WHEN LET-TO-BUY MAY BE BETTER THAN BUY-TO-LET!

If you live in a property and then sell it, generally you will pay no tax on any profit you make. And normally, when you buy a property and let it out, you will pay tax on all the profit you make on the sale. (Note: there are some exceptions in both case) However, if you let out a property you have lived in, there are tax reliefs that could save you a great deal of tax on your profits when you come to sell it. When you sell a property you have lived in, even if you are not living in it currently, you can claim tax relief for the time you did live in it and for the last 18 months before you sell it. Additionally you can claim “Letting Relief” of up to £40,000 for the period of time it was let. So if you are planning to invest in additional properties, it is worth knowing how these tax advantages could make Let-to-Buy an attractive option.

Improving your State Pension!

If you don’t qualify for any basic State Pension or you qualify for less than the full amount based on

your own contributions, you may be able to make a payment to top it up by 6 years and/or you might

be able to qualify for more through your spouse or civil partner’s National Insurance contributions.

Contact the Department of Work and Pensions for help on this – 0345 3000168.

Note: The above information is extracted from the Department for Work and Pensions pamphlet DWPO23

Extra State Pension!

You can choose to get extra State Pension if you put off claiming your State Pension for 5 weeks or more.

When you do claim, you will get a higher weekly State Pension for the rest of your life. The amount of extra State Pension you get works out at 1% for every 5 weeks you have put off your claim (about 10.4% for a full year). If you intend to work past State Pension age, this is worth considering.

SOME TIPS ABOUT MAKING THE MOST OF YOUR STATE PENSION

The State Pension is a regular payment you may get when you reach State Pension Age. The payment will increase each year. It is based on the National Insurance contributions which you paid, you were treated as having paid, or were credited to you during your working life.

To find out when you would receive your State Pension and how much it might be go to: www.gov.uk/state-pension

UPS AND DOWNS OF INVESTMENTS

Recent events in China and their effect on Stock Markets internationally do show the risk that goes

along with such investments. Some general tips that we would recommend:

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

2. Invest for the medium to long term (5 years plus).

3. Never invest in what you don’t understand.

4. Keep track of your investments and don’t be shy about taking a profit, or saying goodbye to a bad

investment.

5. Be your own person – don’t follow the herd.

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

WHAT GUARANTEES CAN I GET ON MY INVESTMENTS?

Some guarantees are still possible. The dilemma for many is that they want to get a reasonable income from their investments but they do not want to take much of a risk.

The investment return on cash deposits is currently very limited – 1 to 2%. Better returns are available with annuities but lifetime annuities generally mean a loss of the cash in exchange for the income. But there are guaranteed funds which can provide a guaranteed income for life while still maintaining access to the capital. A client of ours, who is 70 has taken advantage of such guarantees, and has seen her £100,000 investment increase over the last 9 years to £120,000 while also having her guaranteed income for life increase from 5.0% per annum  originally to 6.5%. The funds are invested for growth in stocks and shares and are reviewed annually. If the fund values have improved above a certain point, the guaranteed income for life is increased, while she is still able to access the capital. If the fund values have gone down in that year, the income stays as it was. If she withdraws capital, then her income would reduce proportionately but would still have the lifetime guarantee. The theoretical worst case scenario is that her fund reduces to nil but she would still have the guaranteed income for life.

If you would like to discuss such a guaranteed investment approach to see if it would suit you, contact us.

A NEW RETIREMENT MENU FOR PERSONAL PENSIONS!

RETIREMENT MENU

Minimum age 55

(Note: different rules apply to Final Salary/Defined Benefit Pensions and some other schemes)

Cash please

You can have it all as cash but only 25% of it tax-free. You will be taxed on whatever else you take out in the same way as if you had earned it in that Tax Year.

Income please Option 1: You can still get an income guaranteed for life (Annuity -see further

notes below)

Option 2: If you have health issues you may be entitled to a higher guaranteed income for life (Enhanced Annuity)

Option 3: Draw an income from your pension fund itself (Drawdown)

Option 4: Use a guaranteed fund to protect your investment but still be able to take an income (Guarantees).

State Pension please  The State Pension is increasing but the State Pension age is also going please up. To find out when you will receive your State Pension go to www.gov.uk/calculate-state-pension.

“Side Dishes”

You may have other sources of income to help in retirement. This might be investment income, or rental income from an investment property or income from letting out one or more rooms in your home  (Rent-A-Room scheme allows you to earn up to £7500 tax-free).

More on Annuities 

There are a variety of annuities available. The general concept is that you use all or some of your pension fund to buy a guaranteed income for life or for a specified period. The older you are, the more income you will get for your money. The guaranteed income can be for the person with the pension and a spouse or partner – to go on for as long as the last survivor is alive. The annuity can provide a level income or an increasing income. There are also annuities which are linked to investments so they can go up or down.

More exotic dishes

The pension rules are different for other types of pensions. If yours is not a personal pension, do feel free to contact us for guidance.