If Pensions are done………what next??

As many of you will know, as I am sure he mentioned it (!) Adrian is off this week falling down a hill……………..he calls it snowboarding but all here at Murphy Wealth Towers know what is really going on!!!

As a result our weekly blog has been left with Nick and I so please bear with us!!!

We have written a few times lately about tax efficient investments and once again this is at the forefront of our mind as two important dates are looming large on the calendar. These are the 2016 Budget and the end of the 2015/16 Tax Year on 5th April 2016.

The first one is Wednesday 16th March 2016 where the Chancellor will announce his 2016 Budget.  Whereas we will the leave the speculating to others as to what the figures will look like and what measures he will put in place one thing we do know is that the long awaited review into pensions will be announced.

What we already know is that as of 6th April 2016 the overall limit for pension savings (Lifetime Allowance) is being reduced from £1.25M to £1M and the Annual Allowance for pension savings will taper from £40,000 down to £10,000 for higher earners.

The financial press and websites are awash with speculation as to what other restrictions or amendments will be made but for the time being I think all we can reasonably assume is that it is not going to be any easier for higher earners to plan or save for the future.

With this in mind we thought we would share a case study that we are currently working on for a client. Due to current pension restrictions the client has virtually no pension options left but is looking to continue to fund for the future to give him maximum opportunities and flexibility moving forward.

Below is a table of how we could use a series of Venture Capital Trust (VCT) to compliment the pension planning that is already in place. Whereas these structures are not as tax efficient as pensions there are more and more clients where pension planning is more difficult and they are looking at alternative options.

You will see from the table that when the first VCT reaches maturity you have the option to roll the capital over and reinvest and therefore recover a further 30% tax relief on the reinvested proceeds.

In addition to the front end tax relief that is available VCT’s offer tax free dividends so when running a portfolio of VCT’s it allows you to build up a stream of tax free income. If this was to reduce the reliance on your pension for future income it would have the effect of preserving an Inheritance Tax friendly asset for future generations without giving up anything during life.

This is just one idea that is right for the particular client in question, however, it should not ever be viewed as prescriptive.

Our goal at Murphy Wealth is to bring fresh ideas to clients and contacts alike to allow a strategy to be established that allows you live your life on your terms and achieve the goals that matter most in life.

If you think we can help you or you would like to know more about the service we provide please get in touch.

Neil & Nick

PS – Please don’t unsubscribe as normal service will be resumed next week!!!!

This is not intended as advice and should not be treated as much. Please speak to an independent financial adviser before making any investment decisions.