Image Courtesy of Flickr_Ishan Manjrekar

Reap the rewards of regular savings

A regular savings plan is one of the most effective ways of building a nest-egg for the future.

Saving regularly can be a painless way to accumulate funds, particularly if you set up a direct debit to deduct this money on pay day. Set aside £100 a month, and you will have squirrelled away £1,200 after one year, or £6,000 over five years – and that’s before counting any returns on investments. Trying to find a lump sum of this size to invest can prove more challenging, without getting a bonus, bequest or some other windfall.

Compounding the issue

The longer-term impact of regular savings should not be underestimated, as you can benefit from compound returns – that is getting investment returns on your investment returns. Over longer periods of time, compounding could significantly boost the value of your savings.

For example, a 5% return on a £1,000 investment gives you £50. With compound returns, if you leave that £50 invested along with the original £1,000 and get the same return, in the second year you could get £52.50, as you’ve earned 5% on £1,050. Over 10 or 20 years this effect can help snowball the value of your investments.

Regular investments

Those putting money into a stocks and shares ISA or other investment plan will find that regular saving helps smooth out the ups and downs of the stock market. There is an old investment adage that it is time in the market, not timing the market, that makes investors’ money. With a regular investment plan you are not trying to second-guess market movements, so you don’t run the risk of missing days when stock markets rise significantly.

Of course, this also means you will keep investing through market downturns. But if markets fall, you will be buying shares, or units in a fund, at cheaper prices. This means you could benefit as and when markets bounce back. The technical term for this is ‘pound-cost averaging’.

Please let us know if you would like to discuss your savings strategies.

The value of your investments, and the income from them, can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.

amit patel pk partnership insurance rolls rouce

Visiting the Geneva International Motor Show

The Geneva motor show is one of the biggest events in the global automotive calendar. Held every year in March, it gives manufacturers an opportunity to reveal their latest creations to the world, and it gives us all a glimpse at the exciting new cars of the future. It takes place in Palexpo, which is a stone’s throw from Geneva airport.

PK Partnership Director, Amit Patel, visited the show for a day viewing models from the world’s finest brands including Rolls-Royce, Ferrari, Bugatti, Koenigsegg, Aston Martin, Porsche and McLaren to name a few.

Amit said, “This is where brands launch their newest and most hyped models. To see these in advance to most of the world is a great privilege and we would like to thank the manufacturers for their hospitality.”

PK Partnership are a specialist insurance broker for high value sports cars and people with exceptional lifestyles.

See all the photos on our Instagram page.

 

Image Courtesy of Patrícia Almeida on Flickr

Spring Statement

The Spring Statement is one of two financial statements the Chancellor makes each year to Parliament, the other being the Autumn Budget. The Spring Statement provides an update on the Office for Budget Responsibility’s economic forecasts but is not intended to include any major tax and spending announcements.

The Chancellor made the Statement today at 12.45pm under ’a cloud of uncertainty’ following the failure of the Government to get its Brexit deal passed by the Commons.

The revised forecasts are:

Growth

  • 2019: 1.2% compared to 1.6% in last October’s budget
  • 2020: 1.4% compared with 1.4%
  • 2021: 1.6% compared with 1.4%
  • 2022: 1.6% compared with 1.5%
  • 2023: 1.6% compared with 1.6%

 

Borrowing

  • 2018/2019: £22.5 billion compared to £25.5 billion in last October’s budget.
  • 2019/2020: £29.3 billion compared with £31.8 billion
  • 2020/2021: £21.2 billion compared with £26.7 billion
  • 2021/2022: £17.6 billion compared with £23.8 billion
  • 2022/2023: £14.4 billion compared with £20.8 billion
  • 2023/2024: £13.5 billion compared with £19.8 billion

 

Public debt

  • 2018/2019: 83.3% of GDP compared to 83.7% in the Budget
  • 2019/2020: 82.2% compared with 82.8%
  • 2020/2021: 79.0% compared with 79.7%
  • 2021/2022: 74.9% compared with 75.7%
  • 2022/2023: 74.0% compared with 75.0%
  • 2023/2024: 73.0% compared with 74.1%

 

Spending review

  • Three-year review to be launched by the summer and concluded by the Autumn Budget. Focus to be on raising productivity.

 

Technology

  • Competition and Markets Authority to undertake a review of the digital advertising market.

 

Housing

  • £3bn Affordable Homes Guarantee scheme, to support delivery of around 30,000 affordable homes.
  • £717m from the Housing Infrastructure Fund to provide new homes on sites in West London, Cheshire, Didcot and Cambridge.

 

Other announcements

  • Free sanitary products to be available in schools from the next school year.
  • PhD level roles to be removed from any visa caps.
  • Review of the Low Pay Commission’s remit for recommendations on the National Living Wage and National Minimum Wage.
  • Call for evidence on the Business Energy Efficiency Scheme to allow small businesses to cut their carbon emissions and their energy bills.

 

Image courtesy of Flickr_Pink Sherbert Photography

Green Cards: Do I need one?

Uncertainty remains on whether the UK leaves the European Union (EU) without a Withdrawal Agreement (a ‘no-deal Brexit’). If this happens, UK motor insurance policyholders driving in the European Economic Area, Andorra, Serbia and Switzerland will need physical proof of motor insurance when they travel. This is commonly referred to as a Green Card.

If you are travelling to the EU and will return prior to 29th March 2019, you do not need a Green Card and do not need to contact us for a Green Card.

If you are planning to be driving your vehicle in the EU on or after 29th March 2019, please contact us four weeks before you plan to travel so we can understand your needs and issue you with a Green Card if you require one.

In the event there is no deal, a Green Card will be required for all vehicles which travel in the EU after 29th March to prove that you have the required insurance, regardless of the level of motor cover provided on your policy. This is true even if you have a foreign use extension on your motor policy.

Please note that you will need a Green Card when driving from Northern Ireland to Ireland.

Whatever the Brexit outcome, we’ll continue to update you with further information and actions you may need to take that are relevant to policies as soon as we can.

If you have any questions regarding your insurance please contact us on 020 8681 4994

Image courtesy of WooWork.com, Flickr

Keyless car theft continues to rise

The Tracker 2018 league table of the Top 10 Most Stolen and Recovered Vehicles shows that the BMW X5 is the most ‘popular’ car to be stolen in Britain.

If you own any of the cars mentioned below, prepare to be more vigilant.

Tracker’s Top Models Stolen & Recovered in 2018

1. BMW X5

2. Mercedes-Benz C Class

3. BMW 3 Series

4. Mercedes E Class

5. BMW 5 Series

6. Range Rover Vogue

7. Land Rover Discovery

8. Range Rover Sport

9. Mercedes S Class

10. Mercedes GLE

Click here to view the full article by Motor 1.com

Talk to our private client division on 020 8681 4994 to arrange specialist insurance cover.

 

Image courtesy of Flickr_Sheila Sund

Increase in subsidence claims following driest and hottest months on record in summer 2018

We might be going through a really cold spell in most parts of the UK, but we should be reminded of last summer with some of the driest and hottest months on record.

A particularly prevalent region, which is well-known for subsidence-prone clay soil, was the South East. The Association of British Insurers (ABI) has reported report that the number of subsidence related claims jumped from 2,500 in Q2 to 10,000 in Q3 – with subsequent pay-outs rising in value from £14 million to £64 million.

Subsidence is the downward movement of ground beneath a property which leads to abnormal stress on the structure and foundations, which can result in cracking and property damage, and typically arises following the removal of underground water. Property is at an increased risk following extended hot weather and dry spells.

The first sign of subsidence is the appearance of cracks in a properties brick or plasterwork. In general, subsidence cracks develop abruptly and exhibit different characterises to other cracks.

There are simple steps property owners can take to avoid potential subsidence. To determine whether your property is subsiding, the ABI’s advice is that subsidence cracks are typically:

- diagonal, and wider at the top than at the bottom

- thicker than a 10 pence coin

- found around doors and windows

Subsidence may also cause doors and windows to stick as the building’s structure becomes distorted.

It is important to note that cracking can occur in a property for reasons unrelated to subsidence. These include the natural settlement of soil under new homes or extensions, thermal and humidity expansions or the drying and shrinkage of building materials (including freshly plastered walls).

Ways to avoid subsidence

- Plant new trees and shrubs at a ‘safe distance’ from your property – review safe distance and tree hazard guidance

- For trees older than the property and within a safe distance, conduct regular pruning to control amount of water used in foliage growth

- Do not remove tress older than the property and within a safe distance, this may cause heave or uplift

- Drains and pipes should be checked regularly to ensure there are no blockages or leaks

- Conduct regular general maintenance including fixing leaking drains, clearing debris from gutters and pruning trees and shrubs

Costs associated with subsidence can be categorised into prevention, investigation, mitigation and repair. Over the last decade, there has been vast improvements in the management and effectiveness of each category. This has largely been enabled by technology advancements and engineering innovations.

Prevention – tracking soil conditions, level monitoring readings and long-term weather forecasts that provide a suite of predictive analytics

Investigation – identifying the cause of the problem, analysing soil conditions, establishing depth of foundations, reviewing historical and geological maps

Mitigation – live remote crack monitoring, video streaming, geo-mapping and data analytics

Repair – modern techniques including screw piling, injection grouting and rehydrating

This is in addition to more traditional repairs such as targeted lifting (jacking) and tree removal. Of course, there is no substitute for skilled adjuster surveyors with a detailed knowledge of subsidence claims. This is particularly important in the interpretation of data pertaining to soil plasticity etc.

Quickly identifying  the cause of the subsidence movement is critical as each movement is unique.

Talk to our private client division on 020 8681 4994 to arrange specialist insurance cover.

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Taking Preventative Action

Reducing your beneficiaries’ potential Inheritance Tax bill – or mitigating it out altogether.

With careful planning and professional financial advice, it is possible to take preventative action to either reduce your beneficiaries’ potential Inheritance Tax bill or mitigate it out altogether.

1. MAKE A WILL

A vital element of effective estate planning is to make a Will – unfortunately, a significant number of adults with children under 18 fail to do so. This is mainly due to apathy, but also a result of the fact that many of us are uncomfortable talking about issues surrounding our death.

Making a Will ensures your assets are distributed in accordance with your wishes.

This is particularly important if you have a spouse or partner, as there is no IHT payable between the two of you, but there could be tax payable if you die intestate – without a Will – and assets end up going to other relatives.

2. MAKE ALLOWABLE GIFTS

You can give cash or gifts worth up to £3,000 in total each tax year, and these will be exempt from Inheritance Tax when you die. You can carry forward any unused part of the £3,000 exemption to the following year, but then you must use it or lose it.

Parents can give cash or gifts worth up to £5,000 when a child gets married, grandparents up to £2,500 and anyone else up to £1,000. Small gifts of up to £250 a year can also be made to as many people as you like.

3. GIVE AWAY ASSETS

Parents are increasingly providing children with funds to help them buy their own home. This can be done through a gift, and, provided the parents survive for seven years after making it, the money automatically ends up outside their estate for IHT calculations – irrespective of size.

4. MAKE USE OF TRUSTS

Assets can be put in trust, thereby no longer forming part of the estate. There are many types of trust available, and they usually involve parents (called ‘settlors’) investing a sum of money into a trust. The trust has to be set up with trustees – a suggested minimum of two – whose role is to ensure that on the death of the settlors, the investment is paid out according to the settlors’ wishes. In most cases, this will be to children or grandchildren.

The most widely used trust is a ‘discretionary’ trust, which can be set up in a way that the settlors (parents) still have access to income or parts of the capital.

It can seem daunting to put money away in a trust, but they can be unwound in the event of a family crisis and monies returned to the settlors via the beneficiaries.

5. THE INCOME OVER EXPENDITURE RULE

As well as putting lump sums into a trust, you can also make monthly contributions into certain savings or insurance policies (not Individual Savings Accounts) and put them in trust. The monthly contributions are potentially subject to IHT, but if you can prove that these payments are not compromising your standard of living, they are exempt.

6. PROVIDE FOR THE TAX

If you are not in a position to take avoiding action, an alternative approach is to make provision for paying IHT when it is due. The tax has to be paid within six months of death (interest is added after this time). Because probate must be granted before any money can be released from an estate, the executor – usually a son or daughter – may have to borrow money or use their own funds to pay the IHT bill.

This is where life assurance policies written into an appropriate trust come into their own. A life assurance policy is taken out on both a husband’s and wife’s life, with the proceeds payable only on second death. The amount of cover should be equal to the expected IHT liability.

By putting the policy into an appropriate trust, it means it does not form part of the estate. The proceeds can then be used to pay any IHT bill without the need for the executors to borrow.

 

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Keeping it in the family

Careful planning can reduce or even eliminate the Inheritance Tax payable.

Intergenerational planning helps you put financial measures in place to benefit your children later in life, and possibly even your future grandchildren, so it’s important to start planning early.

You may want to keep an element of control when passing on your assets. You may want your money to be used for a particular reason, such as paying for school or university fees or for a first property deposit. Or you may just want to make sure your money stays within the family.

Without appropriate provision, Inheritance Tax could become payable on your taxable estate that you leave behind when you pass away. Your taxable estate is made up of all the assets that you owned, the share of any assets that are jointly owned, and the share of any assets that pass automatically by survivorship. Careful planning can reduce or even eliminate the Inheritance Tax payable.

Inheritance Tax is not payable on the first part of the value of your estate – the ‘nil-rate band’.

The nil-rate band is currently £325,000. If the total value of your estate does not exceed the nil-rate band, no Inheritance Tax is payable. Outstanding debts and funeral expenses can be deducted from the value of your estate.

LEAVE YOUR INTEREST IN THE FAMILY HOME

Commencing 6 April 2017, an additional ‘residence nil-rate band’ (RNRB) allowance was introduced if you leave your interest in the family home to direct descendants (such as children, step-children and/or grandchildren). This only applies to your main home but can be available even if that home had been sold after July 2016.

The RNRB is being phased in gradually. For the 2018/19 tax year, the maximum additional allowance is £125,000, increasing your total Inheritance Tax allowance to £450,000 (£900,000 for a married couple). The maximum allowance will rise by £25,000 each tax year until it reaches £175,000 in 2020.

This will give you a potential total Inheritance Tax allowance of £500,000 or £1 million for a married couple. For estates worth more than £2 million, the tax relief is tapered away.

There are legitimate ways to plan to reduce the amount of Inheritance Tax you may have to pay. We can advise you on the ways that you may mitigate any exposure, including these:

MAKE A WILL

Dying intestate, or dying without a Will, means that you may not be making the most of the Inheritance Tax exemption that exists if you wish your estate to pass to your spouse or registered civil partner. For example, if you don’t make a Will, then relatives other than your spouse or registered civil partner may be entitled to a share of your estate, and this might trigger an Inheritance Tax liability.

MAKE LIFETIME GIFTS

Gifts made more than seven years before the donor dies, to an individual or to a bare trust, are free of Inheritance Tax. So, it might be appropriate to pass on some of your wealth while you are still alive. This will reduce the value of your estate when it is assessed for Inheritance Tax purposes, and there is no limit on the sums you can pass on.

You can gift as much as you wish, and this is known as a ‘Potentially Exempt Transfer’ (PET). If you live for seven years after making such a gift, then it will be exempt from Inheritance Tax, but should you be unfortunate enough to die within seven years, then it will still be counted as part of your estate if it is above the annual gift allowance.

However, the longer you survive after making the gift (subject to surviving at least three years), the lower the Inheritance Tax charge:

• If you survive between three to four years from the date of the gift, the Inheritance Tax charge on the gift is reduced by 20%

• If you survive between four to five years from the date of the gift, the Inheritance Tax charge on the gift is reduced by 40%

• If you survive between five to six years from the date of the gift, the Inheritance Tax charge on the gift is reduced by 60%

• If you survive between six to seven years from the date of the gift, the Inheritance Tax charge on the gift is reduced by 80% You need to be careful if you are giving away your home to your children with conditions attached to it, or if you give it away but continue to benefit from it. This is known as a ‘Gift with Reservation of Benefit’.

LEAVE A PROPORTION TO CHARITY

Being generous to your favourite charity can reduce your tax bill. If you leave at least 10% of your estate to a charity or number of charities, then your IHT liability on the taxable portion of the estate is reduced to 36% rather than 40%.

SET UP A TRUST

As part of your Inheritance Tax planning, you may want to consider putting assets in trust – either during your lifetime or under the terms of your Will.

Putting assets in trust – rather than making a direct gift to a beneficiary – can be a more flexible way of achieving your objectives.

Family trusts can be useful as a way of reducing Inheritance Tax, making provision for your children and spouse, and potentially protecting family businesses. Trusts enable the donor to control who benefits (the beneficiaries) and under what circumstances, sometimes long after the donor’s death.

Compare this with making a direct gift (for example, to a child), which offers no control to the donor once given. When you set up a trust, it is a legal arrangement and you will need to appoint ‘trustees’ who are responsible for holding and managing the assets.

Trustees have a responsibility to manage the trust on behalf of and in the best interest of the beneficiaries, in accordance with the trust terms. The terms will be set out in a legal document called ‘the trust deed’.

PASSING ON OUR ASSETS TO OUR LOVED ONES

Being wealthy can have its benefits, and its challenges too. When we die, we like to imagine that we can pass on our assets to our loved ones so that they can benefit from them. In order for them to benefit fully from our assets, it is important to consider the impact of Inheritance Tax.

If you would like to review the potential impact on your estate, please contact us.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

 

 

Image Courtesy of Patrícia Almeida on Flickr

Paying Inheritance Tax

Estimating how much liability you could leave behind for your loved ones Usually the ‘executor’ of a Will or the ‘administrator’ of the estate pays Inheritance Tax (IHT) using funds from the estate.

An executor is a person named in the Will to deal with the estate – there can be more than one. An administrator is the person who deals with the estate if there’s no Will. Trustees are responsible for paying IHT on trusts.

WORK OUT IF INHERITANCETAX IS DUE ON AN ESTATE

To estimate how much IHT you could have to pay, add up the value of all your wealth, subtract your liabilities and the £325,000 nil rate band allowance, and then multiply the remainder by 40%.

If you are married or in a registered civil partnership, add up your combined estates and reduce these by two nil rate band allowances of £325,000 each (£650,000) before applying the 40% rate to estimate your potential liability to IHT. Married couples and registered civil partners are allowed to pass their possessions and assets to each other tax-free, and, since October 2007, the surviving partner is now allowed to use both tax-free allowances (providing one wasn’t used at the first death). Gifts made within the last seven years are not included in the calculations but may be liable to IHT on a sliding scale.

The calculation for valuation of your estate is for your general information and use only and is not intended to address your particular requirements. It should not be relied upon in its entirety and shall not be deemed to be, or constitute, advice. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation.

If IHT is due on the estate, you would need to complete HM Revenue & Customs (HMRC) form IHT400. You may also need to send other forms at the same time. If no IHT is due, you’ll need to complete form IHT205 to tell HMRC that no IHT is due on the estate. You or your solicitor will need to send the forms with your application for probate (‘grant of representation’). This is called ‘confirmation’ in Scotland. The grant of representation (confirmation) gives you the right to deal with the estate as the executor or administrator.

DEADLINE FOR PAYING INHERITANCE TAX

The executor of a Will or administrator of an estate usually has to pay IHT by the end of the sixth month after the person died. After this, the estate has to pay interest. You can make early payments before you know what the estate owes. Interest isn’t due on this amount. You can pay IHT in instalments over 10 years on things that may take time to sell, for example, property and some types of shares. There are different deadlines for paying IHT on a trust.

 

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Pensions: Annuity options for long-life planning

Life expectancy has stopped increasing, according to a report from the Office for National Statistics (ONS) issued in September, but we are still living longer than ever before.

Between 2000 and 2010, average life expectancy at age 65 rose by 2.4 years for men and by 1.8 years for women. However, since 2010 improvements have slowed markedly and the latest figures from the ONS show almost no change from those issued a year ago. On average, a man aged 65 in 2015- 2017 could expect to live for another 18.6 years, while a woman aged 65 could survive for a further 20.9 years. The important word here is ‘average’. Other calculations by the ONS suggest that a man aged 65 now has a one-in-four chance of living for another 29 years, to 94, while a woman has the same chance of living another 31 years, to 96. There is a 7% chance that a man aged 65 now could survive to 100, and an 11% chance for a woman.

Such long terms are challenging if you are considering how to invest your pension fund to provide an income throughout your retirement.

THE ANNUITY OPTION

For those with a pension fund to invest, taking out an annuity is the only way to guarantee income for however long you live. However, since the introduction of pension flexibility, annuities have fallen out of favour. The latest FCA figures suggest over five times as much money is placed in income drawdown as annuities, despite the investment risks and ongoing management involved in drawdown.

While drawdown does have major benefits in many circumstances, the important role of annuities in providing secure income is in danger of being ignored. Annuity income can be structured in a variety of ways to incorporate automatic increases – for instance in line with inflation – minimum payment terms and/or continuing until the second death of you and your partner.

Importantly, once the framework is chosen, there are normally no future changes. That gives security but makes the initial choice of annuity design all the more important.

If you would like more information on annuities, perhaps to provide a core level of retirement income alongside drawdown, please talk to us.

We can supply guidance based on your health and lifestyle circumstances. The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

 

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