Contact us: 01799 543222

How to approach later life care

Archive for October, 2015

How to approach later life care

Wednesday, October 28th, 2015

National Insurance contributions go towards things like your State Pension but they don’t count towards the costs of social care. This type of care is managed by your local authority and generally comes at a price. That is why you have to apply directly to them if you need help with paying for long-term care. Your local authority (or Health and Social Care Trust in Northern Ireland) will first carry out a Care Needs Assessment to find out what support you need.

The next step is to work out who is going to pay. Your local authority might pay for all of it, part of it or nothing at all. Your contribution to the cost of your care is decided following a financial assessment. This Means Test looks at:

  • your regular income – such as pensions, benefits or earnings
  • your capital – such as cash savings and investments, land and property (including overseas property) and business assets

If your income and capital are above a certain amount, you will have to pay towards the costs of your care.

If you own your home, the value of it may be counted as capital after 12 weeks if you move permanently into a residential care or nursing home. However, your home won’t be counted as capital if certain people still live there. They include:

  • your husband, wife, partner or civil partner
  • a close relative who is 60 or over, or incapacitated
  • a close relative under the age of 16 who you’re legally liable to support
  • your ex-husband, ex-wife, ex-civil partner or ex-partner if they are a lone parent.

Your local authority or trust might choose not to count your home as capital in other circumstances, for example if your carer lives there.

The maximum amount you have to pay towards your care is different, depending on where you live in the UK. The cost of living in residential care can be split into:

  • your ‘hotel’ costs, including the cost of accommodation and food
  • your personal care costs.

The cost of care differs around the United Kingdom, and this cost is usually higher where employment costs and housing are more expensive. In England and Wales you can find out how your local authority charges for the care services by first visiting the local authority website. In Scotland, the personal care you receive in a care home is free, if you’re over 65. If you’re in Northern Ireland, you can find your local Health and Social Care Trust on the nidirect website.

The one certainty of care is that, should you need it (and many of us will), you will be in a better position to receive exactly the sort of care you would like if you have some of your own funds set aside to cover the cost. Like the relationship between your state pension and your private pension, the former will only support you to one level. We save into additional pensions to ensure we have the retirement that we want. The same rules could really apply to our approach to care funding.

What is the difference between active funds and passive funds?

Wednesday, October 28th, 2015

You may have heard the terms active and passive with regard to investment funds, but what exactly do they mean and how can they impact your investing?

Actively managed investment funds are run by professional fund managers or investment teams who make all the investment decisions, such as which companies to invest in or when to buy and sell different assets, on your behalf. They have extensive access to research in different markets and sectors and often meet with companies to analyse and assess their prospects before making a decision to invest. Passively managed investment funds cost less in charges because they simply track a market, and are essentially run by computer to buy all of the assets in a particular market, or the majority, to give you a return that reflects how the market is performing.

The aim with active management is to deliver a return that is superior to the market as a whole or, for funds with more conservative investment strategies, to protect capital and lose less value if markets fall. An actively managed fund can offer you the potential for much higher returns than a market provides if your fund manager makes the right calls.

It also means that you have somebody tactically managing your money, so when a particular sector looks like it might be on the up, or one region starts to suffer, the fund manager can move your money accordingly to expose you to this growth or shield you from potential losses.

For the privilege of getting an expert active fund manager, you normally have to pay higher fees than you would with a passive investment fund, which can therefore impact your returns.

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.

Our updated Key Guides series: October 2015

Friday, October 23rd, 2015

Our Key Guides series has recently undergone a quarterly review and have been updated in accordance with the latest facts and figures available. Here is a snapshot of some of the changes you’ll find in the Key Guides:

Pensions freedom – drawing from your pension has been substantially updated to reflect the changes to pensions, including the new class of national insurance contributions.

Workplace pensions and auto-enrolment now includes developments on the single-tier state pension from April 2016.

Pensions and tax planning for high earners has been updated to include a section on Fixed Protection.

The taxation of investments has been amended to include information on the new dividend allowance.

Investing for income when you retire now includes a section on the Personal Savings Allowance.

Please get in touch with us if you need help or advice on any of the topics covered in the Key Guides.

State Pension changes in 2016 – can I top up my pension?

Wednesday, October 21st, 2015

A new initiative allows people who reach the state pension age before April 2016, to top up their pension. This includes those that are already drawing the state pension. The Government is allowing retirees to buy extra state pension by paying so-called Class 3A voluntary National Insurance contributions between October 2015 and April 2017. This will help people reaching state pension age before April 2016 who will not receive the new flat-rate state pension. Some retirees will be better off under the new system (e.g. women and the self-employed) and the top-up will allow pensioners retiring before that date, and who may feel that they are missing out, a chance to build up a higher future state pension income.

Among those who probably won’t achieve the equivalent of the flat-rate state pension of around £151, and will be interested in the top-ups, are people who’ve had career breaks and not paid NI for the full number of years and women bringing up children who’ve missed out on the additional state pension.How much you’ll pay for the extra state pension will depend on your age, with the cost falling as your age increases and your life expectancy falls. The maximum extra pension you can buy is £25 per week, thus:

  • At age 65 increasing your pension by £1 per week will cost £890, or £22,250 for an extra £25 per week;
  • At 70, the cost is £779 for an extra £1 per week, or £19,475 for £25 per week;
  • At 75, the cost is £674 for an extra £1 per week, or £16,850 for £25 per week;
  • At 80, the cost is £544 for an extra £1 per week, or £13,600 for £25 per week.

Making the extra pension purchase can be done either online or by telephone, using a one-off direct debit, online banking transfer or by sending a cheque. Your weekly state pension will increase with immediate effect, although there’s a 90-day ‘cooling-off’ period, during which you can change your mind and get your money refunded, less any payments you’ve already received.Sources: (Article: 2015/10/10)

 The value of tax reliefs depends on your individual circumstances. Tax laws can change.


Regulator reveals increase in auto-enrolment fines

Wednesday, October 21st, 2015

The first 2015 quarterly bulletin published by The Pensions Regulator (TPR) revealed that the number of fixed penalty notices increased in 2015, with 198 penalties for failing to comply with workplace pensions (auto-enrolment) duties handed down in the first three months of the year.

A total of 166 employers were fined for failing to comply with their workplace pensions duties in the last three months of 2014, with a total of 367 having now been issued with a fixed penalty for failing to hit deadlines or comply with employee communication requirements. There were also 213 compliance notices handed out over the period from January to March 2015. In total, there had been 1,529 made by the regulator.

The first four escalating penalty notices were also handed out over the first quarter of 2015. These can be between £50 and £10,000 per day for failure to comply with a statutory notice.

Elsewhere, information notice hand-outs, whereby The Pensions Regulator can demand information under section 72 of the Pensions Act 2004, were at a high, at 15, against a figure of 31 since the regulator began this activity.

A comment within the TPR bulletin noted that:

“It’s no surprise to see that penalty notices from the Pensions Regulator have once again increased over the last quarter. In this period we’ve seen an increase of 20 per cent when it comes to fixed penalty notices – and over the last six months that figure is even bigger, with the number of notices rocketing from just three to 367.

“What is particularly interesting is the first ever escalating penalty notices being given out to employers. Despite support from TPR and previous fines, they have still failed to comply with the legislation – proof that ignoring auto enrolment simply isn’t an option.”

Sources: ( Report: 2015/05/01)



October Market Commentary

Wednesday, October 14th, 2015

The end of September, and the end of the third quarter of 2015 – a quarter which, as all the financial press reported, was the worst for global equities since 2011. As CNBC put it:

A sustained collapse in commodity prices, China’s stunning market rout followed by its shocking currency devaluation as well as fears of a Greek default and a US interest rate hike were some of the factors that made the past three months a summer to forget for investors.

For September itself, the damage was muted. Yes, virtually all of the world’s major markets fell, but by far less than they’d fallen in August. Of the markets we cover in this bulletin Japan suffered the biggest loss, down by 8% in the month.

Elsewhere there was plenty of news to take investors’ minds off their half-empty glasses. Alexis Tsipras and the far-left Syriza coalition won (yet another) general election in Greece, albeit with a smaller percentage of the vote than they’d previously received. In the UK Jeremy Corbyn – a 200/1 outsider at the start of the contest – became the new leader of the Labour Party with 59.5% of the vote.


Let’s get the bad news out of the way first. The FTSE 100 index of leading shares closed September at 6,062 having started the month at 6,248, a fall of 3%. The market was down by 7% in the third quarter, and is down 8% since the start of the year.

There wasn’t much positive news in the business sector either. While the month started with the announcement that Nissan were investing £100m in their Sunderland plant to build the new Juke model in a move that would ‘safeguard thousands of jobs,’ it ended with a bombshell for Teesside, as SSI were forced to mothball their Redcar steel plant with the loss of 1,700 jobs. As always, the job losses will be multiplied as the impact ripples down the supply chain.

There was bad news in the service sector as well, as the rate of growth in August slowed to its lowest level for two years.

Meanwhile Chancellor George Osborne was hard at work trying to drum up business in China, announcing that China was to invest in the Hinkley Point nuclear power station, with the UK government guaranteeing the £2bn deal. Osborne also encouraged the Chinese to bid for work on the new HS2 contracts and – in a move which raised many eyebrows in the city – suggested that the UK and China could explore ways to link their stock markets.

It was also announced that the Chancellor will deliver this year’s Autumn Statement (combined with the Annual Spending Review) on Wednesday November 25th. No doubt we can expect more moves to boost the UK’s productivity in the speech: the productivity gap between the UK and other G7 nations is now at its largest since 1991, with the Office for National Statistics putting it at 20 percentage points.

There was confusion on interest rates through September: at the beginning of the month the BBC was reporting that rates were still likely to rise by the end of the year, despite the slowdown in China. Two weeks later it was suggesting that the Bank of England might have to cut rates (from their present 0.5%) in a bid to combat low inflation.

Meanwhile Tesco was raising £4.2bn by selling its South Korean Homeplus stores: the money will be used to pay down debt and “revitalise” the UK business. As Morrisons have just given up trying to make their ‘local’ stores work and sold them, you have to wish Tesco (not a byword for success of late) the best of luck…


The problems of the Greek economy were best summarised in one simple sentence: “You cannot export olives and import BMWs.”

One thing Greece will clearly not be importing in the near future is Volkswagens, as the company was forced to admit that its emissions data had been falsified. Chief Executive Martin Winterkorn duly fell on his proverbial sword as the shares dropped 20%.

There seems little doubt that we’ll be reporting further on this story next month: at the time of writing it appears that VW may not be alone in falsifying data.

Leaving the empty VW showrooms and heading for the polling booth, Alexis Tsipras was hailing a “victory of the people” after winning Greece’s fifth General Election in six years. Syriza won 35% of the vote – down on December of last year and short of an overall majority – but it will form a coalition with the Independent Greeks party.

In more sober news, the European Central Bank (ECB) was busy cutting growth and inflation forecasts for this year and the next two years. The ECB is now forecasting growth in the Eurozone at 1.4% for 2015 (down from 1.5%) and 1.7% for 2016, down from 1.9%. Mario Draghi, President of the ECB, commented that the “recovery will continue, albeit at a slightly weaker pace.”

The Bank expected inflation to be 0.1% for 2015, rising to 1.5% in 2016 and 1.7% in 2017, with lower energy prices still keeping a lid on inflation.

Not surprisingly, given the worldwide malaise, both of Europe’s leading stock markets suffered the inevitable falls in September. The German DAX index was down by 6% as it slipped back below the 10,000 barrier to end the month at 9,660. The French index fell 4% to 4,455. However, there’s always an exception to the rule, and in this bulletin it’s usually Greece. The Athens stock market celebrated the return of Mr. Tsipras with a 5% rise in September, closing at 654.


The month started with good news for the US economy as figures for July confirmed that the trade deficit was the lowest for five months, down to a paltry $41.9bn in July from $45.2bn the previous month. This means that it may take 24 months instead of the usual 22 months for the US to rack up its next trillion dollars of debt.

Less good was the news on jobs, with the US economy adding 173,000 jobs in August, well below the 217,000 expected. This overshadowed the news that unemployment had fallen from 5.3% to 5.1% – the lowest level since April 2008 – and the mood wasn’t helped when Hewlett Packard announced they were embarking on a programme to axe 25-30,000 jobs.

The oil industry was also reporting disappointing news as US oil output suffered its ‘sharpest fall since 1992’ due to falling oil prices. A year ago US crude was around $90 a barrel: it is now down to $45 a barrel.

For the time being the US Federal Reserve has voted to keep interest rates at their current level of 0.25% (where they have been since December 2008) due to worries about the situation in China and the global economic slowdown. However Janet Yellen, Federal Reserve Chair, still believes that the US is on course for a rate rise, ‘later this year.’

On Wall Street the Dow Jones index inevitably went the same way as all the other major stock markets – but only just. It closed September at 16,285, down just 1% in the month.

Far East

Clearly the eyes of the world were on China in September, as the slide in Chinese shares continued along with the remorseless drip of bad industrial news.

The month started with new data confirming that factory activity was contracting at its fastest rate for three years, and August also saw big falls in exports and imports – although the Chinese trade balance rose sharply.

Imports fell by 14% from the previous year (in yuan denominated terms) while exports only declined 6.1%. The steep fall in imports reflected lower commodity prices, and meant that China’s trade surplus was up by 40% on the previous month to $57.8bn (£37.7bn).

This looks likely to continue, with the expectation that September’s figures will follow a similar pattern: certainly the indications are that Chinese factory activity will be down again when the September figures are released.

There was stock market excitement in Japan as Japan Post raised $11.5bn in one of the world’s biggest stock market debuts this year, and the biggest public share sale in Japan for 30 years.

…And there was excitement of a somewhat different sort in Korea, with the North announcing that its nuclear reactor at Yongbyon was in “full production,” a move which will do nothing to lessen tensions with the South.

What of Far Eastern stock markets? China continued its seemingly inexorable fall, with the Shanghai composite falling to 3,053 – a fall of 5% in the month. The market fell by an eye-watering 29% in the third quarter, but is only 6% down on a year to date basis: and it’s worth noting that the Chinese market closed September 2014 at 2,363.

As we remarked above, the biggest faller in September was Japan, with the market down 8% to 17,388. Hong Kong suffered a relatively modest fall of 4% as it closed at 20,828 whilst the South Korean market was one of the few to move in the opposite direction. The index there closed up 1% at 1,963.

Emerging Markets

It’s not just China – growth in India is also slowing down. The economy grew at an annual rate of 7% from April to June, down from 7.5% in the previous quarter and lower than expected. With interest rates in India still high there are hopes that the Reserve Bank will shortly reduce rates in a bid to boost growth.

Meanwhile Brazil had even bigger problems, as its debt was cut to junk bond status by Standard and Poor’s. The government has introduced a $7bn package of spending cuts and is looking to raise an extra $8bn by re-introducing a financial transactions tax that was abolished eight years ago.

Given these problems the Brazilian market did well to only fall 3% in September, closing at 45,059. Russia – the other major emerging market we report on – saw its stock market fare slightly worse with a 5% fall to 1,643. In India the market – perhaps buoyed by the news regarding interest rates – lost only 128 points, closing more or less unchanged at 26,155.

And finally…

Not surprisingly, lighter financial stories were in somewhat short supply in September, but maybe we should celebrate the success of Banksy’s anti-capitalist, subversive theme park, Dismaland.

Over the past five weeks more than 150,000 people have visited what was previously a derelict lido in Weston-Super-Mare. It had been shut since August 2000 and re-opened as Dismaland on August 20th this year.

Describing itself as “entry-level anarchism” the show – which satirises the tourism and theme park industries – was selling 4,000 tickets a day online and ultimately provided a £20m boost to the local economy, proving that you can be very successful by swimming against the tide. No doubt Messrs Tsipras and Corbyn will have taken note…


Keeping your money safe by avoiding identity theft

Wednesday, October 14th, 2015

Experian’s expertise and insight on data security, in a report published recently, has highlighted a gender imbalance. Men are now victims in two out of three identity thefts (63%) across all financial product applications. The report tells us that criminals making bogus current account applications have been targeting men aged between 50 and 59 (up 3.4%), most during the first six months of 2015. This age group now accounts for nearly one in five (17.6%) current account ID thefts attempted against men.

Nick Mothershaw, UK&I Director of Identity and Fraud at Experian, comments:

“Fraudsters are widening their net and we are seeing a growing number of cases involving older members of society. Older individuals in this category often have a good credit rating and have lived at the same address for a long time. Individuals need to be careful of websites and emails asking for personal information, such as confirmation of their date of birth. This information is then used by criminals to apply for new financial products.”

Ten tips to avoid identity theft are included in Experian’s latest report:

1. Always shred or destroy documents that contain personal information before throwing them away.

2. Never respond to cold phone calls or emails asking for account details, PINs, passwords or personal information.

3. Don’t give too much away on networking websites. For example, pets’ names or children’s names could be used as passwords.

4. Register to vote at your current address. If you don’t, thieves could use your previous address details to open new credit accounts, and run up debts in your name.

5. Monitor your post regularly so you know when to expect important documents — and when to act if they don’t arrive.

6. Redirect your mail via the Post Office if you move house.

7. Always use secure, unique passwords for as many online accounts as possible, and ideally all of them. At the very least have a unique password for each type of service provider such as financial services, retail services and email.

8. Don’t store account names and passwords on your smartphone, either in email, as a note, or to ‘autocomplete’ when you open a website or app. It will be a goldmine for fraudsters if your device is lost or stolen.

9. Read all bank and card statements regularly to check for suspicious transactions.

10. Check your credit report, because it lists your credit accounts and what you owe, so you can spot applications and spending that are nothing to do with you.

Buy-to-let: a future tax trap?

Wednesday, October 7th, 2015

A close reading of the summer Finance Bill has highlighted a further tax consequence of the government’s moves to limit tax relief for interest on buy-to-let mortgages.  

The July Budget included an attack on individual investors in buy-to-let residential property. As well as abolishing the 10% wear-and-tear relief for furnished lettings from next April, the Chancellor also announced a deferred and staged reduction in the maximum amount of tax relief on finance costs. At present all interest for purchasing buy-to-let housing is fully tax-relievable against rental income, so if you are a higher rate taxpayer, the interest you pay benefits from 40% tax relief. In 2017/18, 75% of your interest will be fully relievable and a quarter will be relieved at only basic rate. In 2018/19 the split becomes 50/50 and in 2019/20, 25/75. By 2020/21 the tax relief you will receive will be limited to basic rate on all interest.

The way this will be achieved has now been made clear in the Finance Bill. The basic rate relief will be given as a tax credit rather than allowing a proportion of the interest to be offset against rental income. This may sound an arcane difference, but it could be costly for some buy-to-let investors because it increases their total net income figure. The example below shows the effect on child benefit tax, but there are similar consequences for phasing out of the personal allowance and loss of the forthcoming personal savings allowance.

Buy-to-let and increased income

Tom has income from earnings and non-property investments of £45,000. He also owns a buy-to-let property which produces £15,000 a year rental income after fees, but before deduction of £11,000 a year mortgage interest. In 2016/17, his net taxable income is £49,000 (£45,000 + £15,000 – £11,000). As this is under £50,000, he is not subject to the child benefit tax charge.

In 2017/18, the new rules for buy-to-let interest relief start to be phased in and only 75% of the interest is allowable against the rent. All other things being equal, Tom’s net taxable income thus rises to £51,750 (£45,000 + £15,000 – £11,000 x 75%) and he starts to be liable for some child benefit tax charge. By 2020/21, none of the interest is allowable and Tom’s net income is £60,000, at which point the child benefit tax charge is equal to 100% of the child benefit).

Buy-to-let has been a popular investment, but this latest twist is another reminder that the tax benefits will not be as good in coming years.

The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.

HMRC accelerates to £1bn of collections

Wednesday, October 7th, 2015

HM Revenue & Customs’ (HMRC’s) accelerated payments programme has now collected £1bn from users of tax avoidance schemes.   

Last year HMRC gained the power to demand upfront tax payment from users of tax avoidance schemes subject to the Disclosure of Tax Avoidance Schemes (DOTAS) rules or the General Anti-Abuse Rule, or where a similar scheme had already been defeated in the courts. In 2015, the power was extended to schemes involving National Insurance Contributions.

In August 2014 HMRC started sending out ‘Accelerated Payment Notices’ and to date it has issued over 25,000. By the end of next year, HMRC anticipates it will have issued around 64,000 notices. Anyone receiving such a notice has 90 days to pay up or make representations to HMRC if they consider the notice is incorrect. So far those choosing to pay up have put £1bn into the HMRC coffers. By March 2020 HMRC is projecting that it will have collected £5.5bn of brought forward payments.

HMRC would have to repay some of that money if the courts decide in favour of any litigating scheme users. However, as HMRC regularly reminds taxpayers, the taxman wins 80% of avoidance cases and many people choose to settle before embarking on the expensive path of litigation.

As if to prove the point, HMRC recently won a High Court Judicial Review case in which two users of a film-based avoidance scheme argued that accelerated payments process was unlawful.

The lesson from HMRC’s £1bn revenue raising is that users of aggressive tax avoidance schemes are no longer able to delay tax payment until it is proven in court that their schemes fail the rules – often a protracted process.  Nevertheless, there remain many relatively uncontentious ways to reduce your tax bills. Please get in touch to discuss your options.

The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.

Autumn Statement 2015

Wednesday, October 7th, 2015

The Chancellor has announced the date of the Autumn Statement.

In late July, the Chancellor announced that the results of the Spending Review would be announced on 25 November. At the time he made no reference to the Autumn Statement, probably because the focus was still on his July Budget. However, in the beginning of September an exchange between Mr Osborne and the Office for Budget Responsibility revealed, much as expected, that 25 November will also see the publication of the Autumn Statement.

In recent years the Autumn Statement has increasingly become more like a second Budget – last year’s was particularly notable in this regard. This time around there may not be quite such a Budget overlay, if only because the Chancellor has already presented two budgets in 2015. In July’s he announced most of the income tax details for next tax year, revising figures he had put forward in March. It is difficult to imagine he will make further changes on this front.

Nevertheless there will be two areas worth watching:

  • Pensions The July Budget was accompanied by a consultation paper on the future of pension taxation, which contained little detail, but hinted at the end of higher rate tax relief – and possibly all tax relief – on contributions. The results of that consultation, which ended last month, could appear in November. If you are contemplating making a one-off pension contribution in coming months, it may be wise to act before 25 November. 
  • National Insurance Contributions (NICs) The Treasury is in the throes of overhauling NICs for the self-employed and has said it aims to scrap the weekly Class 2 payment and just have a Class 4 earnings related payment. Tellingly, self-employed NICs were left out of the legislation to freeze NIC rates (along with income tax and VAT rates). The July reforms on dividend taxation, which take effect from 2016/17, were designed to discourage the self-employed from incorporating. We might see why in November – some commentators are predicting a rise from 9% to 12% in the main Class 4 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.  The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.