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City Reach 5 Greenwich View Place London, E14 9NN
020 7537 6934
Summer Newsletter 2020
Financial planning is for the long termStaying afloat during volatile times
Tips to keep your pension ontrack during difficult timesIt would be natural for you to haveconcerns about the financial climateand your pension.
It’s worth remembering that pensionsare a long-term investment and it’srarely a good idea to make changesduring a volatile time.
Women are less likely to have aprivate pensionWomen still lag behind men when itcomes to pensions and those notpaying into a private pension canfind themselves under prepared fortheir retirement.
Reclaiming statutory sick payThe Government has implementedlegislation to allow small andmedium-sized businesses andemployers to reclaim Statutory SickPay (SSP) paid for sicknessabsence due to COVID-19.
Tapered Annual AllowanceChangesDid you miss the tapered annualallowance changes in the Budget?
The threshold income levelincreased in April from £110,000 to£200,000 and the adjusted incomethreshold increased from £150,000to £240,000.
Welcome to the summer edition of ourquarterly client newsletter, whichprovides topical financial articles.
Please let us know if you’d like to discuss your financialsituation or would like to find out more about our services.
Inside this issueInside this issue
If you have any questions in relation to the articles containedwithin this newsletter please do not hesitate to contact usand we will be happy to provide any guidance required.
Whatever your financial need, we are always pleased tospeak with you.
Call us on 020 7537 6934 [email protected]
Any information in this brochure does not constituteadvice and should not be acted upon without taking
professional guidance.
Brexit and the Coronavirus have addeduncertainty to the financial market. It wouldonly be natural to have concerns about thefinancial climate and your pension. It’s worthremembering that pensions are a long-terminvestment and it’s rarely a good idea to makechanges during a volatile period.Making decisions based on what is happeningin the short term can be a risky thing to do. Itmight be tempting, for example, to move allyour investments into cash or other lower-riskinvestments for a while – but in doing that, youmight miss out when the value goes back up,meaning that you could lose out in the longerterm.
So, what can you do to keep your pension ontrack?
1. Maintain or even increase contributionsIt might be tempting to reduce pensioncontributions but any break however shortcould have a long-term impact. If you havespare income, putting it into a pension couldbe one of the most tax-efficient ways ofinvesting it.
If you find you can't continue to makecontributions, be sure that you understand thelong-term impact and what that could mean foryour retirement.
2. Don't make any quick decisions aboutyour financesInvestments can fluctuate in value, and it islikely the investments in your pension will riseand fall at different rates.
You might be unhappy with your currentinvestments and how they’re currentlybalanced to meet your risk profile. If you arethen, although it can feel difficult, sitting onyour hands could be the best thing to do.If you’re older and closer to retirement, youmay have seen your funds ‘lifestyled’.Lifestyling is an investment option that youmay be offered. It is designed to lock ininvestment growth as you near your retirementage. This means your pension will have beenmoved into predominantly less risky funds andinvested in ‘safer’ places such as in cash, gilts
or bonds, which are lower risk and usuallyoffer a fixed rate of return.While some providers offer specific ‘lifestyle’funds, others will have a lifestyle option thatuses their mainstream funds to achieve thesame process.
Now, more than ever, it is important to thinklonger term, consider your options and seekadvice and guidance before making anydecisions.
3. Review the way your pension pot isinvestedIf you have a defined contribution personal orworkplace pension, then you get to choose theway your pension pot is invested.
Typically, this involves choosing from a rangeof funds offered by your pension provider.These funds will be weighted differently be-tween various types of assets, which offer dif-ferent levels of risk and potential return.The longer your money will be invested for, themore scope you’ll have to take any ups anddowns in asset performance in your stride.
4. Consider reducing withdrawals
Falling markets could be damaging for thosedrawing from capital – which means sellinginvestments to fund your income withdrawals.The issue is, if your investments don’t thengrow by at least as much as you withdraw(regardless of market conditions), yourpension could run out sooner than you think.
Tips for keeping your pension on track during volatile times
T
5. Delay retirementIf you’re just about to retire or getting close to retirement, it might be worth considering delaying orphasing in your retirement. Many people choose to phase into retirement gradually, rather thanstopping work completely.
Adding a few years to your retirement date can remove the immediate term worries about cashingin your investments to generate income during a dip in the market.
6. Top-up your pensionAdding more to your pension pot could help to restore your income sustainability to its previouslevel. Some people may decide to invest now when asset prices are depressed in the hope thatthey can find a bargain. But this will mean finding money to add to your retirement savings, whichwon’t be possible for everyone.
7. Speak to your financial adviserIf you would like to learn more about our pension services or any other aspect of your financesplease contact us. We are here to offer both existing and new clients advice when it’s needed.Speaking to us about pension concerns you may have can help you understand the long-termimpact of the current situation and create a solution where one is needed.
Please note: A pension is a long-term investment. The fund value may fluctuate and can godown, which would have an impact on the level of pension benefits available. Your pensionincome could also be affected by the interest rates at the time you take your benefits.
The tax implications of pension withdrawals will be based on your individual circumstances,tax legislation and regulation which are subject to change in the future.
Tips for keeping your pension on track during volatile times
Women are less likely than men to have a private pension
Women are less likely than men to have aprivate pensionWomen still lag behind men when it comes topensions and those not paying into a privatepension can find themselves under preparedfor their retirement.In the past, many workers missed out on valu-able pension benefits, because their employerdidn’t offer them a pension or they didn’t applyto join their company’s pension scheme. Auto-matic enrolment helped by making it compul-sory for employers to automatically enrol theireligible workers into a pension scheme. Theemployer must also pay money into thescheme. This included those (who ordinarilywork in the UK) aged between 22 and StatePension age who earn at least £10,000 peryear.
Women are still less likely than men to have aprivate pension, despite the new autoenrolment rules, perhaps missing out onworkplace pension contributions when theyare caring for children or elderly relatives ornot earning enough to qualify because theyhave a low paid or part time job.
Benefits of having a pensionPensions might seem complicated, but thebasic idea is simple. It’s worth understandingthe benefits of saving into a pension scheme,because your State Pension, whilst providinga foundation, may not be enough to live on.Making the right pension choices can have apositive effect on your lifestyle when you areready to retire.
Once you’ve decided to start saving forretirement, you need to choose how you’regoing to do it.Pensions have a number of importantadvantages that will make your savings growmore rapidly than might otherwise be thecase.A pension is basically a long-term savingsplan with tax relief. Tax relief on pensionsmeans some of your money that would havegone to the government as tax goes into yourpension instead.
If you save through a scheme known as adefined contribution pension scheme yourregular contributions are invested so that theygrow throughout your career and then provideyou with an income in retirement.Generally, you can access the money in yourpension pot from the age of 55.
How tax relief can help top up yourpension potOnce your income is over a certain level, thegovernment takes tax from your earnings.You can see this on your payslip. If you putmoney into a pension scheme, it qualifies fortax relief.This means that as well as the money you’reputting in, some of your money that wouldhave gone to the government as tax now goesinto your pension pot instead. And with 'reliefat source' pensions such as PPP/GPP evenmembers who don't pay tax get 20% tax reliefon gross contributions up to 100% of theirearnings or £3,600 if more (not currently truewith 'net pay' occupational schemes)
Reclaiming Statutory Sick Pay
Coronavirus Support for businesseswho are paying sick pay to employeesThe Government has implemented legislationto allow small and medium-sized businessesand employers to reclaim Statutory Sick Pay(SSP) paid for sickness absence due toCOVID-19. It will repay employers theStatutory Sick Pay paid to current or formeremployees.
If you’re claiming for wage costs throughthe Coronavirus Job Retention SchemeYou can claim back from both the CoronavirusJob Retention Scheme and the CoronavirusStatutory Sick Pay Rebate Scheme for thesame employee but not for the same period oftime.
The eligibility criteria for the scheme willbe as follows:This refund will cover up to two weeks’ SSPper eligible employee who has been off workbecause of COVID-19.
Employers with fewer than 250 employees willbe eligible – the size of an employer will bedetermined by the number of people theyemployed as of 28 February 2020.
Employers will be able to reclaim expenditurefor any employee who has claimed SSP(according to the new eligibility criteria) as aresult of COVID-19.
Employers should keep records of staffabsences and payments of SSP, butemployees will not need to provide a GP fitnote. If evidence is required by an employer,those with symptoms of Coronavirus can getan isolation note from NHS 111 online, andthose who live with someone who hassymptoms can get a note from the NHSwebsite.
EligibilityYou can use the scheme as an employer if:● you’re claiming for an employeewho’s eligible for sick pay due toCoronavirus
● you have a PAYE payroll scheme that wascreated and started on or before 28February 2020● you had fewer than 250 employees on 28February 2020 across all your PAYE payrollschemes● Your business is UK based
What you can claimThe repayment will cover up to 2 weeksStatutory Sick Pay starting from the first day ofsickness, if an employee is unable to workbecause they:● have Coronavirus symptoms● cannot work because they are self-isolating because someone they live withhas symptoms● are shielding and have a letter from theNHS or a GP telling them to stay at home forat least 12 weeks
You can claim for periods of sickness startingon or after:
● 13 March 2020 - if your employee hadCoronavirus or the symptoms or is self-isolating because someone they live withhas symptoms● 16 April 2020 - if your employee wasshielding because of Coronavirus
The weekly rate was £94.25 before 6 April2020 and is now £95.85. If you’re an employerwho pays more than the weekly rate ofStatutory Sick Pay you can only claim up tothe weekly rate paid.
Tapered Annual Allowance Changes
If you have a high income your annual allowance could be tapered (reduced)You’ll only have a ‘tapered’ annual allowance in the current tax year 2020/2021 if both:
● your ‘threshold income’ is over £200,000 (previously £110,000 in 2019/2020)
● your ‘adjusted income’ is over £240,000 (previously £150,000 in 2019/2020)
From April 2020:
● the threshold income level increased from £110,000 to £200,000● the adjusted income level increased from £150,000 to £240,000● the minimum annual allowance reduced from £10,000 to £4,000
Your annual allowance is the most you can save in your pension pot(s) in a tax year (6 April to 5April) before you have to pay tax on the contributions. You’ll only pay tax if you go above the an-nual allowance. This is £40,000 this tax year (2020/2021).
How do you know if you have a tapered annual allowance?To work out if you have a reduced (tapered) annual allowance for a tax year, you’ll need to workout your:
● gross income in that tax year
● pension savings in that tax year
● threshold income in that tax year
● adjusted income in that tax year
If your adjusted income is over £240,000 your annual allowance in the current tax year will bereduced. It will not be reduced if your threshold income for the current tax year is £200,000 or less,no matter what your adjusted income is.
The minimum reduced annual allowance you can have in the current tax year is £4,000. Thosesubject to a Tapered Annual Allowance will still be able to carry forward unused allowance fromprevious tax years.
Background to the measureThe tapered annual allowance was introduced in April 2016 and the £40,000 annual allowancewas reduced by £1 for every £2 that the adjusted income exceeded £150,000, to a minimumannual allowance of £10,000.
Sterling Financial Consultants Limited
Summer Newsletter 2020
Sterling Financial Consultants Limited is authorised and regulated by the Financial ConductAuthority No: 521843
The information contained within this brochure is subject to the UK regulatory regime and is thereforetargeted primarily at consumers based in the UK.
This publication is based on press releases and other online information. The publication is forguidance only and no responsibility can be accepted by ourselves or our representatives.
Any information in this brochure does not constitute advice and should not be acted uponwithout taking professional advice.
Please note The Financial Conduct Authority does not regulate tax advice.
City Reach5 Greenwich View Place London, E14
9NNTel: 020 7537 6934
