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• 1. Your business logo (printed in full-colour), photograph (if required) & business name here. (0845) 686 0055To place an order, or to find out more information, call our sales team on: or email [email protected] ideasAutumnto beat the end Statementof tax year 2012 Key announcements from theNow is the time you should be Chancellor at a glancereviewing your financial affairs Do you needKEEPING A growth, IncomeWATCHFUL EYEor both?ON YOUR MONEY Preparing forTaxing times for the whatever economicaverage 50-year old ups and downsmight be aheadWhatchallengeslie aheadfor investorsin 2013?Navigating your way arounda wide range of investmentproducts and strategiesYour contact details & regulator details here.

2. Financialplanning isour business.Were passionate about making sureyour finances are in good shape.Our range of personal financial planning services isextensive, covering areas from pensions to inheritancematters and tax-efficient investments.Contact us to discuss your current situation, and wellprovide you with a complete financial wealth check. 3. IN THIS ISSUE To yo u r d i s c u s s07fin p l a n na n c ia lrequ ing i o r t or e m e n t s o b ta iIn thisfun i n f o rrt h e r m at i oissue 09 pl n,c o n te a s eac t us05 Happy ISA tax year Dont get bitten - talk to us 14 Tax-saving ideas to beatthe end of tax yearNow is the time you should be05 Inheritance tax, one of lifes unpleasant factsreviewing your financial affairs15 Helping you to protect and preserve your estate16 Developing aninvestment strategyWhat do you want to achieve06 Autumn Statement 2012 Key announcements from thefrom your investments? Chancellor at a glance 19 Avoid facing financialuncertainty in old age06 Outlook for the New Centenarians Financial pressures to snowball forNearly half of women rely on jointsavings to fund retirement 2012 future generationProtection when you may needit more than anything else08 Would you be vulnerable in the event of a financial catastrophe?The right peace of mind when faced with thedifficulty of dealing with a critical illness New figures reveal families arent prepared financially for when the worst happens22 Taxation mattersDifferent investments havedifferent tax treatment09 FLEXIBLE RETIREMENT PLANNING SOLUTIONS 25 Could your pension income rise Take the legwork out of your by as much as 33 per cent? retirement planningWomen need to be aware of their options to13ensure they benefit from this opportunity10 What challenges lie ahead 26 for investors in 2013? Will you be able to Navigating your way around a wide range of enjoy your retirement? investment products and strategies More over-55s are increasingly working pastretirement age as living costs hit savings12 Bad news can impact on any 28 one of us at any timeDo you need growth, Safeguarding and protecting your familysincome or both? standard of living Preparing for whatever economicups and downs might be ahead13 KEEPING A WATCHFUL EYE28 ON YOUR MONEY Taxing times for the average 50-year old13 Could you be short-changed from your future pension income? Reaching retirement is the catalyst for seeking professional financial advice 03 4. CONTENTS Editorial08 Although making resolutions to improve your financial situation is good whatever the time of year, many people find it easier at the beginning of a New Year. Regardless of when you begin, the basics remain the same. So its with this in mind that we have provided a number of ideas inside this issue to get you ahead financially.In a period of slow global growth, aggressive central bank actions and near paralysis on the part of many fiscal policy makers, investors enter 2013 facing a plethora of challenges. On page 10 we look at the three main hot topics that are likely to impact on making investment decisions over the next 12 months: China, the US and the Eurozone.With the end of the tax year rapidly approaching on 5 April, now is the time to focus on ways to mitigate any tax liability.10 To make the most of the opportunities available, if youve not already done so, you should start putting plans in place now. On page 14 we consider some of the areas you may need to review to minimise a potential tax liability. 16This tax year 2012/13, you canshelter up to 11,280 from tax by investing in an Individual Savings Account (ISA), and the good news is that the Chancellor, George Osborne, announced during his Autumn Statement last December plans to increase the ISA limit to 11,520 from 6 April this year. To make the most of the current tax years allowance, you need to act before the fast-approaching deadline. Read the full article on the opposite page. A full list of all the articles featured in 25 22 this edition appears on page 3. n The content of the articles featured in this publication is for your general information 28 and use only and is not intended to address your particular requirements. Articles should not be relied upon in their entirety and shall not be deemed to be, or constitute, advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the26 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 examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts. Levels and bases of, and reliefs from taxation are subject to change and their value depends on the individual circumstances of the investor. The value of your investments can go down as well as up and you may get back less than you invested.04 5. Wealth creationHappy ISAtax yearDont get bitten - talk to usThis tax year you canshelter up to 11,280 from tax by investing inan Individual Savings Account (ISA). During his Autumn Statementlast December, the Chancellor, George Osborne, announced plans toincrease the ISA limit to 11,520 from 6 April this year.ISA allowanceEach tax year you have an ISA allowance. Forthe tax year 2012/2013 (6 April 2012 until 5 AprilThe value of investments and2013) you can save up to 5,640 in a Cash ISAwiththe income from them can gothe remainder in a Stocks & Shares ISA, or you candown as well as up, and youinvest your full allowance in a Stocks & Shares ISA.may not get back the fullYoure only permitted to invest with one Cash ISA amount invested. The taxprovider in each tax year and the same, or another, benefits and liabilities willStocks & Shares ISA provider. depend on individualcircumstances and mayMake up any unused shortfallchange in the future. PastIf you havent already used up your full ISA allowanceperformance is not a guideyou cant retrospectively make up any unused shortfallto the future.later its lost forever. UK residents aged 16 and overcan choose to save in a Cash ISA or, if they are 18 orover, a Stocks & Shares ISA or a combination of both.Parents or guardians can also open a Junior ISA forDiscuss yourchildren under 18. ISA options - dont delayThe interest on a Cash ISA isnt taxed, so all the Whether youre new to investing or lookinginterest you earn you keep. With a Stocks & Shares ISA, to grow your portfolio, we can help pleaseall gains are free from Capital Gains Tax and you dontcontact us to find out more.need to declare your ISA investments to the taxman. n Inheritance tax, one of lifes unpleasant facts Reducing the size of your estate through increased spending or gifting Inheritance tax (IHT) is generally payable upon as debt is being paid off. Over the IHT tax-freeSwapping certain assets that attract IHT to assets n death and during the life of someone where they giveallowance band, IHT is paid at 40 per cent and so that can be free of IHT after two years away assets. IHT can be reduced significantly by taxit is a significant tax charge levied on your assets. n Giving to charity planning in advance.n Making sure your wills are drafted properlyEveryone is entitled to an IHT-free allowance of Reducing a potential IHT bill n aking sure your holiday letting meets the M 325,000 in the current 2012/13 tax year. A married IHT needs to be considered by everyone. These trading tests couple or registered civil partnership wouldare some areas you may wish to discuss with us to therefore generally have no IHT to pay if their mitigate a potential IHT bill:Dont leave your family estate on second death is less than 650,000. The n Giving allowable amounts of moneywith a tax bill IHT allowance threshold which has been frozen at regularly to your children or others eachIf you have significant wealth you need to 325,000 since 2009 is set to increase toyear out of income consider IHT at an early stage. To discuss the 329,000 in 2015/16.n Passing wealth down to the next generation options available to you, please contact us nWhile net estate values might be less thanseven years before death 650,000 now because of a mortgage or somen Using family trusts to hold capitalThe Financial Services Authority does not regulate other liability or loan, it is possible that at the n aking sure your business qualifies for fullMestate planning, wills or trusts. time of death the estate will be worth much more IHT relief 05 6. AUTUMN STATEMENT 2012AUTUMNSTATEMENT2012 Outlook Key announcements from the Chancellor at a glancefor the NewEconomic Growthn Forecasts for the next few years are:1.2% in 2013, 2% in 2014, 2.3% in2015, 2.7% in 2016 and 2.8% in 2017. CentenariansPensions and BenefitsFinancial pressures to snowball for future generationn Most working-age benefits to rise by1% for each of the next three years. A generation of New Centenarians will be forced to work well into their 70s to stay afloat, according ton From 2014/15 lifetime pension relief new research from Scottish Widows. In addition to working longer, they will face a hat-trick of financialallowance to fall from 1.5m to pressures as early as their mid-twenties, with the stresses of saving for their first home, paying back their1.25m annual allowance cutfrom 50,000 to 40,000. student loans and starting a retirement fund impacting on them much earlier than other generations. Tn Capped drawdown limit increasedfor pensioners of all ages with thesehe Office for National Statistics believes New Centenarians who complete higher educationarrangements from 100% to 120% ofthat one in three babies born in 2012could be paying off their student debts of 73,000 untilthe value of an equivalent annuity.in the United Kingdom will live to they are 52 years old.n Basic state pension to rise bybe 100. This unsurpassed average life Couples will increasingly delay having their first child2.5% to 110.15 a week.expectancy, combined with the rising costs of living,until they are in their early 30s, compared to their laten Child benefit to rise by 1% for twoeducation and housing, means that our children and 20s now. An increasing proportion of people will eitheryears from April 2014. grandchildren will need to plan much earlier for their have no children or just one child. After the purchase future and work for longerof their home, consideringTaxes and Allowances than ever before. the financial burden of havingn ersonal basic income tax allowance forP The Scottish Widowschildren is probably the mostthose aged under 65 increasing bysurvey of 1,000 parents withimportant financial decision they1,335 in cash terms to 9,440 in 2013/14. children under the age ofThe Office for Nationalwill face in their lives.n igher rate threshold to rise toHfive reveals that nearly Statistics believes that one in Financial products are likely41,450 in 2013/14, to 41,865 in 2014/15, 78 per cent are concernedthree babies born in 2012 in to change to allow for mortgagesand in 2015/16 it will be 42,285. that their children may need the United Kingdom will live to be paid over a longer periodn Main rate of corporation tax to be cutto work well into their 70s. to be 100. This unsurpassedof time due to people workingby extra 1% to 21% from April 2014.n Capital gains annual exempt willLeading economist and trend forecaster Steve Lucasaverage life expectancy, longer and increased life expectancy. New Centenariansincrease to 11,000 in 2014/15 and of Development Economicscombined with rising costs ofare likely to be paying off their11,100 in 2015/16.analysed the financial and lifeliving, education and housing, mortgage until they are at leastn Temporary doubling of small businessmilestones that babies bornmeans that our children and61, four years later than theirrate relief scheme to be extended by in 2012 will reach beforegrandchildren will need to parents and seven years laterfurther year to April 2014.they turn 100. Looking plan much earlier for theirthan their grandparents.n Inheritance tax threshold to beincreased to 329,000 in 2015/16. backwards from 2112, the research paints a picture offuture and work for longerIn order for New Centenarians to provide ann Bank levy rate to be increasedwhat life might look like forthan ever before.acceptable standard of living forto 0.130%. these babies and examines themselves in old age, a pensionn 5bn over six years expected fromthe steps an averagepot of 2.4m in retirementtreaty with Switzerland to deal with New Centenarian will have taken throughout life in savings will need to start sooner.undisclosed bank accounts. comparison to his or her parents and grandparents.The cost of social care is likely to be anothern ISA contribution limit to be raised to major concern for this future generation. Many New11,520 from 6 April.The personal financial landscape Centenarians will need to contribute financially to then Prosecutions for tax evasions up100 years in the futurecare costs of their parents generation, as well as try to80%, with anti-abuse rule to come in.Changes to ways that student loans (and, for manyput some funds aside for their own care costs in their people, high tuition fees) are provided mean that thosefinal years.06 7. Financial planningNature of work is likely to changecent are pleased to think their children will commencement of working lives and ages ofThe state retirement age will be at least 70 by accomplish more in life because they will be retirement. ONS data was also used to estimatethe turn of the next century and an increasinghealthier longer. n expected future trends for financial mattersproportion of people will continue working wellincluding earnings, rents, house prices, mortgageinto their 70s, either because they cant afford to costs and retirement incomes. A range of otherretire or because they feel it is in their best interestSaving enough information sources published and unpublishedto continue working.for a retirement were utilised to obtain insights into recent and However, the nature of their work is likely to of 30 years or more expected future social trends.change. According to Lucas, In the future, olderThe dramatic speed at which life expectancyworkers especially in the professional and business is increasing means we need to radicallyEstimates of future financial costs includingservices sector are likely to stay working longer rethink our perceptions of life, especially forearnings, housing costs, student debt and retirementinto their 70s, but the nature of this work willour children. Most workers today expect their savings were calculated using bespoke economicbecome more flexible and probably more part-pension to fund a retirement of up to 20 yearsand financial models developed by the authors of thebut increased life expectancy means Newtime. Workers in manual or vocational careers are research. These figures were estimated by projected-Centenarians may have to save enough for aalso likely to look to extend their working lives byretirement of 30 years or more. To discuss howforward underlying trends evident in existingundertaking a less strenuous, more part-time role. we could help you plan for your childrens anddatasets, coupled as appropriate with trend-based However, this means that New Centenarians could be grandchildrens future, please contact us for inflation assumptions.supporting themselves with a potentially limited income further information. Dont leave it to chance.for up to 30 years of retirement. In order to properlyThe main exception is in the area of futureprepare for prolonged retirement and counter the effectsThis research was undertaken based on past student debt, where a new system is currentlyof the collision of financial pressures, Lucas explains thatand expected future demographic trends usingbeing introduced and for which current dataNew Centenarians will need to begin saving for their published research and data from the Office for cannot be used to construct forward estimates.retirement from at least age 25 and that parents should National Statistics (ONS); this included trendIn this case future estimates were based on aencourage their children to start understanding finances data on life expectancy, healthy life expectancy,literature review of estimated future student debtand the importance of saving from a young age.fertility, marriage, divorce, having children,liabilities, using sources including the Department for Education, the National Union of Students andIt isnt all doom and student loan companies.gloom for this generationAlmost 45 per cent are concerned that theirchildren will not be able to save enough moneyfor a longer retirement. Yet almost 40 per cent ofparents are not considering their childs long-termfuture as part of their financial planning and halfof all parents would not consider starting a pensionfor their child on their first birthday. However, it isnt all doom and gloom forthis generation, as 41 per cent of parents areexcited about the potential for long-lastingfamily relationships and a further 37 per 2.4mThe pension pCenten ot New ar i an sto provwill nei d e an eds t an d a accepta rd of liblet h e ms ev i n g folves in r old age . 07 8. ProtectionCutting backon saving and buying insurance may save some money in the short term. However, if the worst happens, the situation for many families could well be extremely worrying.Would you be vulnerable in theevent of a financial catastrophe?New figures reveal families arent prepared financially for when the worst happensLegal & Generals first Deadline to the Breadline Report published in December last year has revealed that the averageBritish family has just 19 days before its savings would run out if the main breadwinner is unable to work for anyreason. This deadline to the breadline - the length of time the average household could last on savings following asudden loss of income due to long term sickness, injury, critical illness or death.Families arent prepared financially Key findings of this first report include:right now impossible. Cutting back on savingThe aim of Legal & Generals Deadline to the Families in the South East of England have theand buying insurance may save some money inBreadline Report is to shed a light on the financial longest Deadline to the Breadline, but would stillthe short term. However, if the worst happens,health of the average British household and to on average last just over a month - 37 days - beforethe situation for many families could well bestimulate debate in the industry about what we their savings would be used up; extremely worrying. At times like this it is evencan do to help consumers better understand theThis is two weeks more than the next two more important that people consider how bestdangers of failing to protect themselves against regions with the North West at 22 days and thethey can plan for a financial catastrophe.financial disaster. Its concerning to see that theSouth West at 21 days; Please note this does not includeaverage UK family has a deadline to the breadline Households in the West Midlands came out asNorthern Ireland. nof just 19 days. Clearly, families arent prepared the least prepared with a deadline to the breadlinefinancially for when the worst happens - loss of of just seven days. Protect yourincome, critical illness or death- and the sad realityis that they need to be ready. Muddling through approach standard of livingLegal & Generals Deadline to the BreadlineWe all know how tough it is for families at There are a range of insurance productsReport is the first of a series of publications that the moment. For many, simply making endsdesigned to help protect your standard ofwill track the financial health of the nationsmeet and staying in regular employmentliving. To discuss affordable ways that wehouseholds and provide a means of tracking thatis a daily challenge. But the loss of regular can help you make sure your familys lifehealth as the economy changes over the nextincome would render the muddling throughgoes on even if youre not around, dont delay please contact us today.few years. approach that many households are taking08 9. RetirementFLEXIBLE retirement The SIPP wrapper is separate from the contentsand, as such, has distinct, often fixed charges.PLANNING SOLUTIONSBecause you can now accumulate a number ofpensions over your working life, consolidatingthem all into a SIPP means that you have onecompany carrying out your pension administration.Take the legwork out of your retirement planningThis could reduce your reporting and paperwork;however, you should ensure that the additionalinvestment options a SIPP provides are required,People are living longer and the number of retirees is growing. Longevity shouldas it can cost more to administer than a normalbe a blessing but many investors are worried they will outlive their savings. So it ispersonal pension plan.essential to consider saving for retirement as early as possible and to decide where SIPPs are appropriate for people comfortablewith making their own investment decisions andbest to invest for your requirements.are not a risk-free product. The capital may beat risk due to the investments held within thisDeciding how to plan Investment choicepension arrangement; the value of investmentsThere is a bewildering choice when deciding howYou can invest in a wide range of investments andcan go down as well as up and you could getto plan for your retirement, and it is important this includes any number of approved funds. Most back less than you invested. Tax reliefs will alsoto weigh up the cost and complexity against theSIPP providers allow you to select from a range of depend on your personal circumstances and thepotential returns. If appropriate, one option to assets, including: pension and tax rules are subject to change byconsider is a Self-Invested Personal Pensionthe government. n(SIPP). Originally designed for people withn stocks and shares quoted on a recognised UK or higher-value pension funds, theyve become moreoverseas stock exchangeprevalent since the UK pension simplificationn government securities BUILDING A BIGGER PENSIONlegislation of 2006. n unit trustsBefore applying for a SIPP, you should seek SIPPs are tax-efficient wrappers within which you n investment companies professional financial advice. To find outcan select your own pension investments from a widen insurance company funds how much you should be saving to helpvariety of sources and choose how to spread your n traded endowment policies achieve your desired retirement income,money among a whole range of different investmentn deposit accounts with banks and building societies contact us for further information.types subject to both HM Revenue & Customs rules n National Savings products and any limits set by the SIPP provider. n commercial property (such as offices, shops or factory premises)Information is based on our current understandingTax-efficiency of taxation legislation and regulations. A SIPP isA SIPP offers the same tax benefits as other Retirement FLEXIBILITYa long-term investment, and the fund value maypersonal pension plans, with personalA SIPP allows you to choose from the full range fluctuate and can go down. Your eventual incomecontributions eligible for Income Tax relief and of options at retirement, from purchasing an may depend upon the size of the fund at retirement,investments within the SIPP able to grow free of annuity to taking a managed income withdrawal future interest rates and tax legislation.Capital Gains Tax. from your fund. SIPPs are tax-efficient wrappers within which you can select your own pension investments from a wide variety of sources and choose how to spread your money among a whole range of different investment types . 09 10. Wealth creationWhat challengeslie ahead forinvestors in 2013?Navigating your way around a wide range of investment products and strategiesIn a period of slow global growth, aggressive central bank actions and near paralysis on the partof many fiscal policy makers, investors enter 2013 facing a plethora of challenges.T here are three main hot topics that areview and see their capital fluctuate in value couldbanking crisis of 2008 and the technology crash of likely to impact on making investmentconsider taking more risk to try and achieve an2000 many investors who were over-exposed to decisions over the next 12 months: inflation-beating return.these areas suffered heavy losses. Diversification China, the US and the Eurozone.Shares are different from most goods in that mitigates risk, as different areas perform well at Chinese monetary policy-making bydemand often increases as prices rise. If an different times. Paradoxically, though, its alsothe new leadership needs to tread a fine line between investment area is fashionable, it could be a sign thatimportant not to be too diversified.slowing economic growth, which could cause social it is overvalued. Traditional areas, such as blue chipOne of the biggest dilemmas investors face isunrest, and creating asset bubbles. A US debt ceiling companies, often generate the best long-term returns,market timing. Jumping in and out of markets on abreach around March 2013 could lead to draconianso it makes sense for most investors to avoid the latest regular basis not only requires constant monitoringconsequences if an agreement is not reached. Finally, fad. However, it is important to remember that all stock of daily events but also requires the skill to act onthe on-going Eurozone sovereign debt crisis althoughmarket investments will fluctuate in value, so you could such events.The return from a lump sum investmentsteps have been taken in the right direction, Europe is get back less than you invest. can depend heavily on the entry point. One way tostill not fixed. achieve this is to spread or drip-feed a lump sumMaximum use of tax sheltersinto the market as opposed to investing it all in oneGood financial planning Investors also need to make the maximum use of tax go. In fact, during volatile times this strategy allowsNavigating your way around the plethora ofshelters as tax can eat away at your returns. These canyou to benefit from what is known as pound costinvestment options out there can be very daunting include pensions and Individual Savings Accounts averaging.Regular investing provides an alternativeand requires professional financial advice. Before(ISAs) at one end of the spectrum to Enterprisemethod of building positions over time. ninvesting, you need to ask yourself a basic question. Investment Schemes and Venture Capital Trusts atWhat are you investing for? Good investmentrequires good financial planning first of all. You mustthe other, higher-risk end. Even following the proposals announced by the Improved returnsdecide what your objectives are, what return you need Chancellor, George Osborne, concerning pension tax within yourto achieve that objective and what risk you are willing relief in his Autumn Statement, pensions still offer investment strategyto take to achieve that return. very attractive tax benefits through the income tax Our services cover a wide range of Deciding how much to invest in equities, fixed relief you receive on the contributions. investment products and strategies. Ourinterest (gilts and corporate bonds), property and In the current 2012/13 tax year, there is no taxdedication to flexibility and innovationcash is the first step in constructing a portfolio. Manyto pay within an ISA on any capital gains and no ensures we are able to secure new andinvestors are understandably nervous about taking further tax to pay on any income and you can shelter tactical opportunities for improvedrisks with their hard-earned capital during thisup to 11,280, which is set to rise to 11,520 from 6returns within your investment strategy.current period but not taking enough risk can be just April this year. To discuss what you need to do next,as damaging as taking too much.Having said this, making an investmentplease contact us for further information.decision based on a tax saving alone should notTaking a long-term view be the main consideration at the expense of the Information is based on our current understandingAll asset classes carry risk including cash, whichother rules of investing.of taxation legislation and regulations. Levels andcan lose its spending power over time because ofbases of and reliefs from taxation are subject toinflation. Most investors see risk as the risk of short-Different areas perform legislative change and their value depends on theterm price falls but fail to consider the risk that their well at different times individual circumstances of the investor. The value ofinvestments will not grow fast enough to meet their An undiversified portfolio will only perform wellyour investments can go down as well as up and youobjectives. Those who can afford to take a long-termsome of the time. Good examples of this are the may get back less than you invested.10 11. Youveprotectedyour mostvaluable assets.But how financially secure areyour dependents?Timely decisions on how jointly owned assets are held,the mitigation of inheritance tax, the preparation of awill and the creation of trusts, can all help ensure yourdependents are financially secure.Contact us to discuss how to safeguard yourdependents, wealth and assets, dont leave it untilits too late. 12. ProtectionBad news can impacton any one of us at any timeSafeguarding and protecting your familys standard of livingBad news can impact on any one of us at any time, in the form of an illness or sudden death. We dont like to think aboutit but we do have to plan for it. So having the correct protection strategy in place will enable you to protect your familyslifestyle if your income suddenly changes due to premature death or illness. However, choosing the right options can bedifficult without obtaining professional advice to ensure you protect your family from financial hardship.Obtaining advice is essential toYour life assurance premiums will vary according to aThe other type of protection available is amaking an informed decision number of different factors, including the sum assuredwhole-of-life assurance policy designed toabout the most suitable sum and the length of your policy (its term), plus individual provide you with cover throughout your entireassured, premium, terms and lifestyle factors such as your age, occupation, gender, lifetime. The policy only pays out once thepayment provisions. We work state of health and whether or not you smoke. policyholder dies, providing the policyholderswith our clients to create tailored protection If you have a spouse, partner or children, you dependants with a lump sum, usually tax-strategies that meet their financial goals and needsshould have sufficient protection to pay off your free. Depending on the individual policy,and were committed to ensuring that our clientsmortgage and any other liabilities. After that, you policyholders may have to continue contributingenjoy the best financial planning service available.may need life assurance to replace at least some of right up until they die, or they may be able to Whether youre wanting to provide a financialyour income. How much money a family needs will stop paying in once they reach a stated age, evensafety net for your loved ones, moving house or a vary from household to household so, ultimately, its though the cover continues until they die. nfirst-time buyer looking to arrange your mortgage up to you to decide how much money you wouldlife insurance or simply wishing to add somelike to leave your family that would enable them tocover to what youve already got youll want to maintain their current standard of living.ADDED PEACE OF MINDmake sure you choose the right type of cover. Thats There are two basic types of life assurance, termWe can help make sure you and yourwhy obtaining the right advice and knowing whichand whole-of-life, but within those categories therefamily is financially protected, whichmeans added peace of mind for youproducts to chooseis essential.are different variations.and protection for them. Contact us Life assurance helps your dependants to copeThe cheapest, simplest form of life assurance is today to discuss your requirements.financially in the event of your prematureterm assurance. It is straightforward protection,death. When you take out life assurance, youthere is no investment element and it pays out aset the amount you want the policy to pay out lump sum if you die within a specified period. Thereshould you die this is called the sum assured.are several types of term assurance.Even if you consider that currently you havesufficient life assurance, youll probably needmore later on if your circumstances change.If you dont update your policy as key eventshappen throughout your life, you may risk beingseriously under-insured. As you reach different stages in your life, theneed for protection will inevitably change. Theseare typical events when you should review your lifeassurance requirements:n Buying your first home with a partnern Having other debts and dependantsn Getting married or entering into a registeredcivil partnershipn Starting a familyn Becoming a stay-at-home parentn Having more childrenn Moving to a bigger propertyn Salary increasesn Changing your jobn Reaching retirementn Relying on someone else to support youn Personal guarantee for business loans12 13. TaxationRetirement Could you be short-changed from your future pension income? Reaching retirement is the catalyst for seeking professional financial advice There is a world of choices and decisions to be made when reaching retirement, and thats before you even look at whether you should take an enhanced annuity. For many individuals, reaching retirement is the catalyst for seeking professional financial advice. Suddenly you can be faced with a pension pot be it large with myriad options, or small and needing to be stretched as far as possible. According to the National Association of Pension Funds (NAPF), nearly two- thirds of us could be eligible for higher pensions when we retire. Thousands of people are missing out because they do not realise that having certain medical or lifestyle conditions could significantly boost their retirement incomes whenKEEPING A WATCHFUL buying an annuity or annual pension. The NAPF estimates that about half aEYE ON YOUR MONEY million people retiring each year are being short-changed by up to 1bn from their total future pension income. If you or your partner suffers fromTaxing times for the average 50-year-old medical and/or lifestyle conditions, you may qualify for enhanced terms on your annuity option, which could increase yourThe average 50-year-old has paid 190,400 in direct taxes by the time they retirement income. Enhanced annuitiestake into consideration detailed informationcelebrate their 50th birthday equivalent to around three-and-a-half times more about yourhealth and lifestyleto providethan theyve invested in their pension, new analysis from MetLife [1] shows. you with a more personal annuity.T Typically, when an annuityhis study of the finances of 50-year-olds last 16 years of their working lives when their focusproviderquotes for an enhanced annuity,shows they have an average of will be on retirement planning.they will pay close attention to all the factors54,300 saved in pension funds but haveMen working from 21 to 66 will pay a total of that will affect your life expectancy. Thispaid out more than three-and-a-half times 316,950 in tax and National Insurance during theirincludes where you live, whether you smokethat in tax and National Insurance. working lives, while women will pay 247,350, theand drink, your lifestyle and your medical People on median earnings starting work at 21 will figures show. nhistory. They can then build a more accuratehave paid out 114,148 in income tax with the otherpicture of your life expectancy, on which76,000 going on National Insurance during the course of they base their calculations. ntheir working lives, figures show. For men the total direct Concerned about yourtax bill by 50 comes in at 205,000, while women pay anaverage 167,370 in income tax and National Insurance.retirement provision?Securing a bigger The amount paid in tax is another illustration ofIf you are concerned about your retirement retirement incomethe financial pressures on the group born between provision, please contact us to review yourYou need to bear in mind that oncecurrent situation its always better to do you commit to an annuity, you1961 and 1981. While the tax bill appears high, thesomething rather than nothing. The problem willwill be stuck with it for life, so itgood news is that pension saving continues to attractnot go away and over time will only get worse. is essential to obtain professionalsignificant tax relief and is a good way to maximise taxefficiency while planning for retirement.financial advice. Contact us today According to the analysis, people working on to [1] MetLife analysis of HMRC and ASHE data to discuss how you could secure a bigger retirement income.66 from age 50 on median earnings will find their totalpublished 07/11/12.tax bill rising to 290,560 another 100,000 in the 13 14. Wealth protectionTax-saving ideas tobeat the end of tax yearNow is the time you should be reviewing your financial affairsWith the end of the tax year rapidly approaching on 5 April, now is the Tax credits on dividends are not repayable so non- taxpayers should ensure that they have other sourcestime to focus on ways to mitigate any tax liability. To make the most of of income to utilise their personal allowances.the opportunities available, if youve not already done so, you should startputting plans in place now. Here we look at some of the areas you may need Pension contributionsto consider to minimise a potential tax liability. There are many opportunities for pension planningI but the rules can be complicated. f your partner pays a lower rate of tax than Children also have their own Capital Gains Tax The rules include a single lifetime limit, currently you, you could consider transferring assets (CGT) annual exemption of 10,600 (2012/13). If 1.5m in 2012/13 but reducing to 1.25m in 2014/15, into their name. This makes particularappropriate, it may be more effective for parents toon the amount of pension saving that can benefit sense if one of you is a non-taxpayer, as invest for capital growth rather than income. from tax relief. There is also an annual limit on theyour taxable income will be lower than your tax The government introduced the Child Trustmaximum level of pension contributions, currentlyallowances, which means you wont have to pay anyFund (CTF) for children born on or after50,000 for 2012/13 reducing to 40,000 in 2014/15.tax on savings interest. Interest on savings accounts1 September 2002. The idea was to promote tax-The annual limit includes employer pensionis usually paid after 20 per cent has been deductedefficient savings by family and friends and includedcontributions as well as contributions by the individual.by the provider. Higher rate tax payers pay 40 per government contributions as an incentive. All Any contributions in excess of the annual limit arecent interest. government contributions have now ceased andtaxable on the individual. To receive your interest paid tax free, you will need children born on or after 3 January 2011 no longer This year and in the next tax year, carry-to complete form R85. This is available from banks,qualify for a CTF account.forward provision allows investors to contributebuilding societies orthe HM Revenue and CustomsExisting CTF accounts continue alongside a new up to a maximum of 200,000. You can carry(HMRC) website. If you are a non-taxpayer, but haveJunior Individual Savings Account (Junior ISA) whichforward any unused annual allowance from thepaid tax on your savings, make sure you claim it back. has been introduced for those children who are notprevious three years, which will give peopleYou need form R40 from HMRC. eligible for a CTF account. This includes childrensome scope to catch up on contributions they Income from jointly owned assets is generally born before 1 September 2002 as well as childrenhave missed. You could potentially invest up toshared equally for tax purposes. This appliesborn from 3 January 2011. Both CTF and Junior ISA 200,000 (assuming a 50,000 allowance from theeven where the asset is owned in unequal sharesaccounts allow parents, other family members or current year and an assumed 50,000 allowanceunless an election is made to split the income friends to invest up to 3,600 (2012/13) annually in afrom the previous three). If these are personalin proportion to the ownership of the asset. tax-efficient fund for a child. There are no government contributions they cannot exceed your earningsThe exception is dividend income from jointlycontributions and no access to the funds until thein the current tax year.owned shares in close companies, which is splitchild reaches 18.Directors of family companies could, as anaccording to the actual ownership of the shares. alternative, consider the advantages of setting upClose companies are broadly those owned by the Taxpayers a company pension scheme or arrange for thedirectors or five or fewer people. The 50 per cent additional rate of income tax oncompany to make employer pension contributions. taxable incomes above 150,000 reduces to 45 perIf a spouse is employed by the company, considerChildren cent on 6 April this year. This means that thoseincluding them in the scheme or arranging forChildren have their own allowances and tax bands.who are able to defer income from 2012/13 tothe company to make reasonable contributions onTherefore it may be possible for tax savings to be 2013/14 could benefit from a 5 per cent or more their behalf.achieved by the transfer of income-producing reduction in the tax charged on the amount deferred.assets to a child. Generally this is ineffective ifEmployer-provided cars and fuelthe source of the asset is a parent and the child is Non-taxpayers If applicable, you should also check that anunder 18. In this case the income remains taxableChildren or any other person whose personal employer-provided car is still a worthwhile benefit.on the parent unless the income arising amounts to allowances exceed their income are not liable toIt may be better to receive a tax-free mileageno more than 100 gross per annum. tax. Where income has suffered a tax deductionallowance of 45p per mile (up to 10,000 miles) You could consider transferring assets from at source a repayment claim should be made. for business travel in your own vehicle. If another relatives, for example, grandparents and/orIn the case of bank or building society interest, employer-provided car is still preferred, consideremploying teenage children in the family business to a declaration can be made by non-taxpayers to the acquisition of a lower CO2 emission vehicle onuse personal allowances and the basic rate tax band. enable interest to be paid gross (form R85).replacement to minimise the tax cost.14 15. Wealth protection Where private fuel is provided, the benefit always consider the differing levels of risk and your shares at a profit will be CGT-free (a reduction ofcharge is also based on CO2 emissions. You shouldrequirements for income and capital in both the the current rate of 28 per cent to 0 per cent).review any such arrangements to ensure nolong and short term. An investment strategy basedAny size of capital gain made on the disposalunnecessary tax charges arise. purely on saving tax is not advisable.of any kind of asset can be deferred by re- investment into EIS-compliant companies. TheCapital Gains Tax (CGT)Individual Savings Accounts deferred gain is then due on the sale of the EISWith 5 April fast approaching, it is a good idea to be Individual Savings Accounts (ISAs) provide an shares unless the sale is to a spouse or on thethinking about using up your CGT exempt amount toIncome Tax and Capital Gains Tax investment death of the shareholder.make the best use of tax advantages. For wrapper. The maximum investment limits are set Investments in EIS-compliant shares can attract2012/13 every individual has a CGT exempt amount offor each tax year. Therefore to take advantage of Inheritance Tax business property relief (BPR)10,600 where no CGT is payable. Any capital gains the limits available for 2012/13 the investment(s)equal to 100 per cent of the investment value onon disposal of assets or investments are added tomust be made by 5 April 2013 (this tax year you gifting or on death.income and taxed at 18 per cent over this exempt canshelter up to 11,280).A Venture Capital Trust (VCT) invests in theamount to the basic rate limit of 34,370 for An individual aged 18 or over may invest in oneshares of unquoted trading companies. An investor2012/13 and then at 28 per cent for any gains over this. Cash ISA and one Stocks & Shares ISA per tax year in the shares of a VCT will be exempt from tax Depending on your income from capital but limits apply. A Cash ISA allows you to invest on dividends (although the tax credits are notgains, timing can become an important issue. up to 5,640 (2012/13) with one provider only, in repayable) and on any capital gains arising fromIf appropriate, you should aim to use up yourany one tax year. disposal of shares in the VCT.personal exemption before 5 April but if your A Stocks & Shares ISA allows you the option toIncome Tax relief, currently at 30 per cent, isincome from capital gains is high enough then youinvest up to 11,280 in the current tax year with available on subscriptions for VCT shares up tocould wait until the 2013/14 tax year to possiblyone provider. 200,000 per tax year so long as the shares are heldavoid paying tax at 28 per cent unnecessarily.If you want to invest in both a Cash ISA and a for at least five years. CGT liabilities are calculated with your Self-Stocks & Shares ISA, the overall amount is cappedFinally, review your borrowings. Full tax relief isAssessment Tax Return and tax payable is due byand you cannot exceed the 11,280 limit (2012/13).given on funds borrowed for business purposes. n31 January 2013 for the tax year ending 5 April 16 to 17-year-olds are able to open an adult2012. Therefore part of your planning may be toCash ISA in 2012/13 and can also have a newleave disposals until after the year end to give you Junior ISA account. This means that a combined Isnt it time youanother 12 months to pay the tax liability.maximum investment of 9,240 (5,640 Cash ISA took advantage of If you have two homes you could consider+ 3,600 Junior ISA) is possible for 2012/13. any tax breaks?making an election, so that future gains on your Its important to take advantage ofmain residence are exempt from CGT.Other investments timely tax breaks. To investigate the A capital gain can also be deferred if theNational Savings & Investment bank (NS&I) opportunities available to you, pleasegain is reinvested in the shares of a qualifying products are taxed in a variety of ways. Some, such contact us today.unquoted trading company through the Enterpriseas National Savings Certificates, are tax-free.Investment Scheme.Single premium life assurance bonds and roll No CGT planning should be undertaken in up funds can provide a useful means of deferringThe value of investments can go down as wellisolation. Other tax and non-tax factors may beincome into a subsequent period when it may be as up and you may not get back your originalrelevant, particularly Inheritance Tax, in relation to taxed at a lower rate.investment. Past performance is not an indicationcapital assets. The Enterprise Investment Scheme (EIS) allowsof future performance. Tax benefits may vary as income tax relief at 30 per cent on new equity a result of statutory change and their value willInvestmentsinvestment (in qualifying unquoted tradingdepend on individual circumstances. Thresholds,There is a wide range of investments with varyingcompanies) of up to 1m in 2012/13. As long aspercentage rates and tax legislation may change intax treatments. When choosing investments, shares held for at least three years, the sale of thesubsequent Finance Acts.15 16. Investment Developing an investment strategy What do you want to achieve from your investments? Whatever your needs, we can help. You may wish to entrust the entire wealth management process to us, or make the investment decisions yourself and still leverage our extensive services and expertise.16 17. InvestmentDeveloping an investment strategy requires that n hat are the tax benefit implications, what taxW Generally, the longer it is before you needyou clearly define the short, medium and long termwill you pay and can you reduce it?your money, the greater the amount of risk yourational for your portfolio. are able to take in the expectation of greaterInvestment objectivesreward. The value of shares goes up and downQuestions that should be considered are:You may be looking for an investment to providein the short term and this can be very difficultmoney for a specific purpose in the future.to predict, but long term they can be expectedQ: What are the investment objectives ofAlternatively, you might want an investment to to deliver higher returns. The same is true to ayour portfolio? provide extra income. So having decided that you lesser extent of bonds. Only cash offers certaintyQ: What appropriate investment strategies willare in a position to invest, the next thing to think in the short term.achieve these objectives? about is: What am I investing for? Your answerBroadly speaking, you can invest in shares forQ: What is your attitude to risk tolerance relative will help you to choose the most suitable type ofthe long term, fixed interest securities for theto your objectives? investment for you. If you have a particular goal, medium term and cash for the short term.Q: What is your time horizon for achieving your you will need to think about how much you canobjectives? afford and how long it might take you to achieve Lifestyle your investmentsyour goal. As the length of time you have shortens, you canA clear road map You may have a lump sum to invest that youchange your total risk by adjusting the asset mix ofDefining your investment objectives will provide awould like to see grow or from which you wish to your investments for example,by gradually movingclear road map for developing the proper investment draw an income. Equally, you may decide to investfrom share investments into bonds and cash. It isstrategy, with the correct balance of risk. in instalments (for example, on a monthly basis) often possible to choose an option to lifestyle your There are different types of risk involved withwith a view to building up a lump sum. investments, which is where your mix of assets is risk-investing, so its important to find out what they adjusted to reflect your age and the time you haveare and think about how much risk youre willingRisk return trade-offbefore you want to spend your money.to take. It all depends on your attitude to risk (how Through a balancing process of the potential risk Income can be in the form of interest or sharemuch risk you are prepared to take) and what youreturn trade-off, your portfolio objectives can be dividends. If you take and spend this income,are trying to achieve with your investments.achieved. All investment strategies used to achieveyour investments will grow more slowly than ifthe objectives must focus on these two important you let it build up by reinvesting it. By not takingInvestment considerations portfolio elements, risk and return. income you will earn interest on interest and theIt is important for you to establish the general The best investment strategy is the one thatreinvested dividends should increase the size ofpurpose for creating the investment portfolio.achieves your objectives with the correct balanceyour investment, which may then generate furtherof the risk return trade-off, viewed over thegrowth. This is called compounding. nSuch analysis should be undertaken: proper duration or time horizon. The asset class,n How much can you afford to invest?n long can you afford to be without the Howwhich has historically provided higher returnsover the long term risk adjusted, is equities, Professional financial money youve invested (most investment followed by bonds. Equities contain the highest advice is essential products should be held for at least five years)?degree of risk volatility. However, the longer the The performance of your investmentsn hat do you want your investment to provide Wduration or time horizon for equities, the lower could make a critical difference to capital growth (your original investment tothe potential for volatility.your financial wellbeing in the future, increase), income or both?Investors typically hedge against volatilityso receiving reliable and professionaln much risk and what sort of risk are you Howthrough an asset allocation across a diverse range financial advice is essential. Please contact prepared to take?of asset classes and strategies. A combination of us to discuss your particular situation.n you want to share costs and risks with Do these different asset classes and strategies should other investors (by using a pooled investment, achieve the investment returns for investors Information is based on our current understanding for example)?relative to their objectives. of taxation legislation and regulations. Levels andn you decide to invest using pooled Ifbases of and reliefs from taxation are subject to investments, consider which type would beDelivering higher returnslegislative change and their value depends on the most suitable for you. The main differencesYour investment goals should determine yourindividual circumstances of the investor. The value of between pooled investments are the way theyinvestment strategy and the time question Howyour investments can go down as well as up and you pay tax and the risks they involve (especially long have I got before I need to spend the money? may get back less than you invested. investment trusts and with-profit funds).is crucial. 17 18. Isnt it timeyou had afinancial review?Well make sure you get the rightadvice for your individual needs.We provide professional financial advice coveringmost areas of financial planning, including, tax-efficientsavings, investment advice, retirement planning, estate& inheritance tax planning, life protection, critical illnesscover and income protection.To discuss your options, please contact us. 19. RetirementAvoid facing financialuncertainty in old ageNearly half of women rely on joint savings to fund retirementNearly half (43 per cent) of women are relying on joint savings with theirpartners to fund their retirement, according to the eighth annual Scottish Achieving yourWidows Women and Pensions Report. However, with one in three marriages retirement goalsin the UK now ending in divorce by the fifteenth anniversary [1], experts The earlier you start saving for aare urging women to make extra provisions for retirement, to avoid facingpension, the better chance youll have offinancial uncertainty in old age.achieving your retirement goals. To find out how putting off the decision to startBased on a sample of 5,200 adults, the report found Unforeseen eventsa pension could affect your potentialthat less than one in five (17 per cent) of women trust We know that the pressure on household budgets and retirement income, please contact us totheir own savings to see them through retirement, the challenge of managing childcare and wider family discuss your requirements.compared to nearly a third (30 per cent) of men.responsibilities whilst balancing work, can all makeit more difficult for women to save for retirement.Precarious plansFor many older or divorced women, this can meanDespite many women being dependent on their relying on a partner or other family members topartners for their income in old age, the report findsprovide support or additional income in later life.that these precarious plans are often left unsaid. TheHowever, unforeseen events can have a stark impactvast majority (79 per cent) of married women sayon retirement plans, and it is important for womenthat retirement was not discussed with their partnerto make sure they know what they are entitled to andbefore they walked down the aisle and 78 per cent how much they can expect to receive in retirement.said they did not know what they would be entitled For this group of women, it is important toto from their partners pension if they divorced. act now. Making a commitment to save a setamount each month, could mean the differenceLosing outbetween a comfortable retirement and one full ofFurthermore, out of the divorced women surveyed,financial difficulties. njust 15 per cent said pensions were discussed aspart of their settlement. This is in spite of it beinga legal requirement that pensions are taken into Enjoy youraccount in divorce settlements, through methodsretirement yearssuch as offsetting, earmarking and sharing. This We can work with you to develop strategiesis especially significant, as women are more likely to accumulate wealth in order for you toto work part-time or have caring responsibilities enjoy your retirement years, by evaluatingfor family members, meaning that they are at your goals, personal circumstances andgreater risk than men of losing out on important projected living costs - please contact us toretirement income. discuss your requirements.Exposed to hardshipThe impact of divorce on womens retirement is[1] Office of Nationalespecially concerning considering that almost one Statistics Divorces inin ten (8 per cent) of women over 50 are wholly England and Wales 2009/10.dependent on their partners savings to fund them All figures, unless otherwisein retirement. This report uncovered that thisstated, are from YouGovgroup of older women are particularly vulnerablePlc. Total sample size wasin terms of lack of retirement provision, with the5,200 adults. Fieldwork wasnumber of women over 50 without a pension undertaken between 4th - 11thnearly double that of men of the same age (28 per March 2012. The survey wascent versus 15 per cent). As the divorce rate in thecarried out online. The figures haveUK continues to rise, this group of women could been weighted and are representativebe exposed to hardship in retirement should theyof all UK adults (agedseparate from their partners. 18 years plus). 19 20. ProtectionProtection whenyou may need it morethan anything elseThe right peace of mind when faced with the difficulty of dealing with a critical illnessYou really need to find the right peace of mind when faced with the difficultyillness given in the policy, the cover would notof dealing with a critical illness. Critical illness cover is a long-term insurance pay out.policy designed to pay you a tax-free lump sum on the diagnosis of certainspecified life-threatening or debilitating (but not necessarily fatal) conditions,A range of factorsHow much you pay for critical illness cover willsuch as a heart attack, stroke, certain types/stages of cancer and multipledepend on a range of factors including what sortsclerosis. A more comprehensive policy will cover many more serious of policy you have chosen, your age, the amountconditions, including loss of sight, permanent loss of hearing and a total andyou want the policy to pay out and whether or notpermanent disability that stops you from working. Some policies also provideyou smoke.cover against the loss of limbs. Permanent, total disability is usually included inthe policy. Some insurers define permanent totalPredicting certain eventsadvice before considering replacing or switching disability as being unable to work as you normallyIts almost impossible to predict certain events thatyour policy, as pre-existing conditions may not be would as a result of sickness, while others see itmay occur within our lives, so taking out critical covered under a new policy.as being unable to independently perform threeillness cover for you and your family, or if you runor more Activities of Daily Living as a result ofa business or company, offers protection when youTop up your existing cover sickness or accident.may need it more than anything else. But not all Some policies allow you to increase your cover,conditions are necessarily covered, which is why you particularly after lifestyle changes such as marriage, Activities of daily living include:should always obtain professional advice.moving home or having children. If you cannotIf you are single with no dependants, critical illness increase the cover under your existing policy, you n Bathingcover can be used to pay off your mortgage, whichcould consider taking out a new policy just to top upn Dressing and undressingmeans that you would have fewer bills or a lump sumyour existing cover. n Eatingto use if you became very unwell. And if you are part A policy will provide cover only for conditions n Transferring from bed to chair and back againof a couple, it can provide much-needed financialdefined in the policy document. For a conditionsupport at a time of emotional stress. to be covered, your condition must meet the policy definition exactly. This can mean that somePursue a lessNot a replacement for income conditions, such as some forms of cancer, wont beThe illnesses covered are specified in the policy alongcovered if deemed insufficiently severe. stressful lifestylewith any exclusions and limitations, which may differThe good news is that medical advancesbetween insurers. Critical illness policies usually only Conditions not coveredmean more people than ever are survivingpay out once, so are not a replacement for income. Similarly, some conditions will not be covered if you conditions that might have killed earlierSome policies offer combined life and critical illness suffer from them after reaching a certain age, forgenerations. Critical illness cover cancover. These pay out if you are diagnosed with a example, many policies will not cover Alzheimers provide cash to allow you to pursue a less stressful lifestyle while you recover fromcritical illness, or you die, whichever happens first. disease if diagnosed after the age of 60. illness, or you can use it for any other If you already have an existing critical illness Very few policies will pay out as soon as you purpose. Dont leave it to chance makepolicy, you might find that by replacing a policyreceive diagnosis of any of the conditions listed in thesure youre fully covered, please contact usyou would lose some of the benefits if you havepolicy and most pay out only after a survival period, to discuss your requirements.developed any illnesses since you took out the which is typically 28 days. This means that if you diefirst policy. It is important to seek professional within 28 days of meeting the definition of the critical20 21. ProtectionHow much you payfor critical illnesscover will dependon a range of factors includingwhat sort of policy you havechosen, your age, the amountyou want the policy to pay outand whether or notyou smoke. 21 22. TAXATIONTaxationmattersDifferent investments have different tax treatmentIf you or your partner is a non-taxpayer, make sure that you are not payingunnecessary tax on bank and savings accounts. Avoid the automatic 20 per centtax deduction on interest by completing form R85 from your bank or productprovider or reclaim it using form R40 from HM Revenue & Customs.22 23. TAXATIONIndividual Savings Accounts (ISAs)You can withdraw up to 5 per cent each year of theOffshore is a common term that is used to describe aYou pay no personal income tax or capital gains taxamount you have paid into your bond without paying range of locations where companies can offer customerson any growth in an ISA, or when you take your any immediate tax on it. This allowance is cumulativegrowth on their funds that is largely free from tax. Thismoney out. You can save up to 11,280 per person inso any unused part of this 5 per cent limit can be carried includes true offshore locations such as the Channelthe 2012/13 tax year in an ISA.forward to future years (although the total cannot beIslands and Isle of Man, and other locations such If you invest in a Stocks and Shares ISA, any greater than 100 per cent of the amount paid in).as Dublin. Tax treatment can vary from one type ofdividends you receive are paid net, with a 10 per centIf you are a higher or additional rate taxpayer now investment to another and from one market to another.tax credit. There is no further tax liability. but know that you will become a basic rate taxpayer The impact of taxation (and any tax reliefs)later (perhaps when you retire for example) then UK shares and taxationdepends on individual circumstances. Information you might consider deferring any withdrawal from If you own shares directly in a company you may beabout tax rules is based upon our currentthe bond (in excess of the accumulated 5 per centliable to tax.understanding and is liable to change in the future. allowances) until that time. If you do this, you will not need to pay tax on any gains from your bond. DividendsNational Savings and InvestmentsAny income (dividends) you receive from your sharesYou can shelter money in a tax-efficient way withinOnshore investment carries a 10 per cent tax credit. Higher rate taxpayersthis government-backed savings institution.bond considerationshave a total liability of 32.5 per cent on dividend Certain events during the lifetime of your bond mayincome and the tax credit reduces this to 22.5 perUnit Trusts and Open Ended trigger a potential income tax liability:cent, while the 50 per cent additional rate taxpayersInvestment Companies (OEICs)have a total liability of 42.5 per cent reduced toWith aUnit Trust or OEICyour money is pooled n Death32.5 per cent after tax credit is applied.with other investors money and can be invested in a n transfers of legal ownership of part Somerange of sectors and assets such as stocks and shares, or all of the bond Sales of sharesbonds or property. n the maturity of the bond (except whole On When you sell shares you may be liable to capital of life policies)gains tax on any gains you may make. You have aDividend income from OEICS andyearly allowance, above which any gains are liable tounit trusts invested in shares On full or final 18 per cent tax. Special rules apply to working outIf your fund is invested in shares then any dividend cashing in of your bondyour gains or losses.income that is paid to you (or accumulated within theIf you withdraw more than the cumulative 5 per centfund if it is reinvested) carries a 10 per cent tax credit. If annual allowance, a tax liability is calculated on the Make the most of youryou are a basic rate or non taxpayer, there is no furtheramount withdrawn above the 5 per cent. personal income allowancesincome tax liability. Higher rate taxpayers have a total If you are a higher or additional rate taxpayer or the If you have a non-earning spouse, or civil partner, youliability of 32.5 per cent on dividend income and the taxprofit (gain) from your bond takes you into a higher can switch income-earning investments to help your taxcredit reduces this to 22.5 per cent, while the additional or additional rate tax position as a result of any of thebill. Everyone up to age 65 has a personal allowance ofrate taxpayers have a total liability of 42.5 per cent above events then you may have an income tax liability.8,105 in the 2012/13 tax year, rising to 10,500 betweenreduced to 32.5 per cent after tax credit is applied.As you are presumed to have paid basic rate tax, the ages of 65 and 74 and 10,660 at 75 and over. This the amount you would be liable for is the difference means you can earn this amount without paying tax.Capital gains taxbetween the basic rate and higher or additional rateNo capital gains tax is paid on the growth in your tax. The events may also affect your eligibility for Use capital gainsmoney from the investments held within the fund, but certain tax credits. tax allowances wiselywhen you sell, you may have to pay capital gains tax. Life assurance bonds held by UK corporate bondsEveryone can make up to a certain amount of profit Bear in mind that you have a personal capital gains fall under different legislation. Corporate investorseach year from selling an investment or propertytax allowance that can help you limit any potential taxcannot withdraw 5 per cent of their investment and without paying tax. Think about switching investmentsliability. After 23 June 2010 the rate of tax that applies defer the tax on this until the bond ends. to a spouses or registered civil partners name to takeon any gain over your allowance is either 18 per cent advantage of both of your allowances. nor 28 per cent depending on your taxable income. Offshore investment bondsAccumulated income Offshore investment bonds are similar to UK investment bonds above but there is one main difference. Make a big difference toAccumulated income is interest or dividendWith an onshore bond tax is payable on gains the value of your moneypayments which are not taken but instead reinvestedmade by the underlying investment, whereas with A little planning and some meaningfulinto your fund. Even though they are reinvested they an offshore bond no income or capital gains tax isdecisions now can make a big difference tostill count as income and are subject to the same taxpayable on the underlying investment. However,the value of your savings and investmentsrules as for dividend income and interest. there may be an element of withholding tax that later. To discuss how we could help you save cannot be recovered.and invest in the most tax-efficient way,Onshore investment bondsThe lack of tax on the underlying investment please contact us for more information.Investment bonds have a different tax treatment from means that potentially it can grow faster than oneother investments. This can lead to some valuablethat is taxed. Note that tax may be payable on aThe value of investments and the income from themtax planning opportunities for individuals. There is chargeable event at a basic, higher or additionalcan go down and up, and you may not get back asno personal liability to capital gains tax or basic rate rate tax as appropriate. much as you paid in. Tax benefits and liabilitiesincome tax on proceeds from your bonds. This is Remember that the value of your fund for both depend on individual circumstances and may changebecause the fund itself is subject to tax, equivalent to onshore and offshore bonds can fluctuate and you in the future.basic rate tax.may not get back your original investment.Past performance is not a guide to the future.23 24. Achieving acomfortableretirement.Do you need a professionalassessment of your situation tomake this a reality?If you are unsure whether your pension isperforming in line with your expectations, and thatyouve made the right pension choices dont leaveit to chance.Contact us to discuss these and other importantquestions, and well help guide you to acomfortable retirement. 25. Retirement There is a real opportunity for women usingcapped income withdrawalto receive more income fromtheir savings next tax year.This could be of benefit forthose who have seen themaximum annual incomewithdrawal from their pensiondecrease significantly inthe last few years as a resultof falling gilt yieldsand previouspolicy change bythis Government.Could your pension incomerise by as much as 33 per cent?Women need to be aware of their options to ensure they benefit from this opportunityWomen taking capped income from their pension could benefit from a significant income uplift this tax year. They mayneed to take action to achieve this and it is important they are aware of the potential opportunity that could exist.Boosting income highlight is that women may not benefit from thisCapped income withdrawalThere are two new factors which will potentiallyenhancement unless they take action. The first key There is a real opportunity for women usingboost income for women taking capped income issue to check if applicable to you is whether yourcapped income withdrawal to receive more incomefrom their pension savings, they are: current pension contract offers an annual review from their savings next tax year. This could be of 1. From 21 December 2012, gender neutralityfacility. If it doesnt (and the arrangement started benefit for those who have seen the maximumcame into effect. For women this means capped on or after 6 April 2006), rather than wait for theannual income withdrawal from their pensionincome withdrawal calculations are based on malenext statutory review period which could be twodecrease significantly in the last few years as arather than female income factors, which are higher.or more years away, you could consider one of theresult of falling gilt yields and previous policyThis means that from this date, when their pensionfollowing options (subject to the flexibility of yourchange by this Government.income is next reviewed, women will be able to take current arrangement): Its important that people are aware of themore income. - If you have money held in your pension whichoptions available to them. One simple check 2. Following the Chancellors Autumn Statementyou have not yet started to take income withdrawalswomen could do now is to confirm whether their2012 in December last year, the formula used to from, some of this money could be released and current capped income contract offers an annualcalculate maximum capped income withdrawal levels added to the income withdrawal fund. The incomereview facility. nwill see a 20 per cent uplift. This could lead to a rise in formula used on the new money would apply to thethe maximum amount of income available to pension entire amount in the income withdrawal fund - notsavers who went into income withdrawal, or had an just the new money moved across. Do you know what youincome review, on or after 6 April 2011. Pre 6 April - If all of your pension savings are already in the should be doing in the2011 the 20 per cent uplift was available.income withdrawal fund and you havent reached run up to retirement?your 75th birthday, you could top-up your pension When you retire, we can help you makeAnnual review facilityby making a new contribution. This new money can the most of your income. To compare theA combination of these two factors could result then be moved across to the income withdrawal fund, options and make the most of your money,in a rise of nearly 33 per cent to a womansand as above, the entire income will be recalculated please contact us for more information.maximum capped income. The important point to on the enhanced basis.25 26. RetirementWill yoube able toenjoy yourretirement? More over-55s are increasingly working past retirement age as living costs hit savings The UKs over-55s are increasingly working past the traditional retirement age as larger numbers fall back on their savings in later life to meet living costs, according to Avivas latest Real Retirement Report. The report examines the financial pressures faced by the UKs three ages of retirement: 55-64s (pre-retirees), 65-74s (the retiring) and over-75s (the long-term retired).26 27. RetirementProlonged working boosts incomeA ll 55 64 65 74Over 75sAverage monthly income for the over-55s hasQ4 2010increased by just 109 in the last two years (from 15,26211,903 21,4278,9981,335 Q4 2010 to 1,444 Q4 2012). The retiringQ4 2011have driven this trend, gaining 166 overall, while11,1536,66521,0708,498monthly incomes have risen a mere 9 for pre- Q3 2012retirees and fallen by just 1 for the long-term retired 18,36412,351 30,62413,332(see table for details). Q4 2012 A ll 55 64 65 74 Over 75s14,54413,873 18,7488,748 Q4 2010 1,335 1,4801,3181,181Dipping into savings The need for the long-term retired to dip into their Q4 2011 savings to maintain their standard of living has seen 1,285 1,2711,3881,125 the percentage with less than 2,000 saved grow from Q4 2012 23 per cent (Q3 2012) to 30 per cent (Q4 2012). 1,444 1,4891,4841,180In addition, the amount retirees save is actually down by 28 per cent from Q1 2012 although they Differencehave increased marginally year-on-year (up 7 per + 109 +9 +166 -1 cent in Q4 2012 compared to Q4 2011). The typical over-55 puts away just 28.67 or 1.99 per cent of theirThe income boost for the retiring has been driven by monthly income: a mere 1.77 more than the samemore people working past the Default Retirementtime last year.Age, which was phased out in 2011. Since the RealRetirement Report launched three years ago, theChoice or necessitypercentage of this age group who list wages as part of Whether its through choice or necessity, the fact thattheir income has risen from 18 per cent to 23 per cent people are working for longer shows how vital it is(Q4 2012). to work hard to achieve financial stability, so you can The report also shows the growing importance of enjoy your retirement without the constant worryworkplace benefits in retirement. With the effects ofabout making ends meet.auto-enrolment yet to kick in for future generations, The growth of income among the retiringpeople aged 65-74 (47 per cent) are still more likely to population is a clear sign they are taking thedraw income from an employer pension than thoseopportunity to prepare for the future, and prioritiseaged 75 and over (37 per cent).their outgoings to clear existing debts. And while the long-term retired may find their savings dwindle inExpenditureretirement, its important to remember that, with theMonthly spending by the UKs over-55s has actually right advice, there are often alternative ways to copefallen in the last year, despite annual inflation of with rising living expenses and unforeseen costs. n2.74 per cent (Q4 2012), with average outgoings of1,231 in Q4 2012 down from 1,269 in Q3Achieve your desired2012 and 1,300 in Q4 2011. The typical over-55 has cut back on non-essentialretirement incomeitems and prioritised debt repayment, travel, and fuelIf you have concerns about your retirementand light. Spending on entertainment, recreation andand want to find out how much you shouldholidays has fallen by 19 per cent in the last quarter, be saving to help achieve your desiredwhile clothing and footwear has dropped by 13 per retirement income, please contact us forfurther information we look forward tocent and leisure goods by 10 per cent. Meanwhile,hearing from you.spending on debt repayment has increased by 8 percent and almost matches monthly food bills(177.58 compared with 189.45). The Real Retirement Report was designed and produced by Wriglesworth Research. As part of thisSavings more than 14,600 UK consumers aged over 55 wereThe average saving pot for over-55s has fallen byinterviewed between February 2010 and Novemberalmost 4,000 in the last quarter (14,544 Q4 2012. This data was used to form the basis of the2012 compared with 18,364 Q3 2012). This remainsAviva Real Retirement Report. Wherever possible, thelarger than a year ago (11,153 Q4 2011), but whilesame data parameters have been used for analysispre-retirees savings have reached their highest level but some additions or changes have been made assince the report began, total savings have decreasedother tracking topics become apparent. Populationamong the two older age groups, both in the lastprojections from ONS.quarter and in the last two years (see table for details). 27 28. Wealth creationDo you needgrowth, incomeor both?Preparing for whatever economic ups and downs might be aheadThe volatility in global markets over the past four years has tested the nerves of even the most experienced investors,making it a difficult time for individuals who rely on income from investments for some or all of their needs. The searchfor inflation-beating income is forcing many investors to move money out of cash accounts and into investment funds,with the aim of achieving a rising level of income.H ow should you decide between Balance between investment portfolio and switch from growth assets growth and income investments? the different asset types to income as your investment needs change. n Much will depend on your Wealthier investors, who can cope with a little investment time frame and what fluctuation in their income and capital, could lookyou need the investment to provide for you. to include corporate bonds, property and dividend-What is yourWhen considering the answer, its important paying shares. Bonds and property traditionally pay financial personality?not to ignore the concept of total return. Totalhigher yields than equity income shares, but equities There are many facets to your financialreturn looks to combine income with capital have provided the greatest opportunity for capitalpersonality and many ways to generategrowth to achieve the best overall return. Onegrowth and growth of income. A balance betweenboth growth and income from yourway of achieving this is with equity income the different asset types should provide the best investments. To discuss the optionsavailable to you or to review your currentfunds, where investors saving for retirementchance for a reasonable and growing income.provision, please contact us.could reinvest the income until the day theyIncome-paying equity, bond and property fundsretire and then elect to have it paid to them can be a good investment for those investing forinstead, producing an income without the costscapital growth too, as its simple to arrange forLevels and bases of and reliefs from taxationof completely overhauling their portfolio.income to be reinvested.are subject to legislative change and their valueIndex-linked investments, such as certain gilts and Whatever your preference, if you hold a variety of depends on the individual circumstances of theNational Savings certificates, can protect againstinvestments, both growth and income, you should investor. The value of your investments and incomeinflation eroding capital and income, but in todaysbe better prepared for whatever economic ups and can go down as well as up and you may get backlow-inflation world investors need to compare the downs might be ahead of you. As your financial less than you invested.total return to that available from an ordinary gilt or situation changes over time, you should also besavings account.prepared to make the necessary adjustments to yourPublished by Goldmine Media Limited,Basepoint Innovation Centre, 110 Butterfield, Great Marlings, Luton, Bedfordshire LU2 8DLArticles are copyright protected by Goldmine Media Limited 2013.Unauthorised duplication or distribution is strictly forbidden.