Bootneck Money

07/08/2023

Heading to Exeter on Friday to see a client. Any connections who want to discuss their situation, please pm me.

21/05/2023

Please sponsor Tim Mitchell. Who will be dragging himself through more than three thirty milers along the South Downs Way.

Help Tim Mitchell raise money to support RMA - The Royal Marines Charity

18/02/2022

I have been working for a former RM on his pension with STM Malta. Research showed annual charges of 4.5%! Not surprisingly, there has been little growth in 7 years. The plan is now about to be moved to the UK and total charges reduced to 1.5%.

23/08/2021

Are ESG funds all they are cut out to be??

In ESG part I we discussed the merits of ESG investing, largely that your pension or investment money can alter corporate behaviour to induce positive social and environmental changes in society. Providing a financial incentive for companies adopting greener practices is certainly a step in the righ...

23/07/2021

Understanding Pension Drawdown
With the declining popularity of defined benefit schemes, a flexi-access drawdown plan might be the best way you can access your hard-earned pension savings.
For those with a “defined contribution” pension, a pension drawdown plan allows you to withdraw however much you want, whenever you want, while keeping the rest of your money earning a healthy return.
You will typically get to withdraw the first 25% of your pension pot as a tax-free lump sum (assuming your pension is within the lifetime allowance).
What you chose to do with the rest of your savings is down to you. However, any income you now withdraw will be subject to income tax rates. There are generally 3 options:
• Withdraw a modest annual amount each year as your pension income
• Purchase an annuity
• Withdraw the rest in large lump sums whenever you need it – note that this method may incur significant income tax charges
So far so good – so what’s the catch?
What are the risks?
Your pension pot under a flexi-access drawdown plan will mostly be invested in the investment markets, making your savings vulnerable to market fluctuations.
Although this will likely offer generous rates of return over a longer time period, at any given point in time your pension pot can very easily go down as well as up.
Growth is not guaranteed. One positive is that those with cold feet can at any time purchase a lifetime annuity for a guaranteed income.
Historically, drawdown pensions invested in the stock market have earned very healthy returns. A skilled (or well-advised) investor with a large pension pot may be able to pay themselves an income entirely with fund growth, making their pension savings self-sustainable.
For those with a lower appetite for risk, many pension providers offer different investment packages that provide greater safety but, consequently, lower returns.
Alternatively, you can consult with your financial advisor to personalise your investment decisions to best suite your own needs.
Is it the best option?
As with most retirement decisions, what is best for someone else may not be best for you.
There are certainly many aspects of drawdown pensions which make them preferable to a lifetime annuity. For example, drawdown pensions (as opposed to most lifetime annuities) allow you to pass down your pension savings to your loved ones.
However, there are circumstances where you may prefer an annuity:
• If you are sick you may be offered a generous annuity
• You prefer a guaranteed income
• You do not feel comfortable with investing your pension savings
• You do not want to manage your own investments
Which retirement option is best for you depends a lot on your situation and what other sources of income you’re likely to have in retirement.
For an overview of all your options, book an appointment with Mark today:
Email: [email protected]
Phone: 01252 713645 and 07500 720938

12/07/2021

Lifetime Allowance: Everything you need to know

Pensions are tax advantaged investments and the lifetime allowance limits the amount that can be built up. Total pension savings exceeding the current limit of £1,073,100 will be taxed – a Lifetime Allowance.
You may decide to withdraw any excess savings as
• a cash lump sum. These excess savings will be taxed at 55%.
• A pension income. These are taxed at 25% PLUS income tax at your highest rate.
For example, if you have pension savings totalling £1,573,100, withdrawing all excess savings (£500,000) as a cash lump sum would mean you only take home £225,000:
£500,000 x 45% = £225,000
These tax charges could mean significant costs to managing your pensions.

When will your savings be taxed?

Simply having pension savings worth more than the lifetime allowance will not trigger a lifetime allowance charge. Pensions are only tested against the lifetime allowance when you take money out. There are many times when this happens but the most typical are:
• Reaching the age of 75
• Withdrawing pension savings
• Passing away before the age of 75
A full list of these events can be found here: https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm088100

A withdrawal simply triggers a test to see if your withdrawn benefits exceed the lifetime allowance. You could make many withdrawals without suffering an additional tax charge.

It may be possible to apply for a higher lifetime allowance, depending on your circumstances.
To see if you are eligible, get in touch with your financial adviser!

Should you avoid surpassing the lifetime allowance?
Considering the extortionate tax rates on excess pension savings, you may wish to slow down your pension contributions to avoid any charges.
There are many scenarios in which easing contributions may prove counterproductive:
• Illness or redundancy may force you to retire early, in which case you will have needlessly stopped saving tax-efficiently.
• If your income is between £100,000 - £125,140, it is more tax-efficient to contribute up to £25,140 into your pension to avoid losing the personal allowance.
• Even if you restrict contributions, you may reach the limit anyway, simply through growth. Take someone that stops all contributions to their £800,000 pension pot offering a 5% return. Their pension savings will breach the lifetime allowance limit in just over 6 years.

Ultimately, what you decide to do with your pension savings is personal and often specific to your situation.

Navigating the complex world of pension tax relief is a lot easier with a qualified financial adviser, so do not hesitate to get in touch!

You can contact mark Beresford by emailing [email protected], or calling 01252 713645 or 07500720938

25/05/2021

With a third of properties being sold above the asking price, many more people may need to consider inheritance tax. The IHT threshold, at which this tax will be paid by an estate is now frozen. With increases in house and other asset prices, it is becoming more likely that you may pat this tax on your death, without some careful planning.

One in three (31%) clients are likely to be affected by the frozen inheritance tax thresholds, according to a survey of financial advisers from Octopus Investments.

18/05/2021

Cashing Pensions Willy-Nilly Can Seriously Affect Your Wealth

Never cash in a pension without taking personal financial advice. If you do, you will probably trigger a little-known tax rule known as the Money Purchase Annual Allowance (MPAA). The MPAA limits how much you can put into a pension subsequently, and how much your employer can put in on your behalf, to a total of £4000pa rather than the normal £40,000pa annual allowance.

Now I’m sure some people on here will say “This is irrelevant – who can afford to put £40,000 into a pension?” It’s certainly true that few people can afford to fund a £40,000 contribution year-in year-out but we come across lots of people of fairly modest means who have plenty of cash savings in the building society but little or nothing in their pension.

If somebody is earning £40,000 and has £32,000 in the bank, that £32,000 can be turned into a pension contribution to get them an immediate tax relief add-back of £8000, making their £32,000 up to £40,000 instantly with nil risk. If they maybe want to retire a year or two before their state pension age, this kind of planning can make all the difference.

28/04/2021

The importance of diversification, investing for the long term and not panicking when the going gets rough.

Investor Views: Retired investor David Ayres has built up a large investment portfolio using diversified global funds

25/11/2020

There a number of tenets that hold true about investing. here is a brief article that talks about some of them.

Today I had the pleasure of listening to professor Elroy Dimson who is the Emeritus Professor at the London Business School and Chairman at the Centre for Endowment Asset Management, Cambridge. I have also read the article written by him , David Chambers and Charikleia Kaffe in which they studied th

20/08/2020

When is the best time to change your portfolio? A little tweak here and there, or a significant change because the markets seem to be moving. Kenneth French shares his thoughts on why this may not be a good idea for the majority of investors and why timing the markets just may not work.

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18/08/2020

Very powerful film.

How do the bereaved pick up the pieces when a loved one doesn't return home from war? Big Brother follows the journey of sibling Jess in the aftermath of los...