Good Morning
And welcome to what is now the 7th issue of the quarterly email we produce. As a reminder, this is exclusively for those of you that have been kind enough to put your trust, faith and money in the hands of IFS, and are paying for our services. This is a part of that package, and is designed to be more of a generic circular to keep you informed of financial events, snippets of information and generally keep everyone updated.
Should you no longer wish to receive these mails, please feel free to reply as such.
Anyway, here we go. Subject title could quite easily have read ‘tax year end’, however I did want to maintain the previous themes. There is also a section at the end with regard to our fees, so please do if you can stay awake long enough, read the entirety of this mail.
ISA’s
April the 5th is the end of the financial year, as I’m sure you’ll all be aware. Does seem an odd date doesn’t it! Anyway, if you haven’t yet used your annual allowance for investing in to an ISA, then you have the best part of 4 weeks to do so, before next years allowance becomes available. Predominantly, there are two types of ISA. The annual amount you can invest is £20,000.00, and the general rule of thumb is, if this is money that you require access to, or are very risk averse with, etc. then follow this link Money Saving Expert – Best Cash ISA – This is something Martin Lewis is really good at. Your £20k (or however much it is) is safe, can not reduce and you will generally earn a fixed rate of interest for a specified period of time. Not forgetting, that the annual limit is per person, so for a couple, you could invest £40k between you. Which, if done pre and post 5th April, then becomes £80k between you! And you don’t get taxed on the interest. This is why we generally recommend an ISA as a good starting point for any portfolio investment.
What I hear you say, if you didn’t fall into the brackets mentioned above, and were prepared to either take more risk with a view to earning more interest, or were prepared to lock an amount of money away for a period we would suggest as a minimum 5 years? Then you could fall into the bracket where we can recommend.
Remembering, that you’ll then be in an ISA environment where you could earn greater returns than the ISA’s above will provide, however your initial investment could potentially go down, as well as up. This is why we suggest a minimum investment timeline of 5 years, so as you can iron out the potential up’s and down’s of these investments. Works in exactly the same way that your pensions do (Remember the uncomfortable conversations we were having 3 – 4 years ago when values had fallen), and all of the previous individual limits still apply.
Pensions
Similarly, there are annual limits on pension contributions, that apply until the end of the tax year. That limit increased the year before last, and is now £60,000.00. Once again, this is per person, so if you used pre and post 5th April, could be £240,000 you can invest into pensions as a couple (This figure is dependent upon differing factors). I am a massive advocate of pension contributions, as many of you will know. First and foremost, you are investing for your future retirement. I do encourage you to think about what your retirement will mean to you? In addition, the tax advantages, well even my Accountant friend sings their praises.
The downside? Once in a pension environment, your money is locked away and you can’t access until at least age 55. In fact, for the younger one’s of you out there, it increases to age 57. I personally believe if you want to invest, this is the place to be. The exceptions to this is if you want access to your money before this age, that’s when an ISA is more suitable. Ideally, you’d have both.
Worth an additional mention, those of you with Limited Companies, and the most popular year end date being the 31st March, so long as a contribution leaves your business bank account by this date, then any contribution into personal pension plans will attract Corporation Tax relief for this year. Would you rather your hard earned money invested for you, or given to HMRC. Similar limits apply, and of course first and foremost you are investing for your retirement, but the tax relief advantage is an added bonus – literally!!
Inheritance Tax (IHT)
I mentioned above a downside to pension contributions. Well potentially, there will become another in 2027. Pensions have previously generally been outside of your Estate for Inheritance Tax purposes. Not any more. If passed through legislation, any unused value of your pension plan will become subject to IHT upon death. Not ideal. And with property prices having increased over the years, even with the thresholds in place before you become liable to IHT, more and more people could fall into an IHT trap.
But fear not! Within a meeting I attended in London this week, there is a potential solution, to at least be considered. I won’t massively go into this here and now, rather just to mention that if you believe this could be you, let’s have a chat about it at your next annual review. There is plenty of time.
IFS Fees
As I mentioned above, the time has come where we’ve had to review the level of our fees applied to your investment plans. Our costs are rising similar to everyone else, and it’s the first time really since IFS began it’s Limited Company status 11 years ago now that we have done so. It’s only a small increase in most cases, and hopefully you do believe we’re worth it! These costs are charged so as we can hold the servicing right’s to look after your investments, offer our continued advice and apply any transactions accordingly. As well as the annual reviews that we of course conduct. Charges are applied against and applicable to the value of your investments, and moving forward will be based as follows;
- £0 – £49,999 will be calculated at 1.00%
- £50,000 – £99,999 will be 0.75%
- £100,000 – £749,999 will be 0.60%
- £750,000+ will be at 0.50%
To make some sense of this, we would like most people to fall into the third bracket. Let’s take a value of £150,000. At 0.60%, calculates at an annual charge of £900.00, broken down to £75.00 per month, which is generally deducted from the value of your pension and paid to us. That is probably ‘break even’ costs for us, when we calculate the cost of the service we offer.
I hope everyone understands this, not ideal, but it will enable me to remain profitable and viable.
IFS
What news lately IFS? Well, as always, you lot keep me really busy. I’m so lucky and thankful. I do have a lot on my plate, and although my OCD doesn’t let me not deal with requirements unquickly (is that even a word!) there are times and instances where I’m just not able to respond as quickly as I would like to. Please bear with me, I will never not intentionally unrespond (Another word!!).
And for those of you who know my wife Kirsty, after just 9 month’s working on the retail side for Virgin Atlantic, she has already achieved a promotion and has started a new position based out of their HQ in Crawley.
Needless to say I am very proud, and thank you to everyone who has already wished her all the best.
So that’s it from me you’ll be pleased to hear. Quite a long version this time for which I make no apologies. Hopefully I’ve provided some education and food for thought. Have a great weekend, and look forward to seeing you all some time soon.
