The Government’s first – and last – Autumn Statement will be remembered for its sensibleness.
When faced with a crisis, Ronald Reagan had a catchphrase: “Don’t just do something. Stand there.”
May’s Chancellor is cut from the same cloth. Philip Hammond is not about fancy initiatives, meddling too much or tweaking things for the sake of a good headline. He does something only when it is required.
At a time when Brexit is going to change everything, we needed a sensible Autumn Statement from a government that lets businesses just get on with it.
Pension warning
There was confirmation that the ‘triple lock’ policy on the state pension would remain – for now.
Philip Hammond gave a very clear flag in the detail behind the budget that the higher rate tax relief on pensions is under serious threat.
The budget notes describe this as unsustainable and we expect this to be removed next year. It’s going to have an impact on higher rate taxpayers so we would recommend those hit by it to increase their pension contributions as soon as possible to get tax relief.
A consultation will be launched on how best to prevent people with retirement savings from being cold-called by pension scams – which is very welcome news.
New savings bond
The Autumn Statement announced a new 2.2% fixed savings bond which will go on offer next year – but don’t crack open the champagne just yet.
The NS&I bond catches the eye but in reality it’s fairly inconsequential. Savers can only invest a maximum of £3000 in total over the three year period – making just £66 a year in interest.
The full details of the bond will be unveiled in the Spring Budget.
Savers looking to invest more, should check out the 123 bank account from Santander which pays a monthly interest of 1.5% but allows you to invest up to £20,000.
Personal Income and employee perks
From April 2017, the Personal Savings Allowance for income tax will raise from £11,000 to £11,500 and the National Living Wage will increase from £7.20 an hour to £7.50.
In 2010, the Personal Savings Allowance was £6,750 so this has gone up massively in a very short space of time, particularly when you consider our low inflation rate in that time.
The planned rise in the higher-rate income tax threshold from £43,000 to £45,000 will be pushed through and will be followed by an additional increase to £50,000 over the same timeframe.
On the other hand, perks for employees are set to cost more. Known as ‘salary sacrifice’ schemes, employees have traditionally been able to give up part of their salary for a non-cash benefit allowing them to buy gym memberships, mobile phone deals and take car allowances.
From April, the scheme will only be beneficial for people using it for childcare vouchers, cycle-to-work schemes and pension contributions – with the exception of ultra-low emission ‘green’ cars.
Clampdown on letting agents
Letting agent fees on people who rent private accommodation will be banned as soon as possible with landlords expected to pick up the costs of preparing tenancy agreements, checking references and credit checks instead.
For too long, abusive agents have been charging their tenants far too much for straightforward checks and paperwork. We will have to wait and see whether this leads to an increase in rental costs.
Regional boost
There was some good news for the North West, which shows that Theresa May seems to be standing by her first pledge as PM for a ‘one-nation Britain’.
The government has committed to raising productivity across the UK – and not just in the south. With the Northern Powerhouse Strategy, there will be £1.8bn funding for regions through the Local Growth Fund.
It will be interesting to see what this means for the North West as the new mayors are elected – I expect they will have the power to spend regionally which will allow them to invest in economically productive infrastructure.
The new £400m Digital Infrastructure Investment Fund and the commitment to rolling out fibre to more homes and businesses will also be good for our region.
No more Autumn Statements
Hammond announced a shake-up for the fiscal calendar with a scrapping of the traditional Autumn Statement.
A new Spring Statement is to be introduced in its place which will react to OBR forecasts.
This makes sense as the Autumn Statement has become a second budget in recent times. A return to one fiscal event should make life simpler for taxpayers.
It’s not the first time the UK has seen a Budget held in the Autumn. In 1993, former Chancellor of the Exchequer Kenneth Clarke merged tax and spending announcements into an Autumn Budget.
Business news
The Government recommitted to cutting the rate of Corporation Tax to 17% by 2020 and reducing the burden of business rates by £6.7bn over the next five years.
There was 100% Rural Rate Relief announced for businesses in rural areas, a cancellation of the planned fuel duty rise for the seventh year in a row (saving an average of £130 a year for car drivers and £350 for van drivers) and over £1bn pledged for improving the country’s digital infrastructure.
Under a simplification of national insurance contributions, businesses face an extra cost of £7.18 per employee from April 2017. Severance payments over £30,000 will also be subject to National Insurance. Previously, only income tax was charged.
Final Salary Pension Latest
/0 Comments/in News /by Sarah LoweIn our November newsletter, we revealed just how dramatically the value of some final salary pensions have risen since the Brexit vote last summer.
Pressures on some pension schemes had led to some making hugely inflated offers to people to swap future income for a cash lump sum.
We have seen cases where the transfer valuations have gone up by tens of thousands of pounds in just a handful of weeks.
For some individuals this has meant cash sums equivalent to more than 30 times the projected annual income on retirement being offered to final salary (otherwise known as Defined Benefit) pension schemes.
While we are still seeing examples of sky-high valuations, there is no question that the tide is beginning to turn with some valuations falling by as much as 10%.
The sharp rise in transfer valuations has been caused by the dramatic fall in AA-rated corporate bond yields which, in turn, track 15 to 20 year gilt yields.
While the increased valuations may look appealing, anyone considering leaving their final salary scheme should do so only after careful consideration with their financial advisor.
There are a number of issues that need to be taken into account, the first of which should be considering your wider asset base. For example, do you have sufficient secure income from other assets to meet your basic living costs in retirement? Is the lump sum going to meet your future income requirements? What are the tax implications of withdrawing from your final salary pension scheme? What will the financial effects be on any spouse and other dependants?
If you are considering investigating the possibility of cashing in your final salary pension early, we recommend that you speak with Alan Mellor as soon as possible. Alan can be contacted on 0151 353 1066.
Neston Fund appeals for projects
/0 Comments/in News /by Sarah LoweOur sister company, Phillip Bates & Co chartered accountants is one of the founders of the Neston and District Community Fund.
The Fund, which was launched in 2015, wants to hear from organisations tackling social issues such as youth crime, drug rehabilitation and elderly isolation.
It was set up to specifically support the work of community and voluntary groups in Neston, Little Neston, Parkgate, Burton, Ness, Willaston and Puddington.
Four businesses – Phillip Bates, Clive Watkin Partnership, Rightway and G Tilby Engineering – launched the fund with an initial substantial donation. They followed this up with a further donation in 2016.
A number of grants have so far been given, the most recent one to Healthbox CIC, a not-for-profit organisation committed to delivering lifestyle change programmes in the community.
The grant from the Fund will support the Neston Healthy Families project which works with families with multiple and complex needs. The six-month project supports families who have been identified by primary schools, Plus Dane Housing and Neston Children’s Centre.
Phil Bates, Principal at Phillip Bates & Co, says: “We are proud of the projects we have been able to support since we launched the Neston and District Community Fund almost two years ago, but we know there is so much more to do.
“We particularly want to hear from any group which is helping to tackle deep-seated social issues within our community.”
The fund is administered by Cheshire Community Foundation, which works to match charitable donors with the causes that matter most in Cheshire and Warrington.
If you would like to apply for a grant, please email angela@cheshirecommunityfoundation.org.uk or call Phil Bates on 0151 353 0003.
Inheritance Tax changes explained
/0 Comments/in News /by Sarah LoweWe are working closely with a number of our clients ensuring they are able to make the most of important changes to inheritance tax rules announced in the 2015 Budget.
If you own a property worth up to £1million, you can leave it to your children or grandchildren completely free of inheritance tax as from April 2020.
The former Chancellor, George Osborne, raised the IHT threshold from £325,000 per person to £500,000. This enables married couples and civil partners to pass on property of up to £1million without paying any IHT.
IHT is currently levied at a rate of 40% on the value of an estate above the tax-free threshold, which has been frozen at £325,000 per person since 2009.
Under the changes, couples can double the allowance, passing on assets to their children or other relations worth up to £650,000 before a tax charge is triggered.
Alan Mellor says: “We are advising our clients on the implications of the changes which were announced in 2015, but I know from speaking to other people that many people are not fully up to speed with the new thresholds.
“It is important that people plan ahead to get the benefit of the changes which will be phased in over the next couple of years. This applies equally to those who have a property worth over £2million or assets of more than £650,000.”
Alan Mellor can be contacted on 0151 353 1066.
PM spells out Brexit vision
/0 Comments/in News /by Sarah LoweAfter months of uncertainty, Prime Minister Theresa May has finally laid out her vision of post-Brexit Britain.
In a 43-minute speech on Tuesday, Mrs May went into some detail about her 12 negotiating objectives.
The Government made it clear that this will be the Prime Minister’s only statement on the matter before the start of exit talks in March.
The 12 objectives include:
• Britain will no longer be a member of the EU Single Market
• Britain will not seek to be a full member of the Customs Union, which is separate to the Single Market
• Britain to “get control of the number of people coming to Britain from the EU”
• Britain to “take back control” of our laws – with laws made in Britain not the EU
• Britain to guarantee the rights of EU workers in Britain and wants similar protection for British nationals in EU member states
• Britain to continue working with the EU on crime and terrorism matters
• Free movement to continue between Northern Ireland and the Republic of Ireland
• To achieve a smooth transition from EU membership to life outside of the EU with a “phased process of implementation”
• Continuing protection of workers’ rights as set out in EU legislation
• Both Houses of Parliament to vote on any final deal between the UK and the EU “prior to it coming into force”
• The importance of the Brexit deal strengthening “the precious union between the four nations of the UK”.
• Continuing collaboration between British and European science community on “major science, research and technology initiatives”.
Alan Mellor says: “Britain has been waiting more than six months for the Prime Minister to spell out her vision for life after Brexit.
“The reaction from the markets and financial community to Mrs May’s speech was generally very positive. The pound has its best day on the currency markets for almost 20 years.
“Now the Government has the trickier task of delivering on its big objectives.”
Beware the scammers
/0 Comments/in News /by Sarah LoweOne of the downsides to the ever advancing technology is the ease with which people can fall prey to so called scammers.
I heard recently about a fellow professional who was caught out in an unfortunate and, ultimately, expensive sting.
He was contacted by email by the scammer masquerading as a client asking him to transfer £20,000 into a bogus account. It was only when the scammer came back a second time by email asking for a further transfer to be made that he smelt a rat.
It turned out that the completely credible email, containing the correct names of husband and wife clients, was a total scam.
The IFA in question was left will no alternative but to repay the £20,000 to his clients.
Here at Phillip Bates & Co Financial Services, we have a long-standing policy of always contacting our clients if we receive an email or letter asking us to making bank transfers.
This is just one example of a scammer in action. There are plenty more too good to be true investment “opportunities” that we should all be on our guard against. Some of the usual suspects include Caribbean holiday homes, storage pods and carbon credits.
Autumn Statement is just what business needs – but heed pension warning
/0 Comments/in Uncategorised /by EdwardLambThe Government’s first – and last – Autumn Statement will be remembered for its sensibleness.
When faced with a crisis, Ronald Reagan had a catchphrase: “Don’t just do something. Stand there.”
May’s Chancellor is cut from the same cloth. Philip Hammond is not about fancy initiatives, meddling too much or tweaking things for the sake of a good headline. He does something only when it is required.
At a time when Brexit is going to change everything, we needed a sensible Autumn Statement from a government that lets businesses just get on with it.
Pension warning
There was confirmation that the ‘triple lock’ policy on the state pension would remain – for now.
Philip Hammond gave a very clear flag in the detail behind the budget that the higher rate tax relief on pensions is under serious threat.
The budget notes describe this as unsustainable and we expect this to be removed next year. It’s going to have an impact on higher rate taxpayers so we would recommend those hit by it to increase their pension contributions as soon as possible to get tax relief.
A consultation will be launched on how best to prevent people with retirement savings from being cold-called by pension scams – which is very welcome news.
New savings bond
The Autumn Statement announced a new 2.2% fixed savings bond which will go on offer next year – but don’t crack open the champagne just yet.
The NS&I bond catches the eye but in reality it’s fairly inconsequential. Savers can only invest a maximum of £3000 in total over the three year period – making just £66 a year in interest.
The full details of the bond will be unveiled in the Spring Budget.
Savers looking to invest more, should check out the 123 bank account from Santander which pays a monthly interest of 1.5% but allows you to invest up to £20,000.
Personal Income and employee perks
From April 2017, the Personal Savings Allowance for income tax will raise from £11,000 to £11,500 and the National Living Wage will increase from £7.20 an hour to £7.50.
In 2010, the Personal Savings Allowance was £6,750 so this has gone up massively in a very short space of time, particularly when you consider our low inflation rate in that time.
The planned rise in the higher-rate income tax threshold from £43,000 to £45,000 will be pushed through and will be followed by an additional increase to £50,000 over the same timeframe.
On the other hand, perks for employees are set to cost more. Known as ‘salary sacrifice’ schemes, employees have traditionally been able to give up part of their salary for a non-cash benefit allowing them to buy gym memberships, mobile phone deals and take car allowances.
From April, the scheme will only be beneficial for people using it for childcare vouchers, cycle-to-work schemes and pension contributions – with the exception of ultra-low emission ‘green’ cars.
Clampdown on letting agents
Letting agent fees on people who rent private accommodation will be banned as soon as possible with landlords expected to pick up the costs of preparing tenancy agreements, checking references and credit checks instead.
For too long, abusive agents have been charging their tenants far too much for straightforward checks and paperwork. We will have to wait and see whether this leads to an increase in rental costs.
Regional boost
There was some good news for the North West, which shows that Theresa May seems to be standing by her first pledge as PM for a ‘one-nation Britain’.
The government has committed to raising productivity across the UK – and not just in the south. With the Northern Powerhouse Strategy, there will be £1.8bn funding for regions through the Local Growth Fund.
It will be interesting to see what this means for the North West as the new mayors are elected – I expect they will have the power to spend regionally which will allow them to invest in economically productive infrastructure.
The new £400m Digital Infrastructure Investment Fund and the commitment to rolling out fibre to more homes and businesses will also be good for our region.
No more Autumn Statements
Hammond announced a shake-up for the fiscal calendar with a scrapping of the traditional Autumn Statement.
A new Spring Statement is to be introduced in its place which will react to OBR forecasts.
This makes sense as the Autumn Statement has become a second budget in recent times. A return to one fiscal event should make life simpler for taxpayers.
It’s not the first time the UK has seen a Budget held in the Autumn. In 1993, former Chancellor of the Exchequer Kenneth Clarke merged tax and spending announcements into an Autumn Budget.
Business news
The Government recommitted to cutting the rate of Corporation Tax to 17% by 2020 and reducing the burden of business rates by £6.7bn over the next five years.
There was 100% Rural Rate Relief announced for businesses in rural areas, a cancellation of the planned fuel duty rise for the seventh year in a row (saving an average of £130 a year for car drivers and £350 for van drivers) and over £1bn pledged for improving the country’s digital infrastructure.
Under a simplification of national insurance contributions, businesses face an extra cost of £7.18 per employee from April 2017. Severance payments over £30,000 will also be subject to National Insurance. Previously, only income tax was charged.
Final Salary Pensions: Values rise post-Brexit
/0 Comments/in News /by Sarah LoweThe value of some final salary pensions have risen dramatically in the aftermath of the UK’s vote to leave the European Union.
Following the Brexit vote on June 23, UK 10-year gilt yields fell to below one per cent for the first time ever, increasing the cost for so called “Defined Benefit” pension schemes to meet their liabilities.
Increasing pressures have led some pension schemes to make eye-watering offers to people to swap future income for a cash lump sum. The transfer valuations of some final salary pension schemes have risen by tens of thousands of pounds in a matter of weeks.
Alan Mellor said: “There are undoubtedly cases where final salary pension values have soared considerably since the Brexit vote and, in a small number of cases, the valuations can be life-changing.
“However, it is critical that people with final salary pension schemes take specialist advice before making any decision to transfer out of their scheme.
“At the moment, there are some startling transfer valuations, but this could quite easily change again by the start of next year.”
The sharp rise in transfer valuations is the result of the dramatic fall in AA-rated corporate bond yields which, in turn, track 15 to 20 year gilt yields.
It is these yields that many final salary schemes use to value their future pension liabilities.
When gilt yields and corporate bond yields decline, the cost to the scheme of meeting future pension promises goes up.
Alan added: “It is not a case that every pension scheme is passing on Brexit bonuses to those choosing to leave their scheme early. Each scheme will carry out its own calculations to determine the valuation they are willing to give a client.”
Anyone with a final salary pension can seek advice by contacting Alan Mellor on 0151 353 1066.
Spotlight: Anne Merriman Foundation
/0 Comments/in News /by Sarah LoweFor nearly 50 years, Dr Anne Merriman has been working to relieve the pain and suffering of those most in need.
In 1992, she founded the charity Hospice Africa with the vision of ‘palliative care for all in need in Africa’. After a feasibility study in 4 countries, Uganda was chosen as the model as Hospice Africa Uganda.
Hospice Africa Uganda was the first ever in Uganda and starting with minimum funding they are now looking after 2,200 patients and have trained more than 10,000 from all over Africa.
With the average life expectancy in Uganda a mere 54 years, cancer is one of the major killers there, and an estimated 1 in 500 people will develop the disease.
But the country is severely lacking in specialists and resources to help them, with 90% dying as a result of late diagnosis.
Merriman, a 2014 Nobel Peace Prize nominee, recognised this need while working in Nairobi as the first medical director of their new Hospice. Uganda was only the fourth country to received palliative care at that time but now 35 countries are having some form but only 20 have the medications to control the severe pain of cancer.
Born in Liverpool in 1935, Merriman came into this line of work after being affected by seeing elderly people die in pain in her home city in the late 1970s.
After graduating as a medical doctor, she spent 35 years working in Africa, including a 20-year stint in Uganda.
In 1985, she introduced palliative care into Singapore, which became an accepted form of care in the country.
She then later returned to Africa, initially to Nairobi hospice, before founding Hospice Africa, introducing palliative care to Uganda in 1993. She had brought a formula for affordable oral morphine with her to Kenya and to Uganda, which she had formulated with the pharmacists in Singapore. This was very easy to make at the kitchen sink and cut costs of manufacture. Control of pain has revolutionised the introduction of holistic care necessary to bring patients and families to peace at this special time of life.
Since leaving Singapore in 1990, Merriman has remained a client of Phillip Bates & Co Financial Services.
“The support I have received from Bates & Co has been invaluable,” she said.
“I have had and continue to have ambitious plans for Hospice Africa, and a key factor in me being able to achieve these goals has been the support I’ve received from Alan Mellor and his first-class team.”
Since its inception, Hospice Uganda has successfully treated 28,000 patients; 25,000 of them availed with oral morphine in their own homes.
But it relies on donors to continue its vital work. It costs £1million per year to care for 2,000 patients each month and to continue its Institute education programmes.
“It’s peace of mind for me to know that Bates can manage my finances in a way that allows me to focus on my work in Uganda,” Merriman continued.
“Having them look after my finances in the excellent way they do gives me the confidence to go out to Uganda and help these people.
“It assures me that I can continue to go out and work as a volunteer in Uganda, 23 years on.”
To find out more about Hospice Uganda, visit www.annemerrimanfoundation.com
Markets steady after Trump shock
/0 Comments/in Uncategorised /by Sarah LoweFears that the markets would tumble in the aftermath of Donald Trump’s victory in the US Presidential race have so far not materialised.
Like Brexit earlier in the year, forecasts of economic doom and gloom have proven false.
The BBC’s economics editor, Kamal Ahmed went as far as describing the initial hours after Trump sealed victory as “Brexit Minus”. Investors are in “wait and see mode”.
Developments in the last 24 hours have included:
Alan Mellor said: “You always expect an initial knee jerk reaction, but the response to the Trump victory was much calmer than was the case following the Brexit vote in June.
“Perhaps Brexit changed the way we view so called ‘seismic’ events of this nature. Markets dislike uncertainty and therefore we can probably expect a certain amount of volatility over the coming days and weeks. But the market will quickly revert to the fundamentals – it is only interested in financial analysis and hard economic facts as opposed to whether we like or dislike Donald Trump as an individual.
“My job as a Chartered Financial Planner is about the long-term planning, helping my clients to invest in the right opportunities, the ones with the best track record and the best future potential.”
Alan added: “Although Trump does not get the keys to the White House until after his inauguration in January, we will hear about his plans for his First 100 Days much sooner than that.
“One policy he is likely to pursue is the repatriation of all profits that have been placed by some of the biggest US corporations elsewhere in the world. This cash pile is likely to spark a period of mergers and acquisitions which will be good for the overall health of the economy.”
Regarding the fall in the value of the $, Alan said: “The US $ is over-valued and has been for some time, so the fall we have seen so far is not such a bad thing.
“We will continue to monitor the impact of the Trump victory very closely and ensure that clients are kept updated with any significant developments affecting their investments. Ultimately, our focus is on the long term, not a single, albeit momentous, event in US history.”
Retirement planning software
/0 Comments/in News /by Sarah LoweWe are committed to continually investing in our business to ensure the best possible service for our clients.
To this end, we have recently implemented state-of-the-art software which further enhances the firm’s ability to provide clients with the most accurate data to inform their retirement planning.
Alan Mellor said: “The investment in our new cash flow tool will really assist with the long-term planning processes we go through with each of our clients.
“It will allow us to make projections and challenge assumptions as part of the process of plotting out a client’s retirement plan.
“The software is extremely interactive and intuitive in its approach, allowing us to consider historic investment performance as well as looking at likely trends and patterns into the future.
“Ultimately, we want to provide our clients with realistic, attainable long-term planning that will allow them to achieve their goals for retirement.”
To find out more, please contact Alan Mellor on 0151 353 1066.