Prospects. The Budget. News, views and updates. Read a summary of elements of the 2014 Budget that may affect you page 4.

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1 News, views and updates This issue s feature article: The Budget Read a summary of elements of the 2014 Budget that may affect you page 4 Welcome p2 Feature p3 Wealthwatch p6 Who s who & Contacts p8

2 Welcome INSIDE THIS ISSUE Welcome...p2 Equity Release...p3 WELCOME to our Spring / Summer Newsletter. In this edition we focus predominantly on George Osborne s 2014 budget probably the most significant ever for savers and investors. A year on from the Budget 2013 and the outlook for UK plc looks considerably brighter. Growth has returned since last year and the forecasts for 2014 and 2015 are being continually revised upwards. In George Osborne s 2013 Autumn Statement, the Office for Budget Responsibility (OBR) predicted growth of 2.4% for this year: at the start of his Budget for 2014, only a little more than three months on, he was confirming the new OBR forecast of 2.7%. In March 2013, the UK was teetering on the brink of a triple-dip recession: now the economy is growing faster than virtually all of the UK s competitors and Osborne was keen to build on this in his speech. Speaking a month before standing in front of Parliament, he said, I want to deliver a Budget that supports a Britain that invests and that exports. A welcome sign perhaps, that the Government realises the economic health of the UK cannot be based on a housing boom in the South East. Wanting to press home what he will have seen as an advantage, the Chancellor used the 2014 Budget to announce a range of surprise reforms to the pension and savings industry. As he noted in his introduction, this was a Budget intended to appeal to makers, doers and savers, many of whom have had lean times over recent years. The Chancellor was boosted before his speech by the news that unemployment had fallen by 63,000 in the three months to January, with unemployment now at 7.2% and a record 30.19m now in work. That s not to say there are no dissenting voices. The Financial Times was rather less optimistic, publishing a report in the week before the Budget and using the same model as the OBR which suggested the Chancellor faced a 20bn black hole, and that austerity would need to continue until 2020, with further cuts in public spending required in addition to the 25bn in 2016/17 and 2017/18 that the Chancellor is already committed to. And as Harold Macmillan always remarked, there continue to be events, dear boy, events. Twelve months ago, Cyprus had just rejected the terms of an EU bailout and North Korea was rumoured to have launched a cyberattack on South Korea. On the morning of the 2014 Budget, Vladimir Putin announced the annexation of Crimea and pro-russian forces had entered the Ukrainian naval base in Sevastopol. The OBR says this will not impact on Britain s recovery. Let s hope they re right. We cover the major changes that may affect our clients later in the newsletter. If you do have any comments or questions about any of the articles then please do not hesitate to let us know all our contact details are on the back page. If you are not yet a client of ours but would like to find out if we could help you, please call us on Andy Kirby Mint Wealth Management Director Main Feature The 2014 Budget and how it may affect you...p4-6 More over-55s seeking financial advice...p7 Who s Who? Your MWM contact details...p8 Markets keep up to date Markets are constantly changing and this is why we now provide a monthly update on our website. If you would like to keep up to date visit web: enquiries line: Many of our clients are recommended to us by existing clients. Should you have friends or colleagues who might be interested in our services, please pass on our details. p2

3 Prospects Equity Release: Advantages and disadvantages PROPERTY RICH, cash poor has been the lament of thousands of older people for a very long time and equity release originally came into being to address this concern. The early years of equity release were blighted by poor advice and unsuitable products and elderly people could and did lose their homes. The financial services industry acted quickly to put matters right and today equity release is a tightly regulated part of the industry and a product which can be a very valuable financial tool in the right circumstances. Equity release is a general term used to describe products which allow you to borrow money secured against your home or to sell all or part of your home without having to move. You are releasing the equity (cash) tied up in the value of your home. Many older people have built up substantial equity in their property as prices have risen over recent years. However, it doesn t automatically follow that equity release is the right answer if they do find themselves property rich and cash poor. As with many aspects of financial planning there are pros and cons to equity release, we look at the main ones here. The Advantages The main advantage of equity release is simple it gives you extra money. What people do with the money is entirely up to them, but typically we see clients: Using the cash from equity release to boost their income in retirement. It s a simple fact that most of us have not saved enough for our retirements and equity release can help to bridge the gap between what s coming in and what you need to live comfortably; Carrying out home improvements, particularly to make the home easier to live in as they get older; Giving it to their children, either so they can see their children and grandchildren enjoying and benefitting from the money or for a more practical purpose, such as putting their children on the property ladder; The dream family holiday is also a popular option! Paying off debt. This is an area where the sums have to be done carefully, but if someone has high interest debt such as credit cards it can make sense to use equity release to pay off that debt. Other advantages of equity release For many people, taking out a loan against their property can mean that the value of their estate is reduced and that there is consequently less inheritance tax to be paid on death. As we ve said many times, inheritance tax is an area which requires specialist advice, but equity release can be a useful tool in making sure that the tax on your estate is kept to a minimum. The no negative equity guarantee (NNEG), which virtually all equity release products now have, means that borrower(s) cannot find themselves with negative equity in the event the property market falls something which was previously a real worry to many older people. The Disadvantages First and foremost, equity release reduces the equity in your property hence there is less money for your potential beneficiaries. This can lead to friction in families and we d always recommend that if you are contemplating equity release you discuss the steps you re taking with your potential beneficiaries. No one wants to fall out with their children. Similarly if it is your intention to leave money to charity, equity release will also reduce the money available for that purpose. Increasing your income through equity release may impact on any meanstested benefits you might be receiving. As your income goes up, so your entitlement to some benefits may go down. Again, this needs looking at carefully before any equity release arrangement is entered into. Finally, equity release has costs associated with it and these costs can be expensive. Your home will need to be valued, and you ll need to pay for the advice that you receive from your professional advisers. That is a brief look at the advantages and disadvantages of equity release. We haven t had space in this article to look at how much money you can typically release, or at the various equity release products. As we said above, equity release can be a very useful financial planning tool but it does require specialist advice. If you have any questions on it, or would like a preliminary chat to look at the options, then please don t hesitate to contact us. As always, we are only a phone call or an away. This is an equity release plan. To understand the features and risks, ask for a personalised illustration. p3

4 The 2014 Budget The Chancellor of the Exchequer gave his Budget to Parliament on 19 March this article summarises some of the announcements that may affect you The Threepenny Bit Pound What The introduction of a new pound coin When From 2017 but tbc Comment The current pound coin is apparently easy to forge, with some estimates putting the number of forged coins in circulation at 1 in 30. From 2017, a new pound coin will be introduced based on the design of the old threepenny bit. It was, the Chancellor declared, a more resilient pound for a more resilient economy. Pensions The Chancellor announced the most radical change to the taxation of pensions since 1921, declaring that he was prepared to trust people with their pensions. The move is predicted to bring in extra revenue for the Government, as people gain the ability to withdraw money from their pension funds on a more flexible basis and consequently contribute more through income tax. However, the reforms are a good thing for savers and there is little doubt that these changes will have a significant impact on the way people manage their pension income and plan for retirement. The pension reforms announced by the Chancellor will be introduced in two stages and relate to those with defined contribution pension schemes. Some aspects commenced from March 27 this year, whilst others will require legislation and are intended to come into force from April What Trivial commutation pension limits to rise from 2,000 to 10,000 When From 27th March Comment This move was anticipated, increasing the amount that can be taken as a lump sum where an individual has only a small pension pot. Not a welcome move for the troubled annuity industry but certainly welcomed by those it will benefit. What There will be an increase in the total pension savings that can be taken as a lump sum from 18,000 to 30,000 When From 27th March Comment This was another significant move to change the pensions industry, increasing the flexibility and access to savings for those with lower levels of pension savings. What The amount of pension needed to access flexible drawdown will be reduced from 20,000 to 12,000 When From 27th March Comment This increases the availability of flexible pension income for many, where previously they may have only had limited options at retirement. A welcome move for those wanting more flexibility over their retirement income. p4

5 Prospects What The capped drawdown limit has been increased to 150% When From 27th March Comment Previously set at 120% of GAD, this will allow retirees to take an increased level of income from their pension funds during retirement. The Chancellor was quick to realise, though, that people would need advice and announced that he was consulting with consumer groups and with the industry to provide people with free, impartial, face to face advice, ahead of further changes to come into force in April What Pensioners will be able to access their savings as and when they want to When From April 2015 Comment Pensioners will be able to take their entire pension savings as cash upon their retirement, subject to the standard rate of income tax on anything over 25% of the entire fund. This will completely eradicate the need to buy an annuity and open up pensioners to many more options. This is an extremely significant announcement which will fundamentally change the way people manage their income throughout retirement. Also announced during the Budget on pensions, were the following details: What Further details were revealed of a new scheme of Voluntary National Insurance Contributions (VNICs) to allow pensioners to top up their Additional State Pension When The Scheme will be open for 18 months from October 2015 Comment A positive move aimed at everyone reaching State Pension age before 6 April What The ISA allowance will rise to 15,000, Cash ISAs and Stocks & Shares ISAs will merge into a New ISA When From 1st July Comment This was one of the two blockbuster announcements of the Budget, with Cash and Stocks & Shares ISAs being merged and the limit on how much can be saved in a year dramatically increased. This was the Chancellor really helping savers who have been hit by low interest rates and delivering on his promise to encourage saving. What Junior ISA and Child Trust Fund contribution limits increased to 4,000 p.a. When July 1st 2014 Comment A positive move for encouraging saving. What The 10% starting rate on savings income will be abolished When From April 2015 Comment The 10% starting rate for savings income will be abolished from April 2015 and replaced with a new 0% band. This new, low band will also cover a new limit: instead of 2,880 (which the 10% rate applied to), up to 5,000 will be protected. p5

6 The 2014 Budget continued What A pensioner bond with market leading rates will be introduced When From January 2015 Comment Another move designed to encourage more people to save: early suggestions were that the rate would be 2.8% for the one year bond and 4% for the three year bond, with pensioners able to save 10,000 in each of these National Savings bonds. What The limit on premium bonds was increased When From June this year Comment In the first change to the amount that could be saved in premium bonds for some time, the Chancellor increased the limit from 30,000 to 40,000 this year and to 50,000 from He also promised to double the number of 1m prizes. Personal Taxation What The personal allowance will rise to 10,500 When From 1st April 2015 Comment With the allowance set to rise to 10,000 in the new tax year, this was the move the Liberal Democrats had been pushing for What The threshold for 40% tax will rise from 41,450 to 41,865 When From April 2014 Comment Conversely, Tory backbenchers may have been slightly disappointed with this relatively small rise although with public sector pay rises capped at 1% it was really impossible for the Chancellor to do more. There will be a further 1% rise to 42,285 from next year. What The transferable tax allowance for married couples and civil partners, announced in the Autumn Statement 2013, will be set at 10% of the personal allowance. This will be 1,050 in When From Comment A favourable move for married couples and those in civil partnerships. What Inheritance Tax waived for emergency services workers killed in the course of duty. When TBC Comment Whilst this was seen as a very popular announcement by the Chancellor, some observers questioned how many people this would impact. Summary George Osborne spoke for a little under an hour, finishing by repeating his claim that he had presented a Budget for makers, doers and savers. What is certain is that he has presented a Budget with wide ranging implications for everyone s financial planning and anyone approaching retirement will need to consider the changes he had made very carefully. Please don t hesitate to get in touch with us if you would like to discuss how this Budget might impact upon you. p6

7 Prospects More over-55s now seek financial advice but there are still plenty who could benefit from talking to an adviser MORE OVER-55s are turning to financial advisers than did so four years ago, new research from Aviva into the shape of financial advice for retirement in 2014, shows. But with 77% of over-55s having no relationship with an adviser and no plans to establish one Aviva s findings reveal a worrying lack of understanding about the nature of financial issues in later life. Almost one in five (18%) of over-55s have spoken to an adviser in the last year. Sadly, 77% are entirely out of the loop with no plans to seek advice. Growing numbers are being surprised by the reality of retirement incomes. When seeking advice, getting the most from their pensions is the over-55s number one concern. Transparency has improved post-rdr but many are still unsure on costs. Almost one in five of over-55s (18%) now have an active relationship with a financial adviser, compared with 14% in February The biggest change has been among over-75s, with 17% now having a financial adviser compared with 11% four years ago. Those aged remain the most likely to use a financial adviser, with 19% having done so in the last year. Just 16% had done the same in February A further 3% of all over-55s are currently looking to establish a relationship with a financial adviser. However, with 3% unsure, this leaves more than three quarters (77%) with no active relationship with a financial adviser and no plans to establish one. The advice gap is especially worrying in light of the widening gulf between expectations and reality when it comes to retirement incomes. The percentage of retired over-55s who are disappointed by their retirement income has increased from 10% to 15% since February Encouragingly, more retired over-55s have incomes beyond their expectations than was the case four years ago (19% in January 2014 from 15% in February 2010). Over-55s are also more likely to underestimate than overestimate their retirement income (19% v 15%). Getting the most from their pensions (52%) is the most pressing retirement issue over-55s would discuss with a financial adviser, which is a good sign, given the recent review of the annuities market and the potential to select a bad pension deal without proper financial advice. Other priorities for over-55s include tax efficiency, budgeting for care costs and other major expenses, and options for drawing on their total wealth to cover the costs of retirement. 11%, sadly, were seeking advice on how to manage the debts they had. Sitting down with an adviser can help to answer many of these questions for over-55s and can help to uncover alternative plans and opportunities in retirement. Getting financial advice can also help you to plan for the unexpected, giving you a full picture of how you are likely to be able to live your retirement. p7

8 Chris Drury Newcastle Tel: Mobile: Pete Jackson Newcastle Mobile: Who s who? and how to contact them Dave Storey Newcastle Tel: david.storey@mintwm.co.uk Sarah Hirst Harrogate Tel: Mobile: sarah.hirst@mintwm.co.uk Nick Sanderson Harrogate Tel: Mobile nick.sanderson@mintwm.co.uk Andrew Dovernor Leeds/Bradford Tel: Mobile andrew.dovernor@mintwm.co.uk Andy Kirby, Director York Mobile: andy.kirby@mintwm.co.uk Steve Smith Chesterfield Tel: Mobile: steve.smith@mintwm.co.uk Dave Nicholls Measham, Derbyshire Tel: david.nicholls@mintwm.co.uk Sue Richardson Leicester Tel: Mobile: sue.richardson@mintwm.co.uk web: enquiries line: p8