REDUCE YOUR INHERITANCE TAX BILL - 10 WAYS TO PROTECT YOUR ESTATE FOR YOUR LOVED ONES - PKF Francis Clark
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MARCH/APRIL 2021
REDUCE YOUR
INHERITANCE
TAX BILL
10 WAYS TO PROTECT YOUR E STATE
FOR YOUR LOVED ONE S
RESPONSIBLE PASSING ON TAX PLANNING
INVESTING PENSION BENEFITS REIMAGINED
Invest today. Providing for your loved Identifying the best options to
Change tomorrow ones after your death preserve your wealth
M A R C H /A P R I L 2021
CONTENTS
INSIDE 04
ISA DEADLINE 5 APRIL 2021:
08
RESPONSIBLE INVESTING
THIS ISSUE USE IT OR LOSE IT Invest today. Change tomorrow
Make the most of the tax breaks before
it's too late
Welcome to our latest edition. At the time of
publishing, Chancellor of the Exchequer Rishi Sunak had
not delivered his Budget 2021 speech. We’ll look at the
key announcements and how these could affect your
personal, family and business finances in the next edition.
09
You’ve worked to create a legacy for the people
you care about. But have you put in place plans so
that your loved ones can receive the most from the
estate you intend to leave behind? Even if you believe PENSION OPTIONS
you have moderate wealth you may still need to take Planning your financial future,
05
action to minimise Inheritance Tax. On page 10 we and how to get there
consider why it can be a great concern for individuals
with wealth exceeding the current £325,000 nil-rate
INFLATION BEATERS
band (2020/21 tax year).
How to ensure your money is protected
Responsible, sustainable and environmentally friendly
from rising inflation
investing is here to stay. But, while demand is growing
among all age groups, genders and income bands,
some savers and investors are missing their biggest
opportunity for responsible investing, which is through
10
their pension. Read the full article on page 08.
If you’ve spent a lifetime saving for retirement, you’d
probably like any remaining money to go to a loved
one after your death. But whether pension benefits are REDUCE YOUR
payable to a beneficiary, and how they’ll receive them, is INHERITANCE TAX BILL
dependent on the type of pension you’ve chosen and 10 ways to protect your estate for your
how you’ve accessed it in your retirement. Find out what loved ones
06
to consider on page 03.
No one likes to pay tax on their hard-earned money.
But due to the complexities of the tax system, without
expert professional financial advice, some individuals TAX PLANNING REIMAGINED
could be paying more tax than necessary. Turn to page Identifying the best options to
06 to see what you may need to consider before the preserve your wealth
end of every tax year on 5 April. A full list of the articles
featured in this issue appears opposite.
PLANNING FOR LIFE’S JOURNEY
Your wealth needs to serve you differently
at different stages of your life. Individual life
planning should not be a one-off exercise.
Your personal circumstances, requirements,
expectations and aspirations will develop over
time. That’s why we’re here to support you INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION
through life’s adventures and provide the right LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS
solution at every step of the way. To discuss how FROM, TAXATION ARE SUBJECT TO CHANGE.
we can help you plan for life’s journey, please
THE VALUE OF INVESTMENTS MAY GO DOWN AS WELL AS UP, AND YOU MAY
contact us. We look forward to hearing from you.
GET BACK LESS THAN YOU INVESTED.
The content of the articles featured in this publication is for your general information and use only and is not intended to address your particular requirements. Articles should not be relied upon in
their entirety and shall not be deemed to be, or constitute, advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information
is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice
after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles. Thresholds, percentage rates and
tax legislation may change in subsequent Finance Acts. Levels and bases of, and reliefs from, taxation are subject to change and their value depends on the individual circumstances of the investor.
The value of your investments can go down as well as up and you may get back less than you invested. Past performance is not a reliable indicator of future results.
CONTENTS
16 20
12
CRITICAL FACTOR FUNDING LONG-TERM CARE
Protection for you and your loved ones How much will it cost to enjoy life in later years?
WEALTH CREATION
Where can you turn if you want to invest
tax-efficiently?
21
HOW MUCH IS THE STATE PENSION?
Understanding what you’ll receive and when
17 22
13
INVESTING FOR YOUR CHILD'S FUTURE
Even small amounts can build up a GOALS BASED INVESTING
substantial nest egg Are you giving yourself the best chance of success?
24
PASSING ON PENSION BENEFITS
Providing for your loved ones after
your death
ISA TRANSFERS
Time too widen your range of investment choices?
25
SUSPENDING PENSION CONTRIBUTIONS
Think carefully about how action taken
now could affect your retirement
26
RETIREMENT FINANCES
COVID-19: third of retirees fearful due
14 18
to negative impact
ADVICE MATTERS
Life events that professional financial advice can
GENERATION COVID-19
Financial support to younger members
28
COMBINED FINANCES
help you navigate
as a direct result of the pandemic Planning ahead for your financial future together
04 I NVE STM ENT
ISA DEADLINE 5 APRIL 2021:
USE IT OR LOSE IT
MAKE THE MOST OF THE TAX BREAKS BEFORE IT’S TOO LATE
If you hold a Cash Individual Savings Account (ISA) you may be dissatisfied have heard of a well-performing stock that’s offering
unbelievable returns. Or you might have suffered a
with the low rates of interest you receive, which could make it difficult to grow sudden loss and decide your existing investments
your money even at a rate that keeps pace with inflation. are underperforming.
S
tocks & Shares ISAs offer the possibility of decisions varies between different ISA providers; INVESTMENTS, BY NATURE, FLUCTUATE IN VALUE
higher returns than Cash ISAs, but only if some allow you to choose individual investments, It’s more helpful to recognise that investments,
you’re prepared to take some risks with while others provide ready-made portfolios. by nature, fluctuate in value. A sudden rise in one
your savings. These investment accounts offer Either way, your professional financial adviser doesn’t mean you should buy and a sudden fall
tax-efficient benefits, and while a Cash ISA is simply can explain how funds work. These funds may in another isn’t a sign you should sell – in fact, you
a tax-efficient savings account which offers capital invest in shares in specific markets, regions may recoup that loss quicker by holding it.
security, a Stocks & Shares ISA lets you put money or industries, or in bonds, in property, in a Constantly moving funds can be
into a range of different investments. combination of these, or in entirely different assets. stressful and ultimately unproductive. In
most cases, you’re better off sticking with
MAKE THE MOST OF YOUR ISA ALLOWANCE MATCH YOUR INVESTMENT GOALS your investments through ups and downs.
All UK residents over the age of 18 receive an Funds tend to advertise themselves based on Diversification (which can be achieved by
annual ISA allowance of £20,000 (2020/21 tax year). their past performance, so it’s naturally tempting investing in several unrelated funds) can also
This is the amount you can pay into your ISA (or to choose those that have achieved the most help to manage your risk level. n
split between several ISAs of different types) to allow growth in recent years. But past performance
it to grow through interest, capital gains or dividend doesn’t guarantee future performance and
income, and you won’t pay tax on these proceeds. outstanding performance last year could be the INVEST IN YOUR FUTURE TODAY
Because you can’t carry over your ISA allowance result of a trend that will self-correct this year. WITH A STOCKS & SHARES ISA
into a new tax year, it’s important to use it by 5 April Don’t base your decisions on this factor alone. Amid the mayhem caused by the
each year. You need to bear in mind, though, that tax Instead, select funds with a stated objective that coronavirus (COVID-19) pandemic, it is easy
rules can change in future and that their effects on matches your investment goals in terms of risk to forget that the end of the current tax year
you will depend on your individual circumstances. and return. Any investment involves an element of is approaching on 5 April and that means
risk. But multiple factors can raise or lower the risk you don’t have much time left to make use
DON’T OBSESS OVER TIMING level of a fund, including the assets it invests in, the of the tax advantage of your £20,000 ISA
When getting started, a common concern is that region, industries and companies it invests in, and allowance. For help selecting funds to suit
the market will fall just after you’ve made a large the way it is managed. Consider all these factors. you, contact us for more information.
investment. Some people make the mistake of
trying to ‘time the market’ – buying in just before REVIEW YOUR INVESTMENTS REGULARLY
prices spike – which, while tempting, is very difficult Once you have made your investment selections, INFORMATION IS BASED ON OUR CURRENT
given the unpredictable nature of investments. you should review your Stocks & Shares ISA UNDERSTANDING OF TAXATION LEGISLATION
If appropriate, a safer strategy can be to regularly to make sure it still meets your needs, AND REGULATIONS. ANY LEVELS AND BASES
drip-feed money into your Stocks & Shares ISA which may change over time. For example, if OF, AND RELIEFS FROM, TAXATION ARE
throughout the year. Sometimes you might buy you hope to buy a house in ten years, you might SUBJECT TO CHANGE.
when the market is high, and sometimes when it is initially choose higher-risk investments, but after
low, but over time the aim is for this to average out. five years you might want to reduce your risk THE VALUE OF INVESTMENTS AND INCOME
level to protect your existing capital. FROM THEM MAY GO DOWN. YOU MAY NOT
TIME TO MAKE YOUR DECISION While annual reviews of your investment strategy GET BACK THE ORIGINAL AMOUNT INVESTED.
When you set up your Stocks & Shares ISA, you’ll are wise, more frequent adjustments are not usually
make some decisions about how your money is recommended. There are many reasons you might PAST PERFORMANCE IS NOT A RELIABLE
invested. How involved you are in your investment be tempted to adjust your investments. You might INDICATOR OF FUTURE PERFORMANCE.
I N VE ST ME NT 05
INFLATION BEATERS
HOW TO ENSURE YOUR MONEY IS PROTECTED FROM RISING INFLATION
ISAs currently allow you to invest up to
With current interest rates on cash savings very low, it is difficult to achieve
£20,000 a year (tax year 2020/21), which can
growth above the rate of inflation. And if the cost of living is rising faster than your provide a tax-efficient return through interest,
savings are growing, you’re effectively losing money. capital gains and dividend income. Pensions
offer the same benefits, plus tax relief on your
W
ith cash savings, a penny saved is a example is bonds: loans given to governments and contributions up to a maximum of £40,000
penny earned. But thanks to inflation, companies that are repaid at a fixed rate of interest. a year (or 100% of your salary if it is less than
over time, the value of the penny Either way, there is always the risk that you £40,000). However, you can’t currently access
saved could be much less than when it was could lose money, so you should keep enough your pension money until you reach age 55. n
earned. When looking at investments, always savings separately in a cash account to cover
focus on what is the real return or the return net any emergency expenses and short-term
PROTECT YOUR PORTFOLIO
of inflation. savings goals. FROM INFLATION
Over longer periods, well-managed investments Inflation is low, but that doesn’t mean
usually grow by more than cash. Even if inflation AHEAD OF INFLATION investors should ignore it. To create a
isn’t a worry right now, you should still factor it into One good way of staying ahead of inflation is portfolio aligned with your goals and
your investing strategy. Here we explain in simple buying stocks that pay good dividends. Dividends choosing the right inflation-beating
terms how to beat inflation. are a tangible return paid by companies and investment vehicles, it’s important you have
can keep up with inflation. And just like inflation, a good mix of investments in your portfolio.
CONSISTENTLY OUTPACED INFLATION dividends, too, can be calculated annually. To discuss your options, please contact us
Investments that change in value a lot day-to-day This figure, called the dividend yield, can be today to find out more.
tend to increase in value the most over several measured by adding dividends received during
years. Investments that change in value a little day- the year and dividing it by the stock price. The
INFORMATION IS BASED ON OUR CURRENT
to-day tend to increase by less over several years. yield must be higher than the annual inflation
UNDERSTANDING OF TAXATION LEGISLATION
So, if it doesn’t worry you to see falls in value rate. Asset allocation is also critical. In this, one
AND REGULATIONS. ANY LEVELS AND BASES
occasionally, and you have enough money in can look at an opportunity to diversify globally.
OF, AND RELIEFS FROM, TAXATION ARE
other places that it wouldn’t affect your lifestyle, This will make your portfolio more stable and less
SUBJECT TO CHANGE.
you might target high growth with higher risk vulnerable to domestic volatility and inflation.
investments, for example, a portfolio of equities.
THE VALUE OF INVESTMENTS AND INCOME
Investing in equities over a long period has INVESTING TAX-EFFICIENTLY
FROM THEM MAY GO DOWN. YOU MAY NOT
consistently outpaced inflation. Because investments have potentially higher
GET BACK THE ORIGINAL AMOUNT INVESTED.
returns than cash savings, it’s important to
LOWER RISK INVESTMENTS protect your returns from tax. Two common
PAST PERFORMANCE IS NOT A RELIABLE
Otherwise, you might target just enough growth ways to do this are through Individual Savings
INDICATOR OF FUTURE PERFORMANCE.
to beat inflation with lower risk investments. One Accounts (ISAs) and pensions.
06 TAXATION
TAX PLANNING REIMAGINED
IDENTIFYING THE BEST OPTIONS TO PRESERVE YOUR WEALTH
No one likes to pay tax on their hard-earned money. But due to the CLAIM TAX RELIEF FOR WORKING FROM HOME
If you’re currently working from home due to
complexities of the tax system, without expert professional financial
the coronavirus (COVID-19) pandemic you may
advice, some individuals could be paying more tax than necessary. Before be entitled to tax relief for your increased costs,
the end of every tax year on 5 April, you have the opportunity to save money such as heating or broadband. You could claim
the exact amount, based on bills and receipts,
on taxes and plan for the year ahead.
or a set amount of £6 per week.
A
s we approach the end of the tax personal allowance, and increasing rates REVIEW YOUR CHILD BENEFIT
year, now is the time to review your apply to income in higher bands. Individuals with a taxable income of over
tax affairs to ensure that you have But there is an additional rule: for every £50,000 who claim Child Benefit will pay a higher
taken advantage of all reliefs and options £2 you earn over £100,000, your personal income Child Benefit charge, which could be
available to you. If you think you may be allowance reduces by £1. Once you reach equal to the benefit you receive.
overpaying tax, here are some ways in which £125,000 your personal allowance is zero. Your options for reducing this charge
you might be able to reduce your bill. This If you’re close to the £100,000 threshold, it include keeping your taxable income below the
information should not be construed as may therefore be sensible to request tax-efficient threshold (by exchanging salary for tax-efficient
advice and is applicable to the 2020/21 tax alternatives to bonuses or salary increases, such alternatives), temporarily stopping your Child
year end. as higher pension contributions. Benefit, or deciding not to claim.
INCOME TAX TRANSFER ASSETS TO YOUR PARTNER DIVIDEND TAX
If you’re close to the £100,000 threshold and
KEEP YOUR PERSONAL ALLOWANCE you have other income yielding assets, you USE YOUR DIVIDEND ALLOWANCE
Income Tax rules appear simple at first: could consider transferring these to a partner Dividend income is taxed differently to other
income under £12,500 is within your tax-free with a lower taxable income. income. Every taxpayer has a tax-free dividend
TAXATION 07
/// W H E T H E R YO U A R E A B O U T TO
RETIRE OR ARE STILL WORKING
TO WA R D S P U T T I N G YO U R F U N D
TO G E T H E R F O R R E T I R E M E N T, T H E R E
A R E M A N Y T H I N G S T H AT YO U S H O U L D
CO N S I D E R W H E N I T CO M E S TO
P L A N N I N G YO U R P E N S I O N .
allowance of £2,000, above which dividend PENSION TAX RELIEF any unused nil-rate band from a deceased
income is taxed at 7.5% in the basic rate band, partner. You also have an additional nil-rate
32.5% in the higher rate band, and 38.1% in the REVIEW YOUR PENSION CONTRIBUTIONS band of £175,000 when leaving a home to a
additional rate band. Whether you are about to retire or are still working direct descendant.
Company owners can therefore benefit towards putting your fund together for retirement,
by taking income from dividends rather there are many things that you should consider CLAIM IHT RELIEF ON CHARITABLE GIFTS
than salary. when it comes to planning your pension. If you leave at least 10% of your total estate to charity,
Pension contributions made through your IHT is applied on the portion outside of your nil-rate
CAPITAL GAINS TAX employer are often the most tax-efficient. band at a reduced rate of 36% (otherwise 40%).
So, discuss options with your employer to
USE YOUR CAPITAL GAINS ALLOWANCE exchange some of your salary for larger pension USE IHT RELIEFS WHILE AVAILABLE
Every taxpayer has a tax-free allowance of contributions. If you own the company, this could IHT reliefs currently under review include Agricultural
£12,300 when realising capital gains. Careful also help you save on Corporation Tax. Relief and Business Relief. Business owners in
consideration of the split of assets between particular should look at how their estate is arranged
spouses can have a significant beneficial CARRY FORWARD YOUR PENSION ALLOWANCE to ensure their wealth can be passed on efficiently.
impact on a couple’s Income Tax burden. Your pension annual allowance (the amount you
If you’re approaching this limit, you may want can make in contributions while claiming tax relief) UPDATE YOUR WILL
to consider transferring assets to your partner to is capped at £40,000 and reduces for higher When there is any significant change in your
use their allowance. earners who exceed the limits on threshold income financial circumstances, or to tax rules, reviewing
and adjusted income (as a guide, this typically and updating your Will can help to reduce your
INVEST FOR CAPITAL GAINS applies only if your income is above £200,000). IHT exposure. n
Capital gains are currently treated more So, if your taxable income increases above
favourably than income and dividends for these thresholds, your annual allowance could
READY TO TALK TAX?
taxation purposes, at a maximum rate of 20% drop dramatically. Carrying forward unused
How can you help yourself and reduce the
(28% for residential property), although this is annual allowance from up to three previous years
impact that these tax burdens could have on
currently under review. could allow you to claim more tax relief.
your financial affairs? If you would like to have
So, for investments outside of a tax-efficient
an informal, no obligation conversation or have
wrapper, for example, an Individual Savings MAKE PENSION CONTRIBUTIONS FOR OTHERS
any questions to discuss ways of reducing tax
Account (ISA), it can be more tax-efficient to If you have used your annual allowance, you
in your individual circumstances, contact us for
target a return through capital gains than can still contribute to other people’s pensions,
more details.
through interest or dividend income. including your children and grandchildren, and
they will receive tax relief.
SAVINGS ACCOUNT (ISA) THE FINANCIAL CONDUCT AUTHORITY
PROTECT YOUR PENSION DOES NOT REGULATE TAXATION AND
USE YOUR ISA ALLOWANCES There is a Lifetime Allowance on pension savings, TRUST ADVICE AND WILL WRITING.
All UK residents over the age of 18 have an currently £1,073,100. Above that limit, you’ll be taxed INFORMATION IS BASED ON OUR
annual ISA allowance of £20,000, which can be severely when taking benefits. If you’re approaching CURRENT UNDERSTANDING OF TAXATION
saved or invested in a tax-efficient environment. that limit, you should seek advice on applying for LEGISLATION AND REGULATIONS. ANY
Under-18s have an allowance of £9,000 each. protection before accessing your pension. LEVELS AND BASES OF, AND RELIEFS FROM,
TAXATION ARE SUBJECT TO CHANGE.
LIFETIME ISAS INHERITANCE TAX (IHT)
Contributions into a Lifetime ISA qualify for a 25% THE VALUE OF INVESTMENTS AND INCOME
government bonus. This can be a tax-efficient USE YOUR IHT NIL-RATE BAND FROM THEM MAY GO DOWN. YOU MAY NOT
way to help adult children buy a home. Your nil-rate band for IHT is £325,000, plus GET BACK THE ORIGINAL AMOUNT INVESTED.
08 I NVE STM E NT
RESPONSIBLE INVESTING
INVEST TODAY. CHANGE TOMORROW
Responsible, sustainable and environmentally friendly investing is here to /// M A N Y P E N S I O N
stay. But, while demand is growing among all age groups, genders and income
HOLDERS DON’T KNOW
T H AT T H E Y C A N C H O O S E
bands, some savers and investors are missing their biggest opportunity for THEIR OWN FUNDS, AND
responsible investing, which is through their pension. T H E R E FO R E T H AT T H E Y
C A N C H O O S E S U S TA I N A B L E
OR RESPONSIBLE
W
e all want to make responsible But while pension holders feel these issues are
FUNDS. AROUND HALF ARE
choices as more of us are becoming important and interesting, that isn’t yet affecting the
U N AWA R E O F
aware of global challenges, such as way they invest. Most people don’t manage their
WAYS TO E N S U R E
environmental issues, human rights and climate pension investments themselves, instead leaving
THEIR PENSION IS
change. We’re also starting to care more about their pension invested in the default options set by
E N V I R O N M E N TA L LY
how our behaviours affect the planet and society. a provider chosen by their workplace. So, more than
F R I E N D LY.
two-thirds of pension holders do not know how
FUTURE SUCCESS sustainable their pension is.
Taking ESG (Environmental, Social and
Governance) factors into consideration when ENVIRONMENTALLY FRIENDLY
investing is becoming more mainstream. It Many pension holders don’t know that they can Source data: [1] https://adviser.scottishwidows.
is acknowledged that companies that act choose their own funds, and therefore that they co.uk/assets/literature/docs/2020-09-responsible-
responsibly to their employees, the environment can choose sustainable or responsible funds. investment.pdf
and the public have a better chance of future Around half are unaware of ways to ensure their
success than those that don’t. Investing in these pension is environmentally friendly. A PENSION IS A LONG-TERM INVESTMENT
companies is a logical approach financially as well Clearly, there is a large audience of individuals NOT NORMALLY ACCESSIBLE UNTIL 55 (57
as ethically. who would like to invest their pension more FROM APRIL 2028). THE VALUE OF YOUR
Many pension holders understand this sustainably and responsibly but don’t know INVESTMENT (AND ANY INCOME FROM
approach and see the value of it. In a recent where to start. There are plenty of options, but THEM) CAN GO DOWN AS WELL AS UP WHICH
survey, more than one-third of respondents said without specialist experience, it can be difficult WOULD HAVE AN IMPACT ON THE LEVEL
that the option to invest their pension only in to select those that are truly responsible and OF PENSION BENEFITS AVAILABLE. YOUR
sustainable companies is important to them[1]. environmentally friendly and will also deliver the PENSION INCOME COULD ALSO BE AFFECTED
Nearly two-thirds said having clearly branded financial return you’re seeking. n THE INTEREST RATES AT THE TIME YOU TAKE
funds for investing in environmentally and YOUR BENEFITS.
socially responsible companies is important.
INVESTING WITH PURPOSE
THE TAX IMPLICATIONS OF PENSION
Responsible investors essentially take
PENSION INVESTMENTS WITHDRAWALS WILL BE BASED ON
responsibility for the impact that the
The same survey suggests that pension holders YOUR INDIVIDUAL CIRCUMSTANCES, TAX
companies they invest in have on the world.
feel that sustainable investing isn’t just important, LEGISLATION AND REGULATION WHICH ARE
Speak to us about what responsible investing
but interesting. More than half of respondents SUBJECT TO CHANGE IN THE FUTURE. YOU
options are available in your pension scheme
said that a fund focused on clean energy and SHOULD SEEK ADVICE TO UNDERSTAND YOUR
and for advice on how to help your money
lowering carbon would make them more OPTIONS AT RETIREMENT.
have the greatest impact. We look forward to
interested in their pension. A similar number felt
hearing from you.
that way about a zero-plastic fund.
R E T I REM EN T 09
/// YO U C A N W I T H D R AW A
LU M P S U M F R O M YO U R
P E N S I O N A N D L E AV E
T H E R E S T I N V E S T E D TO
CO N T I N U E G R O W I N G . U P
TO 25% O F T H E LU M P
S U M W I L L B E TA X- F R E E
AND THE REST WILL
B E TA X E D A S I N CO M E .
S O, T H E A M O U N T O F
TA X YO U ’ L L PAY W I L L
D E P E N D O N YO U R OT H E R
S O U R C E S O F I N CO M E .
PENSION OPTIONS
PLANNING YOUR FINANCIAL FUTURE, AND HOW TO GET THERE
One thing retirement is not, is an age. Not any more anyway. Gone are the days of years. Your professional financial adviser will
help you establish a sustainable withdrawal rate
being told to stop working one day and pick up your State Pension the next. Today
and make sure that the rest of your pension is
you have new pension freedoms to decide when and how you retire. invested appropriately. n
P
ension freedoms in 2015 fundamentally your highest marginal rate. It would be unwise
changed the rules for cashing in your to do this without obtaining expert professional
UNDERSTANDING YOUR OPTIONS
pensions. Current rules allow you far more financial advice.
If you have a defined contribution pension,
freedom and flexibility over how to take your
at some point you’ll have to decide how
pension than in previous generations. WITHDRAWING A PORTION OF YOUR PENSION
you’re going to take it. But if you’re still
If you’ve saved into a defined contribution You can withdraw a lump sum from your
working in your 50s or 60s, now’s the
pension scheme during your working life, you’ll pension and leave the rest invested to continue
perfect time to make sure your retirement
eventually need to decide what to do with the growing. Up to 25% of the lump sum will be
savings are on track to provide you with
money you’ve saved towards your pension when tax-free and the rest will be taxed as income. So,
the sort of lifestyle you want when you stop
you retire, or at age 55, whichever is sooner. the amount of tax you’ll pay will depend on your
work. To find out more, please contact us.
other sources of income.
LEAVING YOUR PENSION INVESTED
You may not be ready to take your pension at BUYING AN ANNUITY A PENSION IS A LONG-TERM INVESTMENT
the age of 55. Leaving your pension invested and An annuity is a guaranteed income for life (or for NOT NORMALLY ACCESSIBLE UNTIL 55 (57
continuing to contribute can provide you with another set period). The income you’ll receive FROM APRIL 2028). THE VALUE OF YOUR
more retirement income once you are ready depends on how much you have in pension INVESTMENT (AND ANY INCOME FROM THEM)
to take your pension. Obtaining professional savings with which to buy an annuity, as well as CAN GO DOWN AS WELL AS UP WHICH WOULD
financial advice will ensure that you have your some other factors, such as your health. If you HAVE AN IMPACT ON THE LEVEL OF PENSION
pension invested effectively. choose to buy an annuity, you can also take up BENEFITS AVAILABLE. YOUR PENSION INCOME
to 25% as a tax-free lump sum when you start COULD ALSO BE AFFECTED THE INTEREST
WITHDRAWING YOUR ENTIRE PENSION your retirement. RATES AT THE TIME YOU TAKE YOUR BENEFITS.
At the other end of the scale, you have the option
to withdraw all the savings in your pension at TAKING A FLEXIBLE INCOME THE TAX IMPLICATIONS OF PENSION
once. But this option has serious drawbacks, as FROM YOUR PENSION WITHDRAWALS WILL BE BASED ON
clearly you won’t be able to take an income from Finally, you can take a regular income from your YOUR INDIVIDUAL CIRCUMSTANCES, TAX
your pension if you’ve withdrawn all the money. pension while it remains invested and has the LEGISLATION AND REGULATION WHICH ARE
You may also receive a significant tax bill to pay. opportunity to grow. You can take this income at SUBJECT TO CHANGE IN THE FUTURE. YOU
While the first 25% of your pension can be taken whatever rate you want, but you are responsible SHOULD SEEK ADVICE TO UNDERSTAND YOUR
tax-free, you’ll pay income tax on the rest at for ensuring it lasts throughout your retirement OPTIONS AT RETIREMENT.
10 I NHERITA NCE TA X
REDUCE YOUR
INHERITANCE
TAX BILL
10 WAYS TO PROTECT YOUR
ESTATE FOR YOUR LOVED ONES
Even those who believe they have moderate wealth levels may still
need to take action to minimise Inheritance Tax, particularly if they own
property and have savings and investments.I N H E R I TANCE TA X 11
/// O N E O F T H E B E T T E R- K N O W N WAYS
TO PA S S O N W E A LT H F R E E F R O M
I N H E R I TA N C E TA X I S TO G I F T I T M O R E
T H A N S E V E N Y E A R S B E FO R E YO U R
D E AT H . O F CO U R S E , T H E R E I S A D E G R E E
O F U N P R E D I C TA B I L I T Y I N T H E O U TCO M E .
I
nheritance Tax is payable in the UK on death, 4. INSURANCE through a discounted gift trust. This will exclude
and sometimes when you give away certain It is possible to take out a life insurance policy the contents of the trust from your estate for
assets during your lifetime. It can be a great written in an appropriate trust that can provide a Inheritance Tax purposes but still provide you
concern for individuals with wealth exceeding the lump sum on your death to be used to pay the with regular payments from it.
current £325,000 nil-rate band (2020/21 tax year). resulting Inheritance Tax bill. If this policy is within
Naturally, you’ll want to pass on as much as a trust, the lump sum paid out will not count 9. BUSINESS RELIEF
possible to your loved ones, rather than paying towards your estate. Business assets can usually be passed on
40% to HM Revenue & Customs (HMRC). Are Insurance can also be taken out when making either in your lifetime or after your death with
you worried your family could be left with an large financial gifts to cover the Inheritance Tax bill Inheritance Tax relief of up to 100%. A business,
Inheritance Tax bill after you’re gone? if you were to die within the following seven years interest in business or shares in an unlisted
(for example, before they are excluded from your company will usually qualify for 100% Business
HERE ARE 10 TIPS TO PAY LESS OR AVOID estate). This is called a ‘term assurance’ policy. Relief. Land, buildings and machinery related to
INHERITANCE TAX: the business will usually qualify for 50% Business
5. PENSIONS Relief, as will shares controlling more than 50% of
1. POTENTIALLY EXEMPT TRANSFERS Typically, though with some exceptions, pensions the voting rights of a listed company.
One of the better-known ways to pass on wealth are excluded from the calculation of your estate
free from Inheritance Tax is to gift it more than and can be passed on free from Inheritance Tax. 10. AGRICULTURAL RELIEF
seven years before your death. Of course, there It is important to name a beneficiary to whom If you own agricultural property (land or pasture
is a degree of unpredictability in the outcome. you wish to pass on your pension benefits. used to grow crops or rear animals as part of
If you were to die within seven years of making It is also possible to make payments in your lifetime a working farm), this can usually be passed on
the gift, Inheritance Tax may be charged, though into another person’s pension, which will protect this in your lifetime or after your death free from
the rate will be reduced if more than three years money from Inheritance Tax. For example, you can Inheritance Tax. n
have passed. set up a Junior Self-Invested Personal Pension for
a grandchild under the age of 18 and pay in up to
TIME TO PLAN YOUR ESTATE?
2. PERSONAL GIFTS £2,880 a year. But they will not usually have access to
Inheritance Tax planning can be a
Gifts up to a certain value can be made free from this money until they reach age 55.
complicated process, especially as rules and
Inheritance Tax, even in the last years of your life.
legislation seem to change every year. But
Your allowance includes: large gifts totalling no 6. DISCRETIONARY TRUSTS
with the right forward planning, it is possible
more than £3,000; unlimited small gifts of up to A discretionary trust can help you to reduce your
to significantly reduce or even eliminate a
£250; and wedding gifts of up to £5,000 for your Inheritance Tax liability by holding money in
potential Inheritance Tax liability. To identify
children, £2,500 for your grandchildren, or £1,000 the name of your beneficiaries while you retain
the best ways to protect your assets for future
for others control. You can use your nil-rate band to pay in
generations, don’t delay. Contact us to discuss
Gifts made within your regular pattern of up to £325,000, which will be excluded from your
your options.
income and normal expenditure (for example, estate after seven years. Funds above the nil-rate
quarterly payments towards a grandchild’s band may attract a lifetime tax charge.
school fees from your annual income) can THE FINANCIAL CONDUCT AUTHORITY DOES
usually be made free from Inheritance Tax, 7. LOAN TRUSTS NOT REGULATE TAXATION AND TRUST ADVICE
although you may need to document this pattern If you would like to protect your money in a trust AND WILL WRITING. TRUSTS ARE A HIGHLY
for three or more years. but need to know you can withdraw it if you need it, COMPLEX AREA OF FINANCIAL PLANNING.
it’s possible to loan money to a trust. You will always
3. CHARITABLE GIFTS have the option to withdraw the original capital INFORMATION PROVIDED AND ANY
Gifts to registered charities can be made entirely you loaned, but any growth on that capital will be OPINIONS EXPRESSED ARE FOR GENERAL
free from Inheritance Tax, which can help you protected within the trust from Inheritance Tax. GUIDANCE ONLY AND NOT PERSONAL TO
to reduce the size of your estate to within the YOUR CIRCUMSTANCES, NOR ARE INTENDED
Inheritance Tax threshold. 8. DISCOUNTED GIFT TRUSTS TO PROVIDE SPECIFIC ADVICE.
Additionally, if at least 10% of your total estate If you would like to earmark some wealth to be
is gifted to charity, it will reduce the rate of passed to a beneficiary or beneficiaries on your TAX LAWS ARE SUBJECT TO CHANGE
Inheritance Tax payable on your remaining estate death, but you want any income generated to AND TAXATION WILL VARY DEPENDING ON
(above the nil-rate band) from 40% to 36%. be paid to you in your lifetime, you can do this INDIVIDUAL CIRCUMSTANCES.12 S AV I N G S
WEALTH CREATION
WHERE CAN YOU TURN IF YOU WANT TO INVEST TAX-EFFICIENTLY?
Tax-efficiency is a key consideration when investing because it can make such
an enormous difference to your wealth and quality of life.
I
f you have an income of over £50,000 it doesn’t just push you into There is a limit on the pension contributions you can receive tax relief on,
a higher income tax bracket, it also means that you’ll pay higher tax which in the current tax year is capped at £40,000 a year (or 100% of your
on capital gains and dividend income from your investments. So, it’s salary if your salary is lower). But if you have contributed less than your limit
important to choose a tax-efficient investment vehicle that is appropriate in recent tax years, you may be able to pay in more this year.
for your particular investments goals and tax position. If you have an annual income of over £200,000, you may have a lower
limit on contributions and should obtain professional financial advice
INDIVIDUAL SAVINGS ACCOUNTS (ISAS) to assess your options. If you are approaching your Lifetime Allowance
ISAs come in various forms, including the Stocks & Shares ISA, for tax- on pension savings, currently £1,073,100 (tax year 2020/21), another
efficient investing. investment vehicle may be more tax-efficient. n
You can invest up to £20,000 a year (tax year 2020/21) in a Stocks &
Shares ISA, and all capital gains, interest growth and dividend income from
INTERESTED IN TAX-EFFICIENT INVESTING?
these investments are protected from tax.
If you are a higher rate taxpayer, tax-efficient investing is a crucial
If you’ve used your ISA allowance, you may wish to consider paying into
component of your financial planning. To learn more about these and other
accounts for your partner (who also has a £20,000 annual ISA allowance in
tax-efficient investing ideas, contact us to discuss your options in detail.
this tax year) and your children (who have a £9,000 annual ISA allowance
in this tax year). Bear in mind that the money will be in their names and will
legally be theirs. INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF
TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF,
PENSIONS AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.
Pensions are designed primarily for retirement saving and can usually
be accessed from the age of 55. Not only do pensions offer protection THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO
from tax on capital gains, interest growth and dividend income (like DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.
ISAs), but you’ll also receive tax relief on your contributions. Higher
rate taxpayers receive tax relief at 40%, while additional rate taxpayers PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF
receive 45%. FUTURE PERFORMANCE.R E T IRE ME NT 13
/// I F YO U H AV E N OT Y E T AC C E S S E D
YO U R P E N S I O N , O R YO U H AV E M A D E
W I T H D R AWA L S F R O M YO U R P E N S I O N B U T
L E F T S O M E M O N E Y I N V E S T E D, I T C A N
U S U A L LY B E PA S S E D TO A B E N E F I C I A RY
A F T E R YO U R D E AT H .
PASSING ON PENSION BENEFITS
PROVIDING FOR YOUR LOVED ONES AFTER YOUR DEATH
If you’ve spent a lifetime saving for retirement, you’d probably like any (which provides an income for a set period,
whether you are still living or not) or a joint life
remaining money to go to a loved one after your death. But whether pension
annuity (which provides an income for life for
benefits are payable to a beneficiary, and how they’ll receive them, is dependent on whichever partner lives longest).
the type of pension you’ve chosen and how you’ve accessed it in your retirement.
STATE PENSION INHERITANCE
T
In certain circumstances, your partner can
hanks to changes in the way that The specifics, for example, in what form they
continue to receive your State Pension after
pensions are taxed, more of your fund will receive these death benefits and whether
your death. For example, if you’re a man born
can survive your death and provide an they will pay tax, will depend on your individual
before 1951 or a woman born before 1953,
income or nest egg for your loved ones to enjoy, circumstances (such as your age) and the
and you’re receiving the Additional State
long after you are gone. Since April 2015 it has scheme rules.
Pension, this can be inherited by your partner
been easier to safeguard your pension for your You should always obtain professional financial
(husband, wife or registered civil partner) after
heirs, but it’s important to make sure you’re advice to assess your specific situation. But if
your death if they have reached the State
keeping up with the changes. your pension scheme allows you to choose a
Pension age. n
The way that you decide to take your pension beneficiary, ensure you have named the person
will affect what you can do with it when you pass you intend to leave your money to.
away. And while it’s not always easy to talk about,
the way you eventually pass on your pension has ANNUITY DEATH BENEFITS PROVIDING AN INCOME OR NEST EGG
the biggest impact on other people, so it could If you have used your pension savings already FOR YOUR LOVED ONES TO ENJOY
help if you talk to your spouse, partner, children to purchase an annuity, this can only be passed You’ve worked and saved throughout your
or other people close to you when you’re on to a beneficiary in certain cases, which must life so that your pension will provide you with
deciding how you take your pension savings. be established when the annuity is purchased. enough to live on in retirement. Now, thanks
A typical lifetime annuity only provides a to changes in the way that pensions are taxed,
PENSION DEATH BENEFITS guaranteed income for the lifetime of the annuity more of your fund can survive your death and
If you have not yet accessed your pension, or holder, regardless of how long this is. provide an income or nest egg for your loved
you have made withdrawals from your pension For your annuity income to go to a loved ones to enjoy, long after you are gone. Contact
but left some money invested, it can usually one after your death you must choose us to find out more.
be passed to a beneficiary after your death. either an annuity with a guarantee period14 F I N A N C I A L P L A N N I N G
ADVICE
MATTERS
LIFE EVENTS THAT PROFESSIONAL
FINANCIAL ADVICE CAN HELP YOU NAVIGATE
In the current climate, we understand that you may be feeling worried
about your work, your finances and what the future holds.F I N A N C I A L P L A N N I N G 15
/// P R O F E S S I O N A L F I N A N C I A L
A DV I C E O F F E R S S O M U C H
M O R E T H A N J U S T P R AC T I C A L ,
FINANCIAL BENEFITS. IT ALSO
H E L P S TO I M P R OV E YO U R
E M OT I O N A L W E L L B E I N G BY
M A K I N G YO U F E E L B E T T E R
A B O U T YO U R M O N E Y A N D
YO U R S E L F – E S P E C I A L LY I N
TIMES OF CRISIS.
R
esearch carried out by the Office for education or home, or to celebrate a special opportunity, the returns they promise can make
National Statistics (ONS) found that, since occasion. But unless you know the complicated rules it very difficult to turn down. Unfortunately, these
the outbreak of coronavirus (COVID-19), around Inheritance Tax and gifting, you might leave opportunities often turn out to be scams.
over 25 million people have experienced ‘high’ the recipient with a potential tax bill in the future. If you’re considering an opportunity or
levels of anxiety[1]. Your professional financial adviser can ensure have already handed over money to someone
Professional financial advice offers so much that you make tax-efficient financial gifts within you suspect is a scammer, your professional
more than just practical, financial benefits. It also the specified limits. They can also assess how financial adviser is there to help. They can
helps to improve your emotional wellbeing by much you can afford to give away without suggest legitimate ways to safeguard and grow
making you feel better about your money and causing yourself financial difficulty. your money. n
yourself – especially in times of crisis.
And receiving advice isn’t just for the very LEAVING ASSETS TO LOVED ONES
COULD ADVICE HELP YOU NOW?
wealthy; most people can benefit from an expert When you make a Will, you’ll want to ensure
Financial decisions can be difficult to
overseeing their finances. Let’s explore what it that your money, assets and property go to the
make on your own. And they’re rarely just
means to take advice and what it might be able intended recipient. But if your estate is larger than
about you. Either directly or indirectly,
to do for you. the current threshold of £325,000 (2020/21 tax
they can also affect your partner or family
Here are five situations you’re likely to year), Inheritance Tax of 40% may be applied,
– which can add to the pressure. If you’d
encounter in your lifetime when professional meaning that a large portion could be taken by
like to discuss any of the issues we’ve
financial advice could help you and ensure you HM Revenue & Customs.
mentioned, please contact us. We look
avoid making costly mistakes. Your professional financial adviser can suggest
forward to hearing from you.
options that will protect your wealth from tax and
CONSOLIDATING YOUR PENSIONS ensure that it goes to your loved ones.
These days it's common to have multiple Source data:
pensions from previous jobs, and there are STARTING TO INVEST [1] Office for National Statistics Research, Personal
various benefits to consolidating them, such Investment always involves an element of risk, and economic wellbeing in the UK, May 2020
as managing all your money in one place and but the level of risk involved varies significantly
paying just one set of fees. between different asset classes, markets, THE FINANCIAL CONDUCT AUTHORITY DOES
However, you could lose out on pension industries and geographical areas, to mention just NOT REGULATE TAXATION AND TRUST ADVICE
benefits when you transfer funds to a different a few. It can be very difficult to assess the level AND WILL WRITING.
provider and may also encounter unexpected of risk involved in an investment. Your adviser
fees. Your professional financial adviser will advise will help to match you with investments that are
on the most appropriate options. appropriate for your goals and investment risk.
MAKING FINANCIAL GIFTS BEING TARGETED BY SCAMMERS
You might want to help your family members When you’re contacted unexpectedly by
by making a financial contribution towards their someone with an incredible investment16 P R OT E C T I O N
CRITICAL FACTOR
PROTECTION FOR YOU AND YOUR LOVED ONES
What would life be like if you were diagnosed with a serious illness? Things FAMILY’S FINANCES
could change very suddenly. You’d get your family together and tell them what The good news is that medical advances mean
more people than ever are surviving conditions.
was going on. Before long, you’d start spending time in hospital for treatment. Critical illness cover can provide cash to allow
You may also need to take some time off. you to pursue a less stressful lifestyle while you
recover from your illness, or you can use it for
I
any other purpose.
t’s hard to know what the financial impact of situation where you survive from a serious illness
What would life be like if you were diagnosed
all this would be for you and the people who but then endure financial hardship. Preparing
with a serious illness? Things could change very
depend on you. A critical illness can affect for the worst is not something we want to think
suddenly. Being diagnosed with a critical illness
anyone at any age and can turn your life upside about when feeling fit and healthy, but you never
is a life-changing moment. It’ll disrupt your home
down. In the event of being unable to work due to know what life is going to throw at you next.
and work life, and could put a strain on your
a critical illness, having a financial cushion in place Critical illness cover, either on its own or as part
family’s finances. n
would alleviate some of the stress of the situation. of a life insurance policy, is designed to pay you
a tax-free lump sum on the diagnosis of certain
FINANCIAL IMPACT specified life-threatening or debilitating (but not LIFE-CHANGING COVER, FOR
Some people may use their savings to necessarily fatal) conditions, such as a heart LIFE-CHANGING EVENTS
supplement their loss of income, others may rely attack, stroke, certain types/stages of cancer and Almost everyone knows someone who has
on an employment benefit package, while others multiple sclerosis. been affected by a life-changing condition
may find that critical illness cover is their best such as cancer, stroke, heart disease or a
option. Critical illness cover can help minimise EMOTIONAL STRESS serious accident. To review your situation or
the financial impact on you and your family if you A more comprehensive policy will cover many consider your options, please contact us –
become critically ill. more serious conditions, including loss of sight, we look forward to hearing from you.
For example, if you needed to give up work to permanent loss of hearing, and a total and
recover, or if you passed away during the length permanent disability that stops you from working.
of the policy, the money could be used to help Some policies also provide cover against the loss of SOME TYPES OF CANCER ARE NOT
fund the mortgage or rent, everyday bills or even limbs. But not all conditions are necessarily covered, INCLUDED AND YOU NEED TO HAVE
simple things like the weekly food shop, giving which is why you should always obtain professional PERMANENT SYMPTOMS TO MAKE A CLAIM
you and/or your family some peace of mind financial advice to consider your options. FOR SOME ILLNESSES.
when you need it most. If you are single with no dependants, critical
illness cover can be used to pay off your THIS IS NOT A SAVINGS OR INVESTMENT
TAX-FREE LUMP SUM mortgage, which means that you would have PRODUCT AND HAS NO CASH VALUE UNLESS A
After surviving a specified critical illness, you fewer bills or a lump sum to use if you became VALID CLAIM IS MADE.
may not be able to return to work straight away very unwell. And if you are part of a couple, it can
(or ever), or may need home modifications or provide the much-needed financial support at a
private therapeutic care. It is sad to contemplate a time of emotional stress.I N VE ST ME NT 17
INVESTING FOR
YOUR CHILD'S FUTURE
EVEN SMALL AMOUNTS CAN BUILD UP A SUBSTANTIAL NEST EGG
Decided it’s time to start saving for your little one? Putting money aside for your child is a great way to prepare them
for their future, and can also teach them valuable lessons about their managing their finances.
W
hatever hopes and dreams you have A second difference is that there is no limit
for your children or grandchildren, it’s on how much can be paid in. While it is not WANT TO DISCUSS INVESTING
reassuring to know that you can help protected from tax (as a Junior ISA is), it will be FOR YOUR CHILDREN?
make this happen by setting them on the path taxed as if it belongs to the child, so will often fall As the costs of private education, university,
to financial security when they are young. To within their personal allowances. getting on the property ladder and
fund the future you want for them, it’s crucial to weddings continue their relentless upward
start saving early. DISCRETIONARY TRUSTS march, investing for your children early is
Discretionary trusts offer more control and flexibility crucial. If you’d like to discuss the best way
BUILDING WEALTH FOR YOUR CHILDREN OR to the trustee. It is possible to establish one in to save for the next generation, contact us
GRANDCHILDREN the name of a group of beneficiaries (named or for more information.
unnamed), for example, all your grandchildren.
JUNIOR INDIVIDUAL SAVING ACCOUNT (JISA) The trustee retains control over the money and TRUSTS ARE A HIGHLY COMPLEX AREA
Junior ISAs share the same set of rules as investment choices and sets the payment terms. OF FINANCIAL PLANNING. THE FINANCIAL
adult ISAs, though with a lower annual limit on However, the tax treatment is more complex CONDUCT AUTHORITY DOES NOT REGULATE
contributions, currently £9,000 (2020/21 tax year). than for bare trusts, usually resulting in higher TRUST ADVICE.
This means they’re a tax-efficient way to taxes and more administration.
save in your child’s name. The money cannot TAX LAWS ARE SUBJECT TO CHANGE
be withdrawn before the child’s 18th birthday, JUNIOR SELF-INVESTED AND TAXATION WILL VARY DEPENDING ON
so cannot be used for certain expenses, such PERSONAL PENSION (SIPP) INDIVIDUAL CIRCUMSTANCES.
as school fees. The child will take control of the Junior SIPPs operate according to the same rules as
money, and can make their own investment other pensions, except that they have a lower £3,600 THE VALUE OF INVESTMENTS AND INCOME
choices, from the age of 16. annual limit on contributions (2020/21 tax year). FROM THEM MAY GO DOWN. YOU MAY NOT
This means that, like other pensions, tax relief GET BACK THE ORIGINAL AMOUNT INVESTED.
BARE TRUSTS is added to contributions, and no tax is paid on
As with a Junior ISA, a child can withdraw money income and capital gains. It also means that, PAST PERFORMANCE IS NOT A RELIABLE
from a bare trust in their name once they turn 18. currently, withdrawals are not possible until the INDICATOR OF FUTURE PERFORMANCE.
However, withdrawals can also be made for the child reaches age 55. So, while they offer very
benefit of the child before this age. So, it can be little flexibility, there is potential for even small
used for school fees, for example. investments to grow significantly. n18 F I N A N C I A L S U P P O RT
GENERATION
COVID-19
FINANCIAL SUPPORT TO YOUNGER MEMBERS
AS A DIRECT RESULT OF THE PANDEMIC
The coronavirus (COVID-19) pandemic has led to more people
supporting younger family members financially. New research shows that
5.5 million older family members expect to provide additional financial
support to younger members as a direct result of the pandemic[1].
O
f these, 15% estimate they will FINANCIAL AID
provide an additional sum of £353 Despite the significant sums handed out, 80% of
in financial aid. The most common older family members who gift money feel it is
reasons given for the payments were to only natural to provide support to their younger
help cover household bills, rent payments, relatives and are more than happy to do so. Of
allowing them to move back to the family the 50% of adults who have received financial aid
home or paying off debts. This equates to from a family member, many have sought further
£1.9 billion being given to younger family support during this year.
members needing financial support. 16% have utilised the government furlough
scheme, 15% moved back to their family home
REGULAR GIFTS to live rent free and 13% have taken out a one-off
This COVID-19 specific support comes in addition loan. The trend of younger family members members have made sacrifices in order to do so.
to regular ongoing financial support provided moving back home is becoming more common, While many (31%) reported cutting back on some
by older family members. Over a third (39%) of with the most recent data from the Office for day-to-day spending in order to gift money, a fifth
young adults, around 3.3 million people, receive National Statistics (ONS) showing that over the (21%) admitted they struggled to pay some bills
regular financial support from their older family last two decades, there has been a 46% increase having helped out a loved one.
members and depend on it to cover their in the number of young people aged 20-34 living Most parents and grandparents will gladly help
monthly outgoings. with their parents, up to 3.5 million from 2.4m[2]. out when they can, but people are often making
Older family members provide on average £113 personal compromises to provide this support.
a month, collectively giving £372 million to loved GIFT MONEY Giving money to a family member has the
ones each month in the form of regular gifts. While the majority (62%) of those who give away potential to be a special experience, but the key is
While the majority (31%) say they use monthly money do so knowing they can afford to maintain not to lose sight of your longer-term plan.
gifts to save for ‘big ticket’ items like a housing their current lifestyle, the research suggests that
deposit, over a quarter use it to pay for everyday selfless relatives are occasionally making changes PROPERTY WEALTH
essentials (29%) and a similar number to pay their to their own finances to meet the expense. Over There is a risk that people could be
bills (27%). a third (38%) of those who gift money to family underestimating what they need to fund aF I N A N C I A L S U P P O RT 19
/// T H I S COV I D - 19 S P E C I F I C
S U P P O RT CO M E S I N
A D D I T I O N TO R E G U L A R
ONGOING FINANCIAL
S U P P O RT P R OV I D E D BY
O L D E R FA M I LY M E M B E R S .
OV E R A T H I R D ( 3 9 % ) O F
YO U N G A D U LT S , A R O U N D
3.3 MILLION PEOPLE,
RECEIVE REGULAR FINANCIAL
S U P P O RT F R O M T H E I R O L D E R
FA M I LY M E M B E R S A N D
D E P E N D O N I T TO COV E R
T H E I R M O N T H LY O U TG O I N G S .
comfortable retirement, and therefore it’s Source data:
important to gift sensibly. Utilising property “BANK OF MUM AND DAD” [1] Opinium Research ran a series of online
wealth, by either downsizing or using equity OPEN FOR FINANCIAL SUPPORT interviews among a nationally representative
release, can often be helpful here as it allows the Younger generations, who stand to be panel of 4,001 UK adults between the 25
opportunity to give a living inheritance without impacted most by the crisis, may need to September and 3 October 2020
touching your income. call on you – the ‘Bank of Mum and Dad’ – for [2] https://www.ons.gov.uk/
These decisions aren’t easy, and the tax rules financial support. If this is the case you need to peoplepopulationandcommunity/
mean gifting money can be complicated. When evaluate how any cash calls could impact your birthsdeathsandmarriages/families/datasets /
gifting, HM Revenue & Customs stipulates you own retirement plans. To discuss any concerns youngadultslivingwiththeirparents
must be able to maintain your current standard that you may have, please contact us.
of living from your remaining income to take
advantage of tax exemptions and there are
tax implications for anything gifted over the
£3,000 annual allowance. nYou can also read
