CHANGES IN THE LAW ABOUT WILLS

The new Inheritance and Trustees Powers Act 2014 takes a number of sensible steps to modernise the way someone’s estate is treated on death when there is no will. This includes the requirement of the court to consider not just spouses, but ex-spouses and co-habitants of the deceased, people who have been treated as ‘children of the family’ and people who were wholly or partly financially dependent on the deceased. While this does bring the legislation more in line with modern life, it is still best to have a will. It is only with a will that you can be sure that your intentions are carried out as to who you want to have what. The lack of a will almost always leads to disputes which are both unpleasant and can be costly.

LANDLORDS GIVEN POLICING FUNCTION

From this year landlords are required by the new Immigration Act to verify their tenants’ nationality and to establish whether they are legally allowed to be in the country, before renting a property to them. While landlords can pass this duty on to a rental agent (subject to a written agreement, of course), it does mean yet another burden for landlords. Some property is exempt, including social housing, student and tourist accommodation, but most privately rented accommodation will be impacted by this. Those who do not comply can face a fine of up to £3000!

MORTGAGES – TIMES ARE CHANGING

The mortgage market is still struggling to adapt to the new MMR (Mortgage Market Review) requirements. There is a much more detailed focus on affordability which has, in our experience, made quite a dramatic difference for those who need to push the boundaries such as borrowing past age 65 or needing to stretch their income as far as possible. We have also seen that virtually any past or present credit difficulty makes it very difficult to obtain borrowing from High Street lenders. There are still possible lending solutions for all of these hurdles but be prepared for the process to take longer and be more difficult than before.

Having said all of that, it is a very good time to move to a fixed interest rate for 3 to 5 years in order to avoid the effects of the coming rate rises. With the average Standard Variable Rate averaging about 4.4%, and 5 year fixed rates available for 1% or more below that, a re-mortgage could allow you to both reduce your outgoings now and avoid the nasty upward movements in interest rates that will almost inevitably start in 2015. We would be happy to make enquiries to see what could be available for you.

INVESTMENT BASICS

When considering investing here are some proven successful tips:

1. Diversify. Don’t put all of your eggs in one basket.

2. Invest for the longer term where possible (5 years plus).

3. Keep track of your investments and don’t be shy about taking a profit.

4. Never buy what you don’t understand.

5. Take your own decisions – don’t follow the herd.

6. Review your investments regularly (at least once or twice a year).

LOW RISK INVESTMENTS

Savings in cash are safe but they are also giving a very low return – 2% to 3% maximum.

This is tempting us to look for better returns. To cater for those with a low risk requirement investment providers are bringing out some investments with guarantees that protect your capital or protect the income.

The guarantees do come at a cost but it does mean that you can seek a better return without risking large parts of your savings. Do contact us if you would like more information on these options. 

NEW PENSION PRODUCTS

The financial services providers are bringing out more and more new products to cater for the

changes that have been announced.

For example, for those who want to access their money now and have an income but also want the option to take it all after next April, there are now one year annuity products. These allow you to take your Tax Free Cash immediately but also allow you to exit the annuity after April next year so you can access more of your pension fund. In addition to short term temporary annuities, there are also investment-based annuities, and enhanced annuities for smokers and those with medical conditions. We would be happy to go over the options that may be available to you.

AND WHY NOT?

There are two good reasons why you might not want to take out all of your pension funds now or next year.

The first is the simple fact that if you take them all out and use them up now, they will be gone, and that could make things harder for you in your later years. The second reason is tax. The first 25% you take out will be free of tax. The rest, however, will be taxed as if you had earned it in that tax year. It is added to your other income in working out how much tax you have to pay.

If you have an income of £10,000 you are likely to be paying no tax. If you then take £30,000 out of your pension fund, £7,500 is free of tax, but the remaining £22,500 is treated as income and would then put your total income up to £32,500. That means all of the £22,500 would be taxed at 20% (£4,500).

Taking even larger sums out of your pension fund might mean paying even higher rate tax on some of it. So it is worth working out your tax position before taking out some or all of your pension fund. In fact, you may even want to delay taking chunks of your pension until you stop working so as to pay as little tax as possible. We can help you with your pension planning.