Budget Roundup

The circumstances surrounding the 2021 Budget are nothing short of extraordinary. The challenges businesses and individuals have faced in recent months are unprecedented but – thankfully – the Chancellors Budget contained no major shocks.

This pandemic has a rather different dynamic compared to other economic downturns which the Government have tackled before. Normally the Government would tighten its belt, but in this instance Government measures are being relied upon to support the economy and hold it back from complete collapse. The repeated lockdowns have pushed Government spending to exceptional levels – unseen outside of wartime – the announced extension of this Covid-19 support until September will increase the scale of this spending further.

The question we are asking here at Generation Financial Services, is whether the measures announced by the Chancellor will be enough to sustain the UK’s economic and financial market recovery. The below gives a short rundown of the Budget.

Income tax

The Chancellor announced that the government will increase the Personal Allowance to £12,570 and the basic rate limit to £37,700. The higher rate threshold (the Personal Allowance added to the basic rate limit) will increase to £50,270 for 2021 to 2022.

The forthcoming changes to the Personal Allowance will apply to the whole of the UK. However, changes to both the basic rate limit and the higher rate threshold, will apply to non-savings, non-dividend income in England, Wales and Northern Ireland, and to savings and dividends income in the UK. Income tax rates and thresholds on non-savings, non-dividend income for Scottish taxpayers are set by the Scottish Parliament, not the UK Government.

Capital Gains Tax

The Capital Gains Tax annual exempt amount will remain at £12,300 for individuals, personal representatives and some types of trusts for disabled people and £6,150 for trustees of most settlements for the tax years until 2025 to 2026.

Inheritance tax

  • Nil-rate band to remain at £325,000
  • Residence nil-rate band to remain at £175,000
  • The residence nil-rate band taper will continue to start at £2 million

In short this means that qualifying estates can continue to pass on up to £500,000 with the qualifying estate of a surviving spouse or civil partner being able to pass on up to £1 million without an inheritance tax liability.

Corporation tax

The Government have introduced a small profits rate of 19% for financial year April 2023. The small profits rate will apply to profits of £50,000 or less.

Savings

  • The adult ISA annual subscription limit will remain unchanged at £20,000
  • The annual subscription limit for Junior ISAs will remain unchanged at £9,000
  • The annual subscription limit for Child Trust Funds will remain unchanged at £9,000
  • A new Green National Savings and Investment product is to launch, providing savers with an opportunity to invest in an environmentally conscious manner

State pension

The state pension will increase by 2.5% from 6 April 2021. For State pension recipients, who are entitled to the full level of new single-tier state pension their payments will increase by £4.40 per week from 6 April 2021.

Lifetime pension allowance

The pensions lifetime allowance has been frozen at £1,073,100 until April 2026. This doesn’t stop you savings, you can still save as much as you want to in your pension during your working life – but if it exceeds a total amount (the lifetime allowance), you could face a tax charge when you come to access this money.

If you would like to know what these changes mean for your personal savings and investments, get in touch with one of our experts.

It is more complicated when the person needing to prepare isn’t yourself, but is your parent, but often it is even more prudent.

Billy’s Story

Billy has been married for 30 years. He is proud that he has always managed the family’s money. But since his accident, Beilly is not able to walk unaided and the pain makes it had to focus, the medication to control the pain affects his concentration and he doesn’t trust his instincts anymore. His wife, Carole, feels exhausted and stressed. Of course, she is worried about Billy’s health. But, on top of that, she is feeling out of her depth as she doesn’t understand how to manage the finances and is scared of missing payments.

John’s Story

In another village, 74-year-old John lives alone. One morning, he fell in the shower and broke his leg. He spent a week in the hospital and 2 months in a rehabilitation centre regaining his strength. Even though his daughter lives 50 miles away, she was able to take charge of her father’s finances right away, because several years ago, John and his daughter made a plan about what should be done in the event of a medical emergency.

Long before his accident, John got all his papers in order, ensuring his daughter knew exactly where to find them. He gave his daughter lasting power of attorney over his finances, hoping she would never need to use it. He ensured that his doctor had written permission to talk with her daughter about his health and insurance claims.

In contrast, Billy always dealt with family money matters, he never talked about the details with Carole as he didn’t want to trouble her and thought he was looking after her. Only Billy knew where he kept their important papers, Billy never expected that his wife would have to take over, but in this instance his lack of planning has made a difficult situation even more challenging for Carole.

As these examples illustrate, prior planning really can make all the difference.

But what is important paperwork?

The answer to this question can vary from family to family, but as a starting point try to include.

  • Names and phone numbers relatives, doctors, lawyers, and financial advisors
  • Medications (keep this regularly updated – date each amend)
  • Location of living will and other legal documents
  • Financial Records
  • Insurance information (life, health, long-term care, home, car) with policy numbers and contact names and phone numbers
  • Names of your banks and account numbers
  • Location of most up-to-date will with an original signature
  • Mortgages information
  • Credit and debit card names and numbers

But where should I begin?

The first step is to gather your important papers and copies of legal documents in one place. Where they are kept is up to you, the important thing is to make sure you tell someone where they are kept in case of an emergency.  If you don’t have close family member, choose a friend, a neighbour, or consult a lawyer. It is important to check each year to see if anything needs adding or updating.

It is bound to be uncomfortable, but it is important to have the difficult discussions with your loved ones about medical decisions, end-of-life preferences, and what you want to happen to your assets before anyone asks them. Forewarned is forearmed.

What if my affairs – or those of my parents – aren’t in order?

You will not be alone if you discover you aren’t as prepared as you thought you were, or that you don’t have the paperwork you need. Finding these issues out now is the whole point of this endeavour.

If you discover that you don’t have the cover you thought you did, or that your cover has lapsed that is also a good thing. It is better to find out when you have a chance to fix it, not at the point you need to draw upon it.

If you are feeling overwhelmed and would like to receive an independent and unbiased view of your affairs, you can speak to a member of our friendly team who will be happy to conduct an audit to highlight any concerns.

 

I believe that dreams are very important. But if you want to achieve your dreams, you need to set financial goals. These goals can be both short term and longer term and provide a clear direction and guide. I always set myself goals, both in business, finance and in other areas of my life. This helps me to ensure I keep striving to be better at everything I do. It also helps with tracking my progress on a regular basis. So if you have a financial goals and are on a journey to achieve it, or simply want to aim a little higher in life, here are some of my key tips on how to dream big, set goals and achieve what you want in life.

Setting financial goals: don’t be afraid to dream big

Firstly, remember that anything is truly possible. With hard work, determination and some smart planning, you really are capable of so much more than you think. Don’t ever underestimate what you are capable of. Remember to dream big and aim high. You often hear people talk of their five-year plan, this is a good timescale as it is close enough to feel tangible, but far enough away to feel achievable.

Short term financial goals: dream big but plan small

While it’s important to dream big, it can often seem overwhelming.  When we have big dreams the path to realise them can seem incredibly long and arduous. So while you should dream big, it’s important to plan small. Break down your big goals into smaller ones and then tackle them individually. When goals are broken down into achievable segments, it feels more manageable and you are more likely to keep moving ahead.

If you want to swim the channel, you would start with a smaller goal, rather than just focusing on the entire 21 miles. The same goes for your finances, we would all like to be financially secure and have a healthy investment portfolio, but these things take time. This is where short term financial goals become important, working towards and realising these goals can help you stay motivated.

Track your financial progress

When working towards a financial goal, it’s important to track your progress to ensure you are on the right trajectory. If you aren’t where you hoped to be, it’s time to reassess and see what you can do to keep improving and succeeding. If you’re not where you want to be, that’s okay too. Sometimes things aren’t as easy as we expect – and we can’t predict financial shocks such as the Covid-19 pandemic – it just means a little more hard work or planning is needed.

Long term financial goals: get the right support to ensure you stay on track

There are lots of resources you can turn to when you are setting your financial goals. You can find a lot of help and advice online, but there are also companies like Generation Wealth Management which can work with you to create a financial roadmap to get your to your desired destination.

It’s also a great motivation to find someone who has already achieved what you want and can help guide you through the process. Having the right support around you really can make all the difference. If you find yourself getting demotivated, then revaluate, taking small steps consistently over time will eventually lead you to reaching your goals.

Financial goals: failure is often part of the process

I’m not going to sugar coat it for you. If you have big dreams, you need to be prepared for some bumps along the way. Every successful person will have failed more than once in his or her life. The important thing isn’t whether or not you get knocked down, the important thing is to keep going and keep getting back up. Learn from your mistakes and understand they are just part of the process.

At Generation Wealth Management we understand that the first steps to planning your financial future can often be the most daunting,  so if our experts can help please get in touch

What is a SSAS?

A SSAS is a type of defined contribution workplace pension that an employer can self-manage. Only one SSAS is permitted per company and membership is capped at 11 individuals.  A SSAS scheme can be more cost-effective than the setting up of multiple schemes for employees.

The benefits of SSAS?

One of the most attractive qualities of a SSAS is that it can offer the employer increased flexibility about where the scheme’s assets can be invested. This form of pension scheme allows investments into assets that aren’t commonly available. As an example, a SSAS is able to purchase the company’s trading premises (any suitable commercial property) and lease it back to the company. It may also – subject to certain terms and conditions – lend money to the company and purchase the company’s shares.

A SSAS can also borrow money for instance, the SSAS may raise a mortgage to assist with the purchase of the company’s premises and the mortgage repayments may then be covered, in all or in part, by the rental income that the company pays the SSAS.

All of the assets are held in the name of the Trustees; a SSAS fund doesn’t have individual pots for each member, but rather each member is deemed to hold a proportion of the scheme’s assets as a whole.

When are SSAS most suitable?

This type of pension is most often utilised by small or family run businesses. The scheme is open to both employees and their family members, meaning it can be offered to individuals who don’t work for the company directly.

The tax benefit of SSAS

Pension contributions to a SSAS are eligible for tax relief. Individuals get relief at their nominal rate, therefore basic rate tax payers get basic 20% rate relief, higher rate tax payers  get 40%, and finally additional rate payers get 45%. It is worth noting that only basic rate tax relief is applied to contributions in pension funds the remainder is claimed back via self assessment.

Contributions paid into the scheme by the employer also qualify for tax relief which can help reduce the company’s total tax liability.

When can you draw a SSAS

Members of SSAS can start drawing benefits from the age of 55. There many options to drawing your money, including, the option to take the first 25% as a tax-free lump sum or to receive 25% of each withdrawal tax-free, however any funds drawn in excess of the tax free lump sum allowance will be subject to personal tax.

The amount of benefits will depend on contributions and the performance of the investments. Members can also choose to draw their pension as an income either by purchasing an annuity, or via income drawdown. The information is this blog is based upon current pension and tax legislation and can change in the future.

If you would like to learn more or to speak to a member of our team get in touch today.

How do I find out my current pension age?

You can check the current pension age on your state pension: www.gov.uk/check-state-pension

Your state pension age will depend on your age and gender, the amount you will receive depends on the years paid in during your working life. It is of course possible that the state pension age may increase in the future, but the above provides useful food for thought.

You should regularly check your State Pension age to help with planning for your retirement.

Is my state pension enough?

Your state pension is a weekly payment that you receive from the government when you reach state pension age. The amount of your state pension will differ depending on when you retire and how much you contributed during your working life.

The future of the state pension has been an ongoing cause for concern. The Government Actuary Department forecast that without intervention, the ‘National Insurance Fund’ – the fund which collects National Insurance contributions – could be depleted as early as 2032.

So while the state pension should form part of your retirement income, it’s prudent to also consider other options when planning your retirement savings.

Where can I turn for advice on pensions?

At Generation Wealth Management we understand that saving for retirement can seem daunting. However, starting early and planning well are the two lynchpins to securing a healthy income for your future.

You will have questions, about how much you need to fund your retirement, when you should start to build your retirement pension pot, how this long term plan can fit around your immediate liquidity. Our experts can provide the answers to those questions.

When should I start saving?

Age doesn’t matter; whether your retirement is just around the corner or whether you’re a millennial with many years to build a healthy pension pot, the sooner you start saving the sooner your money can start to grow.

If you would like to work out your current pension age and to ascertain how much you currently have to retire on, speak to one of our wealth management experts.

Financial planning refers to your comprehensive financial map, the map guiding your path to the achievement of future financial goals. Financial goals are not set in stone; they often vary from person to person, with age and circumstances being large influencing factors.

Our experts will help you navigate the building blocks of financial planning – starting with the importance of having solid foundations. The overarching goal is to ensure you are financially prepared for all events in life; be it a medical emergency, your child’s education, your own retirement or unforeseen health problems.

There is a common misconception that financial planning is all about investment, however this isn’t true, investments are only one part of the financial planning portfolio. To ensure your solid financial foundations the first step has to be comprehensive contingency planning.

Contingency planning

What is contingency planning and why do I need it?

Contingency planning looks in detail at your ability to respond effectively to a significant future event or situation, which may or may not happen. Your contingency plan is devised for an outcome which is removed from your ideal plan. This could be unexpected unemployment, a large debt needing payment, or a sustained increase in your cost of living. It is advisable to have enough money saved to cover three months of expenses should the unexpected happen. Once you have managed your contingency planning you can look at the next step, insurance planning.

What are the consequences of not having contingency plan?

If you were to lose your job suddenly and you had no money behind you there is usually one response, panic. Well actually two, stress and panic. Consequences can vary from person to person but could include, cashing in investments – often at the worst time when markets are down – defaulting on insurance and pension premiums, or even your mortgage.

Insurance planning

Why do we have insurance – what is the impact financially?

The level of insurance which is advisable will depend largely on your personal circumstances. We can discuss repayment of your debts, what would happen to your home if you were unable to keep up repayments on your mortgage, what cover – if any – is supplied via your employer. We can sit down with you and discuss the areas which are important to you; there are numerous options and choices dependent on budgets and requirements.

How do you know you are adequately covered?

Is your health insurance enough? What about retirement or emergency funds? These are all questions we are regularly asked. The most common forms of insurance we are asked about are life insurance and health insurance. One of our experts can sit with you and work out your exact requirements; we can then find the most suitable products to meet your needs.

Just like a plant which relies on a strong root system to grow and mature, the lynchpins of financial planning have to be secured before you can move onto the next three levels. It is these later stages where you experience the benefits of that strong groundwork.

Investment planning

Why invest? Should I not be saving?

Saving has its place, but even the top interest rates don’t offer the same growth potential that investing does. Of course it depends on your investment objectives, nobody ‘needs’ to invest but it can help to provide an improved standard of living and better financial security.

How do I choose investments which are right for me?

Investment planning is the method of matching your financial goals and objectives with your financial resources. A thorough investment plan takes into account your personal circumstances, objectives and risk tolerance; choosing the right types of investments to fit your needs, personality, and goals.

By taking into account your risk tolerance, diversification and asset allocation, we can design an investment plan to provide clarity about where – and how much – to invest in order to maximize your returns. Having an investment plan will provide you with a sound strategy to follow and stick with; even when you see your investments fluctuate during a time of market volatility.

Retirement planning

Why save for retirement?  What are the consequences of not saving?

Retirement planning – in a financial context – refers to the allocation of savings or revenue for retirement. The goal of retirement planning is to achieve financial independence. The aim is to have enough to comfortably live on once you leave work. How much is ‘enough’ depends largely on what you want to do when you retire and when you want to retire. If you don’t save enough you could find yourself working far later in life than you would like.

Our experts will work with you to analyse not only assets and income, but also future expenses, liabilities and life expectancy.

When should I start to plan for my retirement?

Although planning for your retirement is ideally a life-long process. You can start at any time, but it works best if you factor it into your financial planning from the beginning. With increasing life expectancy as well as a growing cost of living, it is best to start retirement planning from the very start of your career. The investment in a good pension will reap rewards – and save you money – in later years.

Estate planning

What is estate planning?

Estate planning is the process of anticipating and arranging – during a person’s life – for the management of that person’s estate upon their death.

Estate planning involves passing on wealth to the people that matter most to you, in the most effective way. Individuals start estate planning for numerous reasons – some may want to reduce an Inheritance Tax bill, others want to see know that their assets will be enjoyed by future generations.

I’m not sure it’s a good fit for me?

Thorough estate planning will make sure that your family is provided for and not left to face financial ruin if the unthinkable should happen. But no planning doesn’t mean that your children won’t inherit anything, but it could mean they inherit far less.

Whether you have a financial plan in place and would like advice to add to it, or you are starting from scratch, please get in touch today to discover how the Generation Wealth Management team can help you.