Pensions warning for women

Women are likely to struggle in old age as a “part-time pensions penalty’ means they will be £106,000 worse off than men at retirement, a report has warned. Working fewer hours, either to raise a family or care for elderly parents, results in a 47% reduction in women’s pension wealth compared with men by their late 50s. This has a bigger impact than the gender pay gap, which cuts women’s pension savings by 28%, it was revealed.

But worryingly, three in 10 part-time women workers do not believe that their hours will affect their pension pots. Failure to face up to this could see millions cast into poverty in retirement, experts warn. By their 60s, women typically have £51,100 – just a third of the average man’s £156,500 pot. Yet women live on average 3.7 more years than men, meaning their pension needs to last longer.

For women to draw the same pension income throughout their retired lifetime, they would need to have saved between five and seven percent more by retirement age. It has been suggested that if we introduced a carer’s top-up for pension contributions and lowered the [workplace pension auto-enrolment] threshold so that more low-paid women in part-time work could benefit, that could make a real difference.

Insurance ‘stealth tax’ on the rise

Britons are paying the taxman record amounts despite the latest headline-grabbing giveaways. Details of HMRC’s tax receipts published show they received £622.8bn in personal taxes for the 2018-19 tax year – up almost £29bn in just 12 months. Income tax is Britain’s most expensive personal tax – raking in £190.5bn.
Despite rises in the personal allowance, the taxman made £27bn more from income tax alone in the last tax year than it did in 2014-15. Second priciest is National Insurance, earning HMRC £137.2bn, followed by VAT at £131.7bn. Capital gains tax was up almost £1.5bn in a year – to £9.2bn – largely because of landlords selling off their bricks-and-mortar assets after a slew of changes (like the removal of tax relief on mortgage interest) started hitting them in the pocket.
Of particular note, the government collected £6.3bn of Insurance Premium Tax (IPT) in the year ending 30 June 2019 according to figures from accountancy firm, UHY Hacker Young. The organisation calculated that this was a 7% rise on the year before. This means IPT receipts have more than doubled since £3bn was gathered in 2013/14 year and commentators believe IPT is becoming the Treasury’s golden goose providing a quick and easy way to raise money.

England and Wales High Court Allows Trustees to Treat Illegitimate Child as Beneficiary

Trustees of a very large family settlement have gained approval from the courts to include as a beneficiary a child born out of wedlock.
The case in question involves a multi-million pound family trust which was set up in 1968 for the benefit of the settlor’s children, remoter issue and their respective spouses.

According to the common law rules of construction, a child is legitimate only if the child is born or conceived in wedlock. Section 15(1)(a) of the Family Law Reform Act 1969, which came into force on 1 January 1970, changed this position however only for trusts which came into being after that date.

One of the beneficiary’s three children was born a month before their wedding took place and because the trust was set up prior to the law coming into force is not covered by the act.

The trustees were uncertain whether she qualifies as a beneficiary under the current trust, as the trust appointment does not contain any provisions concerning illegitimate children.

The trustees were proposing to execute a Deed of Appointment creating a new trust for a class of beneficiaries described as the “Discretionary Beneficiaries” defined as “…the children and remoter issue (whether legitimate, illegitimate, legitimated or adopted)….”

The trustees approached the court (a) to confirm that they had power to take the step they proposed to take and (b) to seek the court’s blessing on their proposed course of action.

The court weighed up all the information including a letter of wishes written by the settlor confirming it was what he had always intended.

The court was satisfied that the trustees have the power to execute the proposed appointment and that to do so would be a proper exercise of their power.

Weekly Market Commentary 4th October 2019

Boris Reveals Brexit plans
This week we saw Boris Johnson outline his Brexit plans to the EU appeasing the Brexit hardliners while drawing frosty reactions from both the EU and Ireland. The new plan will see the removal of the backstop which Theresa May negotiated with the EU, only for it to be shot down three times in parliament. Instead we will see a prior borderless proposal between Ireland and Northern Ireland (NI) replaced by two borders. One between NI and Ireland and another with NI and the rest of the UK.

In reality Boris Johnson’s plans will most likely to be shot down by the EU. Implementing controls of any form goes against the EU’s frictionless trade mantra. And the EU isn’t keen on a technological border either having previously rejected a tech led customs declaration. The chances of a No Deal come deadline day continues to rise.

Japan: Sales tax comes into effect
This week Japan’s delivered on its long-awaited consumption tax hike from eight to ten per cent. The increase will apply to almost all goods and services bar most food items. Past hikes have had had an adverse impact on the economy as shoppers rushed to buy items before the deadline and subsequently cut back on spending sending Japan tumbling into a recession (2014). This time the government promises it will be different. New measures will include a rebate for some items if its paid for by card or other electronic payments.

While the timing of the tax cut amidst slowing growth and manufacturing weakness is inauspicious, Prime Minister Shinzo Abe is willing to potentially take a short term hit in order to help ease the enormous debt burden (world’s largest) as well as improving the social safety net. Currently a quarter of the Japanese are aged 65 or older and it is hoped that some of the additional revenues generated will be used to fund the elderly.

Eurozone: Germany Teeters on the Brink of Recession
Given the continued global headwinds it was unsurprising to see Germany’s manufacturing readings remain weak. The manufacturing PMI gauge fell from 43.5 in August to 41.7 – its lowest level since 2009. GDP growth continues to be revised downwards and inflation levels are falling. The two factors that may help Germany avoid a recession is that construction investment is rising, and a tight labour market and favourable interest rates has seen private consumption tick upwards.

The wider eurozone saw inflation rates fall by 0.1 per cent to 0.9 per cent for the month of September – well below the ECB’s two per cent inflation target. The ECB implemented a range of monetary stimulus packages last month, including slashing the key interest rate and restarting quantitative easing in order to kick start inflation. However, it’s important to distinguish the fact that core inflation (excluding volatile components like energy) actually grew from 0.9 to 1.0 per cent. Headline inflation fell because of cheaper energy prices.

Global; Corporate Bond Issuances Rises in September
Investors on the hunt for yields moved away from sovereign bonds after last summer’s rally and into corporate bonds. More than $430bn of corporate debt was raised globally in September with the bulk of it issued by US companies. Dollar-denominated debt accounted $159bn of bonds sold.

The central banks dovish tilt off the back of global uncertainty and muted growth led to lowered interest rates which has compressed sovereign yields. In turn this has made corporate bond yields attractive leading to a surge in corporate bond issuance during September. The firsttime issuance reached around $300billion in a month. Among the companies capitalising on favourable rates where the likes of Wirecard, Apple and Disney.

Help to Buy ISAs – statistics

The Help to Buy: ISA scheme was launched on 1 December 2015 with accounts available through banks, building societies and credit unions. The scheme enables people saving for their first home to receive a 25% boost to their savings from the Government when they buy a property of £250,000 or less (with a higher price limit of £450,000 in London). This means that for every £200 saved, first-time buyers can receive a Government bonus of £50. The maximum Government bonus is £3,000.

Government statistics show that:
Since the launch of the Help to Buy ISA, 234,074 property completions have been supported by the scheme.
310,658 bonuses have been paid through the scheme with an average bonus value of £920.
The highest number of property completions with the support of the scheme is in the North West and Yorkshire and The Humber, with the lowest number in the North East and Northern Ireland.
The mean value of a property purchased through the scheme is £173,470 compared to an average first-time buyer house price of £190,999 and a national average house price of £226,798.
The median age of a first-time buyer in the scheme is 28 compared to a national first-time buyer median age of 30.
The Help to Buy ISA is available to UK residents over the age of 16 for a temporary period of four years, which started on 1 December 2015 and ends on 30 November 2019.

Help to Buy ISA account holders can, however, continue saving into their account until 30 November 2029 when accounts will close to additional contributions. The Help to Buy ISA Government bonus must be claimed by 1 December 2030.

The Top 1%

How much taxable income would take you into the top 1% of UK income tax payers?
The answer may be smaller than you think: to join that select band of about 310,000 taxpaying individuals, you need taxable income of at least £160,000 a year. It is only when you get to the top 0.1% tier that the figure reaches £650,000.
As part of its research into inequality, the Institute for Fiscal Studies (IFS) has issued a briefing note on that top 1%, a prime target market for financial services providers (and HMRC). The key findings of the IFS were:
To be in the top 1% of adults by income (as opposed to the top 1% of income tax payers) requires a minimum pre-tax income of £120,000. That covers 540,000 people.
As might be expected, the top 1% of income tax payers are disproportionately male, middle-aged and London-based. Almost half of the top 0.1% are based in London and 89% are male.
The top 1% of income tax payers has become more geographically concentrated since 2000. Half of all of the top 1% can now be found in just 65 (out of 650) parliamentary constituencies. In 2000/01, 78 constituencies were required to reach the same halfway mark.
Partnership and dividend income account for over a quarter of the total income of the top 1%, and over a third of the total income of the top 0.1%. Those on lower income have a much smaller share of income in these two categories. As the IFS notes, partnership and dividend income are taxed more favourably than normal salaries – a de facto policy choice in favour of business owners.
The top 1% of income tax payers is not a stable group. The IFS found that a quarter of those in the top 1% in one year disappear in the next. After five years, only half will still be in the top 1%. Past performance is not necessarily…
A corollary of the turnover of the top 1% is that someone has a much higher chance of being in the top 1% at some point in their lives than they do in any single year. For example, 3.4% of all people (and 5.5% of men) born in 1963 were in the top 1% of income tax payers at some point between 2000/01 and 2015/16.

Reasons to Make a Will

This Technical Connection’s video blog gives reasons to make a will dealing with your specific wishes and ensuring your will is legally valid – https://youtu.be/a4NPqZVP80M

UK charity relief statistics

HMRC has published the UK charity tax relief statistics. The statistics broadly show:
For 2018-19 the total amount of tax relief to charities is estimated to be £3,790m which is an increase of over £100m since the previous tax year.
The total amount of tax relief for individuals is estimated to be £1,530m for 2018-19 which is an increase of £30m on the previous tax year.
For reliefs to individuals following a charitable donation the largest contributors in 2018-19 continued to be Inheritance Tax Relief (£890m) and Higher Rate Relief (£520m).
In 2018-19, over 70,000 charities received £1,350 million in Gift Aid
The number of individuals declaring a donation via Self Assessment has plateaued in recent years at about 1.2 million. The total value of their donations has grown overall since 2007-08 and every year since 2011-12, with a value of £3,179m in 2017-18.