1. MoneyMatters March/April 2012 Life AssurancePROTECTEDRIGHTS PENSIONHow the changes affect you Tax ReliefINVESTINGISAIN A RECESSIONBeat theINVESTING TAX CLOCKGLifestyle ProtectionG Creating WealthGTax Rules GCopperfields Financial Management Ltd Basepoint Business Centre, Oakfield Close, Tewkesbury, Gloucestershire GL20 8SD. T: 01684 851224 26 Kings Hill Avenue, Kings Hill, West Malling, Maidstone, Kent ME19 4AE. T: 01732 424035Copperfields Financial Management Limited is an appointed representative of Financial Ltd which is authorised and regulated by the Financial Services Authority.

2. insidePension Tax ReliefNo automatic tax reliefPage 2 ISA Investing A tax efficient wrapper Page 7 Q&A Be in control of your pension Page 10Beat the tax clockBeat the tax clock SIPPs ISA loopholeMake the most of concessions Page 3 For people aged between 16 and 18 Ways of saving for retirement Page 10Everyone faces a race against the clock to make the most out of limited tax Page 7 concessions before they vanish at the end of the current tax year on April 5.End of Tax Year planning Investing in a recessionsTaking advantage of tax breaks Page 4Annuity Nerves of steel requiredPage 11Asset switchingUse your CGT exemptionas they like worth up to 250 to different Before you plan your retirement... Husbands and wives should consider Capital gains tax is charged when you sellindividuals.Page 8switching assets between each other. Aim toassets, including shares and property, for a None of these will affect the 325,000Income tax and income taxCompany Succession Planningput income in the name of the person with theprot. It is levied at 18 per cent for basic rate nil-rate band. You can still give away biggerallowances Page 5Ensure your business survives Page 12lowest income tax rate or who has some taxpayers, rising to 28 per cent if you pay sums, however if you die within seven years of Protected Rightsunused personal allowance. income tax at 40 or 50 per cent.making these gifts they will be treated as part Government to abolish contractingMaximise your cash ISAs The annual allowance provides the rst of your estate and may be subject to IHT.Life assurance out of State PensionReader reply section10,600 of any prots tax free. The CGTCash ISAs are where to start for tax-freeProtect savingsWhich products to choose Page 6Page 9Personalised reply sectionPage 12 exemption is one area of tax planning peoplesaving. They are deposit accounts where allThe Government is reducing the pensioninterest is paid free from tax. Savers can forget or fail to use fully. People, who maylifetime allowance on April 6 from 1.8million Need more information? Simply complete and return the information request on page 12 contribute a maximum of 5,340 this tax year,hold or have inherited substantial assets,to 1.5million.rising to 5,640 from April 6 2012.should think about selling a portion every tax Final salary pensions are valued at the rate year to bank prots and use up the CGTof 20 times annual income. Meaning someoneClaim your tax back allowance.who is already entitled to a pension ofThe Government pays tax credits to helpPension Tax Reliefworking couples and families, depending on Pension boosting75,000 a year or more could have an issue.your income each tax year. You should inform Contributions into a pension qualify for tax Pensions are tested at retirement. ThoseHM Revenue & Customs promptly if thatrelief. This boosts the value of every 1 ofover this limit will be taxed at 55 per cent, butincome changes.taxed income that you pay in by 25p for basic anyone who thinks they might break through The value of the credits can rise if your rate taxpayers. the new allowance can protect their fund ifincome has gone down for whatever reasonHigher rate taxpayers can claim back eventhey register with the Revenue before the endand there is no need to wait for the end of themore. There is a 50,000 annual limit for of the current tax year.tax year or to be sent a renewal form. This is pension contributions, though you need toA higher rate tax payer does not receive tax reliefrelief could be up to a maximum of 20 per cent, on top of theone of the rare occasions where it is worthhave earned at least this sum during the year.getting in touch with HMRC quickly.Some bigger earners, or those who have beenThe value of your investment andautomatically on their personal pension contributions, theybasic rate of 20 per cent.made redundant, may be able to invest more, Also note, rises of income of less thanthe income from it can go down ashave to claim it. This means that someone earning more thanAdditional rate tax payers 10,000 will not affect your credits in theand you can carry forward any unused well as up and you may not get42,475 in the current nancial year could potentially beAs from 6 April 2011, if you are an additional rate tax payer, current tax year. But prompt notication allowances from the three previous tax years back the original amount invested.losing a fth of the value of their pension if they are notpaying 50 per cent, you may also be able to claim additional makes any overpayment of credits next taxin some circumstances. Past performance is not a guide toactively claiming back higher rate tax relief on their tax relief at your highest rate. As with 40 per cent tax payers, year less likely.Children future performance.contributions. this depends on how much you earn over the higher rate tax Equity ISAsThis is the rst tax season when the wholeFor those not adverse to risk, stocks andfamily can top up an ISA. The Junior ISA, Claiming higher rate tax relief on personal pension band and your level of contribution, any additional rate taxshares ISAs are a good area of investment. launched in November, allows family or friendscontributions is considered to be the single most importantrelief could be up to a maximum of 30 per cent, on top of the to save up to 3,600 each tax year into aThese can be used to shelter funds investing inrelief you can claim, yet hundreds of thousands could be basic rate of 20 per cent. shares, bonds and property. There is no furthertax-free account on behalf of children.missing out. To obtain your additional tax relief you must le a The advantage of full tax relief straightincome tax to pay on any dividends orHowever, if you or your child was eligible fortax return or get HM Revenue & Customs to change your taxIf you are employed, your employer will take occupationalpayments from funds held in an ISA. Anya Child Trust fund then you cannot invest in aprots when the investments are eventually Junior ISA.code. To do this, you have to contact your local tax ofce.pension contributions from your paysold are free from capital gains tax. The Like the adult ISA, the JISA can beClaiming your tax back before deducting tax (excluding held in cash or invested in stocks andIf you pay income tax on your earnings before any personal National InsuranceTo discmaximum that can be saved into a stocks and uss ho shares ISA is 10,680 this tax year, rising to shares. The account is open to anyonepension contributions, your pension provider claims tax back contributions). You only to getwaged 17 or under who does not already out ofthe mo 11,280 from April 6 2012.from the government at the basic rate of 20 per cent. In pay tax on the balance, so your p st Redundancy have a Child Trust Fund (CTF). Cashplannienscannot be withdrawn until the childpractice, this means that for every 80 you pay into yourwhether you pay tax atng, ple ionThe rst 30,000 of any redundancy turns 18.personal pension, you receive 100 invested in your pensionbasic, higher or additionalcontac asesettlement is tax-free, but the balance is taxedt usas income. Gift awayfund.rate you receive the full for moThe rst 325,000 of any estate is tax-free and If you are a higher-rate taxpayer, or theIf you are a higher rate tax payer paying 40 per cent, you may relief straight away. inrefor married couples / civil partnerships the rst format redundancy payment moves you into a higherable to claim an additional tax relief. Depending on how much ion.tax band, discuss if you can get the payment 650,000 is tax free. Beyond this, IHT can beyou earn over the higher rate tax band, any additional taxstructured so that part of the payment islevied at 40 per cent, taking a large bite out ofdeferred into the next tax year. Also, a lifetimes work. However, making annualdepending on your employment outlook and gifts to family or friends can reduce theThe articles featured in this publication are for your general information and use only and are not intended to address your particular requirements. They should not be reliedage, it may also be benecial to have apotential for an IHT bill. Each person can giveupon in their entirety. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of thedate it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional portion of any redundancy paid into your up to 3,000 per tax year, plus as many giftsadvice after a thorough examination of their particular situation. Will writing, buy-to-let mortgages, some forms of tax and estate planning are not regulated by the FinancialServices Authority.Levels, bases of and reliefs from taxation are subject to change and their value depends on the individual circumstances of the investor. pension.23 3. Income tax and income tax allowancesEnd of Tax Year planningPersonal allowanceIncome tax personal allowances2011-12 7,4752012-13 8,105Personal allowance for people aged 65-74 9,940 10,500With the End of Tax year looming, make sure you take advantage of all of the taxPersonal allowance for people aged 75 and over10,090 10,660breaks available to you. There is still time to make provisions to avoid paying anyMarried couples allowance for people aged 75 and over 7,2957,705unnecessary tax. As the saying goes; use them or lose them.Income limit for age-related allowances 24,000 25,400 1. From the 2010-11 tax year the Personal Allowance reduces where the income is above 100, 000 - by 1 forevery 2 of income above the 100,000 limit. This reduction applies irrespective of age.Use your ISA allowances Use your pensions allowance investors should also check that(Its not just parents who get a 2. These allowances reduce where the income is above the income limit for age-related allowances by 1 for everyISAs should be at the top of most Almost everyone can pay into aHM Revenue & Customs isntgift exemption on marriage, it2 of income above the limit. For the 2010-11 tax year the Personal Allowance for people aged 65 to 74 and 75peoples savings and investment pension and obtain tax relief ondeducting too much tax in can be used by others, includingand over can be reduced below the basic Personal Allowance where the income is above 100,000.list, these are the reasons why:the contributions, even if you arerespect of interest and dividends.Grandparents, but the limits areTax free growth no capitala non-earner. This means aWhen you receive a coding lower. Check www.hmrc.gov.ukgains tax 1,000 contribution costs justnotice, cross check against any for the current limits).Bands of taxable earned incomeI No need to record your ISA800, the balance being paid by accompanying notes. Capital gains tax (CGT) income or prots on your tax the Government. Most higher 2011-122012-13Inheritance tax (IHT) You could make use of the capital return rate taxpayers can reclaim up toEvery tax year you can gift gains tax annual exemption forStarting rate for savings: 10%*0 - 2,5600 - 2,710I Tax free income on corporatea further 200 tax relief via their 3,000 which will not count 2011/12 of 10,600 for each bonds and other xed interesttax returns. The current tax rulesBasic rate 20%0 - 35,000 0 - 34,370towards your total estate and ifindividual, including your stocks and no further tax on limit the amount that can beyou do not use the full exemption children. For example, it may beHigher rate 40%35,001 - 150,000 34,371 - 150,000 everything elsecontributed to registered pension in one year, you can carry it worth selling shares if they have Additional rate 50%Over 150,000Over 150,000I The income has no impact on schemes each year as tax- forward but for one year only.delivered losses because these age related allowances relieved contributions to 50,000 Gifts of up to 250 a person arecan be set against gains made on * The 10 per cent starting rate applies to savings income only. If your non-savings income is above this limit then making it perfect foror 100 per cent of UK taxable also exempt, but you are notother assets this year.the 10 per cent starting rate for savings will not apply. supplementing pensionearnings, whichever is lower. permitted to use the two The tax on prots from the sale The rates available for dividends are the 10 per cent ordinary rate, the 32.5 per cent dividend upper rate and the income in retirementA new three year carrytogether. If a gift is regular, of a buy-to-let could be cancelled dividend additional rate of 42.5 per cent.I The allowance will increase inforward of unused annual comes out of your income butout by losses on equities. If loss the 2012/13 tax year by 600,allowance was introduced from therefore the overall personal 2011/12. Initially you will be abledoes not impact upon your making disposals are not madeInheritance taxstandard of living, any amountuntil later they cannot be carried allowance will be 11,280 in to carry forward unused can be given away and ignored back against gains in previous Inheritance tax total, 5,640 can be investedallowance from 2008/09, 2009/10 for IHT. You will need to keep full years. into a cash ISA. The whole and 2010/11, provided you were 2011-122012-13records of any gifts made, toMain residence relief If you allowance can be put into aa member of any registeredassist with probate.own more than one residence,Rate 40%40% Stocks and Shares ISA, or thescheme during the relevant year. You cannot use your annualyou can elect which one you remaining 5,640, if wishing The exercise will assume that aIndividual nil-rate band 325,000 325,000exemption and your small giftswant to be treated as your to invest in both. If you are50,000 annual allowanceexemption together to give principal private residence (PPR)Since 9 October 2007, it has been possible to transfer any unused IHT nil-rate band from a late spouse or civil unhappy where you areapplied for those years (rather someone 3,250, but you can use for CGT purposes.partner to reduce the estate of the surviving spouse or civil partner. invested you can transfer your than the actual gure) and use ayour annual exemption with any ISA to another provider. notional carry forward calculationother exemption, such as theAll of the tax benets quotedif total contributions exceededIndividual savings accounts (ISAs)wedding/civil partnershipabove can be changed and the50,000 during a tax year.ceremony gift exemption. exact benet will depend on ISA maximum limitsCheck your tax codeIe: If one of your childrenyour circumstances.Having the wrong tax code can marries or forms a civil 2011-122012-13be costly. Many pensioners canpartnership you can give them Some aspects of Tax Cash5,340 5,640be on the wrong code as they5,000 under the wedding/civilPlanning are not regulatedStocks and Shares (overall limit)10,68011,280have not been moved on to the partnership gift exemption andby the Financial Serviceshigher personal allowances that 3,000 under the annual Authority. From 2010-11 these limits became indexed in line with RPI increases to the preceding September and rounded upkick in at 65 and 75. Savers andexemption - a total of 8,000. to be divisible by 120. Lifetime and Annual allowancesAllowance2011-122012-13Lifetime allowance 1,800,000 1,500,000Annual allowance50,00050,000 The government announced on 14 October 2010 changes to the lifetime allowance for tax relief on pensions. From 2012-13 onwards, the lifetime allowance for pension savings for individuals will be reduced from the current level of 1.8 million to 1.5 million.45 4. Life AssuranceISA Investing ISAAn ISA is another form of a tax efcient The Mini ISA was only allowed to hold one ofwrapper in which you can place investments tothe two components (shares or cash). As aWe all want to protect ourgive them tax efcient status. consequence, many investors would tend tofamily from nancial hardship, For the tax year 2011/2012 an individualsinvest the two components separately, with What are the options?Family income benettotal annual allowance limit to an ISA isdifferent providers. This meant that they wouldso it is important to know The cheapest, simplest form of This offers the policyholders10,680, of which a maximum of 5,340 canoften end up with two Mini ISAs in a tax yearbe held in cash. These gures are increasing inrather than one Maxi ISA.which products to choose,life assurance is term assurance.dependants a regular income 2012/13 to 11,280 and 5,640 respectively.Tax position of ISAs?loophole There is no investment element from the date of death until theincluding the most suitableand it pays out a lump sum ifend of the policy term, instead of Subject to the overall limits, you can splityour ISA between the following: Investments are free from capital gains tax, but investors no longer receive the 10 per cent taxsum assured, premium, termsyou die within a specied period.any lump sum payment. STOCKS AND SHAREScredit on dividends from UK equities. This was Types of term assurance are: Lifetime protection You can hold stocks and shares and managed removed from April 2004, so now suchand payment provisions.Level term assurance investment funds within an ISA.dividends are fully taxable from this date,A whole-of-life assurance People aged between 16 and 18 can Which offers the same payout policy is designed to provideIt is possible to invest up to 10,680 into although there will be no further tax liabilities,open two cash ISAs in the same tax throughout the life of the policy, cover throughout a persons stocks and shares inside an ISA in the tax yeareven for higher rate taxpayers. However,year, which is an occurrence that is not your dependants receive the2011/2012. investments in corporate bonds and gilts arelifetime. The policy only pays outallowed for anyone else. same amount whether you died CASH free from tax and are able to reclaim the fullonce the policyholder dies,20 per cent tax credit. 16 year olds are eligible to open their on the rst day after taking the providing the policyholdersYou can as an option hold a proportion of yourown adult cash ISA, worth 5,340 (or policy out or the nal day beforeISA allowance in cash, which will earn tax-freeWhy invest?dependants with a tax free lump 5,640 next tax year), as well as saving it expired.interest. You are able to invest 5,340 of thatThe stocks and shares element of the ISA willsum. Depending on the up to 3,600 in a Junior ISA (JISA). Theyannual allowance into a cash deposit account allow you to take advantage of the reductionThis is normally used alongside individual policy, policyholderscan save almost 10,000 each tax yearin the tax year 2011/2012. in risk by pooled resourced company share an interest-only mortgage, where may have to continuein cash ISAs. As long as you do not exceed the maximuminvesting. The stocks and shares element of an the debt has to be paid off only contributing right up until theyISA allowances in any one tax year, you canISA can be used to invest in many different Allowing children aged 16 and 17 to on the last day of the mortgagedie, or they may be able to stopsplit your ISA investments. For instance, in the types of investment fund including unit trusts,have both a JISA and an adult cash ISA term.2011/2012 tax year, you could invest justinvestment trusts and OEICS. is something that has not been widelypaying in once they reach a Decreasing term assurance2,000 into a cash ISA and put the remaining Such funds are actively managed by a publicised but is something that, ifstated age, even though the Here the payout reduces by a 8,680 allowance into a dedicated investment professional fund manger who will buy and sell possible, families should make the mostcover continues until they die. of. xed amount every year, nally ISA that may provide higher returns than a shares on your behalf, with the aim of There are policies that alsoThe full 3,600 JISA amount can be ending up at zero by the end ofCash ISA over the medium to long term. achieving the maximum possible return onoffer cover for additional You only have one ISA allowance available your investment. In the past, over the mediumsaved in cash or divided between cash the term. Because the level of benets, such as a lump sum each tax year (6th April to the following 5thto long term, this type of investment hasand stocks and shares, but whilst cover decreases during the term, that is payable if the policyholder April). Subject to the rules above, you canproduced excellent levels of growth, althoughchildren can open an adult cash ISA at premiums on this type of becomes disabled or develops ahowever split your ISA allowance between two it is important to remember that pastthe age of 16, they wont be able to insurance are lower than on levelspecied illness. Whole-of-life different providers, such as a Cash ISA with performance is no guarantee for the future,open a stocks and shares adult ISA until policies. This cover is oftenassurance policies are oftenone provider and an Investment ISA withand the value of such investments can fall asthey are 18 years old. bought with repaymentreviewable, usually after ten another. well as rise. The return is quite nice when a young mortgages, where the debt fallsyears, at which point theWith effect from April 2011, the Governmentadult takes advantage of both this and during the mortgage term.conrmed that each tax year, it is theirnext years full cash ISA allowance, theyinsurance company may decide Increasing term assuranceintention to raise the amount that individualswould have saved an extra 10,980. Ifto increase the premiums or can put in to their annual ISA allowance byThe value of your investment and the income The potential payout increases byreduce the cover it provides.from it can go down as well as up and youthat 10,980 were to grow at anination each April, therefore the limits for a small amount each year. This is may not get back the original amount average tax-free interest rate of 4 per2012/13 are 5,640 into a cash ISA with the a useful way of protecting the Please contact us to reviewinvested. Past performance is not a reliable cent, it would add about a furtherremainder up to the total allowance of initial amount against ination. your life protection indicator for future results. Please contact us18,000 to the overall ISA fund around11,280 available to invest in an investment for further information or if you are in any the age of 30, without the inclusion of Convertible term assurance requirements. ISA. doubt as to the suitability of an investment.the value of the JISA fund, which when A more exible policy that allowsMini and Maxi ISA?added would make a very tidy return. the option of switching in the Since April 2008, the terms Mini and Maxi ISAs future to another type of life became technically incorrect. Over previousThe value of your investment and assurance, such as a whole-of-years, many people used their ISA allowances HM Revenue and Customs practice andby splitting the amount they invested in to twothe law relating to taxation arethe income from it can go down as life or endowment policy, well as up and you may not get without having to submit any different parts as a Mini cash ISA allowance complex and subject to individualwith their bank or building society and a Mini circumstances and changes whichback the original amount invested. further medical evidence.Past performance is not a guide tostocks and shares ISA allowance with ancannot be foreseeninvestment company. future performance.67 5. AnnuityQ&AQ. Is my fund that has already beensaved affected into occupationalpension schemes whilst employeeswere contracted out affected?A. No, your money already held shouldremain in the scheme to provide membersProtectedBefore you plan your retirement, you will Choosing an annuity will depend largely onShopping around with a pension, on retirement, inaccordance with scheme rules.need to appreciate how the money you have your nancial circumstances, the value of You can purchase your annuity from anyin your pension pot will be used to provide your pension or pensions, your retirement provider, this means it need not be from theQ. What happens to protected rightsyou with an income when you retire. One expectations and, possibly, on your health or company you had your pension plan with. already saved?option to choose is to invest most of yourthe health of your dependants.Be aware that the amount of income youA. At the moment the rebates together withRightspension in an annuity, which pays you a You can also decide whether you would receive from your annuity can vary betweenany investment return are known asregular income throughout your retirement prefer a level annuity or an escalating different insurance companies, so it is protected rights. There are currentlyyears.annuity. Level annuities pay you a xed level essential to receive comparisons before statutory restrictions on how protected An annuity is purchased using the lump of income each year, while an escalatingmaking your nal decision.rights can be used. This is because they aresum from your pension or savings, which annuity increases each year in line withintended to be used to provide benets inOpen market optionplace of the additional State Pension.provides you with a guaranteed income for ination or at some xed rate.Pension fund providers are now legally However, from 6 April 2012 thesethe rest of your life. The size of the income The income generated from an escalating obliged to inform you of your rights to restrictions will no longer be in force andyou receive depends on the size of your annuity is usually signicantly lower in thechoose an annuity. You can decide to take former protected rights benets can beThe Government is to abolish contractingBegin planningpension fund, your age, your gender and rst few years than you would expect to the open market option providing that you treated the same as other pension benets.out of the additional State Pension (S2P),Considering how abolition will affect youryour health.receive from a level annuity. have not already taken any benets from They will be retained in the pension schemealso called State Second Pension on a scheme.Decision making You can also decide whether you wantyour pension or agreed an existing annuityunless a transfer request has been made.dened contribution basis from 6 AprilYou will need to decide whether your DWP currently holds records showingAs you near retirement, your pension fund your income to be paid for a guaranteewith your pension provider. 2012. scheme continues or whether you need to details of an individuals membership of aprovider will inform you of your pension fund period, perhaps 5 or 10 years, but this willBefore you take out your annuity, you canalso reduce the amount of initial incomeThis means that from 6 April 2012 make changes as National Insurancecontracted-out dened contributiontotal and offer you a quotation based on thealso decide to withdraw a tax-free lump sum scheme.payable.affected employees will no longer be able rebates will no longer be paid.size of your fund. Generally, most people of up to 25 per cent of the total value of As all the rules around protected rightsto use a Contracted Out Money PurchaseYou may also want to consider thepurchase an annuity by the time they reachEnhanced annuityyour pension, known as a Pensionand the tracking of those rights are to beCOMP occupational pension scheme to impact of the Governments plans forage 75. You may qualify for an enhanced annuity Commencement Lump Sum.removed, the accuracy of DWPs recordscontract out. employers to automatically enrol eligible will decline over time. It is thereforeor an impaired life annuity, if you What to do suffer from poor health. TheseEmployees will automatically be brought employees into qualifying workplace important that schemes ensure that theirWhen annuity rates are falling it might beusually pay a higher income back into the additional State pensionpension schemes.records are up to date prior to abolition.tempting to hold off buying an annuity, untilamount if your health problemssystem unless they become a member of a You should discuss your options with You should also consider now therates increase. This may not necessarily be administrative easement of having to track (such as high blood pressure,scheme which contracts out on a salaryyour advisors. Any changes will need to bethe best course of action and should youprotected rights benets separately and its kidney problems or diabetes) related basis.discussed with pension advisors, schemedecide to delay your purchase, rates couldincorporation into the running of yourcould potentially reduce your Dened Benet schemes can continue to trustees and members alike.fall even further. In addition, every month scheme.lifespan. Smokers or people without an annuity is a month without contract out on a salary related basis. Prepare to pay the correct National diagnosed with obesity may income and this lost income may not beWhat happens from 6 April 2012? Insurance contributions after the abolition Q. Are schemes affected that hold bothalso be able to receive anrecovered in the future.You will not be able to use your COMP date. a section contracted out on a dened enhanced annuity.occupational pension to contractThink about how you will communicatecontribution (money purchase) basisand a section contracted out on aemployees out of the additional State the National Insurance contributiondened benet (salary related) basisPension.changes and any scheme changes to your(a Contracted-out Mixed BenetYour employees may, depending on theiremployees. There is a fact sheet available(COMB) scheme)?For molevel of earnings, start to build upon the website www.direct.gov.uk whichA. No further National Insurance rebatesinform re entitlement to the additional State Pension you can give to employees to provide them will be payable for the period beyond theation a abolition date for employees contracted outretirem boutinstead.with information on what the abolition of ent plaYou will no longer be required to makecontracting out may mean for them.on a dened contribution (money purchase)please nningbasis. Members contracted out on a denedcontacthe minimum payment contributions intodiscuss t us tobenet basis are not affected.your contracted-out occupational pensionYou should consider discussingThe certicate for this scheme will y require ourscheme. these changes with your remain valid only for the section of the mentsBoth you and your employees will payprofessional nancial adviser.scheme contracted out on a dened benet.the standard rate National Insurancebasis. Your scheme will not need to applycontributions instead of the reducedfor a new dened benet contracting-outcerticate as only the contracted-outcontracted-out rate.dened contribution part of the COMB willbe cancelled after abolition.89 6. Q&A Can I gain tax relief? Just like other pensions, everyone including non-earning spouses, can gain basic rate relief on payments into a SIPP. High earners obtain more relief as they complete their tax returns, subject to various limits. 25 per cent of the value of your SIPP can be taken as tax-free cash to spend on anything you SIPPs There are a number of ways of saving for retirement and various types of pensiontax-free lump sum the remaining 75 per centcan be taken gradually as an income or as like after you reach 55 years of age. plans. The Government believes retirementadditional lump sums. Both are subject to What happens to the rest of mysavings are so important that it offersyour tax rate at that time, but this may be savings?generous tax benets to encourage people potentially a lower tax rate than the one you This is where SIPPs can prove veryto make their own pension provision. It is currently pay, depending on your attractive. You are no longer requiredalso the case that you may be able tocircumstances at the time. to spend the remaining 75 per cent of contribute into more than one pension, you Growth your fund on an annuity or guaranteed Investing could contribute to a Self-Invested Personal UK pension fund investments grow free of income for life, when you retire. SaversPension (SIPP) as well as to your companyincome and capital gains tax, except for the can manage their own SIPP to meet pension scheme for example.10 per cent tax credits on UK dividends their changing individual needs. As an example, you may still hold high- Pension wrapperwhich a pension scheme cannot reclaim. yielding bonds, shares and funds to A SIPP is basically a pension wrapper, it Where tax has been deducted at source on in a recession deliver an income without relinquishing holds investments and provides the same tax income within a pension fund like rents, ownership or control of your capital, advantages as other personal pension plans. coupons and interest, this is reclaimed by the after you have retired. SIPPs allow you to take a more activepension provider and the tax credited back Do I have to manage the fund? involvement in your retirement planning. into the pension fund. Assets held in the No. Some SIPP providers offer access toYou generally choose a number of different fund that carry no tax at source like discretionary fund management investments, unlike some other traditional Government gilts or offshore investments,The possibility of recession and abalance sheets with some exposure to bad debt, and bank services as an option, so a professionalpension schemes that can be more are not subject to tax declaration orregulation is still ongoing and unclear. However, Banks could see can pick stocks and shares for you; restrictive, SIPPs offer greater choice over payments. second credit crunch will create aa sharp rally in their share prices should the economic picture be subject to the terms of your agreement. where your money is invested.Investment managing Are there drawbacks? You could consolidate your retirement You cannot draw on a SIPP pension beforeterrifying outlook for investors. better than expected and the Euro zone crisis be averted.However, this is highly uncertain, and as such banks appear a high SIPPs are not suitable for people who savings and bring them together by age 55 and there are usually additional costs Nerves of steel and a strongrisk proposition. do not wish to take any interest in ortransferring in other pensions into your SIPP. involved when investing. You may need to responsibility for their retirementconstitution will be required by Unless you expect the UK to enjoy a strong cyclical recovery, the This may make it easier for you to managespend time managing your investments. most sensible policy seems to be to concentrate on defensive savings. Cheaper options, such as your investment portfolio. SIPPs charge higher costs than a stakeholderinvestors in 2012. The turbulence businesses. These are companies which survive and thrive in bad Stakeholder Pensions might prove more appropriate, as they require less Tax relief and you may pay two sets of managementwill continue until some denitiveeconomic conditions. They tend to supply goods and services thatpeople nd hard to cut back on even when incomes are being attention.SIPP investors receive tax relief on their fees for the wrapper and the underlying action is taken to save the eurosqueezed, these sectors are pharmaceuticals, utilities and contributions, which could deliver benetinvestments. Will my employer contribute? This will depend on your employer, so from between 20 per cent to 50 per cent tax(or it is allowed to fail). telecommunications etc. Many pay attractive dividends to relief depending upon your own Forecasts for the euro zone suggest a second recession is widelyinvestors and have strong balance sheets showing large amounts ask them. If you have access to a company or occupational scheme, and circumstances.predicted as austerity measures take effect. The UK exports 40 perof cash.The value of your investment and the The yields on offer make these areas an excellent choice for your employer is willing to contribute Most returns from investments within aincome from it can go down as well as cent to the euro zone, so this is a worry for our future. A forecast towards that, it is advisable toSIPP are free of income and capital gains tax. by the Centre for Economics and Business Research (February equity income managers. Net yields on average of 4-5 per centup and you may not get back the are common, and any income can be reinvested to boost growth investigate that option rst. However,However, unlike dividend payments received 2012) predicts the UK economy will shrink by 0.4 per cent thisoriginal amount invested. The Tax if not needed. With interest rates likely to remain low, it is thought you can have SIPPs and companyoutside a SIPP, there is no 10 per cent taxyear, but could be as much as 1 per cent if the euro zone were to pensions at the same time. benets of SIPPs will depend on yourthe yields on offer from this type of company could prove popular credit applied to dividend payments within a break up.personal circumstances. The rules of with income-seeking investors, pushing prices even higher. One When is a good time to set up a SIPP. Maintaining international condence is key to the UK so it canSIPPs may change.SIPPs are not suitablemain consideration to remember is that unlike cash, stock market SIPP?retain its triple-A credit rating. Failure to do so would result in a Tax advantages for everyone. Please seek Independentinvestments will uctuate in value and so neither income nor As soon as possible, the sooner you getdramatic rise in the UKs borrowing costs, and a potential SIPPs are long-term savings vehicles withFinancial Advice if you are unsure if theycapital is guaranteed. started, the longer your money has the debt-trap. Only time will tell who is right. potential to grow and work in yourcertain tax advantages, so you should be are right for you. prepared to invest your money until at least What does this mean for investors?The value of your investment and the income from it can favour.Whether we slip back into recession or not, growth will probably age 55. There are various options for taking go down as well as up and you may not get back the If you have any doubts about the remain low. This means, it may be wise to avoid investing inoriginal amount invested. Past performance is not a guide benets from your SIPP that you should be suitability of a SIPP or you need furtherbusinesses which rely on strong economies like retailers andto future performance. Please contact us for further aware of. Generally, you can receive up to 25 advice, you should seek advice from alifestyle providers, Bank investing is also difcult to justify. Theinformation or if you are in any doubt as to the suitability per cent of the pension fund value as a suitably qualied nancial adviser.prospects for the sector remain unclear. Businesses still haveof an investment.1011 7. Company Succession PlanningTo ensure that your business survives after Failure to separate your business with that everyone involved with the plan isyou, try to avoid the following mistakes. your estate plan aware of the change.Failure to plan Many small business owners think that they Failure to understand familyThere is no reason you cant startcan simply leave the business to their spouseIts important when the business is closelypreparation now with a series of plans at any or heirs when, in fact, the business comprises held in the family to separate the familypoint in the life of the business or even virtually all of their net worth. By leaving the dynamic from the business dynamic as muchbefore the business even begins.business to one person, youve excluded allas possible and to recognize that theseother heirs from inheritance.different forces are at work.Failure to obtain the correct valuationYour business succession plan will likely Failure to plan for health problemsFailure to diversify the owners netinvolve selling the business or passing it to It is important to think of disability planningworth from the business as a wholeyour heirs, it is important to know what theand insurance into your business successionMany owners hold virtually all of their netappropriate sales price or inheritance valueplan. What is your plan if youre injured andworth in their business and nd themselvesof the business is, so that plans for its unable to work? Who would run thein a difcult situation in a businesspurchase for paying estate taxes can be business? Know the difference betweendownturn. After they are gone, their heirsmade accordingly. power of attorney for asset management and may be forced to sell the business, when the It is wise to have updated valuations of a living trust. The power of attorney givesmarket is poor.the business to hand and have thatlegal authority of your affairs over to another Failure to consider contingenciesinformation available to your family or person should you become incapacitated, but If youve decided to leave your business tointended successors. Should the businesshas minimal guidelines on how assets should an adult child, what will happen if that adulthave to be sold in an unexpectedbe managed. A living trust allows for more child predeceases you?circumstance, rather than passed on, thecomplete instruction to be available. On thePlanning can be the difference betweenknown valuation of the business, as well as insurance side, consider the value of having a mortality and immortality of your businessthe loans or debts owed, having the personal disability income protection plan. and the goals you set for it. With properinformation readily available will help the Failure to identify key employeesplanning, your business will survive you andprocess.Ensure key employees remain with the continue your legacy for years to come.Failure to organise the successorsbusiness during any succession transfer byThis often involves a tough analysis of sharing your plan with them. This ensureswhether family members have the skill set torun the business or whether your keysuccession candidates may have beenworking in the business.For more information on any subject that we have covered in this issue, or on any other subjects,please tick the appropriate box or boxes, include your personal details and return this section to us. I Financial wealth check Name I Tax efcient investments Address I Pensions Postcode I Tax planning Tel. (home) Tel. (work) I Critical Illness cover MobileEmail I Protection I Mortgage/Re-MortgagePlease return to: Copperfields Financial Management Ltd, Basepoint Business Centre, Oakfield Close, Tewkesbury, Gloucestershire GL20 8SD. I Healthcare 26 Kings Hill Avenue, Kings Hill, West Malling, Maidstone, Kent ME19 4AE. I Director and employee benet schemesYou voluntarily choose to provide your personal details. Personal information will be treated as confidential by us and held in accordance with the Data Protection Act. You agree that personal information maybe used to provide you with details and products or services in writing or by telephone or email.This magazine is for general guidance only and represents our understanding of the current law and HM Revenue and Customs practice.We cannot assume legal responsibility for any errors or omissions it might contain. Level and bases of, and reliefs from taxation are thosecurrently applying but are subject to change and their value depends on the individual circumstances of the investor. The value ofM8trix Media Limited, Basepoint Business & Innovation Centre,investments can go down as well as up, as can the income derived from them. You should remember that past performance does notGreat Marlings, Luton, Bedfordshire, LU2 8DLguarantee future growth or income and you may not get back the full amount invested.