Efficient Wealth Update March 2018
Good news for those dealing with Inheritance Tax – the ‘Main Residence Nil-Rate Band’, which is the amount you can receive before tax from the property that was the deceased’s main residence, will increase from April 2018. The amount will rise from £100,000 to £125,000 per person, giving individuals £450,000 and couples £900,000 tax-free inheritance. This comes at a time The Times reports that HMRC increased their Inheritance Tax take last year by nearly 15%. Against the backdrop of a much more aggressive approach towards tackling avoidance, experts underline that doing the simple things will be key.
Stock Market Tumble
In February we saw the worst stock market tumble since the financial crash of 2008. The Dow Jones fell by 4.6% overnight and went on to fall by more than 10% overall over the following days: a total of $300 billion. The FTSE fared only slightly better, with a total fall of over 8%.
There was always going to be a market event, we just didn’t know whether this would constitute a crash or a correction. The recovery in the markets suggests that this may only have been a correction in this instance, but who knows if there may be more to come
Many experts believe this event was a reality check and broadly a good thing to have happened. With memories of the 2008 financial crash fading, people have started to take more and more risks without thought for the consequences. The fact that the bubble has partially burst will hopefully curb this behaviour, meaning that we may see slower and steadier growth in the markets instead of the rapid rises we have seen in recent years that could potentially lead to unexpected market corrections.
Now, don’t let me fool you – there will likely be more market corrections in the future. All we can do is protect our and your investments to the best of our ability, through a diversified investment approach. Rest assured that our Discretionary Investment Managers are looking at this situation daily and will be monitoring and managing everything for you. Just keep an eye on your updates!
ISA Allowance: Use It or Lose It
March is the final full month in which you can use your ISA allowance. The current allowance is £20,000 and it is a ‘use it or lose it’ allowance. You cannot carry it forward to the next tax year, so now is the time to make that additional contribution you may have been thinking about.
As I am sure you are all aware, by placing funds into an ISA you are increasing the tax efficiency of your savings, as when you come to withdraw these funds they are not liable for Income Tax or Capital Gains Tax. So definitely worth doing!
If you want to make use of this allowance, get in touch with us as soon as possible as there may be forms we need to send out to you to sign and we do not want to miss that deadline!
(N.B. Keep in mind that there are two bank holidays close to the new tax year on Friday 30th March and Monday 2nd April, when our offices will be closed.)
If you do not have any additional funds to invest, we can move money from other areas of your portfolio into your ISA to utilise the allowance. Again, just get in touch to make sure this all happens before the new tax year.
Lasting Power of Attorney: Are You Owed a Refund?
The Office of the Public Guardian (OPG) has announced that they will be choosing to refund part of the fees for Enduring Powers of Attorney and Lasting Powers of Attorney (LPA) charged between 1st April 2013 and 31st March 2017.
Refunds will be processed in approximately twelve weeks from date of request and can be claimed either by phoning the OPG directly on 0300 456 0300 or online by following the link below:
The claim must be made by the Donor (the person whose LPA it is) or, if they are not able to claim, by their appointed attorney on the official document. Sorry but we cannot process or request these refunds on your behalf.
The reason for the refunds is that the OPG is not allowed to charge more than it costs to process LPA documents. During the timeframe mentioned above the OPG’s operating costs came down as more people applied to register a power of attorney and the process became more efficient, but the application fee charged was not reduced in line with this.
There is currently no deadline for the claim process but make sure you start the process as soon as possible, just in case!
Will Your Pension Pass to the Right People?
A prominent pension provider, Royal London, carried out a survey on those aged between 55 and 64 years and discovered that the pensions of 750,000 people approaching retirement will pass to the wrong person.
Whenever you have a pension pot, whether it be with your employer or one you have set up personally, you are usually asked to nominate your beneficiaries via an ‘Expression of Wish’ form. Your pension will likely not then pass according to instructions in your Will, but will be inherited by whomever you nominate on the Expression of Wish form (different rules apply for Defined Benefit Schemes).
Now, the problem is that having another form to remember to complete means that it is easily forgotten or overlooked. This becomes an issue if circumstances change, for example if you get divorced, remarry or simply no longer want that beneficiary to benefit.
To make sure your chosen beneficiaries receive your pension it is best to set up an Asset Preservation Trust, which nominates specific categories of beneficiary. This means, for example, that your pension could be passed on to your children, grandchildren, great grandchildren or others without you having to update Expression of Wish forms with each individual name or every time something changes. A Letter of Wishes can be attached to the Trust explaining the proportions you would like each beneficiary to receive, or with any other further details or instructions. Only one Expression of Wish form that allocates the Trust as the beneficiary of your pension will be needed, the Asset Preservation Trust then does the rest.
If a Trust is not something you would be interested in, you should at least check that your pension will go to the right people. If your pension is managed through us you could call or email us to find out. If it is not, you will need to contact your specific provider.
Pension Scammers’ Comeuppance …
We hear a lot about pension scams, and actually about scams in general, these days. But rarely do we get the satisfaction of seeing the culprits suitably punished for their crimes, generally because they are too adept at hiding themselves and cannot be traced.
However, The Pensions Regulator (TPR) recently secured a ruling that means four scammers have to repay £13.7 million to pension scheme members who were involved in a scam through Friendly Pensions Ltd. An independent Trustee has been appointed by TPR to seek the confiscation of the scammers’ assets to distribute for the benefit of their victims.
Now, who knows whether they will be successful, but hopefully this first ruling that forces the scammers to repay the money they have stolen from innocent people by accessing their personal assets will be the start of more to come.
The victims of the scam were lured in over a two-year period through the use of cold calling and similar techniques in an attempt to get them to agree to transfer their pensions to one of eleven scam schemes.
Please remember to always be vigilant when receiving calls/emails/texts from unfamiliar people about your pensions and savings. You may think it will never happen to you, but the scammers are getting bigger and better at what they do.
Notes on Brexit
Phase 2 of the Brexit negotiations began only recently, so at this stage there is no progress to report. The EU have adopted new Negotiation Directives, and these have highlighted some red-line positions for the EU.
Along with details surrounding what should be covered in Phase 2, the January 2018 Directives set out that, in the view of the EU, a transition will:
- Be time-limited, and end by 31 December 2020;
- Require the entire body (‘acquis’) of EU law to continue to apply to the UK, including in areas relating to free movement of people and the EU’s customs and trade laws and policies, and including new EU laws that will enter into force during the transition period;
- Require the UK to remain within the CJEU’s jurisdiction;
- Preclude the UK from “being able to conclude” its own trade agreements, unless specifically authorised to do so by the EU;
- Preclude the UK from having representatives in the EU institutions and in EU agencies, as it will no longer be a Member State.
It appears that there is not much room for negotiation there, but a paper released by HM Government stated that they feel there is broad alignment on most positions and only a small number of areas need to be discussed, mainly technical in nature.
However, Mr. Corbyn has finally decided what his position is on Brexit, and there is now a strong possibility of a parliamentary defeat for any outcome deemed to be ‘too hard’, so we will have to sit tight and wait for the tangle that is Brexit to unfurl.
Book of the Month
This month’s book is suggestion is an old book that I had heard mentioned many times, but have only just have got around to reading. When some of the people I respect most all put it in their tops books of all time, I had to sit up and listen, and they are right. ‘Man’s search for Meaning’ by Viktor Frankl is moving beyond words, with an unbelievably important message at it’s core.
Frankl was a psychotherapist that was held as a prisoner in the Nazi concentration camps during the Holocaust, so you would expect this to be a harrowing account of the gas chambers. Whilst the horrors of his time there are indeed highlighted time and again, this is not an account of his experiences, rather an inspirational story of how the people that survived it went about coping with the ordeal. In essence, Frankl’s conclusion is that our happiness, and our ability to survive is all centred around the meaning we give our lives. I hope you take the time to read this relatively short book, as the message held within is more powerful than you can imagine.
Charlie’s Mini Blog
Post schooling, I have always delivered the best results I possibly can. Whilst in formal education I admit that I coasted, just doing enough to get to the next base, once I realised I was the ultimate beneficiary of my efforts, I have always tried to be the best. In founding Efficient Portfolio, I wanted to create the best financial planning possible, and over the 12 years it has been running I have sought out every book and course that I could find to make it better.
However, it isn’t just in business I have done this. The reason I attended ‘Unleash the Power Within’ back in 2011, the Tony Robbins event made famous for the fire walk, was because I wanted to create the best version of me that I could. Tony is known to be the best of the best, so if I want to be the best I can, I need to go to the best coach. That’s why people like Serena Williams, Bill Clinton and Andre Agassi go to Tony. If you want to do well in life, look for opportunities to be a small fish in a big pond, rather than being comfortable as the big fish in the small pond, where you won’t be pushed.
Whatever it is in life that I do, I want to seek out the best, and that applies to Efficient Portfolio’s client’s money, and of course my money! As a result, I was delighted that last week, PortfolioMetrix, who manage the largest share of our client’s money and mine too, were recognised for their success. They won the ‘Best Discretionary Manager in London Award’, at the prestigious Citywire Wealth Manager Awards. Well done guys, it was well deserved for their fantastic performance and innovation.
Government measures to boost movement in the housing market appear to be failing, as the Royal Institution of Chartered Surveyors reported more subdued activity.
The professional body said its residential market survey for February 2018 had found new buyer enquiries had fallen for the 11th month in succession. Despite Philip Hammonds attempts in the Autumn Budget to increase activity, including additional help for home builders as well as abolishing Stamp Duty for most first-time buyers.
We think this shows that these moves were not significant enough in their nature to add significant kindling to market.
RICS said: “Alongside ongoing concerns about affordability in some areas of the country, part of the problem may lie in the lack of choice of property to purchase with the RICS New Instruction indicator falling once again, and by the biggest margin on a seasonally adjusted basis since July 2016.
They (RICS) believe this has led to estate agents reporting inventories reaching fresh lows as well as time for a sale to complete increasing to an average of 18 and a half weeks.
Interestingly results of the report showed new buyer enquiries continuing to increase in Scotland, Northern Ireland, Yorkshire and Humberside and the North. Compared to drops in London and the South East where it has been widely reported that prices have been increasing rapidly. Maybe prices in these areas have finally reached the top, and the only way is down?
Simon Rubinsohn, chief economist at RICS, said: “The consultation announced earlier this week (1st week of March) on housing delivery put the onus squarely on developers and planning departments to up their game to lift the supply pipeline, but the feedback to the latest RICS Residential Market Survey casts some doubt as to whether this will be sufficient to address the challenge.”
“Significantly, the longer term national house price indicator has begun to creep upwards once again in recent months despite the current somewhat mixed climate and the private rent series also remains firm, in both cases pointing to increases of at least fifteen percent over the next five years.”
Is Bacteria Making You Crave Bad Food?
If you have read ‘The Dream Retirement’ (Download your free copy here) or read my ‘2 Week Detox Challenge’ (download here) you will know that I live by a ‘Skinny Weeks and Weekend Treats’ principal. I try to avoid dairy, gluten, sugar, caffeine, alcohol and meat during the week, but at the weekend allow myself to delve back into these, albeit in moderation. What I love about this approach is that I now crave the good food more on a Monday than I do the bad on a Friday, but could it be my bacteria talking to me instead of my conscience?
According to Julie Beck of www.theatlantic.com, ‘Humans’ gastrointestinal tracts are home to 10,000 species of bacteria, which take their energy from our half-digested lunches. In exchange, they help us break down food and keep harmful bacteria out; they have also been shown to help regulate fat storage and provide vitamins.’ But interesting recent research has shown that it can actually be our bacteria that influences our cravings.
You may remember the docufilm ‘Supersize Me’ where Morgan Spurlock tried to live for 30 days on nothing but food from the most famous fast-food franchise in the world. After a few days he was being violently sick, and medical advice actually recommended he stop for fear of him not making the full 30 days. Initially repulsed by the excess stomach wrenching fast food, as the time went on he actually started to crave it. How can that be?
Feeding Our Bad News Addiction
In today’s world of 24/7 media, both online and off, it is easy to get caught up in watching, reading and listening to the news three or more times a day. Many would say that contemporary broadcasting trends enable you have your finger on the pulse of global news as it breaks and to be ‘involved’ in events as they unfold. I can appreciate that argument, but does it make you happy? Only a small fraction of all news that you consume is good news. Is that because good things don’t happen? Of course not. Good things happen all the time, but bad news makes good news, as they say. So are we feeding our bad news addiction?
Consuming an unrelenting level of news, particularly when you are unlikely to do anything about it, only serves the purpose of draining your happiness. Let’s take the recent Ebola crisis: This tragedy was devastating communities and countries, and the medical and humanitarian volunteers were doing something heroic, and of course we shouldn’t ignore news of their work. But if you consume news all day long, what is your brain absorbing? You hear about Ebola first thing, on your drive to work, then again at lunch, and then again just before you go to bed.