WORKPLACE PENSIONS/AUTO-ENROLMENT

Those with a pension in their workplace will have an enforced increase to their pension contributions

from the 6th of April. Instead of both the individual and the company putting 1% of their salary into

the employee’s pension, it increases to 3% by the employee and a minimum of 2% by the employer. Someone earning £20,000 could find his monthly contribution going up from £14.00 or so per month to £40.00 per month. While that may not be a welcome extra cost, do remember that the increase also means more from the employer and, taking into account the additional amount the Government has to put in, that £40.00 per month taken from the employee would end up with them getting £83.00 in their pension – over 100% return on their money. Not bad!!

PENSIONS UNDER THE GUN

The Government, as it comes under pressure to make savings, continues to eye the tax advantages that pensions have – particularly as regards the tax-free cash that can be taken out. If you are looking to take your pension benefits, you might want to look to do that sooner rather than later. The same is true if you are looking to top-up your pension. Depending on your income currently you (or your company on your behalf) can put up to £40,000 per annum into your pension and get tax relief on it. For a basic rate taxpayer that means by contributing £32,000 he can get £8,000 from the Government to boost it up to the £40,000. A 40% taxpayer could end up with the £8,000 from the Government to boost it up to £40,000 and also get a further £8,000 in tax relief. It is worth reviewing your pension

planning. We can assist.

MORE FIRST-TIME BUYERS

While the amount of Buy-To-Let buying has gone down, there has been a definite increase in first-time buyers looking to get onto the property ladder. Lenders are looking to keep interest rates as

low as possible to continue to attract these new buyers, and are trying to be as flexible as they can in finding solutions such as involving parents in the transactions in one way or another. This can be by means of providing a deposit or acting as guarantor or even going onto the mortgage itself.

BUY-TO LET SLOWING DOWN

The Government’s actions of increasing the Stamp Duty on buying a second property, and also making letting less attractive tax-wise, has slowed the property market down. Those looking to start or continue letting need to become familiar with the new rules so as to make sure the activity remains profitable.

MORTGAGE STRATEGIES

First: Ensure you have the best rate you can achieve with your mortgage. In some cases the existing rates are variable but very attractive so changing them may not be a good idea. But generally you should make sure you are not just staying with your lender’s SVR (Standard Variable Rate) for lack

of a bit of initiative and asking for better.

Second: If you have an interest-only mortgage, you should review your plan for paying it off by

the end of the mortgage term, and make sure that plan is still workable. For some that may meandown-sizing, but where down-sizing may have looked attractive many years ago, when one is older it can look less attractive to have to move out of a place you still enjoy living in and moving away from an area you know and where you have friends and activities you enjoy. If you are in that situation, you may wish to move over to a repayment mortgage to get it paid off, or look at a Lifetime Mortgage to buy yourself more time. Lifetime Mortgages have become more and more flexible. Avoid the Interest-Only Mortgage Trap!

A NEW TAX YEAR!

As we thaw out from a remarkable period of cold weather, we move into the new

Tax Year with some uncertainties. Interest rates have started an upward move although

the Chairman of the Bank of England has promised that these would be small and far apart.

Brexit still is the focus of most of the Government’s attention when there are a number

of other areas that should be dealt with. Nevertheless, personal financial matters to be

addressed are pretty much the same as they have been for quite a while, i.e. getting the

best possible mortgage rate, while also making savings – using pensions or ISAs and

ensuring those savings make as good a return as possible.

WORKPLACE PENSIONS – PAYMENTS TO INCREASE

If you are employed and paying into a Workplace Pension, you should be advised by the

provider or your employer that the minimum payments will increase from 6 April 2018.

Currently the minimum payments have been 1% of salary by the employee and 1% by the

employer. These will increase to 3% by the employee and 2% by the employer. A person earning

£20,000 per annum (and with a scheme where the full pay is used to calculate the payment) would

see an increase in their deduction from about £14.00 per month to about £40.00 per month. While

that is a large increase, if you take into account what the Government adds and what the employer

adds, that £40.00 paid in would mean a total of about £84.00 going into the pension – a return of

210%! It is something to be aware of and budget for.