The Government’s “Growing a Culture of Social Impact Investing in the UK” report is
The Government’s “Growing a Culture of Social Impact Investing in the UK” report is
If you are an employer, could this apply to you?
Ros Altmann* writes in Money Marketing
“I want to highlight a major pensions injustice concerning employers who choose an auto-enrolment scheme administered on a net pay basis.
“Such schemes cannot add the 25 per cent bonus of tax relief to contributions of workers earning less than £11,500 a year from the employer.
“Auto-enrolling these employees – mostly women – into a net pay scheme forces them to pay extra for their pension. Every £10 that someone on more than £11,510 a year puts into a pension will cost only £8 but every £10 low earners contribute costs them the full amount. So the lowest paid are paying £2 more for the same pension.
“If their employer were to use a relief at source scheme instead, no one would have to pay more than £8 for their £10 of pension. But most would not understand the difference between choosing a net pay or relief at source scheme.
When discovering this as pensions minister, I tried desperately to address it. But nobody was interested in helping the low earners.Officials said “It’s not much money”, which I found unacceptable.
Firstly, it may not be much money, but it could and should be theirs if their employer had chosen a different scheme.
This is from the PFS – Professional Finance Society – my professional body.
The proliferation of investment and pension scams have been a growing concern over the last few years, but since the introduction of pension freedoms unregulated activity has multiplied leaving consumers vulnerable to ever more sophisticated scams.
During 2015/16 more than 3,000 people reported being caught up in scams with an average loss of £32,000. As most scam losses go unreported the actual numbers will be much higher. It is clearly time to take further action and as a profession we have a vested interest in contributing to the wider effort of helping protect consumers.
The 15 minute commitment
I announced at our London Financial Planning Symposium in November that we had joined forces with the FCA in an effort to help protect growing numbers of consumers. Members have been asked to help raise awareness of scams amongst their clients and professional networks. But for personal finance professionals, scams and unregulated investment schemes with overblown promises are easier and quicker to spot than unsuspecting members of the public. We therefore need to mobilise as a united profession to help the authorities by sniffing out and reporting suspicious investments and potential scams.
The small commitment we are asking Personal Finance Society members to make is to spend just 15 minutes per month to help identify and report potential scams. As a profession we have the opportunity to make a huge impact in smoking out and helping close down investment scams before they do too much damage.
Visit the PFS website where there are ideas on how to spend 15 minutes. The website contains information and case study videos along with an overview of the tactics used by scammers. There is also a link to the FCA’s ScamSmart microsite where you can find the latest warning list and details of how you can report a potential scam.
Contact me about this if you wish
It’s not just inexperienced investors who are falling victim to scams; savvy investors are falling victim too and are the target for more sophisticated scams. Affluent retirees aged over 60 are now most likely to be victims.
Just a quarter of people seek the advice of a professional adviser prior to committing to an investment and one in eight people spend little or no time researching investment products before handing over the money. It’s time our profession played its part in demonstrating the value of professional advice and helping protect consumers from the unscrupulous.
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Recent research has shown that 86% of the population wants financial advice to help them prepare for their retirement, highlighting how many people do not feel confident in planning for this pivotal stage of their life.
The vast majority of people surveyed said that they want to ensure that they can financially support themselves during their retirement so that they do not become a burden to their loved ones.
However, due to a greater life expectancy, many clients are likely to experience a longer retirement than they had originally planned for.
This obviously means they will need access to more savings in order to support their lifestyle for a longer period, or reduce their expenditure during retirement.
One challenge which clients face is how to pass on their wealth without impacting on their own financial security during their retirement. Many people are actively looking for an adviser who has specialist knowledge on how to minimise the amount of Inheritance Tax (IHT) due on their estate and increase the amount they can leave for their loved ones.
Coupled with this, clients must plan for potential care costs which currently cost £29,000 per year on average, along with changes to tax or inflation which could dramatically affect how much they have to survive on during their retirement.
For many, retirement is a period of life to look forward to and enjoy after several decades of hard work. However, these figures show how just many people feel overwhelmed with how to plan financially for this period of their life.
Tom Curran, Chief Executive of estate administration specialists Kings Court Trust, commented: “These figures highlight how the majority of the population is looking to plan for their retirement well in advance so that they do not become a financial burden to their loved ones. Along with mitigating the impact of IHT and planning for care costs in later life, another element that clients need to consider is how their estate will be managed when they do pass away.
Estate administration can be a complex legal process, particularly for clients with a portfolio of assets and investments. Families will often turn to the financial adviser when dealing with the loss of a loved one, so a sound knowledge of the process is essential for an adviser to support their clients at this difficult time.”
We use sophisticated modelling to help our clients to see how their existing assets and financial planning can give them outcome they seek – or to show the expected shortfalls whilst there is still time to take action.
For those eligible to use it, it will be in addition to the standard nil rate band (NRB), currently £325,000 (and frozen at that level until April 2021).
In summary, the RNRB is intended to protect some or all of the value of the family home (or previous family home) from inheritance tax where the home (or, if the home has been disposed of, assets of equivalent value) is being passed on to children or grandchildren (or their spouses).
The RNRB will be phased in gradually from 2017/18 to 2020/2021 as follows:
The RNRB can be offset against the value of a property which has, at some time, been occupied as the family home as long as that home passes on death to the direct descendants of the deceased.
A direct descendant is defined as a child (including step-child, adopted child or foster child) or grandchild of the deceased. This includes the situation where the property is left to a direct descendant and their spouse or civil partner jointly, to a direct descendant’s spouse or civil partner solely, or to a direct descendant’s widow, widower or surviving civil partner who has not remarried or entered into another civil partnership at the time of death of the deceased.
The RNRB will be available when the individual dies on or after 6th April 2017. The transfer must be on death and can be made by will, under intestacy or as a result of the rule of survivorship.
An estate will be eligible for the proportion of the RNRB that is foregone as a result of downsizing or disposal of the property as an addition to the RNRB that can be used on death. In the Government Technical Note this is referred to as the ‘additional RNRB’. The qualifying conditions for the additional RNRB would be broadly the same as those for the RNRB.
Clearly there is a lot more to it than this so do take professional advice and not rely upon a limited knowledge of the rules. And ensure that you will including your living will, are up to date ~
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