MJB Partnership

Chancellor Phillip Hammond delivered his first Autumn Statement on 23 November 2016.

Following is an overview of the main points which apply to Financial Planning:

• From the 6 April 2017 the personal Income Tax Allowance will increase to £11,500 and the point at which the higher rate of income tax will apply will increase to £45,000. By the end of this parliament the government will meet its commitment to increase the personal allowance to £12,500 and the point at which the higher rate of income tax will apply will rise to £50,000.
• The money purchase annual allowance will be reduced from £10,000 to £4,000 from April 2017. The aim of this change is to minimise the recycling of pension savings. The government are consulting on the detail of this.
• From June 2017 the rate of insurance premium tax, which is the tax applied to ‘general insurance’, will increase from 10% to 12%.
• The ISA limit will increase from £15,240 to £20,000 in April 2017.

The secondary annuity market was originally supposed to be launched in April 2016, but was later pushed back to 2017.  Given the potential problems with this, it comes as no surprise to MJB that the plan has now been scrapped by the Government.  It would seem that we we’re not alone in our concerns…

John Lawson (Head of Policy Retirement Solutions at Aviva) said: “Our concern was about ensuring good outcomes and the right level of protection for customers. Selling back an income for life would have been a major decision needing crystal clear advice and in many cases may not have been in the customer’s best interests.”

Should this plan have gone ahead there was the likelihood of retirees receiving poor value for their annuities.  There was also possibility that the lump sum would be used up too quickly at the outset leaving little funds available to enjoy retirement.

Annuities may still be the best option for some people as they reach retirement.  The important thing is to take advice at this point.  We would be more than happy to assist.

In the three weeks since the Referendum result the UK Stock Market, as measured by the FTSE 100, has risen by around 8% to stand at 6,689 (at time of writing).  This could be taken as a sign of confidence in the UK economy or in the UK’s ability to negotiate a favourable trade deal with the EU.  On the other hand, the FTSE 250 Index is around 3% down (at time of writing), which gives out ‘mixed signals’.  The different performance can be attributed to the fact that the large companies in the FTSE 100 generate more significant earnings from overseas which are now valued higher due to to the weakening of the pound.  Despite their being much political change which still has not settled, markets have remained relatively calm with the longer term impact of ‘Brexit’ being uncertain…. Those clients with more exposure to equities will have benefited from some short-term growth and we re-iterate our advice to those with diversified portfolios to take the long-term view.

Like the rest of the financial world, MJB were a little surprised by the ‘Brexit’ result, but not surprised by the initial reaction of the Stock Market and currency changes.  As we write this the Stock Market has recovered somewhat from the early falls of over 8% to be 4.7% down with the FTSE 100 just over the 6,000 level.  This is higher than it was in September last year and February this year.  Similarly, with the pound against the dollar an initial slip of around 11% has since adjusted to 6.6%.  Our advice to those with investment portfolios is ‘not to worry’ – most of you have diversified portfolios that should cushion you from the worst of the volatility and long term prospects may well be unaffected.

Please read the article below by Neil Woodford:

Brexit- initial thoughts _ Woodford Funds

Chancellor George Osborne delivered the Spring Budget Statement on 16 March 2016. Following is an overview of the main points set out in the Budget. Please note that these may change before becoming law. (more…)

If you’re wondering if you should cash-in your pension to buy a “buy-to-let” property, we have a worked example available to download here.