By Alan Mellor, Managing Director and Chartered Financial Planner at Phillip Bates & Co Financial Services
This week saw a report from the Office for Budget Responsibility warning that recent pension reforms will end up costing the taxpayer billions of pounds.
The OBR said that new savings schemes and the removal of tax relief on pension for higher earners could cost the Exchequer £5billion a year.
The watchdog warned that higher earners will instead move money into tax efficient investments which could also drive up property prices.
It is simple and obvious that people will want and need income for the time when they stop work. We will still want to do things, pay bills, live a life once we stop working. What has become clear from Government and commentators is that getting people to save enough for a decent retirement is a conundrum that has yet to be solved.
George Osborne’s approach in the latter years of his Chancellorship was to simplify how you can use Pension savings – known as Pensions Freedom, a laudable approach that in a rational market would encourage savings through individuals trusting Government that they can use funds as they see fit.
The problem is that this would need a long-term to be accepted, understood and acted upon in relation to savings rates and would need to be left well alone by subsequent Chancellors. Neither of these is likely.
Further, there is an increasing feeling of a generational divide, where those who need to save more – principally the 20-35s – have little capacity to save and have an overriding and difficult goal of getting on the housing ladder.
The Baby Boomers, the 50-65s, are the last ones likely to have a secure and simple Final Salary pension, unless they are in the Public sector. They are also the generation most likely to have some spare income, having already finished in many cases paying off a mortgage.
It is no surprise that many of the Baby Boomer generation have seen buy-to-let as the right option in building a retirement pot. It is what they understand and trust and it is also largely free from Government tinkering, although that seems set to change with stamp duty changes and increased tax on rents already on the way or in place.
So what does Government do to encourage those who aren’t saving for retirement to start and for those who have started to do more?
Government has three levers it can pull:
- Incentivise. Tax relief has been effective for decades in persuading those who can to save into Pensions. The problem is that the older, more affluent are the ones saving.
- Automate. Put people into Pensions at work, make it difficult to leave and gradually increase the level they must contribute. The early signs are positive, we must hope that engagement is positive enough to stop too many jumping out when contributions get hotter.
- Persuade. PR, spin, nudge. Governments like this as it costs less than doing something and by the time everyone realises it was ineffective the persuader will be long gone.
In reality the public aren’t saving enough because of:
- Lack of Trust. They don’t trust Pensions, they are told not to daily, they have recent knowledge of their fathers, mothers, brothers and sisters being let down by things called Pensions over the last 30 years. Positive handling of this issue is difficult, long and slow.
- Change. Each idea and policy barely lasts a Parliament, so why change behaviour because next year we’ll be nudged in a different direction.
- Other pressures. The people who need to save the most have other priorities, for example, the young need to save for a house, while the poorer old don’t have spare income.
The one parallel that has been effective in getting those who can to save has been ISAs with £518 billion saved into ISAs – more than double the amount of 10 years ago.
So why has this been a success given there is no tax relief on offer in this market? The main difference is simplicity and stability, people understand ISAs. The reason why they are understood is because they have largely been left alone, limits have been tinkered with, but people get the tax breaks, they get the access they have and they trust the system. What is unclear is whether this will continue once the multitude of variations recently introduced start to sink in. We now have NISAs, JISAs, HISAs, H2SISAs and I’ve probably missed one or two in this list!
The reality is that to boost Pension savings, particularly for the young, the elephant in the room needs sorting first – housing. The cost of renting and buying is the issue of our time and until this is addressed we will not make more than a pin prick on the level of Pension savings.
Demand outstrips supply with the inevitable effect on price. Unless and until the housing market is changed to provide an affordable solution for the young and slightly less young, Pension funding will be a difficult problem to crack, but that doesn’t mean another decade of tinkering will have no effect. Every change and complication destroys confidence slowly but inexorably.
So, in summary, we need to do nothing, change nothing and let Pensions grow in public confidence like ISAs by leaving them alone.
It may not be a good time to be quoting US Republican Party Presidential candidates, but as Ronald Reagan was once quoted as saying: “Don’t just do something, stand there!”
Pensions: Why the Government should stop tinkering
/0 Comments/in News /by EdwardLambBy Alan Mellor, Managing Director and Chartered Financial Planner at Phillip Bates & Co Financial Services
This week saw a report from the Office for Budget Responsibility warning that recent pension reforms will end up costing the taxpayer billions of pounds.
The OBR said that new savings schemes and the removal of tax relief on pension for higher earners could cost the Exchequer £5billion a year.
The watchdog warned that higher earners will instead move money into tax efficient investments which could also drive up property prices.
It is simple and obvious that people will want and need income for the time when they stop work. We will still want to do things, pay bills, live a life once we stop working. What has become clear from Government and commentators is that getting people to save enough for a decent retirement is a conundrum that has yet to be solved.
George Osborne’s approach in the latter years of his Chancellorship was to simplify how you can use Pension savings – known as Pensions Freedom, a laudable approach that in a rational market would encourage savings through individuals trusting Government that they can use funds as they see fit.
The problem is that this would need a long-term to be accepted, understood and acted upon in relation to savings rates and would need to be left well alone by subsequent Chancellors. Neither of these is likely.
Further, there is an increasing feeling of a generational divide, where those who need to save more – principally the 20-35s – have little capacity to save and have an overriding and difficult goal of getting on the housing ladder.
The Baby Boomers, the 50-65s, are the last ones likely to have a secure and simple Final Salary pension, unless they are in the Public sector. They are also the generation most likely to have some spare income, having already finished in many cases paying off a mortgage.
It is no surprise that many of the Baby Boomer generation have seen buy-to-let as the right option in building a retirement pot. It is what they understand and trust and it is also largely free from Government tinkering, although that seems set to change with stamp duty changes and increased tax on rents already on the way or in place.
So what does Government do to encourage those who aren’t saving for retirement to start and for those who have started to do more?
Government has three levers it can pull:
In reality the public aren’t saving enough because of:
The one parallel that has been effective in getting those who can to save has been ISAs with £518 billion saved into ISAs – more than double the amount of 10 years ago.
So why has this been a success given there is no tax relief on offer in this market? The main difference is simplicity and stability, people understand ISAs. The reason why they are understood is because they have largely been left alone, limits have been tinkered with, but people get the tax breaks, they get the access they have and they trust the system. What is unclear is whether this will continue once the multitude of variations recently introduced start to sink in. We now have NISAs, JISAs, HISAs, H2SISAs and I’ve probably missed one or two in this list!
The reality is that to boost Pension savings, particularly for the young, the elephant in the room needs sorting first – housing. The cost of renting and buying is the issue of our time and until this is addressed we will not make more than a pin prick on the level of Pension savings.
Demand outstrips supply with the inevitable effect on price. Unless and until the housing market is changed to provide an affordable solution for the young and slightly less young, Pension funding will be a difficult problem to crack, but that doesn’t mean another decade of tinkering will have no effect. Every change and complication destroys confidence slowly but inexorably.
So, in summary, we need to do nothing, change nothing and let Pensions grow in public confidence like ISAs by leaving them alone.
It may not be a good time to be quoting US Republican Party Presidential candidates, but as Ronald Reagan was once quoted as saying: “Don’t just do something, stand there!”
Investments “performing well” post Brexit, says chartered financial planner
/0 Comments/in News /by EdwardLambA Cheshire and Wirral chartered financial planner says client investments are performing strongly in the aftermath of the Brexit vote.
Alan Mellor, Managing Director of Phillip Bates & Co Financial Services, has completed a comprehensive fund review – the first analysis since the shock decision in June by UK voters to leave the European Union.
Alan, whose office is in Neston but who advises clients across Cheshire, Wirral and North Wales, said: “We delayed our most recent fund review in order that we could fully assess the impact of the Brexit vote.
“We wanted to consider the investment markets and how we should react to this change.
“Returns post-Brexit have been positive with the vast majority of the funds in which we invest continuing to meet our objectives.
“The FTSE100 has performed strongly, nearly exceeding its all-time high, while overseas investment markets have also done well as a result of the fall in the value of the pound.”
Alan added: “There will clearly be some difficult times ahead, not least with uncertainty likely to remain while the UK negotiates its departure from the UK and begins to chart its future course.
“However, I am optimistic regarding the processes we have in place to meet the needs of our clients.
“Our investment approach is always individual to each client, although inevitably there are similarities between many of our clients.
“Good financial planning is about looking at the long-term and ensuring that our approach to investment is sufficiently flexible to meet differing economic circumstances and adaptable enough to mitigate risk wherever possible.”
Phillip Bates & Co Financial Services and its sister business, Phillip Bates & Co Chartered Accountants, are among a small number in the region to have Chartered Partnership status. They are the only ones in Wirral.
Chartered Partnership Phillip Bates & Co unveils new look
/0 Comments/in News /by EdwardLambA leading firm of chartered accountants and financial planners has unveiled a new look.
Phillip Bates & Co has undergone a rebranding programme as it aims to further build its profile across Cheshire, Wirral, Merseyside and North Wales.
Phillip Bates & Co chartered accountants was established over 100 years ago with Phillip Bates & Co Financial Services being set up in 1998. They are unique in the area for both disciplines having the prestigious Chartered status.
The new branding, which has been carried out by PR and Marketing specialist Mason Media, is being rolled out across the firm’s Neston offices as well as business stationery and all other marketing and advertising materials.
Phil Bates, Principal of Phillip Bates & Co Chartered Accountants, said: “We decided the time was right to give ourselves a fresh new look.
“We are constantly advising our clients to ensure they continue to evolve and develop as businesses and we are no different.
“We have established a very loyal client base across both the accountancy and financial planning businesses, but we also know there are many more SMEs and private clients who would benefit from the comprehensive range of services we offer.”
Alan Mellor, Managing Director of Phillip Bates & Co Financial Services, said: “The current team at Phillip Bates & Co has worked incredibly hard over the last 30 years to build a successful, highly regarded business.
“We are proud to be the only firm in the area to have Chartered status for both accountancy and financial planning.”
Phillip Bates & Co Ltd provides its clients with a full range of accountancy and taxation services including company formation, business planning, payroll, VAT and finance raising. Phil also provides a number of clients with a bespoke business development programme.
Phillip Bates & Co Financial Services provides clients with independent financial planning to help them achieve their personal or commercial goals. This includes planning for retirement, savings and investments, pensions, taxation, inheritance tax, life assurance and health insurance.
Long-term financial planning vital in wake of Brexit vote
/0 Comments/in News /by EdwardLambLong-term financial planning is more vital than ever in the aftermath of the UK’s vote to leave the European Union, according to a leading chartered financial planner.
Alan Mellor, Managing Director of Cheshire-based Phillip Bates & Co Financial Services, has been cautioning clients not to be overly concerned by the Brexit decision.
Alan, whose office is in Neston, said: “The result of the referendum was a surprise to most people and not a result markets anticipated.
“This inevitably leads to uncertainty, which is never a positive thing for investment markets. The FTSE100 initially went down a little under 5% with European markets slightly more heavily affected.
“This is a moderate reaction to the result and reflects the markets confidence that the change to our political position will not have a major impact on company performance.
“The fall in the value of the Pound relative to the Dollar has been one of the things most remarked upon in news headlines. This will, if sustained, affect investments to a degree. However this will help exports but increase inflation in the short term.
“It is absolutely essential that the Government and the Bank of England do everything in their power in the coming days and weeks to ensure as much stability as possible. My clients are looking for reassurance in the aftermath of such a historic and seismic event.”
Phillip Bates & Co is the only Chartered Partnership in its area with both the financial planning and accountancy businesses holding the prestigious chartered status.
Alan added: “It is more essential than ever that people ensure they have sensible, balanced and long-term financial plans in the UK and overseas.
“Our planning is always geared around what might happen in the future including dramatic events such as the Brexit vote.
“This means using managers who have a track record of identifying well run companies that are likely to make profits and pay dividends in the future. These companies will still do this, albeit in a market which may be slower for some time.
“Additionally, we diversify into fixed interest investments such as gilts and corporate bonds, as well as income producing assets such as infrastructure and property. Gilts are likely to be a beneficiary of uncertainty as they tend to be a place of safety when stock market uncertainty is prevalent, although property may well suffer a similar down turn to equities.
“Inevitably, there will be a lack of optimism among many investors over the coming weeks, but good financial planning should always be about the longer-term.”
Helen Brown named among top 250 financial advisers in the UK
/0 Comments/in News /by EdwardLambA leading financial adviser has been named among the top 250 advisers in the UK.
Helen Brown, who works for Cheshire-based Chartered Financial Planners Phillip Bates & Co Financial Services, appeared in the list compiled by vouchedfor, the national website helping people find trusted professional advisers.
Helen was one of just 12 advisers from Cheshire and Wirral to make the list of financial advisers.
She specialises in advising clients on pensions and retirement income as well as investments and annuities.
The list is compiled based on the number and quality of reviews posted by clients on the vouchedfor website. Helen’s 47 reviews are one of the largest number of any financial adviser.
Helen said: “I am honoured to have been selected to appear in the vouchedfor list of the top 250 financial advisers in the UK.
“It is particularly pleasing because the list is compiled as a direct result of reviews from clients.”
Phillip Bates & Co Financial Services is led by Managing Director Alan Mellor and works with clients across Cheshire, Wirral, Merseyside and elsewhere from its offices in Neston.
It is one of only a handful of firms in the region to have Chartered Financial Planner status. Its sister business, Phillip Bates & Co has the Chartered Accountant status. Helen’s profile on vouchedfor can be found here.
Budget paves way for future pension upheaval
/0 Comments/in News /by EdwardLambFuture pensions upheaval remains a strong possibility following the Budget, according to a leading chartered financial planner.
Alan Mellor, Managing Director of Cheshire-based Phillip Bates & Co Financial Services, believes Chancellor George Osborne may delayed further changes until the Europe referendum is out of the way.
Alan, whose offices are in Neston, said: “Radical pension changes were threatened leading up to this Budget but with political priorities to the fore, major changes have been put off until a future date, possibly once the Brexit vote is decided.”
Alan says the Chancellor’s announcement of a new Lifetime ISA may hint at future pension reforms.
The Lifetime ISA is the biggest change affecting family finances and will be introduced from April 2017. Savers aged between 18 and 40 can save up to £4,000 a year and receive a Government bonus of 25% – up to £1,000 a year up to the age of 50 provided they keep the money in the ISA until they are 60 or use it before then to purchase a first home.
Alan said: “This measure will prove popular for those saving to buy a house and the ability to borrow from this fund will be attractive to many. The worry is that both of these features detract from the reason we save into pensions – for retirement.
“There will be widespread concern if this announcement is part of a longer term strategy around pensions. The 25% bonus only equates to tax relief at 20% and it would also take away the principle of a pension being deferred income and tax similarly deferred until later.
“The move would be attractive to the Chancellor because it would bring in a huge tax take today of £6-10billion rather than waiting 20-30 years for a tax take.”
Alan highlighted a small number of other key announcements in the Budget including:
Alan concluded: “The Budget should provide a timely boost to small business owners, but there remain questions as to whether the Chancellor will be able to meet his long-term financial targets for the UK economy.”
Chartered Financial Planner issues pre-Budget warning
/0 Comments/in News /by EdwardLambBusiness owners and high earners are being warned to take pre-emptive action ahead of next month’s Budget.
Alan Mellor, Managing Director of Cheshire-based Chartered Financial Planners Phillip Bates & Co Financial Services, says the Chancellor could announce further pension changes in his Budget statement.
In his post-election Budget last year, George Osborne said he would cut the lifetime allowance of tax-free pension savings from £1.25million to £1million from April this year.
Currently, savings of over £40,000 a year and any pension pot of over £1.25million are subject to tax at 55 per cent.
Alan says the Chancellor may also be eyeing a further raid on pensions by limiting or scrapping pension tax relief – something it is believed could net the Treasury up to £34billion.
Alan, whose offices are in Neston, said: “Business owners and high earners are advised to seek advice before the Budget on March 16th.
“They could be hit by a double whammy of previous announcements which are due to take effect from April this year and potential further announcements, particularly around the levelling of tax relief.
“Higher rate taxpayers currently get tax relief for pension contributions at 40 per cent and businesses are able to pay into employees and get corporation tax relief. Both are believed to be under serious threat of removal.
“This means that any company or individual who is considering any pension contribution in the foreseeable future should, where possible, accelerate this to before March 16th.
“If the rate is cut to 25 per cent, it could make the difference of many thousands of pounds depending on whether someone acts now or after the Budget.”
Regarding lifetime and annual allowances, Alan added: “Everyone with savings in excess of £500,000 in personal pensions should be checking to see if they need to protect their savings from potential tax rates of up to 55 per cent.
“Anyone earning over £110,000 from all sources should be considering their position. Major changes are set to impact them from April, potentially leading to a tax bill of tens of thousands of pounds.”
Alan concluded: “The impact caused by changes to pension tax relief and lifetime and annual allowances can be mitigated with good planning, but the window to do so is rapidly closing.”