Another year over and for many people the Christmas break is a time to reflect. The opportunity to review their finances is often high on their list.
Thankfully, 2017 didn’t quite see the political changes we saw in 2016, but Britain is now a step closer to leaving the EU which could still have consequences on the stockmarket, currency and household finances, especially with inflation running high.
Here’s a review and some planning opportunities to consider.
A number of firms were caught out last year for failing to meet their legal obligations and The Pension Regulator (TPR) came down hard on those that did, with fines and court summonses. It’s important to not only fulfil your duties, but don’t forget to complete your Declaration of Compliance within 5 months of your staging date.
This year sees the minimum level of contributions increase to 5% of which employers must pay in a minimum of 2%, so firms need to ensure that they are geared up for the increase which occurs after 6 April.
New firms set up last year will find that their auto enrolment responsibilities come into play this year too. Those who employed someone after 2 April 2017 but before 30 September 2017 will find that they must take action by either 1 January 2018 or 1 February 2018. To check, visit TPR’s website here: http://www.thepensionsregulator.gov.uk/en/employers/employing-someone-between-2-april-2017-and-30-september-2017.aspx
Those employing staff for the first time after 1 October 2017 will find their duties start on the day their first member of staff starts work, so early preparation is a must!
Protection and insurance
According to the Association of British Insurers’ UK Insurance and Long Term Savings Key Facts document there were 27.2 million households in the UK in 2015-2016. Of these:
This shows a significant gap, with millions of people and families without any insurance or protection to cover themselves and their loved ones in the event of something happening to them. Less than 2 million new protection policies were taken out in 2016.
Those with property portfolios will have seen the most changes this year, whereas those undertaking new property purchases, including their first homes, benefitted the most.
New deals, especially fixed term rates, remained low for a second year, but first time buyers received a boost from the Chancellor in November when he announced the abolishment of Stamp Duty on first time buyer property purchases up to £300,000.
It was a relatively quiet year in the pensions and retirement world which made a nice change!
There was a parliamentary decision to cap early exit charges to 1% of the value of a member’s benefits being taken, converted or transferred from a personal pension or stakeholder pension scheme, which came into effect on 31 March last year.
Anyone flexibly accessing their defined contribution pension savings will be limited to the amount they’re able to pay further into pension savings. The Money Purchase Annual Allowance (MPAA) became effective and whilst there was a little to-ing and fro-ing, the level is now just £4,000.
A cold calling ban was confirmed, which will hopefully help protect pension savers from being wrongfully duped out of their retirement savings.
For those with pension savings, the Lifetime Allowance will increase to £1,030,000 from 6 April this year, representing the first increase for many years. It’s still worth remembering that anyone fortunate to receive a Death in Service (DIS) benefit from their employer should check if the benefit is established alongside their pension scheme arrangement. If it is, their DIS benefit will use up some of their Lifetime Allowance upon their death.
Anyone in receipt of the state pension will see a rise from April by 3% - equivalent to £3.65 per week - for those eligible for the full basic state pension. The full new state pension will also benefit from an increase of £4.80 per week too.
Savings and investments
The new dividend allowance introduced only last year is due to reduce to £2,000 from 6 April, affecting anyone with dividend income from investments as well as income as part of a remuneration package.
Those under 40 saw the introduction of the Lifetime ISA last April, but the take-up rate appears lower than anticipated.
This year, the annual ISA allowance will remain at the current limit of £20,000, but the Junior ISA limit will rise to £4,260 from 6 April.
Both inflation and interest rates hit the headlines throughout last year. The Consumer Prices Index (CPI) rose above 3% and the Bank of England Base Rate was increased to 0.5%, representing the first rate rise in 10 years. Savers with money on deposit didn’t see any meaningful returns and many struggled to obtain returns even approaching the rate of inflation. Our cash management option could prove attractive for those with larger balances.
Taxes and estate planning
The new inheritance tax (IHT) threshold came into effect last year, linked to your main residence (the Residence Nil Rate Band) but it will still be some years before the magic £1 million will be reached.
In terms of annual allowances people saw the standard Personal Allowance and income tax bands raise last year with similar changes due again this April. The Scots on the other hand can expect the introduction of five new tax bands from April if the changes announced in the Scottish Budget in December are introduced!
The fresh start to the New Year and the impending tax year end also represent good opportunities to review your finances and check that your plans are on track.
Our Financial Planning Consultants are independent financial advisers and can be located across our offices across Cumbria, Northumberland, Yorkshire and Scotland. Our Financial Planning Team can be contacted on 0808 144 5575 or you can visit our website: www.armstrongwatsonfp.co.uk.
If you'd like some advice for planning the year ahead, visit our Financial Planning websitevisit the website
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