Our ...July 2023 Newsletter
You may have heard of The Consumer Duty – new regulations from our regulator, the Financial Conduct Authority, setting higher expectations for the standard of care firms give to their customers, and ensuring that existing best practice is applied consistently across the industry.
When Simon and I founded JJFS back in 2009 we wanted to provide high quality, personalised advice to our clients unbounded by the constraints of a large, faceless national organisation. We pride ourselves on having developed a base of long-standing client relationships (some spanning 20+ years), working with our clients and tailoring our advice throughout their life cycle. We have examined our advice process and systems to ensure we fully meet the new Consumer Duty principles and have adapted and amended where we have identified potential gaps. That said, we are always open to feedback and comments. These new principles set clearer standards of consumer protection across all financial services, not just the advice sector, and quite rightly puts the onus on firms to meet the standards through innovation and evidence, rather than formulaic box ticking.
We aim to be helpful and informative via our newsletter and this issue includes a reminder about scams and being ‘scam aware’, a financial breakdown of the potential cost of missing out on the full state pension and some pitfalls for those relying on the Bank of Mum and Dad.
We hope you enjoy the articles and find them useful.
In this issue:-
- Child Benefit and Higher Earners
- Why you really need a full State Pension
- Be Scam-Savvy
- Beware the Bank of Mum & Dad
These articles do not constitute any form of personal advice or recommendation and are not intended to be relied upon in making (or refraining from making) any investment or financial planning decisions.
Child Benefit and Higher Earners
The Government has just announced plans to remove the requirement for high earning parents to complete a tax return to pay the High Income Child Benefit Charge.
Currently, parents are subject to a tax charge if their total taxable income before any personal allowances reaches or exceeds £50,000. However thousands of parents have received penalties for failing to declare and pay the tax charge, many of whom have been caught unaware of their liability after receiving a pay rise or bonus. Instead, the Government plans to recoup the charge via PAYE codes. This should simplify the process for thousands of high earning parents, many of whom have opted out of child benefit over the years to avoid paying the charge.
For those within the tax charge bracket, there are a couple of options which may help you retain some or all of your child benefit. Take a look at our factsheet ‘Earning over £50,000?- how to keep your child benefit’ and get in touch with us to discuss whether this would be appropriate for you.
Why you really need a full State Pension
To be eligible for the Full State Pension you need to have 35 qualifying years of National Insurance payments. Many people full short of the full requirement through taking time out of employment to raise family, care for elderly parents or to live and work abroad.
However, according to latest market prices, replacing the current maximum state pension (available to those retiring after 5 April 2016) could cost slightly more than £205,430. This is based on the cost of buying an annuity on current rates to replace the income provided by the State Pension.
The State pension is guaranteed and protected against inflation, something that is difficult to replicate by other means. The rates on annuities for example, are around 5.16% for a healthy 65 year old with income payments escalating by 3% a year to combat rises in prices. This is not the full protection against inflation that the State Pension offers but still very valuable.
Alternatively, using a sustainable 4% withdrawal rate, replacing the State Pension via income drawdown from a personal pension would require an initial pension fund of approximately £265,000.
It therefore makes sense to pay your NI contributions if you have gaps and are not meeting the 35 year limit. Usually you can pay up to 6 previous years of unpaid NI contributions but the government has extended the window to fill in missing years of NI contributions during the period 2006-2017. Men born after 5 April 1951 and women born after 5 April 1953 have until 31 July to pay for any eligible gaps. After 31 July this will revert to the usual 6 year period.
To check your NI record go to www.gov.uk/check-national-insurance-record You will need a Government Gateway User ID and password access the system.
For more information please get in touch with your usual JJFS contact or email us on firstname.lastname@example.org.
Scamming is big business and those involved are becoming increasingly sophisticated in the way they operate making it even easier to fall victim. During 2022, over £1.2 billion was stolen by criminals through authorised and unauthorised fraud, equivalent to over £2,300 every minute. The banking and finance industry prevented a further £1.2 billion of unauthorised fraud.
Worryingly, AI (Artificial Intelligence) is now being used to dupe people into parting with their money with incidences of well-known and trusted personalities such as Martin Lewis, being impersonated online to persuade people to invest in fraudulent schemes.
As part of our service we are always keen to give a second opinion if you are tempted to invest in something that has not been recommended by us and would encourage you to contact your usual JJFS contact for advice.
We all know there’s no such thing as a guaranteed ‘get-rich-quick’ scheme but the scammers are good at what they do and it can be easy to get caught out. Here are our top ten Golden Rules to stay safe and be Scam-Savvy:
1). Don’t be rushed into agreeing to offers or deals immediately. Insist on having time to get independent or legal advice before making a decision.
2). Don’t hand over money or sign anything until you’ve checked their credentials. Look out for the use of things such as a PO box, mobile number or premium rate number (usually beginning 090).
3). Pay close attention to how you’ve been addressed if it’s by email. Scams may not contain your name in full, correctly or at all, and be suspicious if there are spelling or punctuation errors.
4). Don’t just rely on glowing testimonials. Find solid, independent evidence of a company’s success. You can also look them up on Companies House to see if they are registered and the Financial Conduct Authority website to check their warning list of unauthorised and clone firms.
5). Never send money to anyone you don’t know or trust, whether in the UK or abroad, or use methods of payment you’re not comfortable with.
6). Never give banking or personal details to anyone you don’t know or trust. This information is valuable so make sure you protect it.
7). Don’t click on links or attachments in an unexpected email, even to unsubscribe. Delete the email and go to the organisation’s own website. Don’t reply to scam emails even to say no – this lets the scammer know the account is active.
8). Use strong passwords. Stringing together three random words, and including numbers and letters, can create a strong but memorable password – eg House1Car2Dog3%.
9). Scammers can hack into email accounts and impersonate the business or individual using their actual email address, mimicking their communication style to make correspondence believable. Make sure you check the sender is who you think it is – even if it joins an existing message thread you know to be authentic. Don’t be afraid to double-check and call the company directly on a number you trust.
10). Install legitimate anti-virus and firewall software and make sure you keep it up to date.
Lots more information is available on the Get Safe Online website which is dedicated to online safety and is supported by leading organisations in banking, retail and internet security. It’s a valuable resource full of easy to understand, practical information.
If you spot a scam or have been scammed, report it and get help via the ActionFraud website which also provides information on fraud prevention.
Don’t be embarrassed about reporting a scam. By reporting it, you’ll make it more difficult for the scammers to deceive others.
Lastly, we reiterate that if you are concerned about a financial dealing and would like a second opinion please get in touch with your usual JJFS contact or email us on email@example.com.
Beware the Bank of Mum & Dad
The rate of inflation, the energy crisis and ongoing interest rate rises have left many households struggling, particularly those with fixed low-rate mortgages that are coming to an end. Monthly mortgage payments have been doubling or more, forcing many to turn to the other family members for help. It’s therefore worth considering some of the basics of Inheritance Tax Rules to help ensure any financial assistance doesn’t simply cause further problems down the line.
If your estate is worth more than £325,000 (or £650,000 for married couples and civil partners), some of it may pass to HMRC in inheritance tax when you pass away. One of the most straightforward ways to avoid inheritance tax is to consider giving away assets while you are still alive. You’re allowed to gift some of your money away each year without any tax being due after your death. This includes gifts to your spouse or civil partner, or if you’d like to leave money to a charity. It usually also includes gifts to individuals made more than seven years before your death.
However, if you make a gift within seven years of your death, it will generally be included in your estate for inheritance tax purposes. There may also be inheritance tax due if you put your money into a trust, or if you’re passing on ownership or shares in a business (although you may be able to get business relief. The list below explains some of the key details for making tax-free gifts.
- £0 – The amount of tax due on gifts to your spouse or civil partner
- Seven – Number of years you have between gifting something to an individual (who isn’t your spouse) and your death, to ensure it is tax-free
- £3,000 – The total amount you can gift tax-free in a tax year (your ‘annual exemption’)
- £250 – Maximum amount you can gift tax-free to an individual who hasn’t benefited from your annual exemption each year
- £0 – Amount of tax due on gifts given for maintenance of old or infirm relatives
- 18 – The age up to which you can gift your children with maintenance for their education or training tax-free
- £5,000 – The amount a parent can gift their child tax-free for their wedding
- £0 – Amount of tax due on gifts to charities or political parties.
If you wish to leave money to other family members it’s a good idea to plan how you want to do this as some gifts are best given while you’re still alive rather than leave in your will.
If you have any queries or would like assistance with your own IHT planning please get in touch with your usual JJFS contact or email us on firstname.lastname@example.org.
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