June 16th, 2010
We are now less than a week away from any proposals by the Conservatives and it will be interesting to see where they intend to make savings that will affect clients.
The major changes are the likely amendments to Capital Gains Tax in terms of relief and possible tax allowances. If changes are made to stop the ability to roll forward tax on capital gains by investing in certain investments this may also bring in extra revenue for the treasury. Clients and advisers need to be careful that they do not rush into decisions but also should consider the what if scenario.
Pensions may suffer another blow if higher rate tax relief were to be removed further. With the very low annuity rates that are currently acailable the ability for those nearing retirement, the chance to enhance their pension funds and income quickly would be restricted again. Predictions are stating that they believe the taper relief level will begin at inmcome from £100,000 from next tax year. This would restrict the ability for paraplanners and financial advisers to help clients use their pensions to reduce the high taxes paid by those earning in the £100,000 to £113,000 tax bracket.
Many financial adviser clients decry the low income they are quoted now and so the ability to increase any fund values by making contributions is vital. If any income tax rises occur these will also affect pensions in payment, which if were recent annuities would suffer a decrease in net payment.
There maybe some positive news if the requirement to force individuals to begin drawing an income at age 75 comes closer, and this will also though likely signal the demise of Alternatively Secured Pension Planning (ASP). Again if clients are about to purchase an ASP because it is their only option they need to consider whether it would be wise to delay a decision until after the budget if time allows this.
On the subject of fees any increase in VAT will also increase the cost of advice and with a move towards products that have VATable monthly fees will again make inrodes into clients returns at a difficult time in the market.
The expected reduction in child tax credits also means that those who have clients who use this income to save for their children may have to find additional money from their income to top up these payments.
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May 28th, 2010
The new Capital Gains Tax rules are still in the balance it would appear.
The politicians seem to fear the mass sell off that is being planned in shares and property. Whilst selling shares is relatively easy if everyone empties their applecart in the space of three weeks then prices will be pretty depressed. So not so great if you are already invested but handy for those who have been sitting on cash.
Property is not so easy, how can you sell your property portfolio in three weeks. Well if its commercial property and you have a sufficient sized fund then you could sell it to your pension fund. Failing that you may struggle as the market becomes flooded temporarily.
What this does prove is that people must use their ISA allowances to protect themselves wher they can, and for many investmnets where they receive rollover relief will become increasingly popular despite their probable higher risk. If you are guaranteed to pay 40% or maybe 50% tax instead of 18% then the risk of the investment falling but deferring any tax and you really making a loss changes.
The coalition face their first real challenge. A brave face will be shown but I imagine their will be much jousting behind the scenes. I wonder how many MP second homes are up for sale???
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September 18th, 2009
Captain Darling and the General have put rather a spoke in high earners retirement planning with the new anti-forestalling rules. Whilst this has rather upset all FTSE Directors it affects many mere mortals as well.
So lets look at an example:
Mr Smith owns his company with his wife, equal shareholding, different roles. He is a key role employee and his wife supports him. He draws £175,000 in total and Mrs Smith draws £30,000, they are simple people with no other income currently. He pays £3,000 pm plus usually £100,000 lump sum before the company year end Mrs Smith pays £300 pm with no lump sum. Company pays 28% corporation tax and all contributions come from the company. Should he pay his £100,000 now?
Well let’s assume that his previous £100,000 is ignored but his £36,000 regular is allowed. If he pays £100,000 he will likely have to pay £20,000 extra tax in January 2011. Mr Smith and their company will save:
28% Corporation tax – £28,000
12.8% Employer NI – £12,800
1% Employee NI – £ 1,000
Total £41,800
It is likely Mr Smith would need to draw a gross c£35k to pay his net £20k tax bill so it is all a bit reduced in terms of tax benefits but his tax would not be due until Jan 2011 and corporation tax would be payable 9 months after company year end so there is still a cashflow benefit. If the insurers get their way maybe Mr Smith’s last lump sum contribution will be counted and so no 20% tax bill would be due….let’s hope so.
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September 14th, 2009
Several months ago I started work with the Financial Services Skills Council to help define the role of a Paraplanner, I’m really pleased that this has now evolved into the new Paraplanning Qualification which will be launched in October by the IFP at their conference. Hopefully this is a big step in the perception and ability for Paraplanners to evidence their skills to new employers and will help distribute knowledge across the industry for the benefit of clients.
Tags: FSSC, IFP, knowledge, Paraplanner
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September 10th, 2009
Paraplanning is all about teamwork. It’s about getting your heads together and coming up with solutions for clients. You need to be confident that those around you are doing a great job. So how do you build that confidence in your team?
Well, you have to make sure first that everybody in your team is credible and that means looking at this from an insider viewpoint and externally to clients, in my case that’s financial advisers, and in financial advisers cases that clearly is their clients.
To build credibility you need to get a number of people involved in processes and in completing tasks. This means that a buddy system can work very well in preventing delays in work when the unexpected happens like an illness. By putting teams in front of clients rather than individuals this builds any firms credibility and acts as a reassurance for the client that they’re not simply dealing with an individual. This promotes greater customer satisfaction and boosts retention.
Tags: clients, confidence, paraplanning, teamwork
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