Financial Awareness Day, taking place each year on 14 August, is a time to promote financial literacy and encourage individuals to take control of their financial wellbeing. In this article, we outline five key areas you may wish to consider as part of your financial planning strategy.
Pensions and retirement planning
Pension allowances have become more generous in recent years, with the Annual Allowance now £60,000 and the Lifetime Allowance abolished in April 2024. However, there are concerns that pension tax relief could be targeted in the Autumn Budget, therefore it may be prudent to consider increasing your pension contributions, if this matches your long-term strategy. There is the added benefit of an immediate reduction in your Income Tax liability.
You could also take advantage of pension carry forward rules that allow you to bring forward any unused allowances from the previous three tax years. This can be particularly valuable if you are getting close to retirement.
In addition to making the most of your pension allowance and benefitting from pension contribution tax relief, it is important to utilise other tax-efficient vehicles when planning for retirement. Building an Individual Savings Account (ISA) portfolio and general investment account can provide significant growth potential in addition to your pension. UK residents can save £20,000 in an ISA (for the tax year 2024/25), with all growth free of Income Tax and Capital Gains Tax (CGT).
For those willing to take on more risk, investment options like Enterprise Investment Schemes (EIS), and Venture Capital Trusts (VCTs) can be valuable additions to your pension. These schemes offer 30% tax relief and are exempt from dividend tax and CGT. Investment in EIS and VCTs should be considered with caution and advice sought from an independent financial adviser due to the heightened risk involved.
If you are near to, or at retirement, the focus shifts to the tax-efficient release of income. At this time, we would work with you to create tailored wealth management strategies that align with your individual goals, objectives and circumstances.
Investments
Investment strategies are personalised, as no two investors are alike. A well-crafted investment strategy, designed to meet your unique goals and timelines is vital. Whether you are aiming to grow wealth for future needs, provide income in retirement, or pass assets to future generations, a successful portfolio balances growth potential with acceptable risk.
A diversified mix of investments across different sectors and global markets can help achieve this balance. Regular reviews are important as they will ensure that your portfolio remains on track, despite unforeseen events or changes in your circumstances.
We believe we offer our clients the best chance of achieving strong results with innovative investment solutions. We maintain a complete absence of bias in investment selection given the performance of different investment instruments and groups may vary according to market conditions. This is why Partners Wealth Management provides investment independence and by maintaining this objectivity we believe we offer clients the best chance of achieving strong results with innovative investment solutions.
Inheritance Tax (IHT) and estate planning
After years of challenging work accumulating wealth, you will want to ensure that as much of your estate as possible is passed on to future generations. Effective estate planning and tax-saving strategies are essential to this goal.
We help clients preserve their wealth and minimise IHT. This is more important than ever as the nil-rate band (NRB) has been frozen at £325,000 since 2009/10 and the main residence nil-rate band (RNRB) has been frozen at £175,000 since 2020/21. The previous Chancellor, Jeremy Hunt, said these allowances would remain unchanged until April 2028; we wait to see whether Rachel Reeves, our new Chancellor makes any changes to IHT in the Autumn Budget.
Strategies may include investing in tax-efficient schemes, gifting assets during your lifetime, taking out life insurance, setting up trusts and making charitable donations. Using annual tax-free allowances and making gifts from surplus income are also effective measures that we can advise you on.
Our Lifetime Wealth Model is an invaluable tool for tracking income flows and assessing overall capital positions, ensuring your financial stability and legacy planning are aligned. By building a clear and detailed financial model, it enables you to make important strategic decisions about your finances from a position of factual knowledge.
School fees planning
Rachel Reeves’ recent spending audit highlighted a £22bn funding shortfall. One measure to help fill the gap is the end to VAT tax breaks for private schools from 1 January 2025, which is likely to affect many parents’ plans for school fees. For those with a longer horizon before needing funds, utilising ISAs can be a tax-efficient way to save for future education expenses.
If this is an area of concern for you, please do come and talk to us about your options.
Tax planning
Exposure to tax is a major consideration; our Tax Optimisation Strategy is designed to minimise tax liabilities and maximise returns. This involves comprehensive planning to reduce tax burdens and retain more wealth for your family.
Key strategies include making full use of your ISA and pension allowances. Offshore investments and tax concessions available under EIS and VCTs can also be explored. Additionally, reducing the value of your estate can help to mitigate potential Inheritance Tax liabilities.
We’re here to help
Financial Awareness Day serves as a reminder of the importance of pro-active financial planning. This is something we consider every day for our clients, helping them to better secure their financial futures.
If you would like to know more about how our financial advisers can support you, please contact us on 020 7444 4030 or email us.
The information and/or any reference to specific instruments contained in this article does not constitute an investment recommendation or tax advice. The contents of the article have been prepared solely for information purposes. The article contains information on financial products and services and such information is designed for and addressed solely to individuals seeking generic industry information. This document reflects our understanding of current legislation. Past performance is no guide to future returns.