Lloyd O Sullivan https://www.lloydosullivan.co.uk/blog Our Blog Mon, 16 Jul 2018 07:00:49 +0000 en-US hourly 1 Back to the future https://www.lloydosullivan.co.uk/blog/back-to-the-future/ https://www.lloydosullivan.co.uk/blog/back-to-the-future/#respond Mon, 16 Jul 2018 07:00:49 +0000 https://www.lloydosullivan.co.uk/blog/?p=1010 Uncovering what really matters to you is the key to the planning process

Have you ever thought about writing a letter to yourself to describe your ideal future life, long-term life goals and the process of how to plan for them? Imagining what you want your life to be like in the long term when you retire will help you think much further ahead than you might have done before. Research conducted for a new campaign[1] shows that over half (54%) of people plan their lives only days (31%) or weeks (23%) ahead. 

The participants were asked to look deep into their future lives in a bid to uncover what really matters to them. When asked to write a letter to describe their ideal future lives, people were very good at imagining it. But many didn’t know how they were going to achieve it or how to take the next step to build a bridge from now to that future self by putting a plan in place to get there. 
 
Key well-being aspirations

The writing exercise uncovered how people really envisage their life in the future. The letters illustrate that well-being in old age pivots on simple hopes (family, health and happiness) rather than extravagant financial ambitions. A well-balanced life was a key aspiration for many respondents. The letters confirm a clear hierarchy of needs and aspirations in life that many of us would have expected: family/partner, followed by career and financial security, followed by hobbies and interests, including friends. 

While a handful of the respondents hope for lottery wins or gold medal glory, the overwhelming majority express their desire to remain healthy and active in old age and to live ‘comfortably’ with some degree of financial security. The letters revealed a nation aspiring to much more grounded ambitions: the centrality of family, a desire to travel, to learn throughout life, and to have fulfilling but balanced careers with a good work/life balance.

Family, health and happiness
 
It’s not surprising that family, health and happiness are central pillars for people’s well-being. What is surprising is how unprepared most people are to achieve the dreams they have described. The letters are wonderfully optimistic, but there is a reality check. The findings showed that people underestimate their required size of pensions pots by up to £550,000, while many people who have the capacity to save aren’t doing so. 

By using the letter as a catalyst, once you know what your goals are, the next step is to plan for them. To support the letter writing campaign, a study was also commissioned to gauge people’s current well-being and life goals[2]. The survey indicates a fundamental disconnect between the life people aspire to and their life now. 

Prevention barriers

The study found over half (54%) of people plan their lives only days (31%) or weeks (23%) ahead. While 14% of respondents said they plan for years ahead, very few (4%) plan for future decades. This may explain why only 11% of UK adults with life goals know how they will achieve them. 
 
When it comes to life goals for the future, travel is a primary ambition for over two in five people (44%), followed by eating well (40%), getting fit (39%), more time with friends and family (36%) and better work/life balance (20%). Money is the main thing (33%) preventing people from achieving their goals, then motivation (28%), followed by energy and time as barriers in equal measure (26%). 

Path to financial freedom

When it comes to financial goals, one in five people (20%) have none whatsoever. Among those with goals in mind, the same percentage of people (20%) have not worked out a strategy and don’t know how they will achieve their specific goals. The top financial goals are: save for a rainy day (43%); earn more money (32%); save for a special occasion (21%); reduce or clear debts (19%); and buy property and pay off mortgage (both 17%).

Your finances touch just about every aspect of your life. Your personal life and your financial life are not separate – they intertwine with each other. Your path to financial freedom means identifying and harnessing your dreams and bringing them alive. We can help you find an answer. Whatever stage of life you’re at, we can guide you through the opportunities and challenges you face.

Start planning decades ahead

We all want to fulfil our life plans, so the earlier you know where you want to get to, the better chance you have of getting there. Ideally, it’s essential to start planning decades ahead to map out the life you want for yourself and your family. The process of writing the letter should prompt that thinking and planning and hopefully that conversation with your partner and family. To discuss your situation or to arrange a meeting, please contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk – we look forward to hearing from you.

Source data:

[1] The Brewin Dolphin letter writing project asked 500 UK adults to write a letter to their future selves deep into old age – a letter their ‘future self’ may discover and read as they reflect back on life. Methodology: online survey completed by 500 economically active respondents aged 18–65. Fieldwork by Trajectory from 12–20 April 2018. 

[2] The survey polled over 2,000 UK adults about their life now, their well-being and attitude to money, plus also what they want in the future – personal and financial goals, and how they’ll achieve them. Methodology: online survey was completed by 2,004 UK adults (18+). Fieldwork by Opinium from 11–14 May 2018.

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Driving towards the next phase of your life https://www.lloydosullivan.co.uk/blog/driving-towards-the-next-phase-of-your-life/ https://www.lloydosullivan.co.uk/blog/driving-towards-the-next-phase-of-your-life/#respond Mon, 09 Jul 2018 07:00:31 +0000 https://www.lloydosullivan.co.uk/blog/?p=1007 Getting the date right can help you reach your destination sooner

At some point you’ll say ‘goodbye’ to your co-workers, get into your car and drive towards the next phase of your life – retirement. But when will that be? The move to retirement is one of the most important decisions you’ll make, so it’s not surprising that determining the date is harder than you may ever expect.

However, most over-45s are not making plans to match their hopes for the future according to new research[1]. The vast majority (86%) of those aged 45 or over are already dreaming about escaping their working life for retirement, but only 8% of the same age group have recently checked the retirement date on their pension plans to make sure it is still in line with their plans. Over half (56%) don’t have a clear idea of when they want to retire, and only one in ten (10%) have worked out how much income they’ll need when they decide to stop working.

The study reveals that it doesn’t get much clearer as you go up the generations. Less than a fifth (17%) of those aged between 55 and 64 have recently checked to see if the retirement date on their pension policy still fits in with their plans.

Some people will have set their retirement date when they were in their 20s or 30s, and a great deal will have changed since then, including their State Pension age and perhaps their career plans. It may seem like a finger-in-the-air guess when you’re younger, but the date that you set for retirement on a pension plan does matter. It will often dictate how your money is being invested and the communications you receive as you get nearer to that date.

Reasons to keep your retirement plans up to date

Right support, right time

If the date you plan to retire changes or you simply want to take some of your pension without stopping working, it’s important to tell your pension company provider. Otherwise you may not receive information and support about your pending retirement at the most helpful times, as they’ll be basing this on your out-of-date plans.

De-risking investments

Some investment options will start to move your pension savings into lower-risk investments as you get closer to retirement. If you don’t have the right retirement date on your plan, you could be moving into these investments at the wrong time. For example, if you move into them too early, you could potentially miss out on investment returns that could increase the value of your pension savings. But if you move too late, you could be exposing your life savings to unnecessary risk.

Investment pot

The size of pension pot you need to build up to maintain your lifestyle when you come to retire will depend on when you plan to do so.

Income

If you’re planning to buy an annuity at retirement, which will guarantee you an income for the rest of your life, the amount of income you’ll get will depend on the size of your pot and annuity rates at that time. If you prefer to use your pension savings more flexibly, you can keep your money invested and take it as and when you require it. You’re then responsible for making sure your life savings last as long as you need them to.

Time to review your retirement date?

Reviewing your retirement date regularly as you get older makes real sense, and most modern pension plans enable you to change and update this date whenever you choose. If you would like to make sure that you are still on track for a successful retirement, please contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk for a review – don’t leave it to chance.

Source data:

[1] Research was carried out online for Standard Life by Opinuium. Sample size was 2,001 adults. The figures have been weighted and are representative of all GB adults (aged 18+). Fieldwork was undertaken in November 2017.

PENSIONS ARE A LONG-TERM INVESTMENT.

THE RETIREMENT BENEFITS YOU RECEIVE FROM YOUR PENSION PLAN WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE VALUE OF YOUR PLAN WHEN YOU DECIDE TO TAKE YOUR BENEFITS, WHICH ISN’T GUARANTEED AND CAN GO DOWN AS WELL AS UP.

THE VALUE OF YOUR PLAN COULD FALL BELOW THE AMOUNT(S) PAID IN.

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When I’m gone https://www.lloydosullivan.co.uk/blog/when-im-gone/ https://www.lloydosullivan.co.uk/blog/when-im-gone/#respond Mon, 02 Jul 2018 07:00:07 +0000 https://www.lloydosullivan.co.uk/blog/?p=992
How a simple list can help your loved ones after your death

Although it may not feel like it, your family finances are probably more precarious than you think. It’s all well and good when the breadwinners are healthy and working, but if something unfortunate were to happen, the outlook for those around you could change instantly.

Research from Macmillan[1] highlights the worrying fact that two in three people living in Britain don’t have a Will – including 42% of over-55s. Without an up-to-date Will, the law could supersede a person’s final wishes and leave treasured possessions, money, property and even dependent children with someone they may not have chosen. 

This news comes despite official guidance recommending that people review their Will every five years and after any major life changes[2], yet a quarter of Wills have not been updated for at least five years[3].

Top five things to do to help your loved ones after you have gone:

1. Write a Will

A Will ensures that the right people inherit from you, and while most of us know how important it is to have a Will and keep it up to date, many of us don’t do it. The research[4] shows that three in five adults (60%) don’t have a Will, and a quarter (26%) of those are aged 55 and above. It’s especially important for cohabitating couples to have a Will, as the surviving partner does not automatically inherit any estate or possessions left behind.

2. Think about care of children

If you have children, it’s important to decide on guardians, but three in five (58%) parents with children under 18 haven’t chosen guardians should they die[4]. Think about who you would want to step into this role, and ask them if they’d be happy to do so. Then make sure you appoint them as guardians in your Will.

3. Write a ‘when I’m gone’ list

More than one in ten (12%) adults admitted that it would be very difficult for anyone to handle their financial affairs after they died[5]. Pulling together all your personal and financial information into one simple document can really help your loved ones when you’re gone.

4. Make a plan to pay for your funeral

Research[6] shows that the average cost of a funeral is around £3,800, with one in six people (16%) saying they struggled with the cost. Having a plan in place to pay for your funeral will mean your family won’t have to find several thousand pounds at a difficult time.

5. Have a conversation with your family

Having a conversation with your family about your wishes can remove a great deal of uncertainty for them in the event of your death. The research shows that for those who have had to arrange a funeral, two in five (41%) were not left any instructions from the deceased. Starting a conversation might include talking about your funeral wishes with your loved ones or showing them where your important documents are kept.

Protecting your family

It’s an old saying that you should look at protecting before investing, and they are wise words because it’s more important to make sure that your family are covered against the financial impact of your premature death than it is to invest for an uncertain future. Please contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk for a review of your situation – we look forward to hearing from you.

Source data:

[1] Macmillan/Opinion Matters online survey of 2,000 UK adults. Fieldwork conducted 1–4 December 2017. Figures based on total population.

[2] Office for National Statistics. UK population mid-year estimate for adults aged 18 or over. Available from: https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/populationestimates/datasets/populationestimatesforukenglandandwalesscotlandandnorthernireland [Accessed 12 December 2017]

[3] https://www.gov.uk/make-will/updating-your-will

[4] YouGov findings carried out on behalf of Royal London. 2,089 adults were surveyed between 10 and 11 October 2017. The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+).

[5] Figures taken from an Opinium survey carried out on behalf of Royal London. 2,020 adults were surveyed between 19 and 21 September 2017. The survey was carried out online. The sample has been weighted to reflect a nationally representative audience.

[6] The Royal London National Funeral Cost Index 2017 found that the average cost of a funeral in the UK is £3,784, an increase of 3% from 2016.

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Generous grandparents https://www.lloydosullivan.co.uk/blog/generous-grandparents/ https://www.lloydosullivan.co.uk/blog/generous-grandparents/#respond Tue, 29 May 2018 07:00:55 +0000 http://www.lloydosullivan.co.uk/blog/?p=989
The bank that likes to say ‘yes’

Forget the Lamborghini – 2.4 million UK grandparents[1] have either raided their pension to support their grandchildren or plan to in the future.

According to research from LV=, a quarter of generous grandparents (25%) who have already given away money to their grandchildren[2] have taken the funds from their pension. A further one in six (16%) plan to use their pension for this reason once they reach retirement age.

Substantial amounts

Open-handed grandparents are willing to give away substantial amounts to their grandchildren, whether from their pensions, savings or wages, with the average grandparent having already spent £1,633. More than one in 20 (6%) have given gifts of more than £10,000.

The generosity shows no sign of stopping, with many grandparents (56%) planning to give away even more money in future. The average grandparent expects to give away £2,938 in the coming years, with charitable grandmas expecting to give away £173 more than grandads on average.

Living inheritance

Pension savings are used to help with a wide range of things, from helping grandchildren get on the housing ladder (21%) and other high-ticket items like university fees (20%) or cars (17%). A similar number would help out with more day-to-day expenses like bills (21%) and hobbies (19%).

Grandparents often view the financial gifts they make as a ‘living inheritance’, with more than a third (37%) wanting to be around to see their grandchildren enjoy the money[3].

Retirement focus

Its heart-warming to see grandparents so willing to help out their grandchildren both day-to-day and with large ticket purchases. With one in five using their pension to help out, it’s important these kind individuals plan for their retirement and have enough money left for themselves, as even smaller outgoings like bills can become harder to meet later in life, as well as the flexibility to access it.

The generosity of grandparents in Britain is clear to see, and it is great that so many feel comfortable enough to be able to help out their family and plan to continue doing so. However, the average retirement is now much longer than past generations, and people’s lifestyle and associated costs are likely to change over this period.

Remaining generous, but also adapting to your changing needs

The flow of financial support across the generations is a striking feature of the modern family. If you find yourself in this position and are approaching retirement, it’s important to structure your income in a way that offers you enough financial flexibility to enable you to remain generous, but also adapt to your changing needs. To look at the options available, please contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk.

Source data:

[1] According to ONS Population Pyramid, there are 49,533,900 people aged over 18 in the UK. The research found that 39% of a sample of 2,002 adults were grandparents, indicating there are 19,318,221 grandparents in the UK. 56% of grandparents have helped or plan to help their grandchildren, and 22% of these would use their pension to do so. Therefore, 2.38 million grandparents have helped or plan to help their grandchildren, using their pension.

[2] According to research carried out by Opinium Research on behalf of LV=, 25% of grandparents have already taken money from their pension to give to their grandchildren.

[3] Statistics from research carried out on behalf of LV= by Opinium Research in June 2014 (total sample size = 2043). The press release for this research was issued on 20 June 2014.

The research was carried out by Opinium Research from 13–16 October 2015. The total sample size was 786 British grandparents over the age of 30, and the survey was conducted online. Results are weighted to a nationally representative criteria.

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Make it a date https://www.lloydosullivan.co.uk/blog/make-it-a-date/ https://www.lloydosullivan.co.uk/blog/make-it-a-date/#respond Mon, 21 May 2018 07:00:44 +0000 http://www.lloydosullivan.co.uk/blog/?p=987
Keeping your target retirement plans on track

Most over-45s are not making plans to match their hopes for the future, according to research from Standard Life[1]. The vast majority (86%) of those aged 45 or over are already dreaming about escaping their working life for retirement, but only 8% of the same age group have recently checked the retirement date on their pension plans to make sure it is still in line with their plans.

Over half (56%) don’t have a clear idea when they want to retire, and only one in ten (10%) have worked out how much income they’ll need when they decide to stop working. The study also reveals it doesn’t get much clearer as you go up the generations: less than a fifth (17%) of those aged between 55 and 64 have recently checked to see if the retirement date on their pension policy is still fitting in with their plans.

Setting your retirement date on a pension plan does matter

Some people will have set their retirement date when they were in their 20s or 30s, and a great deal will have changed since then, including their State Pension age and perhaps their career plans. It may seem like a finger in the air guess when you’re younger, but the date that you set for retirement on a pension plan does matter. It will often dictate how your money is being invested and the communications you receive as you get nearer to that date.

Why you need to keep your retirement plans up to date

Right support, right time

If the date you plan to retire changes or you simply want to take some of your pension without stopping working, it’s important to tell your pension company. Otherwise, you may not receive information and support about your pending retirement at the most helpful times, as they’ll be basing this on your out-of-date plans.

De-risking investments

Some investment options will start to move your pension savings into lower-risk investments as you get closer to retirement. If you don’t have the right retirement date on your plan, you could be moving into these investments at the wrong time. For example, if you move into them too early, you could potentially miss out on investment returns which could increase the value of your pension savings. But if you move too late, you could be exposing your life savings to unnecessary risk.

Investment pot size

The size of the pension pot you need to build up to maintain your lifestyle when you come to retire will depend on when you plan to do so.

Income for life

If you’re planning to buy an annuity at retirement, which will guarantee you an income for the rest of your life, the amount of income you’ll get will depend on the size of your pot and annuity rates at that time. If you prefer to use your pension savings more flexibly, you can keep your money invested, and take it as and when you need. You’re then responsible for making sure your life savings last as long as you need them to.

Work longer or retire earlier

Reviewing your retirement date regularly as you get older makes real sense, and most modern pension plans enable you to change and update this date whenever you choose. It needn’t be the same as your State Pension age – you might want to work longer or retire earlier. Some people who plan to slow down or stop work earlier are using money from their private pension savings to bridge the gap until they can start claiming State Pension. All you need to do is inform your pension company of your plans, even if they change again in future.

Do you have clear idea of how to achieve your aims?

Whatever you want out of retirement, we will help get you there. Whether your retirement’s a long way off or just around the corner, having a clear idea of how to achieve your aims is important. To review your situation, please contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk.

Source data:

[1] The research was carried out online for Standard Life by Opinium. Sample size was 2,001 adults. The figures have been weighted and are representative of all GB adults (aged 18+). Fieldwork was undertaken in November 2017.

A PENSION IS A LONG-TERM INVESTMENT. THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

PENSIONS ARE NOT NORMALLY ACCESSIBLE UNTIL AGE 55. YOUR PENSION INCOME COULD ALSO BE AFFECTED BY INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS. THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION, WHICH ARE SUBJECT TO CHANGE IN THE FUTURE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

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Your money, your choice https://www.lloydosullivan.co.uk/blog/your-money-your-choice/ https://www.lloydosullivan.co.uk/blog/your-money-your-choice/#respond Mon, 14 May 2018 09:07:45 +0000 http://www.lloydosullivan.co.uk/blog/?p=985
Supporting your future financial requirements

You can pay into as many pension schemes as you want; it depends on how much money you can set aside. There are several different types of private pension to choose from, but in light of recent government changes the tax aspects can require careful planning. So what do you need to consider?

Building up a substantial pension pot

The term ‘private pension’ covers both workplace pensions and personal pensions. The UK Government currently places no restrictions on the number of different pension schemes you can be a member of. So, even if you already have a workplace pension, you can have a personal pension too, or even multiple personal pensions. These can be a useful alternative to workplace pensions if you’re self-employed or not earning, or simply another way to save for retirement.

Any UK resident between the ages of 18 and 75 can pay into a personal pension – although the earlier you invest, the more likely you are to be able to build up a substantial pension pot. However, the maximum that can be contributed to all your pensions during the tax year and receive tax relief (known as the ‘annual allowance’) is £40,000. 

Tax relief on pension contributions

A private pension is designed to be a tax-efficient savings scheme. The Government encourages this kind of saving through tax relief on pension contributions.

In the 2018/2019 tax year, pension-related tax relief is limited to either 100% of your UK earnings, or £3,600 per annum – whichever is highest. Contributions are also limited by the current annual (£40,000) and lifetime allowance (£1,030,000).

Pension tax relief rates:

• Basic-rate taxpayers will receive 20% tax relief on pension contributions
• Higher-rate taxpayers also receive 20% tax relief, but they can claim back up to an additional 20% through their tax return
• Additional-rate taxpayers again pay 20% tax relief, but they can claim back up to a further 25% through their tax return
• Non-taxpayers receive basic-rate tax relief, but the maximum payment they can make is £2,880, to which the Government adds £720 in tax relief, making a total gross contribution of £3,600

Annual allowance

The annual allowance is the maximum amount that you can contribute to your pension each year while still receiving tax relief. The current annual allowance is capped at £40,000, but may be lower depending on your personal circumstances.

In April 2016, the Government introduced the tapered annual allowance for high earners, which states that for every £2 of income earned above £150,000 each year, £1 of annual allowance will be forfeited. The maximum reduction will however be £30,000 – taking the highest earners’ annual allowance down to £10,000.

Any contributions over the annual allowance won’t be eligible for tax relief, and you will need to pay an annual allowance charge. This charge will form part of your overall tax liability for that year, although there is the option to ask your pension scheme to pay the charge from your benefits if it is more than £2,000. It is worth noting that you may be able to carry forward any unused annual allowances from the previous three tax years.

Lifetime allowance

The lifetime allowance (LTA) is the maximum amount of pension benefit that can be drawn without incurring an additional tax charge, currently £1,030,000. What counts towards your LTA depends on the type of pension you have:

▪ Defined contribution – personal, stakeholder and most workplace schemes – the money in pension pots that goes towards paying you, however you decide to take the money

▪ Defined benefit – some workplace schemes – usually 20 times the pension you get in the first year plus your lump sum – check with your pension provider

Your pension provider will be able to help you determine how much of your LTA you have already used up. This is important because exceeding the LTA will result in a charge of 55% on any lump sum and 25% on any other pension income such as cash withdrawals. This charge will usually be deducted by your pension provider before you start getting your pension.

Pension protection

It’s easier than you think to exceed the LTA. If you are concerned about exceeding your LTA, or have already done so, it’s essential to obtain professional financial advice. It may be that you can apply for pension protection. This could enable you to retain a larger LTA and keep paying into your pension – depending on which form of protection you are eligible for. We can assess and review the options available to your particular situation.

Alternative savings

In addition to pension protection, if you have reached your LTA (or are close to doing so), it may also be worth considering other tax-effective vehicles for retirement savings, such as Individual Savings Accounts (ISAs). In the current tax year, individuals can invest up to £20,000 into an ISA.

The Lifetime ISA launched in April 2017 is open to UK residents aged 18–40 and will enable younger savers to invest up to £4,000 a year tax-efficiently – and any savings you put into the ISA before your 50th birthday will receive an added 25% bonus from the Government. After your 60th birthday, you can take out all the savings tax-free, making this an interesting alternative for those saving for retirement.

Pension beneficiaries

There will normally be no tax to pay on pension assets passed on to your beneficiaries if you die before the age of 75 and before you take anything from your pension pot – as long as the total assets are less than the LTA. If you die aged 75 or older, the beneficiary will typically be taxed at their marginal rate.

Where are you along your retirement journey?

There is no one-size-fits all tax-efficient solution when it comes to planning for your retirement. So wherever you are in your retirement journey, we’re here to support you, whether it’s starting a pension, saving more into your plan or helping with your options for retirement. To review your unique situation, please contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

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Retirement wealth https://www.lloydosullivan.co.uk/blog/retirement-wealth/ https://www.lloydosullivan.co.uk/blog/retirement-wealth/#respond Tue, 08 May 2018 07:00:17 +0000 http://www.lloydosullivan.co.uk/blog/?p=982 What’s the right answer for you?

The first increase in minimum automatic enrolment (AE) workplace pension contributions came into effect on 6 April[1]. According to research from Scottish Widows, however, one in five Britons (20%) – amounting to more than ten million people – say they’ll work until they’re physically unable to, while one in 20 (6%) – another three million people – say they expect to work until they die.

While the increase in AE workplace pension contributions will help people narrow the gap in their retirement savings, there are many who need to be doing more to ensure a comfortable retirement. The research shows that 44% of people are not saving its recommended 12% of their salary towards retirement each year[2], which is more than double the new minimum AE contribution level of 5%.

Expectation to continue working at least part-time

In addition, the findings also reveal that more than half (51%) of Britons expect to continue working at least part-time past retirement age, and a fifth (18%) say that working beyond the age of 65 will be a necessity rather than a choice.

Only a quarter (24%) expect to have completely retired by the time they’re 65, the research reveals. Young people are least hopeful of this being a possibility, with only one in 20 (5%) of 18-24-year-olds expecting to retire by the age of 65, but this proportion doubles among 25-34-year-olds (11%) and triples among 35-44-year-olds (16%).

Delaying retirement – make it a choice, not a necessity

Nearly one in five (18%) people say they’ll work longer than they want to because they worry about their level of saving. Just under a third (32%) of 25-54-year-olds worry they haven’t been saving enough in their early years, and two fifths (39%) of people fear running completely out of money in retirement.

Interestingly, women are more concerned than men about the cost of later life. Just over two fifths (43%) of women are concerned that they’ll run out of money during retirement, while only a third (34%) of men feel this way. Others worry about facing potential shortfalls due to policy change, with four in ten (37%) citing concern about changes to the State Pension, such as a further increase to the retirement age.

Preparing for the costs of retirement

Despite the majority of British adults recognising the need to work longer to prepare for their retirement, a significant number have no contingency in place should they face increasing costs in later life. When told that people going into a nursing home can expect to pay an average of £866 per week for this, 22% of respondents said they’d never considered how they would cover this cost, and another 22% said they’d rely on the state to pay for care.

However, more than three in five (62%) people say they are unsure what behaviour they would change to make up for increasing retirement spending. Only 12% say they will hold off drawing down their maximum pension allowance for as long as possible, and just 8% say they will forego leisure spending to prepare for retirement spending.

Keeping your finances in good shape

When you reach that next chapter in life, you’ll want to make the most of it and keep your finances in good shape. Whether it’s saving for retirement or living in retirement, we can help give you more peace of mind with a financial plan that is able to remain on track as your life continues to change. Please contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk for more information.

Source data:

All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 3,535 adults. Fieldwork was undertaken between 17 and 22 January 2018. The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+).

[1] From 6 April 2018, the minimum contribution is 5%, with at least 2% from the employer; from 6 April 2019, the minimum contribution is 8%, with at least 3% from the employer.

[2] 2017 Scottish Widows Retirement Report – 44% of people aged 30+ are not saving adequately for retirement.

A PENSION IS A LONG-TERM INVESTMENT. THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

PENSIONS ARE NOT NORMALLY ACCESSIBLE UNTIL AGE 55. YOUR PENSION INCOME COULD ALSO BE AFFECTED BY INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS. THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION, WHICH ARE SUBJECT TO CHANGE IN THE FUTURE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

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2018/19 tax changes https://www.lloydosullivan.co.uk/blog/201819-tax-changes/ https://www.lloydosullivan.co.uk/blog/201819-tax-changes/#respond Mon, 30 Apr 2018 07:00:20 +0000 http://www.lloydosullivan.co.uk/blog/?p=978 New initiatives you need to know

It’s important to consider the tax implications of making financial decisions. The 2018/19 tax year is now upon us, and a raft of new changes have come into force. The good news is that the overall tax burden is little changed for basic-rate taxpayers, but there are number of areas that have changed that should be taken note of.

Here’s what you need to know about the 2018/19 tax year changes and new initiatives.

Personal Allowance

The tax-free Personal Allowance is the amount of income you can earn before you have to start paying Income Tax. All individuals are entitled to the same Personal Allowance, regardless of their date of birth.

In the 2017/18 tax year, the Personal Allowance was £11,500, and it rises to £11,850 in the 2018/19 tax year. This means you can earn £350 more in the 2018/19 tax year than in the previous tax year before you start paying Income Tax. However, bear in mind that the Personal Allowance is restricted by £1 for every £2 of an individual’s adjusted net income above £100,000.

A spouse or registered civil partner who isn’t liable to Income Tax above the basic rate may transfer £1,185 of their unused Personal Allowance in the 2018/19 tax year, compared to £1,150 in the 2017/18 tax year to their spouse or registered civil partner, as long as the recipient isn’t liable to Income Tax above the basic rate.

Higher-rate threshold

The threshold for people paying the higher rate of Income Tax (which is 40%) increased from £45,000 to £46,350 in the 2018/19 tax year. This new figure also includes the increased Personal Allowance.

Dividend Allowance

The Chancellor of the Exchequer, Philip Hammond, announced in the Spring Budget 2017 that the Dividend Allowance would reduce from £5,000 to £2,000 from 5 April 2018.

Any dividend income that investors earn above the £2,000 allowance will attract tax at 7.5% for basic-rate taxpayers, while higher-rate taxpayers will be taxed at 32.5% and additional-rate taxpayers at 38.1%.

This may impact on shareholders of private companies paying themselves in the form of dividends, for example, rather than salary. Investors with portfolios that produce an income in the form of dividends of more than £2,000 a year, which are held outside ISA or pensions, will also be affected by the reduction in the allowance.

National Insurance Contributions (NICs)

NICs be charged at 12% of income on earnings above £8,424, up from £8,164 until you are earning more than £46,350, after which the rate drops to 2%. It’s the same in Scotland.

Auto enrolment contributions

Auto enrolment contribution rates have increased for employees and employers. In the previous 2017/18 tax year, the minimum pension contribution rate was 1% from the employee and 1% from the employer, which provides a 2% contribution. However, from 6 April 2018, the contribution rate increased to 3% for employees and 2% from the employer, totalling 5%.

Pension Lifetime Allowance

The Lifetime Allowance increased from £1 million to £1.03 million in the 2018/19 tax year. This is the maximum total amount you can hold within all your pension savings without having to pay extra tax when you withdraw money from them.

If the total value of your pension savings goes over the Lifetime Allowance, any excess will be taxed at a rate of 25% in addition to your marginal rate of Income Tax if drawn as income, or 55% if you take it as a lump sum.

State Pension

There has been a 3% rise for the old basic State Pension and the new flat-rate State Pension. If you’re on the basic State Pension (previously £122.30 per week), this has increased to £125.95. The flat-rate State Pension has increased from £159.55 to £164.35 a week.

Inheritance Tax

The residence nil-rate band (RNRB) has risen from £100,000 to £125,000. The RNRB enables eligible people to pass on a property to direct descendants and potentially save on death duties.

Capital Gains Tax

Capital Gains Tax is charged on profits that are made when certain assets are either transferred or sold. There’s no tax to pay if all gains made in a tax year fall within the annual Capital Gains Tax allowance. For the 2018/19 tax year, this will be £11,700 (it was £11,300 for the 2017/18 tax year).

Buy-to-let landlords


Changes mean that only 50% of mortgage interest will be able to be offset when calculating a tax bill, compared with 75% previously.

Need help navigating the tax maze?

Remember that tax rules and allowances can and do change over time. Their effect on you depends on your individual circumstances, which can also change. We’ll help you to optimise your tax position. For a review of your position, contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk for further information or to arrange a meeting.

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Financial freedom https://www.lloydosullivan.co.uk/blog/financial-freedom-2/ https://www.lloydosullivan.co.uk/blog/financial-freedom-2/#respond Mon, 23 Apr 2018 07:00:14 +0000 http://www.lloydosullivan.co.uk/blog/?p=976 Deciding what to do with pension savings – even if you’re still working

It might seem like a far-off prospect, but knowing how you can access your pension pot can help you understand how best to build for the future you want when you retire.

On 6 April 2015, the Government introduced major changes to people’s defined contribution (DC) private pensions. Once you reach the age of 55 years, you now have much more freedom to access your pension savings or pension pot and to decide what to do with this money – even if you’re still working.

Depending on the scheme, you may be able to take cash lump sums, a variable income through drawdown (known as ‘flexi-access drawdown’), a guaranteed income under an annuity, or a combination of these options. This means being faced with the choice of deciding how much money to take out each year and setting an appropriate investment strategy. It goes without saying that your income won’t last as long if you take a lot of money out of the pension pot early on.

What are your retirement income options?

There are many things to consider as you approach retirement. You need to review your finances to ensure your future income will allow you to enjoy the lifestyle you want. You’ll also be faced with a number of different options available for accessing your pension. Being faced with such an important decision, it’s essential you obtain professional financial advice and guidance. We’ve provided an overview of the main options.

Keep your pension pot where it is

You can delay taking money from your pension pot to allow you to consider your options. Reaching age 55 or the age you agreed with your pension provider to retire is not a deadline to act. Delaying taking your money may give your pension pot a chance to grow, but it could go down in value too.

Receive a guaranteed income for life

A lifelong, regular income (also known as an ‘annuity’) provides you with a guarantee that the income will last as long as you live. A quarter of your pension pot can usually be taken tax-free, and any other payments will be taxed.

Receive a flexible retirement income

You can leave your money in your pension pot and take an income from it. Any money left in your pension pot remains invested, which may give your pension pot a chance to grow, but it could go down in value too. A quarter of your pension pot can usually be taken tax-free, and any other withdrawals will be taxed whether you take them as income or as lump sums. You may need to move into a new pension plan to do this. You do not need to take an income.

Take your whole pension pot in one go

You can take the whole amount as a single lump sum. A quarter of your pension pot can usually be taken tax-free – the rest will be taxed. You will need to plan how you will provide an income for the rest of your retirement.

Take your pension pot as a number of lump sums

You can leave your money in your pension pot and take lump sums from it as and when you need until your money runs out or you choose another option. You can decide when and how much to take out. Any money left in your pension pot remains invested, which may give your pension pot a chance to grow, but it could go down in value too. Each time you take a lump sum, normally a quarter of it is tax-free and the rest will be taxed. You may need to move into a new pension plan to do this.

Choose more than one option and combine them

You can also choose to take your pension using a combination of some or all of the options over time or over your total pot. If you have more than one pot, you can use the different options for each pot. Some pension providers or advisers can offer you an option that combines a guaranteed income for life with a flexible income.

Significant effect on the amount of income available

The earlier you choose to access your pension pot, the smaller your potential fund and income may be for later in life. This could have a significant effect on the amount of income available to you, meaning it may be less than it could have been, and it could run out much earlier than expected.

Taking an appropriate income or money from your pension is very complex. We’ll help you access your options. Remember: if you choose to only withdraw some of your money, what’s left will remain invested and could go down as well as up in value. You could also get back less than has been invested. Also, if you buy an income for life, you can’t generally change it or cash it in, even if your personal circumstances change. And the inheritance you can pass on depends on what you decide to do with your pension money.

Expert and professional advice is the key

You don’t have to do anything with your pension savings when you reach age 55. If you don’t need the money yet, you can leave it where it is. But whatever your future plans are, it’s essential to receive expert and professional advice. To review your situation and consider the ways we can to help you make the most of your retirement income, please contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk – we look forward to hearing from you.

A PENSION IS A LONG-TERM INVESTMENT. THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

PENSIONS ARE NOT NORMALLY ACCESSIBLE UNTIL AGE 55. YOUR PENSION INCOME COULD ALSO BE AFFECTED BY INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS. THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION, WHICH ARE SUBJECT TO CHANGE IN THE FUTURE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

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Protecting your estate for future generations https://www.lloydosullivan.co.uk/blog/protecting-your-estate-for-future-generations/ https://www.lloydosullivan.co.uk/blog/protecting-your-estate-for-future-generations/#respond Tue, 17 Apr 2018 09:00:40 +0000 http://www.lloydosullivan.co.uk/blog/?p=972
Many individuals find the Inheritance Tax rules too complicated

If you struggle to navigate the UK’s Inheritance Tax regime, you are not alone. Whether you are setting up your estate planning or sorting out the estate of a departed family member, the system can be hard to follow. Getting your planning wrong could also mean your family is faced with an unexpectedly high Inheritance Tax bill.

Reluctant to seek professional advice

Findings from a recent survey[1] revealed that many individuals find the Inheritance Tax rules too complicated, but the majority are reluctant to seek professional advice. The research revealed that over three quarters (77%) think the UK’s Inheritance Tax rules are too complicated. Yet despite this, only a third (33%) have sought professional advice on Inheritance Tax planning.

We understand that ensuring your Inheritance Tax planning is tax-efficient is a sensitive subject, and as a result planning opportunities can be missed. Early preparation is the key to success. Taking advantage of alternative methods to secure wealth and to shelter your estate will ensure that more wealth can be passed onto the next generation.

Exempt from Inheritance Tax

Every individual in the UK, regardless of marital status, is entitled to leave an estate worth up to £325,000. This is known as the ‘nil-rate band’. Anything above that amount is taxed at a rate of 40%. If you are married or in a registered civil partnership, then you can leave your entire estate to your spouse or partner. The estate will be exempt from Inheritance Tax and will not use up the nil-rate band.

Instead, the unused nil-rate band is transferred to your spouse or registered civil partner on their death. This means that should you and your spouse pass away, the value of your combined estate has to be valued at more than £650,000 before the estate would face an Inheritance Tax liability.

Here’s our snapshot of the main Inheritance Tax areas you may wish to consider and discuss further with us.

Steps to mitigate against Inheritance Tax

Make a Will

Dying intestate (without a Will) means that you may not be making the most of the Inheritance Tax exemption which exists if you wish your estate to pass to your spouse or registered civil partner. For example, if you don’t make a Will, then relatives other than your spouse or registered civil partner may be entitled to a share of your estate, and this might trigger an Inheritance Tax liability.

Residence nil-rate band

If you’re worried that rising house prices might have pushed the value of your estate into exceeding the nil-rate band, then the new ‘residence nil-rate band’ could be significant. From 6 April 2017, it can now be claimed on top of the existing nil-rate band. It starts at £100,000 per person and will increase annually by £25,000 every April until 2020, when the £175,000 maximum is reached.

Make lifetime gifts

Gifts made more than seven years before the donor dies, to an individual or to a bare trust (see types of trust), are free of IHT. So it might be wise to pass on some of your wealth while you are still alive. This will reduce the value of your estate when it is assessed for IHT purposes, and there is no limit on the sums you can pass on. You can gift as much as you wish – this is known as a ‘Potentially Exempt Transfer’ (PET).

However, if you live for seven years after making such a gift, then it will be exempt from Inheritance Tax. However, should you be unfortunate enough to die within seven years, then it will still be counted as part of your estate if it is above the annual gift allowance. You need to be particularly careful if you are giving away your home to your children with conditions attached to it, or if you give it away but continue to benefit from it. This is known as a ‘Gift with Reservation of Benefit’.

Leave a proportion to charity

Being generous to your favourite charity can reduce your Inheritance Tax bill. If you leave at least 10% of your estate to a charity or number of charities, then your Inheritance Tax liability on the taxable portion of the estate is reduced to 36% rather than 40%.

Set up a trust

Family trusts can be useful as a way of reducing Inheritance Tax, making provision for your children and spouse, and potentially protecting family businesses. Trusts enable the donor to control who benefits (the beneficiaries) and under what circumstances, sometimes long after the donor’s death. Compare this with making a direct gift (for example, to a child) which offers no control to the donor once given. When you set up a trust, it is a legal arrangement, and you will need to appoint ‘trustees’ who are responsible for holding and managing the assets. Trustees have a responsibility to manage the trust on behalf of and in the best interest of the beneficiaries, in accordance with the trust terms. The terms will be set out in a legal document called ‘the trust deed’.

Types of trust you might consider

Bare (Absolute) Trusts

The beneficiaries are entitled to a specific share of the trust, which can’t be changed once the trust has been established. The settlor (person who puts the assets in trust) decides on the beneficiaries and shares at outset. This is a simple and straightforward trust – the trustees invest the trust fund for the beneficiaries but don’t have the power to change the beneficiaries’ interests decided on by the settlor at outset. This trust offers potential Income Tax and Capital Gains Tax benefits, particularly for minor beneficiaries.

Life Interest Trusts

Typically, one beneficiary will be entitled to the income from the trust fund whilst alive, with capital going to another (or other beneficiaries) on that beneficiary’s death. This is often used in Will planning to provide security for a surviving spouse, with the capital preserved for children. It can also be used to pass income from an asset onto a beneficiary without losing control of the capital. This can be particularly attractive in second marriage situations when the children are from an earlier marriage.

Discretionary (Flexible) Trusts

The settlor decides who can potentially benefit from the trust, but the trustees are then able to use their discretion to determine who, when and in what amounts beneficiaries do actually benefit. This provides maximum flexibility compared to the other trust types, and for this reason is often referred to as a ‘Flexible Trust’.

Time to evaluate whether or not Inheritance Tax could become payable?

When someone dies, Inheritance Tax needs to be considered. Without the right professional advice and careful financial planning, HM Revenue & Customs can become the single largest beneficiary of your estate following your death. To evaluate whether or not Inheritance Tax could become payable, all of your assets you hold at the date of death need to be valued, and reliefs and exemptions determined. Don’t leave it to chance – contact Lloyd O’Sullivan on 0208 941 9779 or email info@lloydosullivan.co.uk for a review of your situation.

Source data:

[1] Canada Life’s annual Inheritance Tax monitor survey of 1,001 UK consumers aged 45 or over with total assets exceeding the individual Inheritance Tax threshold (nil-rate band) of £325,000. Carried out in October 2017.

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