does not affect you. You can pay into a pension for yourself, or not, as you choose.
Employed? – If you are aged 22 or older and under age 75 earning approximately £6000 or more per annum, you will be automatically enrolled into the pension scheme of your employer (unless your employer is already providing a scheme at least as good). Both you and your employer will be required to contribute into the scheme. It will take a few years to phase in, but eventually it is intended that the employee contribute 4% of his wages and the employer adding the equivalent of another 3%.
Employer? – You will have no choice. Unless you have an alternative scheme in place providing benefits at least as good as the NEST scheme, you will need to set up a pension plan and deal with collecting the payments and automatically enrolling all of your eligible employees into it. You will be responsible for it being done correctly and there will be penalties for failure to do so.
To find out more you can go to www.nest.pensions.org.uk or www.thepensionsregular.gov.uk
We will be automatically assisting those companies whose pension schemes we look after and those individual clients whose pensions we look after. Those employers who will want assistance are welcome to contact us to explore how we may be able to assist.
Monday, 26 September 2011
COMING UP TO RETIREMENT/AGE 55?
Whether you are just coming up to age 55 and want to start taking your pension benefits, or approaching 65 and State Pension Age, it is worth learning how to get the most from your pensions. There are some important decisions to make which can significantly affect how much money you can get in retirement. For example, if you have your pension with one company, you are not restricted to taking your benefit from them. You may find you can get more by taking advantage of the Open Market Option, which allows you to compare what other companies would offer you. Also remember that you do not have to stop working if you start taking your pension benefits.
Monday, 19 September 2011
UPS AND DOWNS
The world’s Stock Markets are moving rather wildly up and down as investors worry about the problems that many countries face in meeting their debt obligations. They include Spain, Portugal and Italy, as well as the United States. In these circumstances it is worth reviewing the following Investment Tips that have proven their worth in the past.
Buy what’s right for you.
Diversify (don’t put all of your eggs in one basket).
Invest for the long term.
If an investment has risen substantially, consider selling it (don’t be ashamed to take a profit).
Never buy what you don’t understand.
Know when to say goodbye to a bad investment.
Be your own person – don’t follow the herd.
Review your investments regularly.
Don’t believe everything you read!
Buy what’s right for you.
Diversify (don’t put all of your eggs in one basket).
Invest for the long term.
If an investment has risen substantially, consider selling it (don’t be ashamed to take a profit).
Never buy what you don’t understand.
Know when to say goodbye to a bad investment.
Be your own person – don’t follow the herd.
Review your investments regularly.
Don’t believe everything you read!
Monday, 12 September 2011
MAXIMISE YOUR INCOME
1) Maximise the income on your savings. Keep in touch with how much interest you are receiving from your cash savings. One poor soul received 0.1% interest for over two years before he finally wised up. There are various websites you can use to search out the best savings rates such as: www.moneyfacts.co.uk and www.moneysupermarket.com
2) If appropriate, find out if you are eligible for any benefits such as Pension Credit or Working Family Credit.
3) If you are aged 55 or over, look at possibly taking some of your pension benefits such as the Tax Free Cash immediately to augment your income. Note: some people may have lost track of pension benefits they have had, but there is a tracing system to allow you to hunt those down. Contact us for more information on this.
4) If you are really struggling with making ends meet, but have a house with little or no mortgage, look into Equity Release options. Here again it costs nothing to find out what is possible and we are happy to research your options for you without charge.
2) If appropriate, find out if you are eligible for any benefits such as Pension Credit or Working Family Credit.
3) If you are aged 55 or over, look at possibly taking some of your pension benefits such as the Tax Free Cash immediately to augment your income. Note: some people may have lost track of pension benefits they have had, but there is a tracing system to allow you to hunt those down. Contact us for more information on this.
4) If you are really struggling with making ends meet, but have a house with little or no mortgage, look into Equity Release options. Here again it costs nothing to find out what is possible and we are happy to research your options for you without charge.
Monday, 5 September 2011
CUTTING COSTS
The cost of living is increasing. That includes food, heating, travel and electricity. It is time to check to make sure that you remain in the Happiness Zone. To qualify for the Happiness Zone you need to have more money coming in than going out. If you are already there, pat yourself on your back. For those not there, it is worth looking at some ways to make some savings.
1) Reduce the cost of your credit. If you have ongoing, ‘never-ending’ credit card balances, you will be paying a very high interest rate. Check out possible personal loans to see if you can save on the costs. Changing it into a loan will also mean that the debt will eventually be gone! If your debts are too high to deal with by means of a personal loan, find out about remortgage possibilities. You may be able to score twice – once by lowering the costs of your credit, and secondly by lowering your mortgage payments by getting a better mortgage interest rate from another lender. It will cost you nothing to find out what your options are. Just give us a ring.
2) Really face up to your financial situation. Take the last 3 months and see what your spending has actually been. List out everything. Then compare it to your average income. You will soon see how much you need to cut back. Or, if you are already in the Happiness Zone, you can look at savings for the future.
3) Make sure you are not paying more tax than you have to. If you are employed, you should check your Tax Coding to see if it is correct. The Tax Man has certainly been known to make mistakes. If you are over 65, check to see that you are making the most of the extra personal allowance to which you are entitled. That can save almost £500 a year in tax. If you have investments, do not forget to take advantage of your Capital Gains Tax Allowance. It allows you to take profits out of your investments of up to £10,600 without having to pay any tax at all.
1) Reduce the cost of your credit. If you have ongoing, ‘never-ending’ credit card balances, you will be paying a very high interest rate. Check out possible personal loans to see if you can save on the costs. Changing it into a loan will also mean that the debt will eventually be gone! If your debts are too high to deal with by means of a personal loan, find out about remortgage possibilities. You may be able to score twice – once by lowering the costs of your credit, and secondly by lowering your mortgage payments by getting a better mortgage interest rate from another lender. It will cost you nothing to find out what your options are. Just give us a ring.
2) Really face up to your financial situation. Take the last 3 months and see what your spending has actually been. List out everything. Then compare it to your average income. You will soon see how much you need to cut back. Or, if you are already in the Happiness Zone, you can look at savings for the future.
3) Make sure you are not paying more tax than you have to. If you are employed, you should check your Tax Coding to see if it is correct. The Tax Man has certainly been known to make mistakes. If you are over 65, check to see that you are making the most of the extra personal allowance to which you are entitled. That can save almost £500 a year in tax. If you have investments, do not forget to take advantage of your Capital Gains Tax Allowance. It allows you to take profits out of your investments of up to £10,600 without having to pay any tax at all.
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