MANAGING YOUR MONEY

AND IMPORTANT FINANCIAL UPDATES...

SUMMER 2018

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CONTENTSMANAGINGYOURMONEY

What does retirement planning mean for you? The rise of the part-time pensioner03

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Early retirement could disappear by 2034, so it's time to plan

Inheritance tax - where are we now?

Drawdown is increasingly a popular choice, but advice is essential Planning how to take your money

Saving for your child's education - £17,000 a year on average Why you should avoid protection procrastination

08 Contact us

WHAT DOES RETIREMENT PLANNING MEAN FOR YOU?

Retirement is often seen as the end of onechapter and the beginning of the next.

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Depending on your circumstances, you may want totake the opportunity to completely change yourlifestyle, move home, start a new business, travel theworld, learn a new skill or simply put your feet up.And like all big projects in life, the more time you caninvest in thinking it through, the better the outcomewill be. MANAGING YOUR MONEY Getting financial planning advice before accessingyour pension pot can go a long way to help alleviatefinancial worries later on in life. The changes in legislation have given those about toretire far greater freedom when it comes to usingtheir pension pot, but freedom brings with it greaterindividual responsibility. Low interest rates and 

periods of market volatility can make incomeplanning for the future a difficult task withoutprofessional advice. BUDGETING FOR YOUR LIFESTYLE It makes sense to draw up a budget for yourretirement. How much money will you need? Youcould choose to give up work altogether and tick offthe items on your bucket list. You may decide todownsize from a family home and take some equityto bolster your income. You may want to help children or grandchildrenfinancially by paying for school fees or helping themwith a deposit for a home of their own. You will alsohave to plan for a time when you might need to payfor help around the house, and for the likelihood ofneeding medical and nursing care in your lateryears. Taking professional advice can help bycreating a roadmap for your financial future.

THE RISE OF THE PART-TIME PENSIONER

There was a time, not so long ago, when manypeople's lives fell neatly into three distinctstages - they were educated, embarked upona career and then retired. The date at whichpeople chose to retire was generally in linewith their state retirement age, meaning 60for women and 65 for men. Today, retirement no longer means clearing yourdesk on your 60th or 65th birthday and facing afuture without work and the benefits that go with it. Increasingly, people are adopting a more gradualapproach to retirement. 'Pretirement', the process of gradually reducing thenumber of hours worked, is now a widely-acceptedconcept which generally begins in people's 50s andcan run into their 70s. WHY PEOPLE CONTINUE TO WORK The key reasons people adopt this approach includedoing so because they enjoy the work theydo, they're fit and healthy and feel too young to

stop, or because they need to do so to boost theirretirement income. As the nature of retirement continues to change, it'simportant to have the right retirement plans in placeso that you can choose the path to full retirementthat suits you best. Taking financial advice in theyears leading up to retirement will ensure that whenthe time comes, you can make the best use of yoursavings and pension funds and select the bestretirement income solution for your circumstances.

CAN YOU AFFORD TO PRETIRE? EARLY RETIREMENT COULD DISAPPEAR BY 2035*, SO IT'S TIME TO PLAN

In planning for retirement, people canunderestimate the odds of reaching a greatage and may not be adequately preparedfinancially for the years ahead.

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That's why it makes good sense at all stages of yourworking life to keep an eye on your pensionarrangements. You need to think about the following key questions: TAX-FREE SAVINGS FOR INDIVIDUALS

ISA allowance £20,000

Although it has recently been increased, the statepension is still only a basic safety net for mostpeople, and not enough on its own to guarantee acomfortable retirement. As part of the government's drive to ensure we allmake adequate provision for retirement, employersare now legally obliged, subject to age and earningthresholds, to automatically enrol their employeesinto a qualifying pension scheme, where employeesand employers make monthly contributions. TAKING ADVICE CAN HELP YOU MEET YOURGOALS The need for professional advice tailored to your

Junior ISA allowance £4,260

Lifetime ISA £4,000

Help to BuyISA £2,400

(counts against £20,000 ISA Allowance)

(you can contribute up to £200 per month*)

* Additional £1,000 in 1 year

When do I want to retire? How much will I need in income and savings tofund my lifestyle in retirement? Are my plans on track? Am I currently savingenough?

individual circumstances has never been more important. If you're concerned about your pensionarrangements, we're happy to review your plans and help you keep on track for a financially comfortableretirement. *According to analysis by Aviva, the number of people retiringbefore they reach age 65 is decreasing rapidly and by 2035, almostno one will be able to retire early.

INHERITANCE TAX - WHERE ARE WE NOW? If ever there is a UK tax that needed a majoroverhaul, then Inheritance Tax (IHT) must be aprime candidate. Many families will thereforebe delighted to hear that the Chancellor,Philip Hammond, has written to the Office ofTax Simplification (OTS) asking them to putforward proposals for the reform of IHT "toensure that the system is fit for purpose andmakes the experience of those who interact withit as smooth as possible."

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At the start of the year, UK shareholders saw asharp increase in dividends as global pay outshit a record high. Global dividend pay outssoared 10.2% to $244.7bn, making it a record-breaking Q1 for shareholders across the globe. According to investment firm Janus Henderson,dividend payments to shareholders in the UK inthe first quarter of the year grew by over 21%to $18.7bn (£16.4bn) from $15.4bn (£13.5bn) inQ1 last year. The report outlined that thisfigure was lifted by a variety of factors,including a special dividend from Sky, theaddition of new companies to the index andBritish American Tobacco's first quarterlydividend. Adjusted underlying growth, takingthese factors into account, was a more modest4.2%. Continental Europe registered dividend growthof 3.9%, whilst an 8% increase in pay outs wasexperienced in the US, boosted by PresidentTrump's corporate tax cuts. In the first threemonths of the year, US companies increaseddividend payments by 5.2% to a record $113bn,with financial, healthcare and tech stocksrecording the highest growth. Shareholdershave benefited as corporate profitability rises.

RAISING THE THRESHOLD ACROSS THE BOARD Given the individual threshold for IHT has remainedat £325,000 since 2009, many would argue that,rather than adding another layer of complicationsuch as the RNRB, the simplest and fairest thing tohave done would have been to increase the Nil RateBand to a limit that bore some correlation with therise in house prices. Hopefully, that's one of manythoughts currently crossing the minds of the team atthe OTS. His letter asked the OTS to look at the technical and

administrative issues associated with IHT, theprocess of submitting returns and paying the tax. MrHammond also called for a review of the issuessurrounding estate planning, and whether thecurrent framework causes 'distortions' to taxpayers'decisions regarding investments and transfers. INCREASING PROPERTY PRICES GIVE RISE TOHIGHER IHT In the 2016/17 tax year, HMRC raised a hefty£4.84bn in IHT, brought about largely by risingproperty prices that are seeing more and morefamilies drawn inexorably into the tax net, despitedoing nothing more than owning their home. IHT has certainly made several aspects of financialplanning more complex. With the Bank of Mum andDad currently a major source of funding for housepurchases for first-time buyers, the operation of theseven-year rule is becoming a key issue that needscareful consideration in effective tax planning. Theannual tax-exempt gift allowance of just £3,000arguably needs a major overhaul, as does the out ofdate amount of £5,000 that can be given away tooffspring on their marriage. Since the advent of pension freedoms in 2015, it hasbecome more tax-efficient to pass on a pension thanan ISA, meaning that some people have foundthemselves viewing their retirement savings in awhole new light. More controversial still was the recent introductionof the Residence Nil Rate Band (RNRB) which is bothcomplex in its application and divisive in itsoutcomes. Former MP and now TV personality, AnnWiddecombe, was particularly incensed that underRNRB rules she wouldn't be able to benefit byleaving her home to her niece, as the regulation onlycovered direct descendants, which she doesn't have.

DIVIDENDS RISE FOR SHAREHOLDERS

IF YOU WOULD LIKE ADVICE ORINFORMATION ON ANY OF THE AREASHIGHLIGHTED IN THIS NEWSLETTER,PLEASE GET IN TOUCH

WHEN YOU DO RETIRE, HOW WILL YOU TAKE YOUR MONEY? DRAWDOWN IS INCREASINGLY A POPULAR CHOICE, BUT ADVICE IS ESSENTIAL There are risks involved both in taking out toolittle and too much.

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If you draw too little you might not have sufficient tocover your living expenses. Taking out too muchcould have tax implications and also restrict yourremaining pension pot's ability to provide an incomethroughout your retirement. This is where your financial adviser can providevaluable input, helping you plan your drawdownstrategy and ensuring that it's kept under regularreview.

PLANNING HOW TO TAKE YOUR MONEY

We unravel a couple of terms that you mayhave come across and be unclear about. ANNUITIES When you retire, you can choose to take some or allof your pension pot as an annuity; an insuranceproduct that provides a guaranteed income for life.One of the benefits that annuities can provide issecurity. On the downside, should you die early, theresidual value of the annuity dies with you; there isusually no return of capital to your estate. DRAWDOWN With income drawdown, you take a retirementincome direct from your pension pot while leavingthe rest of the cash invested, providing anopportunity for future growth. There is no minimumamount for drawdown, so you could, for instance,take your 25% tax-free lump sum and choose toleave the remaining funds invested. You can also 

move funds into drawdown stages, known as partialor phased drawdown. The 25% tax-free amount  doesn't have to be taken at once on retirement -smaller amounts can be taken over time, each with25% tax-free. Once in drawdown you can access funds as youneed them, knowing how much money you will getevery month.

SAVING FOR YOUR CHILD'S EDUCATION - £17,000 A YEAR ON AVERAGE

According to the annual census of leadingindependent schools, the average fee forattending a private school is now over£17,000* a year.

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Despite the rising cost of fees, private educationcontinues to remain popular. IT PAYS TO PLAN EARLY After buying a home, school fees could be a family'slargest expense, especially if you have severalchildren to put through school and college. Startingto save from the day the children are born andencouraging other family members to contribute toaccounts like Junior ISAs can all help in building upthe amount needed in fees. If you have more thanten years to go before schooling starts, then it'sworth considering stock market investments. Whilstyour money will be exposed to risk, it also has thepotential, although not the guarantee, to outstripthe returns you would get in an average savingsaccount. Parents can make use of their annual ISA allowance

(£20,000 for 2018-19). Money invested in an ISAgrows in a tax-free fund and can be withdrawn tomeet fees without incurring tax. Increasingly,grandparents are looking at passing money on totheir grandchildren during their lifetime as a way ofreducing the value of their estate for inheritance taxpurposes, either by giving a lump sum or setting upa trust for the benefit of the child. If you're considering paying for your child'seducation, taking professional advice can help youplan effectively for the years that lie ahead.

WHY YOU SHOULD AVOID PROTECTION PROCRASTINATION

People put off buying life insurance for avariety of reasons, and they shouldn't. Each year, insurers pay out millions of pounds tofamilies to help ease the financial strain caused bylife's unexpected events. Here are a few reasonspeople often give for not taking this vital step. IT'S TOO EXPENSIVE? Many people are surprised to learn that cover is farless expensive than they'd first thought. Plus, it's asmall price to pay when you consider that having noinsurance would cost your family considerably moreand could result in them struggling for money. I'M FIT AND WELL! No one is immortal and buying protection policieswhen you're in good health means you'll find iteasier to get a cost-efficient policy that meets yourneeds. If you leave it until you're older and have 

health problems, your premiums will be higher. BUT I DON'T HAVE KIDS If you don't have kids but do have loved ones thatdepend on you financially - your spouse, partner,parent or sibling - then a payout from a policy wouldhelp to alleviate their financial burden. I GET COVER THROUGH MY JOB While you may get insurance as part of youremployment package, it may not be enough for yourneeds, and the policy won't move with you if youchange jobs. I DON'T HAVE THE TIME TO FIND THE RIGHT PLAN It can be hard to assess how much life insurance youneed on your own, but that's where we can helpyou. Don't let procrastination hold you back, get intouch.

*Independent Schools Council, 2018

CONTACT US

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Tait Walker Wealth Management have a teamof independent financial planners. Ouradvisers are fully qualified to assess yourindividual needs and provide tailored advice,and we would be delighted to offer you a freeinitial consultation. T: 0191 285 0321 E: advice@taitwalker.co.uk

It is important to take professional advice before making any decisionrelating to your personal finances. Information within this newsletter isbased on our current understanding of taxation and can be subject tochange in future. It does not provide individual tailored investment adviceand is for guidance only. Some rules may vary in different parts of theUK; please ask for details. We cannot assume legal liability for any errorsor omissions it might contain. Levels and bases of, and reliefs fromtaxation, are those currently applying or proposed and are subject tochange; their value depends on the individual circumstances of theinvestor. The value of investments can go down as well as up and you may not getback the full amount you invested. The past is not a guide to futureperformance and past performance may not necessarily be repeated. Ifyou withdraw from an investment in the early years, you may not getback the full amount you invested. Changes in the rates of exchange mayhave an adverse effect on the value or price of an investment in sterlingterms if it is denominated in a foreign currency. Taxation depends onindividual circumstances as well as tax law and HMRC practice which canchange. The information contained within this newsletter is for information onlypurposes and does not constitute financial advice. Tait Walker Wealth Management is a trading style of Tait Walker FinancialServices Ltd which is authorised and regulated by the Financial ConductAuthority.