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This is our last newsletter of 2015 and this month we’re covering some diverse subjects – including investing for children, following a number of requests from clients recently on how best to make financial provision for children or grandchildren. For those approaching retirement there are still ways to boost your pension income and Scottish Widows have released an interesting report on the impact of older workers in the workplace.  We finish off with yet another sporting achievement in the office, this time it’s Hannah, our Office Administrator and Auto Enrolment Specialist. We hope you enjoy the articles.

In this issue:

• Investing for your children
• 3 Ways to Boost Your Pension Savings
• The Changing Face of the Work Place – exploring the impact of older workers in employment
• Hannah’s Marathon for Cancer Research

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Investing For Your Children

Parents (and grandparents) who are keen to save for their children have many options but it is important to know the pros and cons and potential tax issues that can arise, even for children.

The main point to note is that if the child receives income exceeding £100 per annum from a gift or investment directly from the parent, the income can actually be taxed at the parent’s rate of tax. Gifts from other family members however are treated differently, and will be offset against the child’s personal allowance. Children have their own allowance equal to that of a basic rate payer which at current levels is £10,600.

With that in mind, the obvious choice is a Junior ISA which, like an adult ISA, is tax free. The current contribution limit is £4,080 which can be split between cash and stocks and shares.  JISAs are available for any child under the age of 18 unless they already hold a Child Trust Fund, as they cannot hold both. If the child does have a CTF it is worth checking the underlying investment funds are still suitable and switching if necessary.

However, if the annual JISA limit has been used up alternative options include Children’s Bonds from NS&I can be bought for a child under age 16 up to a maximum of £3,000. The bonds pay a fixed rate of interest and returns are free of income and capital gains tax so long as the bond is held for the whole five year term.  Some Friendly Society bonds also offer tax free schemes for children which are designed to mature on a specific date or event. There are limits on contribution levels and minimum requirements for holding the bond to obtain the tax free status.

You can also invest in stocks and shares over and above the JISA limit using unit trusts, investment trusts or OEICs in an account set up specifically for your child, however these are subject to the parental settlement rules if funded by you as the parent(s).

Alternatively you could consider a vehicle where the tax liability can be postponed until a more convenient time, for example an offshore fund where tax won’t be payable until the investment is sold (at which time if the child is 18 the taxable income and gains can be offset against their personal tax allowance).  A life assurance investment bond is similar in that it can be bought within a trust for the benefit of the child and the trustees can pass the bond to the child for encashment when he/she reaches age 18 or later.

Lastly, for the ultimate in forward planning, you could set up a pension fund for your child and make contributions up to the annual limit of £2,880 which will then receive tax relief taking the total to £3,600.

To find out more about investing for your children, please get in touch with your usual JJFS contact or email us on justask@jjfsltd.com or call 01789 263257.

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3 Ways to Boost Your Pension Income

1.    Are you taking advantage of all available tax breaks?

The current levels of tax relief in pension contributions are 20% for basic rate payers, 40% for higher rate taxpayers and 45% for top rate payers. However from April 2016 tax relief will reduce for those earning over £150,000 by £1 for every £2 earned over the £150,000 threshold until the tax relief limit reaches £10,000. If you are a business owner or director and you receive most of your pay as dividends from the company, you may be able to make employer contributions into a pension through your company. These could potentially be deducted as an expense when assessing the profits of a trade, thereby reducing the employer/company’s taxable profit.

2.    Have you used your full entitlement under the ‘carry forward’ rules?

Although the annual limit for contributions is currently £40,000, you can increase your contributions above this level by taking advantage of the ‘carry forward’ rules. If you have unused tax relief from the previous 3 tax years, you can increase your annual contributions to include this amount even if this takes you over the £40,000 limit. This is subject to affordability of course but would ensure you receive your full entitlement.

3.    Claim Non-Taxpayer Relief

If you have a spouse who doesn’t work you can take advantage of the non-tax payer pension relief by paying contributions into their pension up to a maximum of £2,880 per tax year. The non-tax payer receives tax relief at 20% resulting in a total pension contribution of £3,600. An additional benefit is that your spouse will then receive an income in retirement and can take advantage of their personal allowance which will effectively double the tax free income you will receive as a couple in retirement.

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The Changing Face of the Work Place – exploring the impact of older workers in employment

Scottish Widows recently released a report which explores why an increasing number of people are working into later life, the attitudes towards older workers by employers and fellow workers and how the expectations of employers and older workers may differ.  Some interesting facts emerged and the key findings show that:

• Remaining in work past the current state pension age is now an established concept among the general public
• Attitudes to older workers are generally positive, but many young people and employers have concerns. Around four in 10 people (44%) and employers (39%) believe older workers reduce the number of roles on offer to younger people.
• People have both positive and negative feelings about their friends and family working for longer. While more than one in four (27%) of survey respondents believe working will enable older relatives to remain active for longer, almost as many (23%) worry about the impact of work on their health.
• The majority of workers over the age of 55 have either not planned their retirement, or wish to continue working. This is especially prevalent among men.
• Employees believe more support is needed for older staff as the workforce ages, but say employers have yet to confront this challenge.

The report makes interesting reading and can be viewed here.  (Please note this is a PDF and may take short while to download).

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Hannah’s Marathon for Cancer Research

Hannah Savidge (centre)

Congratulations to Hannah Savidge, who recently completed a full 26.2 mile marathon walk through the streets of London to raise funds for Cancer Research.

Hannah and her sister Victoria took part in the Shine Night Walk on 26th September, an annual event in which thousands participate in an overnight walk from Southwark Park to Billingsgate Market, taking them past London’s major sights including Buckingham Palace, the Houses of Parliament and Tower Bridge.  Hannah and Victoria started at 9.30pm and finally crossed the finish line at 7.50am, a gruelling 10½ hours later. Despite suffering some eye watering blisters and several uncomfortable days afterwards being unable to wear her shoes, Hannah is justifiably proud of her achievement.

Hannah and Friends outside Buckingham Palace. Hannah is 4th from left

It was a very personal mission for them as their mother was diagnosed with cancer earlier this year but following a long spell of treatment and surgery, is recovering well. The past year has therefore been extremely challenging for all the family and Hannah felt this would be a fitting tribute to acknowledge all the excellent care her mother received.  Between them, Hannah and Victoria raised an impressive £2,147, all of which goes directly to Cancer Research.