19 February 2010

Pensions for Children

That sounds like a contradiction in terms, I’m sure you’d agree. But a client has highlighted to me the value of starting a pension early – and that means as soon after birth as possible – and I thought it was worth passing it on to a wider audience.

The source of the information was a recent Saturday Telegraph article, and it highlights what keen investors will know about – let’s call it the miracle of compounding.

Basically, if you (on behalf of the new-born baby!) contribute the maximum allowed for a non-taxpayer into a pension plan (yes, even children can have one) - that's £2,880 net per year – for the first 18 years of their life, then they could have a pension pot of £1.8m. That’s worth having! (although the real value would be less due to inflation during their lifetime).

There are potential Inheritance Tax advantages for you, too, particularly if you are older (perhaps a grandparent), since that amount fits into your annual allowance for gifts of £3,000. However, if you have more than one grandchild you have to make sure that you live at least seven more years to take full advantage.

9 February 2010

Capital Gains Tax to increase?

Political parties are fighting over what public spending to cut, and where to raise taxes, but there's general agreement that both of those have to happen. One tax area which seems ripe for attention is Capital Gains Tax (CGT).

The current flat rate of 18% was introduced only in 2008, but the rate feels lower than the general tax environment. So an increase after April 2010 seems a good possibility, and the annual allowance is unlikely to increase - effectively a stealth tax. So what could you do to prepare?

One thing you are unlikely to be able to do anything about is second (and third, ...) homes. If a property which you rent out has increased in value since you bought it, then you will have capital gains tax to pay when you sell. However you are unlikely to start thinking about selling now if you weren't already, and selling in a short space of time in the current market seems unrealistic.

Other than that, investments which are not protected in an ISA (or some other) tax wrapper are potentially vulnerable to CGT. Selling them now would be a good thing if you had considered selling in the near future. Making use of your annual ISA allowance is generally worthwhile since it will avoid CGT in future.

Transferring assets between spouses may be appropriate prior to selling - there is no CGT implication of doing that transfer, and you could make use of two lots of the annual allowance when you finally sell.

Other than that, taking professional advice is good advice - remember that this blog does not provide personal financial advice.

2 February 2010

A New Start - Prime Time Financial

After something of a delay while the Financial Services Authority sorted out their paperwork(!), I am now providing financial advice as "Prime Time Financial" - part of Keystone Financial Ltd (FSA registration number 501917 should you care to check).

Feel free to get in touch ... click on "View my complete profile" on the right for email address and Prime Time's website. I'm happy to talk to anyone, but my focus will be on the over 50's, pre- and post-retirement.

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