An expected ban on lucrative “no transfer, no fee” incentives paid to pensions advisers will not happen until next year at the earliest after the financial regulator said it needed more time before making a ruling. Currently, anyone looking to transfer a defined benefit fund to a personal pension must seek advice from a regulated adviser if their fund is valued at more than £30,000. The adviser either levies an upfront fee or enables the client to pay from their pension fund if they choose to go ahead with the transfer. This year The FCA said that contingent charging, in which advisers are paid only when they persuade savers to move out of final-salary company schemes, was potentially harmful to customers. On Thursday it said that it had sought views and because of comments needed to carry out more work. Any proposals to change the rules will be consulted on “in the first half of 2019”.
Based on the Annual CPI to September 2018 of 2.4% the Lifetime Allowance for 2019-20 will be £1,055,000. This figure was confirmed in the Budget 2018 documentation.
House prices fell at the fastest pace since April last month, figures from mortgage lender Halifax showed on Friday, though other data pointed to a smaller slowdown, six months before Britain is due to leave the European Union. House prices dropped 1.4% on the month in September after a 0.2% fall in August, a bigger drop than forecast by most commentators and economists. On the plus side, a low supply of new homes and existing properties for sale, combined with low mortgage rates and high employment, may continue to prop up house prices. Despite the data (and it is worth contrasting with Nationwide’s data that showed the market had picked up in August) commentators, in the main, do not think that the Bank of England’s rate increase in August has, in any way, pushed the housing market over the edge.
The £50,000 higher rate threshold, accompanied by a £12,500 personal allowance, has some interesting hidden consequences. The Chancellor’s announcement that in 2019/20 the personal allowance (PA) would rise to £12,500 and the basic rate band to £37,500 came as something of a surprise. Prior to the Budget there had been suggestions he might even have frozen both at this year’s level. With the benefit of a few days hindsight since the Budget, the consequences of the increases and the resultant £50,000 higher rate threshold (HRT) are beginning to emerge. Here are a few:
Reaching the 2017 Conservative manifesto targets for PA and HRT one year early has only a one-off cost, assuming they would anyway have been met in 2020/21. That is because there will be no increase to either PA or HRT in 2020/21, meaning that from then onwards the Chancellor is working from the same PA/HRT baseline for CPI indexation.
The HRT increase is automatically carried across to the upper earnings limit for full rate NICs. An employee earning £50,000 a year will save £860 a year in tax from the PA/HRT uplift in 2019/20 but will simultaneously lose £340 – 40% – in extra NICs. A £50,000 HRT now means that theoretically the threshold at which the high-income child benefit charge is triggered matches the end point for basic rate tax. Thus, someone with two children could be in the position where their marginal income tax rate (ignoring NICs, a de facto tax) goes from 20% at £49,999 to 57.89% from £50,000 to £60,000.
While the effect for an additional rate taxpayer is the same as if all income between £100,000 and £150,000 were taxed at the old additional rate of 50%, the overall result is better for the Exchequer because there will be more people in the first £25,000 of that band, paying a rate 10% greater. Unless a decision is taken to the contrary, the upper end of ‘band earnings’ for auto-enrolment will rise to match the HRT at £50,000. Allowing for the lower earnings threshold rise of £104 (to £6,136), that means the band will widen by £3,546 (8.8%) on an annual basis, just as the overall minimum contribution rate steps up from 5% to 8%.
Worst hit will be someone earning £50,000 as their larger contributions will also come with 20% rather than 40% tax relief in the next tax year.
The lifetime allowance (LTA), which governs how much can be saved into a pension over a lifetime before tax charges apply, is expected to rise to £1.054m, up from the current £1.03m, effective from April 2019. Although in some respects it is a relatively small change, it could make a not insignificant difference for savers. The limit won't just affect the wealthiest as people on middle incomes who have been saving into a Defined Benefit pension for a long time can also be caught by the tax hike that comes with surpassing the allowance. It goes without saying that, for people approaching the threshold, financial advice is particularly important.
The founders of the Cannock-based Wealth Design Group have launched a new company ‘Wealth Design Marketing Limited’. This is a joint venture between the Wealth Design Group and Hannah Price, who has been working on the firm's marketing since June 2015. The new company will deliver on initiatives within the Group and externally delivering branding, marketing and training to other professional services firms.
The decision to branch out seemed a natural fit by Wealth Design’s founders David Philips and Steve Bennett, pictured with Hannah. Creating a well thought through client experience supported by a strong brand has been key to the growth and success of the Wealth Design Group. The brand communications helped to reassure and retain clients when they acquired a Streetly-based firm run by a retiring IFA, Robin Hunter, Hunter & Co (IFA) in 2016.
Having their own inhouse marketing company will enable the Group to differentiate themselves by having a continuous focus on both internal and external communications and develop their brand and client experience. Wealth Design Marketing is working on projects for advisory firms that are currently rebranding due to acquisitions and those who want a proactive communication strategy to raise their profile with younger generations.
Wealth Design has produced a comprehensive Budget Overview. In it, we look at the impact of the main changes on various groups of taxpayers. The groups include investors and savers, estate planners, business owners, employees, retirees and parents. The categorisation is inevitably rather arbitrary, so it pays to read all sections. Similarly, several of the tax planning points are universal. Please read the guide here
Based on the Annual CPI to September 2018 of 2.4% the Lifetime Allowance for 2019-20 will be £1,054,800.
Regulations state that the previous Lifetime Allowance will be:
(a) increased by the percentage increase in the index, and
(b) if the result is not a multiple of £100, rounded up to the nearest amount which is such a multiple.
The index referred to above is CPI.
The above figure is expected to be confirmed as part of the Budget and a statutory instrument passed to bring it into force.
The Pensions Regulator has introduced a new supervision regime, which includes one-to-one supervision of 25 of the largest schemes in the UK and will aim to monitor all schemes more closely. The watchdog will be working more proactively with schemes. A variety of new interventions are designed to address risks more quickly, clearly set out its expectations and take action where necessary. The changes are part of its pledge to be clearer, quicker and tougher. It comes following a major review of its regulatory approach, which the regulator published in July last year.
Lawmakers have backed calls for greater regulation of cryptocurrency such as bitcoin to bring an element of control to a market that more resembles the Wild West. In a report on digital currencies published Wednesday, the Treasury Select Committee called for regulations to protect consumers and prevent money laundering. The report highlighted a rapidly emerging industry that’s been troubled by wild price swings, allegations of fraud and worries it could be used to finance criminal or terrorist activity. In the report, the committee said the British government has taken an ambiguous position on regulation and argued that the industry’s voluntary approach is inadequate. As a result, it said, investors have been left open to risks including volatile prices and hacking vulnerabilities.