June 1, 2020
Collate lost pensions arrangements
Are you aware of all your existing pension pots? The average size of a ‘forgotten pension pot’, which may have come from that job you had for a short time a while ago, is estimated to be £13,000. This could make a real difference to your overall pension savings when you reach retirement.
You are now able to track down a pension scheme’s contact details by using the ‘Pension Tracing Service,’ which is a free Government service on the following address: https://www.gov. uk/find-pension-contact-details
In 2016, the UK Government introduced the new single-tier state pension. Under the previous system, it was difficult to understand what you may have been entitled to until you reached your state retirement age. The new system is designed to make this far simpler.
The new State Pension is based on your National Insurance record, requiring an individual to have 35 qualifying years to be eligible to receive the full amount. A qualifying year can include years where you have been in full or part-time employment, self-employment or where an individual has received National Insurance credits, given to those who have caring responsibilities (i.e. those receiving Child Benefit).
The State Pension could form a valuable part of your retirement income, so understanding your entitlement is essential but many individuals are unaware of how much they may be eligible to receive as their State Pension, or at what age they will qualify for it. For further information on how much you could stand to receive and at what date it could become payable, visit: https://www.gov. uk/check-state-pension
Update pension beneficiary form (expression of wishes)
In order to specify who you want to inherit your pension after your death you need to have an Expression of Wish in place, and if any of your pensions pre-date your current relationship then you may want to review this to ensure they are up-to-date.
The best chance of ensuring your beneficiaries are able to retain the tax advantageous pension wrapper in the form of a beneficiaries’ pension, is to list them specifically on your Expression of Wish form and check the death benefit options of your existing arrangement.
You should contact your pension providers to find out your current nomination and to obtain the relevant forms as soon as possible.
Review old insurance policies
Do you know what you are actually covered for and whether this is sufficient for your needs? Insurance may also need updating following changes in your personal and financial situation and/or following certain life events, including a new job or changing to self-employment. You may have sold your business and be considering retirement, marriage or divorce and the arrival of children or grandchildren.
As you review these policies, you should also check if your life assurance policies are held in trust. Ensuring these policies are written under trust will mean that when the funds are paid out, they do not automatically form part of your estate or your beneficiary’s estate on your death.
Consider new insurance policies
Putting a basic level of protection in place is probably more affordable than you think, and you could buy certain life insurance for just a few pounds a month.
Given the recent COVID-19 pandemic, now could be the time to consider your ongoing protection needs for you and your family.
Consider making gifts
Now might be a time that someone close to you needs some financial support. Each individual is able to make an outright gift of £3000 per annum, which is immediately exempt from their estate for Inheritance Tax (IHT) purposes. In addition, once the current year’s allowance has been maximised, you are able to utilise the previous year’s unused allowance, meaning the first gift could amount to £6000, which is immediately exempt from IHT.
Where you have the disposable income to do so, gifts out of income could also be immediately exempt from IHT provided the gifts are from disposable income, the intention is to establish a regular pattern of gifting and, they do not adversely impact on your standard of living.
Concerns have been raised about the potential longevity of these valuable reliefs with several influential reviews calling for wholesale change to the IHT regime. With asset valuations potentially lower, if you feel that you are in a position to do so, now may be an opportune time to make those gifts.
You may be making donations to a charity close to your heart at this time or raising funds yourself following the inspiring efforts of Captain Tom Moore for NHS Charities Together and others.
If you are a UK tax payer, when you make these donations, you are usually able to elect to apply Gift Aid to these contributions meaning the charity you are donating to receives an extra 25 per cent, at no cost to you.
In addition, if you pay tax above the basic rate, you can claim the difference between the rate you pay and basic rate on your gross donation (i.e. the donation amount after gift aid is applied). You should therefore remember to make a note of the donations you make so that you can apply for the additional relief on completion of your self- assessment tax return.
Perspective (North East) Ltd
If you would like help with any aspect of your financial planning or have a question, contact the Perspective team.
0191 217 3340
– Advertising feature –