During a detailed financial review for a client it was noticed that 200% of the normal level of tax free cash could be drawn from an old-style pension plan but the only option for pension income was to use the balance of the fund to purchase an annuity. Using his knowledge of current pension legislation Ted arranged for the client to receive both the highest level of tax free cash and also benefit from the new methods of drawing flexible income. The result is that the client has £25,000 more in their bank account and enjoys the option of drawing pension income when they wish. They now also have the opportunity to leave the pension fund to their descendants IHT free.
An older couple found out that one of them had a terminal illness and they then wanted to tour the world together, within the short time scale that they were given but did not have sufficient liquidity. To realise their wish, Ted at EJF put in place an Equity Release loan arrangement that did not require regular repayments. Instead interest was “rolled up” with the full amount only becoming repayable from the sale of the house, when the survivor died or moved into long term care.
A number of wealthier Clients had spare cash and wished to reclaim some of the Income Tax that they had paid in the last tax year and would be paying in the current tax year. Ted at EJF researched the marketplace and found some Enterprise Investment Scheme (EIS) plans that were at the lower end of the risk scale, in what is considered a High-Risk area. The clients invested between the minimum of £10,000 and up to as much as £75,000, which brought them income tax reclaims from £3,000 up to £22,500. The relief was allocated across the two tax years as appropriate.
A new Client had previously sold a property and paid Capital Gains Tax (CGT) on the sale. The sale proceeds were not required to fund expenditure and Ted at EJF proposed that a portion of the money be invested into a suitable EIS plan. In addition to the reclaim of income tax the client also reclaimed part of the CGT paid, which would remain deferred for so long as the EIS plan is held. Ted explained that the CGT would be brought back into tax when the EIS matured but that the client would benefit from the annual CGT exemption at that time and might be able to defer for a further period if a follow-on EIS investment is available. An additional benefit, is that if an EIS is held until the date of death, the CGT recovery becomes permanent.
The father of a client had developed dementia and the client was concerned that if his father gifted him £200,000 and did not survive for 7 years, Inheritance Tax (IHT) would be due on the gift. Ted at EJF proposed that the father invested the monies into business ‘property’ relief that becomes exempt from IHT after two years of ownership. Risk was mitigated by using a fund of 30 or so eligible companies quoted on the Alternative Investment Market (AIM) and the assets remained the property of the father. The father, did unfortunately die, but it was 2 years and 10 months later and so the family inheritance increased by the £80,000 saving in IHT.
After being made redundant a Client wished to repay his mortgage using his pension plans but did not wish to draw income. He had two final salary Defined Benefit (DB) pensions and two small fund based personal pensions. Ted at EJF helped him to find a DB transfer specialist and the advice, after due process, was to transfer the DB schemes into a Self-Invested Personal Pension (SIPP) together with one of the smaller schemes. The transfers totalled approximately £998,000, £2,000 below the LTA of £1,000,000. And a tax free lump sum of 25% or £249,000 was withdrawn. The mortgage was paid down, and the balance was invested tax efficiently, with total pension funds below the taxable LTA level. Happily the client then found another job.
An older client was earning a good income but had not been contributing to his pension and, knowing that the annual pension contribution limits had been reduced, was worried that he had ‘missed the boat’. Ted’s solution was to use the HMRC ‘carry forward’ option which allowed the client to look back over the three previous tax years to maximise his pension contributions. Following the review and detailed calculation, after tax relief the net personal contribution of £83,000 became a £128,650 gross addition his pension. Thereafter a maximum gross annual contribution of £40,000 may be made., subject to the new threshold rules.
EJ FINANCIAL LTD
2nd Floor • Johnsons Building • The Broadway • Crowborough • East Sussex • TN6 1DE
01892 234884 • 020 3657 9079 • 01635 777795
EJ Financial Ltd. Registered in England and Wales No 9370740
Authorised and regulated by the Financial Conduct Authority. We are entered on the Financial Services Register No 670594 at www.fsa.gov.uk/register.
The Financial Conduct Authority does not regulate taxation and trust advice.
The value of your investment can go down as well as up and you may get back less than you have invested.
The information contained within the website is subject to the UK regulatory regime and is therefore primarily targeted at customers in the UK.
NOTE: None of the above constitutes advice, always consult a professional adviser before making any investment decisions.
Please talk to Ted on 01892 234884 or 01635 777795 for further information.
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Independent Financial Advisor
Financial Review & Planning • Pension Contribution Planning • ISA Contribution • Pension Freedom Advice • Protection
Investment Portfolio Management • Tax Planning • Retirement Planning • Trust Investment • Portfolio Reviews