Second home stamp duty surcharge

HM Treasury has recently published details of how it will apply the new stamp duty land tax (SDLT) surcharge on second properties from 6 April 2016.

The draft guidance states that an extra 3% stamp duty charge applies where a purchaser(s) owns more than one residential property at the end of the day of its purchase – irrespective of the intended use of the property.

An exception applies to properties bought to replace the main residence, on the condition that the original main residence has been sold. However, if the new main residence is bought before the old one has been sold; the buyer must pay the charge but can claim a refund providing the old one is sold within 18 months.

It is not clear exactly what the definition of ‘main residence’ will be, or how closely it will mirror the principle private residence (PPR) for capital gains tax purposes. There is to be no right to elect which residence is the main residence for SDLT purposes, so HMRC will instead determine it by ‘taking into account ‘a group of ‘factors’.

Properties bought as furnished holiday lets will be treated in the same way as all other residential properties, in that the surcharge will apply if the property is purchased as an additional property.

Married couples and civil partners will be treated as a single unit, so that each couple may only own one main residence between them at any one time for the purposes of the SDLT surcharge. This could cause issues where the property is owned by one member of the couple, as the other member would incur the surcharge if they purchased another property.

HM Treasury has not yet decided how to deal with scenarios where two or more people who are neither married or in a civil partnership purchase property jointly (this could be cohabitee’s, parents and children, property partnerships etc.). If one of the people already owns a property but another does not, then either applying or not applying the surcharge seems unfair to one of the parties.  They are inviting suggestions on how to deal with this.

The proposed rules may also present some problems for trusts and their beneficiaries. Those who obtain a life interest or interest in possession (IIP) in a second property will be liable to the surcharge.

If you plan to make a future property purchase you therefore need to take this issue into consideration.

A Time for Reflection and Planning

December and January are often seen as a time for reflection and planning; a time to look back at the recent past and consider the near future. It’s also a time for the media’s perennial favourites: the review of the past year and outlook for the next.

The Investment Bank strategists fail miserably year after year in forecasting events over the coming 12 months.  As entertaining as these may be, this type of commentary is of little practical use in the real world and our suggestion is to take it with a pinch of salt.  As George Eliot noted in Middlemarch “Among all forms of mistake, prophesy is the most gratuitous.”

Sometimes it’s nice to look back—to reflect on what you have achieved and to use recent experiences to inform future decisions.  But as soothing as it might be to stand on the stern of a ship and gaze at its wake, it does nothing to help you reach your destination.

This is why we take care to review your investment portfolio and the philosophy that drives it, but never rest in our pursuit of ways to make improvements.  Our Investment Committee meets quarterly and its role is to ensure that we offer you suitable investment solutions in order to meet your goals.  We regularly review your goals with you and, where necessary, make adjustments to your financial plan to increase your chances of meeting them.

We believe in our philosophy of investing in a scientific manner rather than speculating.  It can be boring but it is an excellent framework for building an investment portfolio.  This has been our strategy for a number of years, and a process that run throughout 2015 and will continue to run through 2016 and beyond.  In our view, this is more valuable than the end-of-year press fodder that will be forgotten before long.

Merry Christmas

We would like to wish you all a very Merry Christmas and a Happy New Year and also thank you for your support over the last 12 months.

The office will be closed from 5pm on Wednesday 23rd December and will re-open on Monday 4th January 2016.

As in previous years, we are not issuing Christmas Cards but have instead made donations to 3 local charities – Key 103 Mission Xmas, The Nightingale Centre Christmas Appeal and Play-ability Supporting Disabilities.

Merry xmas


Turn Down the Noise

The investment and financial services industry is a noisy one. Every day, thousands of articles, blogs, broadcasts, podcasts and webcasts are published, all vying for your attention.

It’s easy to fall into the trap of thinking that if you don’t listen to the noise carefully and sift out the ideas that could help you find the highest returns, then you won’t achieve your financial goals.

Actually, we find the opposite to be true. Trying to keep up with the latest investment fads can be detrimental to your long-term performance, rather than prove beneficial. The noise can drown out the signal.

So, what’s the alternative?

We believe that it starts with having a strong investment philosophy which, over a long period of time, will prove to be rewarding for our clients. Our philosophy is based around some of the most enduring ideas in finance that help us to help you achieve your financial goals by harnessing the power of capital markets in a systematic way.

At the core, these fundamental concepts have remained the same for decades but, as research into how markets work evolves, our understanding improves and we develop our approach accordingly.

Added to this, we use investment managers who take real care over the details when implementing these ideas. They understand that investment returns are precious and easy to lose in day-to-day management. They know it doesn’t make sense to pay five per cent in fees and costs to go after a four per cent return.

This combination of a robust, enduring philosophy and a steady, disciplined application has helped us provide our clients with a way to turn down the noise.


Is it worth paying the Lifetime Allowance charge?

In April, the lifetime allowance (LTA) drops to £1M and for anyone approaching this limit there are some tough choices ahead:

  • Should I continue to pay pension contributions?
  • Should I give up the pension contributions from my employer?
  • If I exceed the LTA, is it worth carrying on paying into a pension?

How this could affect you depends on your circumstances, if you would like to speak to us about this, please give us a call.

Everyone’s initial reaction will be to stop paying into their pension as this will lead to a tax charge on savings in excess of the LTA.  However, is a bigger tax bill necessarily a bad thing?

Important considerations

So what must you consider when making this important decision?

Stop funding Continue funding
You’ll reduce or eliminate the LTA charge on future savings.

You’ll potentially be eligible for ‘fixed protection’ on your existing savings.

You’ll continue to benefit from your employer’s contribution.

You’ll still get tax relief on their personal contributions at your highest marginal rate of income tax (if within your annual allowance).

The pension will continue to grow tax free.

You’re likely to lose your employer’s contributions.

You’ll have to decide where to save your personal contributions instead.

Saving above the LTA will be subject to an LTA charge of 25% if savings extracted as taxable income (or 55% if the surplus is taken as a lump sum).

None of the surplus can be taken as tax free cash.

Fixed protection could mean that up to an additional £250,000 of your pension funds are free from the LTA charge, but just a single pound of additional contributions will void that protection. So it’s clear that there’s a trade-off of an increased LTA against the loss of future funding.

The loss of employer funding

Employer pension contributions are essentially ‘free money’. Even if you suffer an LTA charge of 55% on your entire future employer funding you’ll still be better off (As you’re still receiving 45% of something they would otherwise miss out on).

If you have to continue to pay into the scheme in order to secure the employer contribution, it could still make sense and take the LTA charge on the chin.

The goalposts may move if your employer is prepared to offer some other financial incentive instead of making pension contributions. This will very much depend on what the alternative offer is, and how much will be lost to tax and NICs (both individual and company), but is worth considering.

So I have decided to stop paying into a pension, where do I save for the future now?

  • Cash
  • National Savings
  • ISAs
  • Investments
  • Offshore Bond

But wait – why not continue to fund your pension?

Funding above the LTA certainly makes sense where it means retaining employer contributions (‘free money’), but the same can be said for personal contributions too!

There’s something that feels slightly uncomfortable about paying contributions knowing that an additional tax charge will be applied, but what really matters is what you get back after all taxes have been deducted.

The table below compares what you could get back after 10 years for the same net cost of £15,000:

Pension ISA Offshore Bond
Contributions paid (inc tax relief) £25,000 £15,000 £15,000
Final fund value

(10 years later assuming 2.5% growth pa)

£32,000 £19,200 £19,200
LTA charge 25% (£8,000)
Income tax 20% (£4,800)   (£840)
Net amount received £19,200 £19,200 £18,360

What this does ignore is the position on death; the pension is generally IHT free, whereas both the ISA and offshore bond will form part of your estate for IHT.


It’s only natural to think tax charges should be avoided – especially one designed to act as a cap on funding, but it’s always important to weigh up all of the options available.

If you would like to weigh up your options and the alternatives, please call us for a chat.


Five Steps to Starting to Save for Retirement in Your 30s

It’s simple: the sooner you start saving for retirement and the more you can put aside, the more you’ll have to spend when the time arrives. What’s not so simple is figuring out what you need to get started once you’re ready to start saving.

I know that many of you have already started this process, but please forward this on to members of your family who may not have.

  1. Start With Some Assumptions

Most people are put off planning for retirement because it seems such a long way off and who knows how much they’ll need, or even if they’ll ever retire?

If this resonates with you, you’re not alone. However, these are only assumptions which could change significantly during the years between now and retirement – so stick a pin in a page and start with that.

When do you want to retire? How much income do you want your pension to provide? How much can you afford to put away in a pension right now? Are you a cautious, balanced or adventurous investor?

  1. How Much Income Will You Need for Retirement?

You can arrive at this decision in a number of ways but, most importantly, it can be refined as retirement gets closer.  You can take advantage of simple calculators that can be found online to see what your affordable level of saving would provide, or you can work out an assessment based on your current expenditure – there is no wrong answer.

  1. Take Advantage of Compounding Growth

With compounding growth, you can earn growth on your growth. The longer your pension runs, the more money you will make, because the growth will just keep rising exponentially. Compounding growth can significantly boost your plan value in the long-run because it will nurture your pension at a faster rate.

e.g if you start saving at 25 (with an annual return of seven per cent after fees), you only have to save around £4,830 annually to reach £1 million by age 65. If you wait until age 40, you’ll need to save £15,240 per year, which is more than triple that amount – all thanks to compounding growth.

To give yourself the best chance of growth, many providers offer a range of funds (which can be difficult to navigate and choose from), but also offer short risk assessments, allowing you to compile a shortlist of investments that suit your appetite for risk.

  1. Find Out About Employer Contributions

The first thing you need to do is enrol in your workplace pension. You may have seen the adverts on TV but, if you aren’t already enrolled, you may be missing out on free money.

From 2017, for most employees, a company will have to contribute a certain amount to your pension. This is like free money and should be considered an additional source of income which will benefit you in retirement.

Make sure you learn what your plan includes, such as how much you need to contribute and the investment options.

  1. Keep an eye on costs

The more that is deducted from your pension in charges, the less growth you’ll enjoy and the lower fund value you’ll ultimately have in retirement. Look for low-cost products and funds (such as index funds), so that you’re spending less on fees and enjoying more in your pension.

If you still aren’t sure, or are struggling to get started, you may want to speak with a financial planner – such as us. We can help you organise your personal finances and create the right retirement plan for you.


The Power of Getting Started

I was chasing up a client the other day that had told me that he desperately needed to meet with me to discuss his financial plan; not so much for his own benefit, but for his family. For some time now he has been promising his wife that he would set out everything they have so that when we all meet up, we can discuss when and if they will run out of money, can they help their children to buy a property each and how much are they going to leave the tax man.

This client certainly has his life plan sorted and since retiring from a very high powered job, he is enjoying lots of adventure and living life to the full.  However, he still hasn’t got his financial affairs in order and there are a number of issues that need to be addressed.   Fortunately for him, they are not massive issues as it is highly unlikely that he will ever run out of money, but all the same it needs sorting out for the family’s sake and then they can all get on with enjoying themselves. Plus in a purely selfish way, I will feel a lot better knowing that it has been done.

I’m guessing what I’ve just described sounds a lot like many people. We can all come up with perfect plans to get everything done, then we wake up and realise that real life gets in the way and in our ‘spare’ time we prefer to do the fun stuff.

When it comes to our finances, we tell ourselves we can’t possibly invest our hard-earned money unless we’ve identified perfect investments and it fits a perfect plan.  Perfection means different things to different people, but with investments it often means, “Guaranteed to make me a lot of money with very little risk.”

There’s one, teeny weeny problem with this definition …. It doesn’t exist! Unfortunately however, that doesn’t stop people from trying to find these perfect investments.

That’s why getting started is such a big thing!  By putting aside a bit of time to think longer term and letting go of the need for perfect, we can begin to recognize that the end goal matters so much more than whether the journey is perfect.

I want to reach my financial goals. I know you probably want to reach yours, too. But we’ll never get there if we keep on stalling or waiting for something that’s highly improbable.

Good things happen if you stick to the plan

This blog coincides with the launch of our first corporate yoga class which took place in our offices yesterday afternoon.  There were quite a number of our staff involved, which is fantastic; I wasn’t one of them as I was busy writing this…. hopefully the yoga made for a calmer drive home.

It is often said that the secret of success in any endeavour is “stickability”, your capacity for staying committed to a goal.  But success also depends on having goals you can stick with. Managing that tension is what a financial adviser does.

Inspired by the impressive weight-loss of a work colleague, a portly middle-aged businessman decided to copy his friends programme. It was a crushing regime, involving zero carbs, 5am sprint sessions and mountain biking.  You can guess what happened next? The aspiring dieter lasted about a week on the programme before packing it all in and returning to sedentary life, pies and beer.

In hindsight, it would have been better for him to get some advice first, start slowly, swap the mountain biking for brisk walks and the zero carb diet for low calorie beer. He may not have lost weight as quickly as his friend, but he would probably have had a better chance of sticking with the plan in the longer term.

Similar principles apply with investment. You may envy acquaintances who seem to have succeeded with high-risk strategies, but that doesn’t necessarily mean those are right for you (or them).  In any case, their dinner party talk may leave out key information, such as how they sit up all night watching the market and worrying.

Just as the want-to-be weight loser couldn’t live with 5am sprints, not everyone can stick with highly volatile investments that keep them up at night or that cause them to constantly second-guess themselves and few people can do it without a trainer.

On the other hand, reaching a long-term goal like losing weight and building personal wealth requires accepting the possibility of pain and uncertainty in the short-term.

The trick is finding the right balance between your desire to satisfy your long-term aspirations and your ability to live with the discomfort in the here and now. Quite often, this tension can be managed through compromise. In other words, you can accept some temporary anxiety or you can moderate your goals.

The point is you have choices. And the role of a financial adviser is to help you understand what they are. So, for example, an adviser can assist you in clarifying your goals and setting priorities.

A personal trainer would be unlikely to recommend an out-of-shape sedentary business executive should start running marathons or try to halve his body weight in six months.  The job of the trainer, or an adviser, is to manage your expectations and ensure the goals you are pursuing work with everything else you want to achieve in your life.

An adviser can also assess your capacity for taking risk. We aren’t all high risk takers and a portfolio that’s right for one person may be all wrong for another. That’s because each individual’s circumstances, risk appetites and goals are different. A financial plan should be bespoke not an off the peg solution .

A third contribution an adviser can make is to help you manage change. Our lives are not static, we change jobs, our incomes increase, we take on new responsibilities like children and mortgages, we deal with aging parents, we move cities and countries. Nothing stays the same and a financial plan shouldn’t either.

So not only do different people have different goals, but each person’s own goals evolve in unique ways as they move through life. Reaching those goals requires a detailed and realistic plan, plus a commitment to stay with it. Some people may be up for the triathlon when they’re young and fit. But in later years, they might just need a more conservative programme of stretching and walking.

You can try doing this on your own, of course. But it makes it easier if you have someone to keep you focused, keep you disciplined and help you change course when the circumstances of life require it.

Now that’s stickability!

Suits You ……Tailor Made Pension Scheme for the Family Business

I am pleased to announce that I have recently had confirmation that I have passed my latest exam. To tell the truth I thought my exam days were over, but I really quite enjoyed the study and the paper I had to write to achieve my pass in the Advanced Certificate in Family Business Advising from STEP (Society of Trust and Estate Planners) – trumpet blown!

Family businesses in the UK employ over 9.5 million people and two thirds of this country’s businesses are family owned. We have a great deal of experience in dealing with family businesses a lot of which comes as a result of the fact that we administer the ultimate family business pension vehicle, the Small Self- Administered Pension Scheme (SSAS).

These schemes are the made to measure Family Business Pension Plan in that the family are trustees, members and also have the facility to use the funds in the scheme to invest into the family business by way of a loan to the company (now referred to as Pension Led Funding but we still call it Loan back) or using the funds to purchase commercial property for the business. The key here is that the family has control over the investment strategy, the membership (family members only) and the level of contributions (within limits set out by our good friends HMRC but we covered that in a previous blog and will no doubt do so again).

In addition to this, the fund can assist with the family’s succession plans in that Mum and Dad can draw their benefits from the pension fund making them less reliant on drawing funds from the business enabling more to be paid to younger family members working in the business, when they probably need it most.

In our dealing with the Family Pension Schemes we have grown into the role of Family Business advisors and developed the soft skills necessary to help families with their future planning. It is not always about the money it is often about how and who is best to take the business forwards and where to have the assets i.e. in the Company or the Pension Fund to help with the future generational planning.

I am probably teaching to the converted in many cases but please feel free to pass the word on to other family businesses that could benefit from the bespoke made to measure pension scheme or who simply have a scheme but are not receiving any proactive advice on what they can do.


Cyber-crime and your personal data

Last week was National Get Safe Online Week, so I suppose it was somewhat ironic that one of the week’s big news stories related to a cyber-attack on TalkTalk, which saw many individuals left vulnerable to fraud.

Unfortunately for TalkTalk customers, the risk that fraudsters may now be in possession of their personal information is not the whole story; it also brings with it the added risk that other fraudsters may seize the opportunity to contact individuals, claiming to be from TalkTalk with instructions on how to ‘safeguard individuals from fraud’, claiming to be from a third-party security company, or claiming to be software companies offering advice or a fix!

Frustratingly, we have no control over how companies manage our personal data, but we can control how we manage it ourselves. While I’m not a client of TalkTalk, it certainly made me stop and think about just how much personal information we are prepared to share via the internet, particularly on social media platforms.

Take Facebook for example: we proudly update our status to share beach photos of ourselves and our family, advertising that we are away on holiday and our homes are therefore empty. We also share our dates of birth, children’s and pets’ names, previous schools and home towns. Whilst all of this information is posted innocently and intended for our Facebook friends and contacts, it can be a fraudster’s dream.

According to the National Crime Agency, cyber-crime is one of the most significant criminal threats to the UK. So, what can we do to help protect ourselves? A good place to start would certainly be to ensure that your devices are protected with secure passwords and up to date anti-virus.

Get Safe Online suggests that there are a number of sensible and simple measures that we should follow in order to protect ourselves. Their six top tips are as follows: –

 Cyber crime - 6 tips to keep it personalSource:

As a business, we have worked hard to ensure that our IT systems are as secure as possible and have trained our staff to look out for potential scams but, as the TalkTalk debacle has highlighted, nothing is invincible and there’s no such thing as ‘no risk’.   However, with our continued vigilance of our systems and your individual vigilance with your personal data, we can certainly all help to ensure that we maintain a ‘low risk’ profile.