Workers ‘losing track’ of pension funds

Nearly a quarter of UK adults have lost track of at least one of their pensions, adding to the pressures facing the pension system, according to Age UK.

In a recent poll conducted by the charity, 23% of adults reported that they have lost track of at least one of their pensions, and many are not sure how to go about tracing their lost funds.

With today’s employees increasingly having a variety of different jobs during the course of their career, individuals are likely to draw on several, smaller pension funds on their retirement.

The survey also revealed that 24% of adults are currently failing to plan for their retirement, as they ‘cannot afford’ to do so.

Lucy Harmer, Head of Services at Age UK, said, ‘It’s really important we all set aside time to keep on top of our personal admin, such as organising paperwork and keeping details of any financial products safe and secure. This is especially crucial for pensions as it may be some years down the line until they need to be accessed’.

We can help with your tax and financial planning needs, including planning ahead for a comfortable retirement. Please contact us for further advice.

New body aims to boost local High Streets

A new body will aim to help town centres to adapt to the modern marketplace, by building on the foundations laid down in the High Street Review conducted by Mary Portas.

The Future High Streets Forum brings together civic and business leaders from across the retail, property and hospitality sectors.

Speaking after the first meeting of the Forum, Local Growth Minister Mark Prisk said, ‘Over the last year this Government has worked hard to help boost the High Street, including initiatives to simplify planning, revamp the public realm, cut the business rate burden and revive local markets’.

‘Now, the Future High Streets Forum will take a joint lead in driving forward these initiatives and providing the strategic leadership needed to analyse the competition and tackle the difficult problems which conventional High Streets need to address.’

The Forum will address a number of key issues, including:

• helping to accelerate the local mentoring programme
• advising the Government on the more efficient use of existing buildings, in order to encourage people to live in town centres
• supporting the expansion of such initiatives as Love Your Local Markets and pop-up shops
• researching into a practical toolkit to help town teams to ‘futureproof’ High Streets
• exploring solutions to barriers to the High Street, such as local parking policies

The Association of Town and City Management will offer a £1m two-year peer-to-peer support package for the 27 Portas Pilots and 330 town teams across country.

Is your High Street full of empty shops and requiring a much needed boost? Do you think this forum will make a difference? Please let us know what you think

If you are thinking about starting your own business and would like some practical and professional advice, please visit our Business Start upspage.

Chancellor set to announce £2.5bn cuts in a Budget ‘to tackle the economy’

Chancellor George Osborne will announce an additional £2.5bn of Whitehall cuts when he presents the 2013 Budget at 12.30pm today.

The Chancellor will outline the details of the additional 2% departmental spending cuts, to be spread over the next two years, with the money set to be spent on infrastructure projects.

George Osborne has been under increasing pressure to cut taxes and increase spending in a bid to boost the economy, and the latest economic forecasts from the Office for Budget Responsibility are likely to be negative.

However, despite the growing pressure, and the recent loss of the UK’s AAA credit rating, the Chancellor has insisted that the Government will stick to its reduction plan.

Posting his first ever message on Twitter, George Osborne commented, ‘Today I’ll present a Budget that tackles the economy’s problems head on helping those who want to work hard and get on’.

Business groups have urged the Chancellor to take action on business taxes, including an acceleration in the planned reduction in the main rate of corporation tax, and many economists are predicting that the Government will announce a further increase in the personal tax allowance, to reach the Coalition’s target of £10,000.

In the run-up to the Budget, the Government announced plans to allow some working parents to claim back up to £1,200 a year in childcare costs, with effect from 2015.

We’ll keep you posted on all the latest developments happening on this very important day of the Budget, or alternatively, you can visit our Twitter page @LGaccountants for all the latest tweets about pensions, tax and cross border trading, as well as tax saving tips! So, why not follow us too, as it would be great to have you onboard.

If you have any questions about how the Budget will affect you, or require advice about your current tax arrangements, please call us on +44 (0)20 8861 7575

If Tax Matters To You, YOU Matter To Us

Is this You? Survey highlights UK’s reluctance to save for retirement

One of the major clearing banks recently undertook a retirement planning survey across 15 countries in which it operates. Among its findings for the UK were:

 

• One third of people were not making any preparation for retirement, while a virtually identical proportion thought they were not doing enough.
•  The average expected time spent in retirement was 19 years, which was 12 years longer than the average time retirement savings were expected to last.
•  In terms of retirement income, the average amount thought appropriate was 73% of pre-retirement income.
•  Just 38% of people are regular savers, leaving the UK only above Egypt in terms of thrift. 
• The UK came top in one unfortunate category: prioritising saving for a holiday over saving for retirement. Given the choice of only one savings goal for the year, 58% of the UK respondents chose a holiday, while 32% opted for retirement.

One interesting point the survey threw up was that, for those on average incomes, there was a strong relationship between financial planning and greater saving. People who had carried out some type of financial planning had at least four times the retirement savings of those who had failed to plan. Where professional advice is used, savings were two and a half times more than those of people who have not taken expert advice. 

Everyone hopes to maintain the same standard of living in retirement as they presently enjoy whilst working, but to achieve this requires considerable forward planning.

Please contact us on 0208 861 7575 or visit our website for more information, or book a FREE initial consultation so that you can come in and see us and talk over your requirments.

The Bank of England changes its inflation stance

In recent years the Bank of England (BoE) has gained an unfortunate reputation for over-optimism about the path of inflation. The BoE’s Quarterly Inflation Reports (QIRs) have regularly said that inflation would be back on target (2% of the consumer prices index [CPI]) by the end of its two-year forecast period.

Each quarter’s bulletin has contained a graph which, almost magically, showed the chances of inflation being above target were 50% two years out. However, CPI inflation has been over 2% since December 2009 and has only been below 2% for six months in the last five years, and reached a peak of 5.2% as recently as September 2011.

The BoE’s latest QIR, the penultimate of Sir Mervyn King’s tenure as Governor, has changed tack somewhat. The February edition says that ‘Inflation has remained stubbornly above the 2% target…CPI inflation is likely to rise further in the near term and may remain above the 2% target for the next two years.’ The graph now shows a near 60% probability that inflation will be over 2% in the first quarter of 2015, with the 50% level not being reached for another year.

The BoE’s new inflation calmness is a reflection of the state of the economy and government finances.

• In normal times, above-target inflation would mean that the BoE would increase interest rates. However, the parlous state of the UK economy rules out such a course of action. Rate rises and the threat of a triple-dip recession are not compatible.

•  Some of the inflationary pressure is the result of Government policy, which the BoE is powerless to counter. The QIR comments that moves such as increases to tuition fees and green levies on energy suppliers added around 1% to inflation at the end of 2012, and are likely to continue to add to it. 

The message of the BoE’s new stance is that, at least for now, inflation is less of a concern than helping the economy by keeping interest rates low and taking other monetary action, such as quantitative easing. That is not good news if you hold large sums on deposit.

 

Ever-dwindling interest: Instant access rates are shrinking further

What do you think is the current top market interest rate for £10,000 in a new instant access account?

If you have not looked at the savings league tables recently, it may surprise you to learn that the answer is now just 2%. And that is gross, so if you are a 40% taxpayer, the net return is just 1.2%, little more than a third the current rate of retail prices index (RPI) inflation.

Rates have fallen for new accounts and for many existing variable rate accounts (notably the Post Office) because the banks and building societies can access up to £80 billion worth of cheap money under the Funding for Lending Scheme (FLS). The FLS was launched by the Treasury and Bank of England last summer in an effort to stimulate lending to households and businesses. So far, the main impact has been on deposit rates for investors and the mortgage market, where rates for new loans have been falling.

The drop in instant access deposit rates has rippled through to fixed term accounts, with only the longest terms from a handful of lenders now offering a rate above 3%. This year’s cash ISA season looks set to be much less competitive than previous years, with building societies rather than banks giving the best terms at the time of writing.

We all need some rainy day money on deposit – three to six months’ cover for outgoings is a good start – but if you have more, now is a sensible time to consider ways in which you could make that excess cash work harder, if only to counter that stubbornly over-target inflation rate.

Past performance is not a reliable indicator of future performance. The value of investments and income from them can go down as well as up and you may not get back the original amount invested.

Government could raise income tax allowance ‘above £10,000’

Conservative Party chairman Grant Shapps has told the BBC that the Government might consider raising the starting point for paying income tax above the Coalition’s stated target of £10,000.

From April this year, individuals will receive the first £9,440 of their income free of tax – a rate that Chancellor George Osborne has described as being within ‘touching distance’ of the £10,000 personal income tax allowance goal.

Now Mr Schapps’ comments, made on BBC Radio 5 Live’s Pienaar’s Politics programme, have fuelled speculation that next month’s Budget might see another rise in the threshold, and leave the Chancellor with two more Budgets – in 2014 and 2015 – in which to raise it up to or beyond the £10,000 mark.

“We’ve already said that we want to get it up to £10,000 and I don’t think I’d be revealing too much to say that our ambition might be to get it higher,” Mr Schapps said.

His remarks followed a Labour pledge last week to reintroduce the 10p rate of tax, which was scrapped by Gordon Brown, if the party returns to power at the next general election. Mr Shapps criticised these plans as being too complicated.

“I certainly think taking people out of tax entirely is the most efficient best way to do this,” he said.

“Having tax inspectors running around trying to charge people even if it’s only 10p in the pound and work out their tax situation, for the hardest pressed people on the lowest pay in this country, is not good use of taxpayers’ time.”

“People should be able to earn that money without having to worry about paying that tax.”

Is this the right for the Government to make? If this change applies to you, how much better off will you be? We’d love to hear any thoughts you may have on this.

If Tax Matters To You, YOU Matter To Us 

As the tax year-end approaches, it is time to top up your ISA

With February upon us, it won’t be long before the ISA supplements start appearing in the weekend papers. The end-of-tax-year rush to invest in an ISA is at once both sensible and illogical. It’s sensible because of the benefits an ISA offers:

• Dividends and income from fixed-interest securities are free of personal UK tax within a stocks and shares ISA, although dividend tax credits can’t be reclaimed.  
• Interest earned on deposits is UK tax-free in a cash ISA. A flat 20% tax applies within a stocks and shares ISA. 
• Gains made within ISAs are free of capital gains tax (CGT).  
• ISA income and gains do not have to be reported on your tax return.

The illogic stems from the timing: why wait until the end of the tax year before taking advantage of the ISA’s tax benefits if you could have invested last April and enjoyed them since then? The answer is probably that there’s nothing like a deadline to concentrate minds, and, as a result, the marketing departments of financial services companies make the most of them.

In recent years, cash ISAs have attracted the bulk of ISA subscriptions, despite the base rate having been 0.5% since March 2009. The most successful cash ISA providers have relied upon temporary bonuses to attract investors – last year’s ISA season saw rates of around 3%, of which up to 2.5% was accounted for by a one-year bonus (now just about to end). So far in 2013, rates have been lower, with the big banks either staying their hand or deciding they don’t need the cash. Most returns on offer are now below the prevailing inflation rate.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.

If you would like to talk to us about your savings or investment, and help you make the right decisions and save you money, please visit our website or call us on 0208 861 7575

 

New era for the state pension as single-tier system unveiled

The Government has set out its plans for a new flat-rate state pension system, which is expected to take effect from April 2017.

Under the existing system, many poorer pensioners are entitled to top up their basic state pension payments of £107.45 a week, via the means-tested Pension Credit and the second state pension.

However, figures suggest that around 1.5 million people are failing to claim Pension Credit.

The new single-tier pension of around £144 a week (plus inflationary increases) will replace the state second pension, contracting out and out-dated additions. It is expected to be paid to all qualifying pensioners who reach the state pension age from 6 April 2017.

In addition, the Government has increased the number of years of national insurance contributions (NICs) required to qualify for the full state pension from 30 to 35. Under the new system, taking a career break to raise a family will also count towards the 35 years of NICs required to receive a full pension.

Currently, an individual begins to build up their entitlement to the state pension after one year of NICs. However, from April 2017 taxpayers will require a minimum of somewhere between seven and 10 years of NICs.

The changes are expected to benefit the self-employed and many women. However, the system would not distinguish between poorer and wealthier individuals, prompting some experts to warn that there could be long-term losers when the changes come into effect.

The Government will also need to determine how to deal with people who have contracted out of the state second pension.

Announcing the proposals, the Pensions Minister Steve Webb, said: ‘The current state pension system is too complicated and leaves millions of people needing means-tested top-ups.

‘Our simple, single-tier pension will provide a decent, solid foundation for new pensioners in an otherwise less certain world, ensuring it pays to save.’

The proposals have been welcomed by the British Chambers of Commerce (BCC). ‘[This] announcement will bring welcome simplification for pension savers and parity for the self-employed, who were previously ineligible to top-up state pensions,’ commented Dr Adam Marshall, BCC Director of Policy and External Affairs.

‘These reforms support the rollout of automatic enrolment, providing certainty about the size of the state pension and creating a much-needed incentive for individuals to save privately.’

The state pension age is set to rise to 66 by 2020, and to 67 by 2028.

How will this affect you? Are you about to reach state pension age of 60?

MPs question ‘two Budgets a year’

MPs have urged HM Treasury to reconsider the role played by the Chancellor of the Exchequer’s annual Autumn Statement.

The Autumn Statement traditionally provides an update on the public finances and the economy ahead of the Spring Budget, but has taken on increasing significance in recent years, and is now often used to announce key changes to tax and policy.

With last year’s Autumn Statement dubbed a ‘mini-Budget’ by the media, the Treasury Committee has expressed concern that effectively having two Budgets a year creates additional uncertainty and costs for business and the economy.

The Committee has also challenged the role of the Office for Budget Responsibility, which is responsible for providing independent forecasts for the economy and public finances, arguing that its forecasts are frequently over-optimistic.

Do you think the committee is right? Is the Autumn statement un-necessary, or do you like getting a ‘progress report’ on how the economy is performing? Let us hear your thoughts 

The 2013 Spring Budget will take place on Wednesday 20 March and you can visit our website for updates on the latest announcements that could affect you and your business.