Would the right people inherit from your estate?



For the first time ever, the number of people living together in the UK exceeds the number of married couples; and around half the number of new-born children are born outside marriage.

 

This situation is giving rise to an increasing number of property disputes, particularly where one party dies without having made a will. It appears that many unmarried couples do not realise that the concept of “common law marriage” does not exist, and that their partners are not necessarily entitled to assets which they may currently share.

 

The situation becomes even more complicated in the case of older couples who are living together but have property or children from previous relationships.

 

The main problems result from intestacy and can be avoided by each party executing a will, and ensuring that this is kept up-to-date as circumstances change. Whilst there is the option of standard wills online, our experience has shown that in the majority of cases these are drafted in such a way that leave them open to challenge/interpretation, or worse, in a way that means the wrong people receive inheritances. 

 

We believe that the most effective solution in such cases is to combine the services of a solicitor (especially for larger estates where tax efficiency is all-important) with the services of an independent financial planner to ensure that your assets are managed in the best way while you are alive, and so that the right people benefit from hard earned money at the right time and in the most efficient manner from the perspective of mitigating inheritance tax.

 

Our Private Client Team have a wealth of experience in working in collaboration with your solicitor to ensure that all your affairs are arranged in such a way that there is minimal fuss in dealing with inheritances, and that as much money is passed to your beneficiaries in the way you would wish it to be.

 

Duncan Wilson

Private Client Partner

 

Telephone: +44 (0)20 7893 3456

Email:  getintouch [@] broadstoneltd.co.uk

 

Would you turn down free money from auto enrolment?

With the new changes to pensions there is even less reason to opt out of a workplace pension. It has always been the case that an employer pension contribution is free money but what stopped people taking it up was the fact that people were limited to how and when they could draw that money back.

Not so now. Benefits will be able to be drawn from 55 from 2016, in full, so no need for people with a small fund to sign up to a potentially expensive and inflexible annuity. The combination of tax relief up front, a top up from the employer and much more flexibility on when you can draw out is hard to beat.

A classic example is people close to retirement. So many ask me whether it's worth joining an auto enrolment scheme for such a short time. The answer is most definitely yes! Even before the new rules are implemented in full it is possible to build up a pot of up to £10,000 which can then all be drawn as a lump sum (25% is tax free and the balance taxed as income). No brainer!

 

Nick Rudd

Corporate Benefits Director

 

Telephone: +44 (0)20 7893 3456

Email:  contactus [@] broadstoneltd.co.uk
 

 

 

 

“Alpha women” need financial planning advice!

Sorry if this blog comes across as a little bit sexist – but woman to woman - our need for long term financial planning advice and investment confidence has never been greater.

 

Women who successfully juggle their careers with having a family and continuing to climb the employment ladder have been labelled by some as “alpha” women and by others as “financially indecisive”.

 

Other surveys suggest that working women find it easier to do the weekly shopping, and book a family holiday, than make longer term financial decisions - but oddly enough these same women usually have mortgages.

 

Frequently with both partners working some aspects of the previously recognisable “financial dominance” haven’t been fully ironed-out.

 

As a result, there is often a lack of clarity about who should benefit from the long term savings and retirement planning provisions and consequently these decisions are often delayed, or not addressed.

 

From 6 April 2016 the new single-tier State Pension will no longer take into consideration our partners’ National Insurance records. The currently available 50% of our partner’s state pension and the state widow’s pension (we receive following their death) will cease to accrue.

 

This could leave a big hole in our retirement budget that needs to be filled.

 

That said by acknowledging that women continue to make well thought out strategic decisions, on a daily basis, for both our families and the businesses we represent, isn’t it time we gave more consideration to our own financial planning needs - especially over the longer term?

 

 

Helen Wilson

Consultant

Telephone: +44 (0)20 7893 3456

Email:  getintouch [@] broadstoneltd.co.uk

What a relief - Retirement and Legacy Planning

One thing we have gleaned lately is that when the Pensions Minister believes change is needed - he makes it happen.

Following the surprise pension announcements in the 2014 budget, which no one saw coming, Steve Webb’s comments about introducing a single tax relief rate possibly carry more weight than before.

Could this be the right time for him to deliver his swansong by creating a single 30% pension contribution tax relief rate?

While the Government is in its “run-up-to-election strategy” and there being little, or no, new legislation on the books perhaps this is the right time for him to strike?

And if he were to include in this the Chancellor’s inference that the 55% pension death benefit tax should be reduced as it is “inappropriate in most cases” - things really come alive!

And if we add to this Mr Webb’s preference for scrapping the lifetime allowance could he possibly be preparing to deal the final ”Ace-in-the-pack” of radical pension reform; bringing the hurdy-gurdy of Pensions Simplification to a close?

Whatever Steve Webb’s final thoughts, one thing for certain is that pension legislation will not stand still and retirement planning and legacy considerations will continue to change and evolve.

Whichever way he goes there will always be winners and losers – after all, the glass is either half full or half empty – but one thing is clear the need for retirement and legacy planning advice has never been greater.

Helen Wilson

Consultant

Telephone:  +44 (0)20 7893 3456

Email:  getintouch[@]broadstoneltd.co.uk

  

Our poll of trustees and sponsoring employers on the changes from the Budget

We recently ran a high level breakfast seminar to discuss the pensions revolution kick-started by George Osborne in March.

During the sessions we surveyed the attendees to gauge their views on some of the pertinent issues.

Our poll found that:

100% support the government’s decision to expand pension flexibility.

This is perhaps no surprise. Increased freedom and choice is nearly always universally welcomed, despite the short period of flux that we have to go through to get there.

68% expect defined benefit (DB) members to be tempted to take their transfer value and convert to defined contribution (DC) to access flexibilities.

This is surprisingly high and only time will tell if this view is borne out. If the government decides to ban transfers from DB to DC from April 2015 (and we have received strong indications from HM Treasury that if they do bring in a ban it will be from that date) this could create a “buy it now while stocks last” style firesale. However, if the government does not ban the transfers it will be interesting to see the steady state numbers. It is hard to think that many members will transfer as they will risk losing the guaranteed income, which surely remains very valuable.

90% of attendees think that individuals will act prudently in retirement.

This has certainly changed from my early conversations with employers who were very worried that their members could make more decisions in retirement. It is here that the guidance guarantee will be crucial in ensuring members consider their own needs and don’t underestimate their longevity – otherwise there could be a lengthy wait for a Lamborghini (or Aston Martin...).

73% expect annuities to remain a key part of retirement planning.

This certainly echoes our view that the need for a guaranteed income during retirement will be highly valued by individuals. There is no doubt that the frequency or size of annuity purchases will decrease and it is likely that many individuals will use some of their DC savings to purchase an annuity at some point.

14% support a government ban on transfer from defined benefit to defined contribution.

This is interesting as restricting freedom to just DC only members seems to go against the government’s ideology and is perhaps driven by the fear of the impact on the economy by the possible exodus from long-dated gilts.

What should employers and trustees be doing?

The wide-ranging changes in the budget mean that trustees and sponsoring employers need to move from ‘wait and see’ to taking action. Top of their list should be the need to review their default investment strategies to ensure that they remain relevant for the majority of their members. This is especially so when typically the vast majority of the members make use of default strategies.

Sponsoring employers should also review the benefit structures in their DB schemes to ensure they remain fit for purpose in the changing world. Members use of trivial commutation and additional voluntary contributions are going to change with the Budget’s changes to the way members will structure their retirement income. By reviewing the schemes’ benefits employers could realise long-term cost savings as members have access to the fullest range of options as possible. In many cases rules will need to be changed and this work should begin sooner rather than later.

David Brooks
Technical Consultant

Telephone: +44 (0)20 7893 3456

Email:  contactus [@] broadstoneltd.co.uk

Active Member Discounts

The Government recently released further information on its plans to cap Annual Management Charges at 0.75%, and also remove Active Member Discounts, from the list of charges that providers have sometimes levied on our personal pensions upon stopping regular contributions.

To elaborate, the base charge providers use to administer our pensions and investments is called an Annual Management Charge (AMC) which is taken from our pension investments. Typically this can range from anything as low as 0.10% to as high as 2.00% a year, but for most of the new employer schemes I’ve seen installed in the last few years, it has been between 0.35% and 0.75%.

The Active Member Discount mechanism was generally added to employer schemes where providers would agree to provide a ‘low’ AMC for those members who paid pension contributions regularly, in exchange for being able to increase the AMC to those who stopped. Usually the charge would double, for the last such pension I had from an employer it went from 0.35% whilst I was there making contributions, to 0.70% when I left and stopped.

So good news for you and me, the Government is getting rid of that possible trap and capping our costs going forward!

Now that I’ve finished today’s educational piece, I can’t resist playing devil’s advocate here.

Considering the Government’s desire to get us all saving more for our retirement, is there a case for saying they’ve lost a good incentive, by removing the scope for this Active Member Discount mechanism?

Let’s put it in the context of another ongoing concern of the Government, the state of the nation’s physical health.

Now what if the gym, which insists you sign up for an annual membership, instead of charging me a fixed monthly fee, charged me less if I went to the gym regularly, and more for the days when I didn’t.

The more I went, the less I’d pay, and hopefully (although not guaranteed, if I just sat in the Sauna), the fitter and healthier I’d be.

Of course, the less I went, the more I’d pay, and I may have to accept I will no longer look this trim.

Wouldn’t this be a good incentive to get off the sofa and go to the gym to get fit?

Back to reality and unfortunately Active Member Discounts for pensions didn’t have this effect. They weren’t conceived as an incentive, or particularly marketed in this way. Members were told about them when they started the plan, but generally had forgotten by the time they had left, or had stopped making contributions. And where they didn’t necessarily think about the plan again, possibly suffered unwittingly.

Undoubtedly losing this particular mechanism is a victory for the consumer, removing a potential pitfall for the less engaged investor.

As the auto enrolment legislation takes effect, fortunately many of us will continue to make regular contributions throughout our working lives now without rest. The need or place for any such mechanism, potential incentive or not, has seemingly gone, and is probably best left consigned to history.

Charles Goodman

Consultant

Telephone: +44 (0)20 7893 3972

Email:  contactus[@]broadstoneltd.co.uk