Pension consolidation

Mitigating lost investment opportunities, exposure to undue risk and higher costs

Most people, during their career, accumulate a number of different pension plans. Keeping your pension savings in a number of different plans may result in lost investment opportunities and unnecessary exposure to risk.

However, not all consolidation of pensions will be in your best interests. You should always look carefully into the possible benefits and drawbacks and, if unsure, seek professional financial advice.

Keeping track of your pension portfolio
It’s important to ensure that you get the best out of the contributions you’ve made and keep track of your pension portfolio to make sure it remains appropriate to your personal circumstances. Consolidating your existing pensions is one way of doing this.

Pension consolidation involves moving, where appropriate, a number of pension plans – potentially from many different pensions’ providers – into one single plan. It is sometimes referred to as ‘pension switching’.

Pension consolidation can be a very valuable exercise, as it can enable you to:

•    Bring all your pension investments into one easy-to manage wrapper
•    Identify any underperforming and expensive investments, with a view to switching these to more appropriate investments
•    Accurately review your pension provision in order to identify whether you are on track

Why consolidate your pensions?
Traditionally, personal pensions have favoured with-profits funds – low-risk investment funds that pool the policyholders’ premiums. But many of these are now heavily invested in bonds to even out the stock market’s ups and downs and, unfortunately, this can lead to diluted returns for investors.

It’s vital that you review your existing pensions to assess whether they are still meeting your needs – some with profits funds may not penalise all investors for withdrawal, so a cost-free exit could be possible.

Focusing on fund performance
Many older plans from pension providers that have been absorbed into other companies may have pension funds which are no longer open to new investment – so-called ‘closed funds’. As a result, focusing on fund performance may not be a priority for the fund managers.

These old-style pensions often impose higher charges that eat into your money, so it may be advisable to consolidate any investments in these funds into a potentially better performing and cheaper alternative.

Economic and market movements
It’s also worth taking a close look at any investments you may have in managed funds. Most unit-linked pensions are invested in a single managed fund offered by the pension provider and may not be quite as diverse as their name often implies. These funds are mainly equity-based and do not take economic and market movements into account.

Lack of the latest investment techniques
The lack of alternative or more innovative investment funds, especially within with-profits pensions – and often also a lack of the latest investment techniques – mean that your pension fund and your resulting retirement income could be disadvantaged.

Significant equity exposure
Lifestyling is a concept whereby investment risk within a pension is managed according to the length of time to retirement. ‘Lifestyled’ pensions aim to ensure that, in its early years, the pension benefits from significant equity exposure.

Then, as you get closer to retirement, risk is gradually reduced to prevent stock market fluctuations reducing the value of your pension. Most old plans do not offer lifestyling – so fund volatility will continue right up to the point you retire. This can be a risky strategy and inappropriate for those approaching retirement.

Conversely, more people are now opting for pension income drawdown, rather than conventional annuities. For such people, a lifestyled policy may be inappropriate.

Consolidating your pensions won’t apply to everyone
The potential benefits of consolidating your pensions won’t apply to everyone, and there may be drawbacks to moving your pension plans – particularly so for certain types of pension. It is therefore vitally important to carefully consider all aspects of your existing pensions before making a decision as to whether or not to consolidate.

As well as whether the total size of your pension funds make consolidation viable, issues to take into account include whether your existing pensions have:

•    Loyalty bonuses
•    Early termination penalties
•    Guaranteed annuity rates
•    Integrated life cover or other additional benefits
•    Final salary pension benefits

The value of the investments in your pension fund can go down as well as up. Early investment losses can be particularly difficult or even impossible to recover. If your investments fall in value, you may need to reduce the amount of income you withdraw from your fund. If your investments fall in value, or fail to grow sufficiently, you may not be able to withdraw as much income in future. This information does not constitute advice and should not be used as the basis of any financial decision, nor should it be treated as a recommendation for any product. Although endeavours have been made to provide  accurate and timely information, Professional Practice Services cannot guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough review of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions.

Professional financial advice you can trust
Many people during their career may accumulate a number of different pension plans, and maintaining these separate plans can be laborious and complicated, leading to lost investment opportunities, exposure to undue risk and higher costs. To find out how we could help you, please contact us for further information.

Call our friendly, knowledgeable team for a confidential, no obligation discussion:
01527 880345
 
Visit our Website at:
www.pps-vet.co.uk
 

Professional Practice Services is a Veterinary Business Consultancy and Independent Financial Advisory Firm. Professional Practice Services is authorised and regulated by the Financial Conduct Authority 

 The Financial Conduct Authority does not regulate finance, will writing, commercial lending, taxation or trust advice.
Article Reference: PPS062014.GM26
Article Author: David Hodgetts
VIP Publication Date: 23/02/2015
 

BSAVA Congress 2015

Professional Practice Services are pleased to confirm we will be exhibiting again this year at the BSAVA Annual Congress held at The ICC and NIA, Birmingham from 9th -12th April 2015.

Please do come and visit us at Stand 602 for an informal chat about your Practice needs.

 

Alternatively do let us know if you would like a more in depth conversation as we are offering 1-2-1 meetings throughout Congress.

 

 

 

Your Success is Our Business
The PPS Group provide personal expert financial advice and consultancy services exclusively to the veterinary profession.  We've been providing successful financial solutions since 1997. Our team of experienced and knowledgeable staff can guide you through a sometimes unexpected financial minefield.

With personal visits to your practice, no call centres or push button phones, you can speak directly to the people who matter.

Financial Services through Professional Practice Services

• Independent Financial Advice for Practice Owners and Staff
• Retirement/Succession Planning
• Practice Finance
• Business Protection
• Partnership/Share Protection
• Investment/Pension and Wealth Management
• Family Protection
• Income Protection
• Mortgages
• Employee Benefits
• Workplace Pensions
• Business Consultancy

 

Call our friendly, knowedgeable team from a confidential, no obligation discussion:

01527 880345

 

Visit our Website at:

www.pps-vet.co.uk

Professional Practice Services is authorised and regulated by the Financial Conduct Authority. 

The Financial Conduct Authority does not regulate finance, will writing, commercial lending, taxation or trust advice.

Maximising the value of your pension pot

Probably the single most important decision to realise your long-term goals

Retirement planning involves thinking about your plans for the future now – that means investing your money with the aim of maximising its value ready for when you retire. Careful retirement planning, the right mix of assets and starting sooner rather than later will help lead to the retirement you are looking for.

Historically, for many people, the traditional view of saving for retirement was to simply put your money into a pension, with few decisions to make in the run-up to your retirement date and no choice over how the pension was taken.

Reviewing your retirement planning
Having a pension today is recognised as just one important step along the path to achieving your dreams once you have stopped working. Now, not only must you carefully consider where you actually invest your pension money and how you are going to use your pension, but if appropriate you should also review other forms of retirement savings. Reviewing your retirement planning is critical and probably the single most important decision you can make to help you realise your long-term goals.

Different investment choices produce different results. It’s essential that you contact us to review all your retirement investments to make sure they are heading in the right direction. If your circumstances change, some investments may no longer be appropriate. It’s important to get these things right, as you will be relying on the provisions you make now to generate income after you retire.

Factors that will determine your strategy
When building or reviewing your pension portfolio, there are a number of factors that will determine your strategy, including the level of risk you are willing to take. This is likely to change throughout your life, which means your investment strategy will also need to change. Receiving professional financial advice plays a vital role in helping to make sure that your pension holdings match your risk profile and your investment goals.

Typically, people in the early years of the term of their pension may feel they have time to take more risks with their investments, to increase the potential for higher returns. As they approach retirement and the duration of the investment is shorter, they may prefer, more predictably, to start to plan for their future after work. Alternatively, if they have reached their pension age and are still investing part of their fund while drawing benefits, they may prefer to keep an element of greater risk in return for higher potential growth.

When it comes to retirement planning
Your 40s is ‘the golden decade’ when it comes to retirement planning. This is when you should be putting as much as possible into your pension to give your contributions time to grow.

In your 50s, you may want to start making decisions about your retirement. If you are going to convert all of your retirement funds into income the moment you retire, you may wish to start reducing risk now. If you expect to keep it mainly invested, you may wish to keep a good weighting in investments based on shares. After all, with the growing trend towards taking work in retirement, many people may feel they can afford to keep their pension invested for longer while drawing an income.

Delaying the start of your retirement provision will have an obvious impact on the potential growth of your pension. Not only will the time period for growth potential be reduced, but you could also be passing up the opportunity for valuable tax relief.

Streamlined pension regime
Pensions have always provided a highly tax-efficient environment for long-term retirement investments. However, in April 2006, a streamlined pension regime introduced a number of extra benefits, including the potential to contribute larger sums into your pension fund when the timing is right for you.

Lifetime Allowance
Since the rules were simplified, pensions have become easier to navigate. Whether you have occupational pensions, personal pensions or both, you now have one overall annual and one Lifetime Allowance for pension savings. You can save as much as you like towards your pension, but there is a limit on the amount of tax relief you can get. The Lifetime Allowance is the maximum amount of pension saving you can build up over your life that will benefit from tax relief. If you build up pension savings worth more than the Lifetime Allowance, you’ll pay a tax charge on the excess.

If you’re in a defined benefit scheme and you take your pension after 6 April 2014, your pension benefits will be tested against the Lifetime Allowance of £1.25 million. This level of pension saving is broadly equivalent to an annual pension of £62,500 if you don’t take a lump sum, or £46,875 if you take the 25% maximum tax free lump sum (Source: HM Revenue & Customs).

For a money purchase scheme, it‘s the value of your pension pot that is used to pay your pension benefits (such as an annuity and a tax-free lump sum) that is tested against the Lifetime Allowance at the time you take your benefits. The charge is paid on any excess over the Lifetime Allowance limit. The rate depends on how this excess is paid to you. If the amount over the Lifetime Allowance is paid as a lump sum, the rate is 55%, and if it is paid as pension, the rate is 25%.

Consolidating funds
Another feature of pensions is that you can consolidate payments from one UK registered pension scheme to another. This could be either to access different benefit options or simply to consolidate your funds in one place. It is important to note that there are costs involved, and obtaining professional financial advice is essential to ensure that you take the appropriate course of action for your specific situation.

If you have more than one pension plan in your name, there could be a number of advantages to consolidating all your plans into one. Having one pension can make it much easier for you to keep track of funds, monitor performance and change strategy if necessary. Consolidation may also cut down on paperwork and could make estate planning simpler.

Again, it’s possible that consolidating pension funds may not be beneficial for your particular circumstances. You should always receive professional financial advice before deciding if it is the right course of action for you.

Post-retirement
The array of post-retirement options is vast and will need to be considered carefully, especially in the light of the proposed changes announced in Budget 2014 to fundamentally redesign the UK private pensions system. The best option for you will depend on factors such as the size of your fund, your ongoing involvement, the risk you are willing to take and the level of benefit flexibility you want.

Annuities have long been the mainstay of turning your retirement pot into income. When it comes to buying a pension annuity, you can choose from any provider in the market, with the option of inflation-proofing it or buying a guarantee so that it continues to pay out for a set period of time. You might also want an income to continue for your spouse after your death. All these options will reduce the amount you initially receive.

Currently you have other options besides buying an annuity, such as using a drawdown facility and leaving your pension invested but receiving an income from the fund. If you do this, you can still take your 25% tax-free lump sum out of your pension.

There are many choices to make during the pre and post-retirement years. However, these choices are some of the most important you will ever make, so careful consideration is essential in order to safeguard your financial future and give you the retirement you are dreaming of.

Professional financial advice you can trust
When it comes to planning for your retirement, time is your friend. The earlier you start, the longer your money has the potential to grow. But retirement planning isn’t just paying money into your pension each month and forgetting about it – you need to be proactive. To review your current situation or requirements, please contact us for more information.

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of and reliefs from taxation are subject to change. Tax treatment is based on individual circumstances and may be subject to change in the future. This information does not constitute advice and should not be used as the basis of any financial decision, nor should it be treated as a recommendation for any product. Although endeavours have been made to provide accurate and timely information, Professional Practice Services cannot guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough review of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions.

Call our friendly, knowledgeable team for a confidential, no obligation discussion:
01527 880345
 

Visit our Website at:
www.pps-vet.co.uk
 

Professional Practice Services is a Veterinary Business Consultancy and Independent Financial Advisory Firm. Professional Practice Services is authorised and regulated by the Financial Conduct Authority
The Financial Conduct Authority does not regulate finance, will writing, commercial lending, taxation or trust advice.
Article Reference: PPS062014.GM25

How to make sure you enjoy your retirement

5 tips to improve your golden years, no matter what your current stage of life

Retirement may seem a long way off for you at the moment, but that doesn’t mean you should forget about it.
 

1. Have you considered how much State Pension will you receive?
The State Pension is a valuable foundation on which to build your retirement income, together with any workplace or personal pension provision you have. If you work, you’re required to contribute, and if you don’t work, you might be making voluntary contributions or being credited as though you were contributing. You can log onto www.gov.uk/calculate-state-pension to get a State Pension forecast.

2. Track down your missing pension(s)
You might move jobs a number of times during your working life and pay into a number of pensions. It can be hard for you to keep track of your pensions. If you do lose track, you can visit www.gov.uk/find-lost-pension to track your lost pension or pensions.

3. Think about the ‘what if’ scenario – who inherits your pension pot?
Make sure your pension paperwork is up to date, or there could be confusion over who the beneficiary should be. This is particularly important if you’re not married and you want to safeguard your partner’s position. Most pension providers have an Expression of Wishes form where you can state a preference for who should receive your pension pot once you’re no longer here. There are typically different choices depending on the type of pension and also whether you’ve started to take an income yet.

4. How much have you saved for your retirement?
If you don’t know, what are you expecting to live on later in life? When thinking about your income in retirement, you need to consider the sort of retirement you want and how much money you’ll need. We can help you to review how much you’ve saved for retirement so far and explore your options if you’re not saving enough.

5. Relationships
Another factor is the rise in ‘silver splitters’ – those who divorce and form new relationships later in life. More relaxed attitudes to divorce among the ‘baby boomer’ generation in comparison with their parents, as well as greater financial independence among women, have been cited as possible explanations for this. We recommend that you seek legal and professional financial advice to help preserve your chances of having the retirement you want and are entitled to.

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of and reliefs from taxation are subject to change. Tax treatment is based on individual circumstances and may be subject to change in the future. This information does not constitute advice and should not be used as the basis of any financial decision, nor should it be treated as a recommendation for any specific product. Although endeavours have been made to provide accurate and timely information, Professional Practice Services cannot guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough review of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions.

Professional financial advice you can trust
If you’re approaching retirement, it’s time to think hard about your options. These are some of the most important decisions you’ll ever make, so let us help you. Please contact us to discuss your requirements.



Call our friendly, knowledgeable team for a confidential, no obligation discussion:

01527 880345

Visit our Website at:

www.pps-vet.co.uk

Professional Practice Services is a Veterinary Business Consultancy and Independent Financial Advisory Firm. Professional Practice Services is authorised and regulated by the Financial Conduct Authority.

The Financial Conduct Authority does not regulate finance, will writing, commercial lending, taxation or trust advice

Article Reference: PPS062014.GM13

Greater choice for retirees

Proposals to fundamentally redesign the UK private pensions system

Fundamental plans proposed to redesign the UK defined contribution pension system (as opposed to workplace final salary schemes) were announced as part of the Budget 2014 speech. This is the most far-reaching reform to the taxation of pensions since the regime was introduced in 1921, introducing new flexibility to the pensions system.

By further relaxing the rules around income withdrawals from pension funds, which will be introduced from 6 April 2015, people will have greater flexibility and choice about how they can access their money. Those who want to guarantee a regular income for life will still be able to purchase an annuity, of course.

Taking pension savings
This announcement means that people will be in a position to choose how they take their pension savings: for example, they could take all their pension savings as a lump sum, draw them down over time or buy an annuity.

The Government also intends to explore with interested parties whether those tax rules that prevent individuals aged 75 and over from claiming tax relief on their pension contributions should be amended or abolished.

Savings freedom
In the meantime, as a first step towards this reform, a number of changes have been announced to the rules. These commenced from 27 March 2014 and now allow people greater freedom and choice over accessing their defined contribution pension savings at retirement.

The changes are:
•    Reducing the amount of guaranteed annual income people need in retirement to access their savings flexibly, from £20,000 to £12,000
•     Increasing the amount of total pension savings that can be taken as a lump sum, from £18,000 to £30,000
•    Increasing the capped drawdown withdrawal limit from 120% to 150% of an equivalent annuity income
•    Increasing the maximum size of a small pension pot which can be taken as a lump sum (regardless of total pension wealth) from £2,000 to £10,000, and increasing the number of personal pots that can be taken under these rules from two to three

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of and reliefs from taxation are subject to change. Tax treatment is based on individual circumstances and may be subject to change in the future. This information does not constitute advice and should not be used as the basis of any financial decision, nor should it be treated as a recommendation for any specific product. Although endeavours have been made to provide accurate and timely information, Professional Practice Services cannot guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough review of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions.

Professional financial advice you can trust
This major announcement to give retirees more choice as to how they take the income from their pension fund will mean that other options may now be given more consideration. These changes make it even more important, if you are approaching retirement, to seek professional financial advice in order to make the most of your pension pot. If you would like to find out how the changes could affect your future retirement plans, please contact us.

Call our friendly, knowledgeable team for a confidential, no obligation discussion:
01527 880345
 

Visit our Website at:
www.pps-vet.co.uk
 

Professional Practice Services is a Veterinary Business Consultancy and Independent Financial Advisory Firm. Professional Practice Services is authorised and regulated by the Financial Conduct Authority
The Financial Conduct Authority does not regulate finance, will writing, commercial lending, taxation or trust advice.

Article Reference: PPS062014.GM09

BSAVA Congress 2014

Professional Practice Services and PPS GI are pleased to confirm we will be exhibiting again this year at the BSAVA Annual Congress held at The ICC and NIA, Birmingham from 3rd-6th April 2014.

 

 

Please do come and visit us at Stand 410 for an informal chat about your Practice needs.

 

Alternatively do let us know if you would like a more in depth conversation as we are offering 1-2-1 meetings throughout Congress.

Your Success is Our Business
The PPS Group provide personal expert financial advice and consultancy services exclusively to the veterinary profession.  We've been providing successful financial solutions since 1997. Our team of experienced and knowledgeable staff can guide you through a sometimes unexpected financial minefield.

With personal visits to your practice, no call centres or push button phones, you can speak directly to the people who matter.

Financial Services through Professional Practice Services

• Independent Financial Advice for Practice Owners and Staff
• Retirement/Succession Planning
• Practice Finance
• Business Protection
• Partnership/Share Protection
• Investment/Pension and Wealth Management
• Family Protection
• Income Protection
• Mortgages
• Employee Benefits
• Workplace Pensions
• Business Consultancy

General Insurance through PPS GI

• Market Leading Surgery Insurance
• Locum & Group Personal Accident Insurance
• Private Medical Insurance
• Motor Fleet & Home Insurance
• Veterinary Professional Indemnity Insurance
• Equipment Financing

Call our friendly, knowedgeable team from a confidential, no obligation discussion:

01527 880345

 

Or for General Insurance enquiries please call:

01527 832394

 

Visit our Website at:

www.pps-vet.co.uk

The PPS Group relates to Professional Practice Services, our Business Consultancy and Independent Financial Advisory arm, and PPS GI, our specialist insurance brokerage.

PPS Group is a trading name of Professional Practice Services which is authorised and regulated by the Financial Conduct Authority.  PPS GI is an appointed representative of Professional Practice Services, which is authorised and regulated by the Financial Conduct Authority.

The Financial Conduct Authority does not regulate finance, will writing, commercial lending, taxation or trust advice

2014 Budget Summary

It’s fair to say that yesterday’s budget was unexpectedly eventful, including some major changes to ISA and pension rules that we think make financial advice more important than ever. The big headliners are highlighted below but we thought we would write with a snapshot of all the announcements and the background to the Budget itself.

What is the Budget?

The Budget is a report presented each year by the Chancellor of the Exchequer to Parliament and the nation. The primary role of the Budget is to control public finances by setting out how much tax the Government will collect, how much the Government will borrow and how much the Government will spend. The Budget Responsibility and National Audit Act 2011 requires the Government to produce a Budget Report (which is the formal name for the Budget) for each financial year. The Charter for Budget Responsibility sets out what the Budget Report must cover.

When the Government publishes the Budget, the Chancellor gives a speech to Parliament in which he sets out the key decisions on tax, borrowing and spending, and his reasons for taking those decisions. This speech is known as the Budget Statement.

The official forecast on which the Chancellor bases the Government’s Budget is provided by the Office for Budget Responsibility (OBR). The Budget Responsibility and National Audit Act 2011 requires the OBR to publish two economic and fiscal forecasts for each financial year, including one published at the Budget. The OBR’s duty is to examine and report on the sustainability of the public finances and it is required to do so objectively, transparently and impartially.

PLEASE NOTE: This update is not intended as an in-depth analysis of the Chancellor’s speech (we will leave that to the industry commentators) but we hope this brief snapshot helps you gain a quick grasp on the key points delivered by the Chancellor from the dispatch box.

Forecasts

• Due to the positive economic pictured described, the Chancellor announced adjustments to previous growth forecasts from those previously announced.
• Growth forecast for 2014 –  revised up to 2.7%
• Growth forecast for 2015 – revised up  to 2.3%
• Growth forecast for 2016 – remains unchanged at  2.6%
• OBR says UK growing faster than any other major economy
• OBR expects 1.5million more jobs over next 5 years
• Deficit  forecast for 2014 is 6.6% and for 2015 it is 5.5%
• Borrowing forecast to reduce to £95 billion for 2014/2015 and then reducing further with no borrowing forecast by 2018/19
• OBR revises down national debt to 74.5% of GDP
• OBR expects to meet 2% inflation target this year

Taxation/Welfare

• New cap on welfare bills.  Welfare cap of £119bn to be applied in 2015/2016
• Much harsher approach and measures to be applied to tax collection and tax avoidance schemes. HMRC budget increasing to assist in stopping tax avoiders
• LIBOR fines to be redirected to military charities
• 15% stamp duty to be introduced on property over £500k bought via a corporate envelope
• Tax receipts from North Sea Oil revised down
• Tobacco duty escalator extended (rising 2% above inflation)
• Beer duty escalator scrapped altogether and beer duty to be cut by 1p – Duty frozen on Whiskey and Cider.  All other alcohol duties to increase as planned in line with inflation
• Personal tax allowance – to increase to £10,500 from 2015
• Higher rate tax threshold to increase to £41,865 from April 2014 and then by further 1% in 2015
• Married couples tax allowance to rise to £1,050
• ISAs – Cash and stocks & shares ISAs to be merged into a simple, single ISA.  All existing monies can be transferred from stocks and shares to cash and vice versa. Limit increased to £15,000
• Junior ISA limit to increase to £4,000
• New pensioner bond to be introduced from January 2015
• Major far reaching reforms to tax treatment of defined contribution pension schemes:  Income requirement for flexible drawdown to be reduced to £12,000; increasing the amount of total pension savings that can be taken as a lump sum, from £18,000 to £30,000; increasing the capped drawdown withdrawal limit from 120% to 150% of an equivalent annuity; increasing the maximum size of a small pension pot which can be taken as a lump sum (regardless of total pension wealth) from £2,000 to £10,000 and increasing the number of personal pots that can be taken under these rules from two to three; complete freedom to drawdown as much or as little as needed; No pensioner will have to buy an annuity;
• 10p tax rate for savers abolished

Transport/Fuel/Energy

• Air passenger duty – all long-haul flights will carry same long haul US tax rate
• Start up support for more flights from regional airports
• £270million guarantee approved for Mersey Gateway Bridge
• Money pledged to improve flood defences and fund road repairs
• Charge on private jets to increase
• More investment in nuclear, renewables and shale gas
• £7bn package to reduce manufacturer’s energy bills
• Fuel – Car fuel duty rise planned for September scrapped

Small Business / Business in General

• Lending to exporters to increase to £3bn
• More money to be made available to support apprenticeships
• Corporation tax to reduce to 21% (20% in 2015)
• First enterprise zone to be introduced to Northern Ireland
• Annual investment allowance to be doubled to £500,000 and extended to end of 2015.
• Business rate discounts to be extended for a further three years

Public Sector

• Public service pensions to be properly valued

Housing

• Further reforms to planning to increase house building
• £150m to be made available for new build housing
• Help to Buy Scheme extended to 2020
• First new Garden City for 100 years to be built at Ebbsfleet

Other Points

• NEW £1 coin to be introduced in 2017
• Raising duty for fixed odds betting machines
• Bingo duty halved to 10%

And finally…

As is always the case with complex legislation such as this, it pays to seek advice from a professional financial planner.

The contents of this article are for guidance only and do not constitute financial advice. If you have any questions about the issues featured please contact us.

Call our friendly, knowledgeable team for a confidential, no obligation discussion: 01527 880345

Visit our Website at: www.pps-vet.co.uk

 The PPS Group relates to Professional Practice Services, our Business Consultancy and Independent Financial Advisory arm, and PPS GI, our specialist insurance brokerage.

PPS Group is a trading name of Professional Practice Services which is authorised and regulated by the Financial Conduct Authority. PPS GI is an appointed representative of Professional Practice Services, which is authorised and regulated by the Financial Conduct Authority.

The Financial Conduct Authority does not regulate finance, will writing, commercial lending, taxation or trust advice.

Bringing Clarity to Pensions

The Lifetime Allowance - Fixed Protection 2014 explained

Before we go into the details of Fixed Protection 2014 it’s important to understand the background and terminology involved.

The lifetime allowance (often referred to as LTA) is the maximum amount of pension saving you can build up over your working life. If you build up pension savings worth more than the lifetime allowance you'll pay a tax charge on the excess when you start to draw your benefits.

The lifetime allowance tax charge is paid on any excess over the LTA. The rate depends on how this excess is paid to you. If the amount over the lifetime allowance is paid as:

·         A lump sum - the rate is 55%

·         A pension - the rate is 25% (with the taxed amount also being subject to income tax at your highest applicable rate)

The lifetime allowance has been as much as £1.8m in 2010-11 and 2011-12, but it reduced to £1.5m in April 2012 and is set to fall to £1.25m for 2014-15.

When the lifetime allowance was first introduced, and when it was later reduced, individuals who thought they might be affected were able to apply for primary or enhanced protection or Fixed Protection 2012 (either to keep their LTA at a higher level or to fully protect their benefits in the case of enhanced protection).

Similar arrangements are in place for next year’s reduction in LTA – these are called Fixed Protection 2014 (FP14) and Individual Protection 2014 (IP14). You can’t have FP14 or IP14 if you already have primary or enhanced protection.

Fixed Protection 2014

Individuals who’ve already built up tax-relieved pension rights of more than £1.25m, or who think they may have more than that by the time they take their pension, can apply for FP14.

If you want to apply, you must notify HMRC by 5 April 2014. Individuals with FP14 will be entitled to a personal LTA of the greater of £1.5m and the standard LTA (which will be £1.25m from 6th April 2014).

In order to maintain FP14 individuals must not:

·         Have a contribution paid to any of their money purchase schemes (examples include a SIPP, Personal Pension or Stakeholder Pension)

·         Build up new benefits in a defined benefits scheme (such as Universities Superannuation Scheme) above a set amount

·         Join a new pension scheme, unless you are only transferring pension savings from one of your existing schemes into the new scheme

·         Start saving in a new pension pot either under a new or an existing pension scheme, including Auto Enrolment (see overleaf)

Individual Protection 2014 (IP14)

IP14 is an additional protection which is expected to be introduced. To be eligible for Individual Protection 2014 individuals must have already built up tax-relieved pension rights of over £1.25m by 5 April 2014.

Unlike Fixed Protection, people who secure Individual Protection 2014 will be allowed to continue pension saving after 5th April 2014 while protecting tax relieved pension savings that have been accrued up to that date.

Individual Protection 14 will enable individuals to protect the value of their savings as long as they are above £1.25m but subject to a maximum of £1.5m. However any savings accrued above £1.5m will be subject to the lifetime allowance tax charge.

Applying for FP14 and IP14

The Government intends to allow a three-year period from 5th April 2014 for people to apply for Individual Protection 2014 with the final date for applications being 5th April 2017.

However, if you’re applying for Fixed Protection 2014 you’ll need to apply by 5th April 2014 at the very latest.

Application forms for both types of protection will be made available on the HMRC website.

Risks for Active Defined Benefit scheme members (Fixed Protection or Enhanced Protection)

Examples of Defined Benefits Schemes include the Universities Superannuation Scheme (USS). The problem with defined benefit accrual is that it often happens in the background. You might not be aware that a pay rise, or the addition of another year’s service, could take you over the allowed accrual rate. And by the time it has happened, the damage is done and your protection will have been lost.

The calculations to work out the acceptable level of DB scheme accrual are quite complex, so if you’re an active member of a defined benefit scheme you should seek advice as soon as possible to establish whether you’re likely to be affected.

Auto-Enrolment Risk

Those who secure Fixed Protection 2014, or who already have Enhanced Protection or Fixed Protection 2012, must take great care to ensure that they opt-out of any pension scheme into which they’re automatically enrolled.  This must be done within the opt-out window.

Failure to do so would breach the fourth bullet point above and consequently the loss of Fixed or Enhanced Protection probably resulting in a hefty tax bill.

And finally…

As is always the case with complex legislation such as this, it pays to seek advice and to do it early.

A professional financial planner will be able to advise you whether you should consider applying for lifetime allowance protection.

And don’t delay - April 2014 might seem like a long way off but contributions you make now are counting towards that lifetime allowance calculation.

The contents of this article are for guidance only and do not constitute financial advice. If you have any questions about the issues features please contact us.

Call our friendly, knowledgeable team for a confidential, no obligation discussion:

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