The big budget decider: Can the Government afford the nation not to save?

 Our panel of experts will be tweeting and commenting throughout the Budget on 19^th March from @Brewin_Guy

Wealth manager Brewin Dolphin unveils its budget predictions

A key focus of this year’s budget is likely to be pensions and the increasing demand for reform in the annuity market. Nick Fitzgerald, head of financial planning, said, “We are always busy with pensions in the approach to the end of the financial year, but this year we have not noticed a discernible increase above the usual, of clients rushing to top up their pension pots.

“The world of pensions is increasingly less certain with a loss of trust in the stability of the regime. Over recent years we have seen a constant nibbling away at the incentives to save; reducing lifetime allowances; a fear of means testing for the state pension; investments in pension funds no longer receiving dividend tax credits – which were a huge incentive in the past; and now more and more pension savers are paying higher rate tax in retirement. Altogether, these changes are making ISAs a more attractive long term savings vehicle.

“There is a growing fear that pension savings are an easy target for stealth taxes. A commitment from the government that pension reliefs will not be tinkered with for the lifetime of the next Parliament would help restore trust, especially in the face of Labour’s intention to restrict higher rate tax relief - costing pension savers an estimated £1 billion per annum.   If we are to avoid seeing further erosion of pensions, we must regain confidence in the Government’s intentions on incentives and also push hard for reform of the annuity market.”

Members of the Brewin Dolphin team have given their key predictions:

PENSIONS

Richard Harwood, divisional director financial planning - predicts:

·         Restrictions on some of the more esoteric investments that can be held in pension schemes.

·         Possible new limits to pension tax relief that may hit the ‘squeezed middle’

·         Announcement that small pension pots – say <£40k – will no longer be forced to buy an annuity

“The government has put in place measures to further limit tax reliefs to those thought of as wealthy.  It would seem that there is political will to restrict tax reliefs so the limits may be tightened further in future, but there is a danger that these will again hit the ‘squeezed middle’”.

TAX & NI

Guy Foster, head of portfolio strategy - predicts:

·         A clear political and economic rationale exists for raising the national minimum wage beyond the 3% recommended by the low pay commission, although the likely casualty of such a move might be further advances in the personal allowance.

·         The distinction between income tax and NI is now so blurred as to be meaningless and this nettle needs to be grasped.

Guy Foster commented, “Mr Osborne has been quite clear about the type of budget he is planning. Large scale giveaways aren't justified by either the political or economic cycle this year.  Even as inflation falls, however, the accumulated decline in real incomes from rising prices and stubbornly inert wages remains a hindrance to economic prospects.  A big issue therefore is what he may do for the low paid.”

VCT & EIS

Richard Harwood, divisional director financial planning - predicts:

·         Possible increase in investment limits for Venture Capital Trusts and Enterprise Investment Schemes.

·         Further tweaking of the rules to ensure that eligible investments are not just tax-relief schemes.

“Increasingly EISs and VCTs are providing funding for businesses that would traditionally be the domain of banks.  But we would not be surprised if there was further tweaking of the rules on what investments are approved in order to ensure that there is true risk within the plans and that they are not just schemes to maximise tax reliefs.”

TAX AVOIDANCE

Richard Harwood, divisional director financial planning - predicts:

“This continues to be a priority and any victory in court for HMRC is strongly publicised, so we should expect the closure of perceived loopholes to be highlighted.”

ISAs

Rob Burgeman, divisional director predicts

 “We would welcome a commitment from the Government to ISAs as a core long term savings vehicle for UK citizens.  Speculation is building that there may be changes here and the uncertainty is most unwelcome and destabilising at a time when every encouragement should be given to those seeking to ensure their long term financial security. Any restrictions on ISA savings will drive the spare savings flow into the already overheated property market.”

CAPITAL GAINS TAX REFORM

Rob Burgeman, divisional director predicts:

“Greater simplification is required over CGT, especially as savers are now being taxed on inflation since the indexation of book costs was removed. How long before we will see fair differentiation in the taxation of short term speculation and long term investment?”

www.brewin.co.uk/exeter

Brewin Dolphin Welcomes Campaigns to end the 'Pensions rip off'

Discrepancies between the best and worst annuity deals on offer could cost you as much as £100k.

Following Pensions Minister Steve Webb’s recent suggestion that pensioners should be given the power to switch annuities and the campaigns launched recently by the Financial Services Consumer Panel and The Sunday Times – to name only two, wealth manager Brewin Dolphin hugely welcomes all initiatives to find a better deal for savers.

Brewin has underlined the importance of shopping around and seeking professional advice when choosing your annuity. Having spoken to four of the major pension providers, Brewin Dolphin has found considerable disparities between the best and worst annuities quoted for the same typical 65 year old single male.

We surveyed the following Life companies: Canada Life; Legal & General; Standard Life and Prudential, for this study and they all quoted for the same client (see table at the foot of this article). 

Life companies rates do change almost daily – hence the need to get good professional advice with deep industry knowledge.

Nicholas Fitzgerald, Head of Financial Planning at Brewin Dolphin, commented: "Anything and everything should be considered in the quest to improve the returns from Annuities or to find an alternative. Since the banking crisis and the advent of QE – Annuity rates have dropped to pitiful levels – and we have advised very few clients to purchase annuities in the last few years, instead recommending drawdown.

"So Steve Webb's idea of a secondary market should not be dismissed out of hand. We must all think hard about improving returns from pensions for an ageing population, and his innovative idea is full of good intentions. Deciding whether to buy an annuity is one of the biggest financial decisions most of us will ever make, and in the meantime it is essential to get professional advice and to shop around, since your annual income from your annuity could vary hugely depending on which provider you choose. The real tragedy in the example above is that you could be over £100k worse off just by accepting the first offer and not seeking advice, which of course is something we can all do something about…”

With regard to the Annuity Directory concept as a way to avoid the cost advice; looking at the differential quotes above from three major annuity providers for the same client – we can’t stress enough the false economy this would be and the need for professional guidance – even if it is the only time you ever pay for it. ‘You wouldn’t perform open heart surgery yourself, and this could be a life and death decision – or certainly the difference between a comfortable or a miserable retirement.”

www.brewin.co.uk 

Chartered Accountants Haines Watts Exeter showcases its new branding of the Crediton Office, formerly known as Ocean Consultancy, following the practice merger which took place earlier this year.

Terry Brydes / Alex Armstrong / Becky Gibson / Sarah Chalmers / David Park ­ Partner 

A national network established over 80 years ago, with more than 50 offices, each Haines Watts office operates independently offering a wide range of services tailored to the local market.  The local office primarily focuses on providing accountancy and taxation services to owner-managed small and medium-sized entities and dealing with private client tax affairs across the South West.

David Park – Partner Haines Watts Exeter says: “The strong Haines Watts brand is very distinctive and we certainly won’t be missed in the square!  Being part of this well-respected national group enables us to continue to give a great local service with access to specialists across the UK when required.  This means that we are competitively priced because our clients do not pay for the specialists unless the need arises but the resource brings peace of mind.”

And it’s a double celebration as the expanding Crediton office welcomes newly appointed professional student, Becky Gibson who is studying for the ACCA qualification.  This increases the small and friendly team to six members who are all local with over 80 years’ of combined experience.

David Park – Partner Haines Watts  Exeter says: “It has been a very exciting six months following the merger which has really motivated the team and we are delighted that Becky has joined us.  We are a progressive and proactive firm; getting to know our clients and their business means we get results.  Our clients generally run successful businesses and we are here to build on this with them developing business and taxation strategy.”

http://www.hwca.com/accountants-exeter/