www.chaptersfinancial.come-mail: info@chaptersfinancial.com

®F I N A N C I A L

HAPTERSCNEWSLETTER

Autumn 2016

Woking Office: Suite 2, Third Floor, One Crown Square,

Woking, GU21 6HR.

Tel: 01483 330800

The last few years have seen market volatility and it is interesting to note that following the result of the EU Referendum in June, we saw markets fall significantly, to then rebound promptly. With a few exceptions, and a good example is the commercial property market, many equity and bond type funds have seen double-digit gains in the last few weeks. Where possible, we have issued up to date

details of current fund values and if you would like to review these, or would like a further update, then please let the team know. In addition, Sterling as a currency has been weaker and although this is good for the cost of our exports, it does not help with the cost of imports or the price of holiday expenditure whilst abroad. Linked to the fall in Sterling, we have seen inflation rise to 0.6% (CPI) in August 2016.

Although it is pleasing to see these results, we remain aware of the risks ahead, both from a UK and a global perspective. We remain advocates of investment diversification and have experienced a significant uplift in investment enquiries in August following the Bank of England base interest rate reduction from 0.50% to 0.25% at the beginning of that month. The indications are that rates will remain low or fall further with the aim of ensuring that our economy remains vibrant. I have detailed this further later in this newsletter.

There are many merger and acquisition changes occurring in our profession with Friends Life merging with Aviva, Aegon buying Cofunds and Axa Wealth being sold to Standard Life to name a few. I am sure there will be more to come, with some individual investment funds also grouping together. As we write there are no issues that we are aware of with these current changes, although if you have any questions please let us know.

I am delighted to confirm we have secured a new lease on our premises in Guildford going forward and have expanded the team with the appointment of a new Apprentice, Sam Bell, who joins us after completing his A Levels. We look forward to working with Sam and to growing the team further into the future.

Welcome

Keith Churchouse

Guildford (Registered Office):

Hadleigh House, 232 High Street,

Guildford, GU1 3JF.

Tel: 01483 578800Fax: 01483 578864

Chapters Financial Offices

Cash Savings Alternatives? Chapters Financial has had a busy summer period, which was in part fuelled by the fall in Bank base rates to 0.25% but also by the greater fear that this low interest return environment now seems to be becoming entrenched and will probably endure for some time.

We have always advocated that clients maintain a readily accessible fund of about 3-6 months’ income to cover emergencies or opportunities. With many deposit rates now below 1.0% gross pa AER, we still like the tax efficient opportunity that Premium Bonds afford. The big advantage of cash and cash type savings is that they are secure within the limits of the plan but the cost of security is often poor returns and when inflation is taken into account, even the possibility of negative returns over time. The new tax change allowing the first £1,000 of taxable deposit interest in this tax year (2016/2017) to be tax free for basic rate taxpayers is helpful, but it still only offsets what are usually poor deposit rates.

The potential to increase returns elsewhere invariably imports risk and volatility as fund values, and the income they generate, can fall as well as rise and are not guaranteed. Some enquirers have found our newly updated Investment Risk Scale useful in considering investment alternatives and this is available on request or can be found on our website as follows:

https://chapterfinancial.s3.amazonaws.com/uploads/document/file/10/investment_risk_scale.pdf

A balanced, lower risk portfolio of diversified assets can provide the opportunity and potential for improved returns, although this is not guaranteed, and it is good to see many individuals focussing on their financial planning, the future of their income, and taking positive action. There are many opportunities to control the tax charges made to investments and we have considered ISAs later

in this newsletter.

If you would like to review your savings and investment arrangements then please let us know.

HMRC Pension Lifetime Allowance Protection 2016It’s been a long wait, but HMRC has now issued its pension Lifetime Allowance protection options for 2016 online. We have noted this forthcoming opportunity in previous newsletters and it is pleasing that this has finally arrived for those affected.

It was quite un-nerving for some to know that HMRC Protection 2016 would be available for pensions, but that you could not secure it until after the event (05 April 2016), although you still had to comply with the various requirements. Frustrating for many, but at least it is now available and the details, requirements and application process can be found here:

https://www.gov.uk/guidance/pension-schemes-protect-your-lifetime-allowance#individual-protection-2016

You will need to create a Government Gateway account if you do not already have one.

HMRC 2016 Protection

Two types of protection are available for 2016, as in previous options (2014 being the last time):

• Fixed Protection 2016 to £1.25MSuitable for those who want to protect pension benefits into the future to a level of £1.25M in value, even if they are below £1.0M as total accrued pension benefits at 05 April 2016. No further pension contributions can be made on your behalf from any source after 05 April 2016 (this includes Auto-Enrolment/Workplace Pensions).

• Individual Protection 2016 to £1.25M Appropriate where your total accrued pension benefits at 05 April 2016 exceeded £1.0M in value and you want to protect the amount accrued at that date (to a limit of £1.25M). Continued accrual of pension benefits is allowed, but you will only be protected to the amount you have accrued as at 05 April 2016. Any excess is likely to be taxable.

The HMRC Individual Protection certificate will provide you with an individual percentage allowance of the standard Lifetime Allowance and can be applied for online.

Summary

There is much to consider if you are affected by this legislation, both at the time of drawing benefits and a further HMRC limit check at age 75.

It is important that you take advice based on your individual circumstances and the team at Chapters Financial can help you with your overall pension and financial planning. Please contact our Guildford or Woking offices to discuss your individual needs and circumstances.

Protecting the family….and you!

Many of you will know that through our advice service we have some cornerstones of financial planning which we advocate. Amongst others, we suggest that individuals hold 3-6 months’ income in cash/cash type holdings to cover for unforeseen emergencies or, alternatively, to pay for something pleasurably unexpected, like a long holiday. As noted earlier, we appreciate that gaining a reasonable return from savings is becoming harder to achieve.

Another major cornerstone of financial planning is having a robust Will in place and ensuring this is up to date. We are not legal advisers; however, we have a range of local connections that can help in this regard.

We also advocate the establishment of Power of Attorney arrangements for those entering retirement. There are two sorts, ‘Health’ and ‘Wealth’, and these should be considered to ensure that your needs could be addressed by those that you want to deal with your affairs if your personal circumstances change. Again, we can refer you to a suitable solicitor to help you establish the correct arrangements if required, or you may prefer to put this to your current legal providers for their feedback and guidance.

What will the Autumn Budget 2016 hold?

It will be interesting to see what the new Chancellor, Philip Hammond, has in store for us all in his first Autumn Statement. There is some time before he reaches the dispatch box (expected in November 2016), with some hoping that he will move away from the austerity program of the recent past. I am sure that pensions will come under some scrutiny. In recent years, the use of a salary sacrifice facility for pension schemes have come under increasing interest to our tax authorities as they grow in size and reach.

The Budget of March 2016 noted that HM Revenue & Customs had launched a consultation paper to examine the use of salary sacrifice for the provision of benefits in kind. The HMRC definition of such a scheme is as follows: “A salary sacrifice arrangement is an agreement between an employer and an employee to change the terms of the employment contract to reduce the employee’s entitlement to cash pay. This sacrifice of cash entitlement is usually made in return for some form of non-cash benefit.”

This individual consultation ends on 19 October 2016, with the possible outcome being the reduction in the types of benefits that could be offered through this tax-efficient arrangement. Will there be an announcement at the Autumn Statement? Time will tell.

With this year’s tax changes, are tax-efficient ISAs still worth it?

This is a question we have been asked by a few clients over the summer and the simple answer is yes.

This new tax year saw the introduction of a tax change which allows the first £5,000 gross of dividend income to be paid tax free to an individual. For those who have taxable unit-linked investments, such as Open Ended Investment Companies (OEICs), it is possible to move these into an ISA arrangement each year, if the allowance is not used elsewhere. This is usually worthwhile if you do not plan to add new funds into your ISA arrangements. For reference, the ISA allowance in the current tax year is £15,240 and will rise to £20,000 in the new tax year 2017/2018.

Noting this, some have asked that if the dividend income from relevant taxable investment accounts is now tax free up to £5,000, why change? We believe it is still worthwhile, because once funds are within an ISA wrapper, they are sheltered from tax in future years and dividend income from ISAs will remain tax free. If the new dividend tax rule were to be changed again in future years, the ISA allowance for this and subsequent years would be lost if not used.

For reference, this year’s capital gains tax allowance is £11,100 and this might be of interest to those who have seen capital values of relevant investments rise. The applicable tax charge to gains above this allowance limit in a tax year may well still be an attractive position (against income tax rate) to both basic and higher rate tax payers.

If you want to consider the structure of your investments further then please contact the team for more details. Our website is also kept up to date with the latest thoughts and information.

Please contact us on

01483 578800 (Guildford) 01483 330800 (Woking)

or by email at

info@chaptersfinancial.com to discuss your requirements and to book

a meeting or financial planning review.

Summary & Review As we approach the autumn months, traditionally our busiest of the year, the team at Chapters Financial are here to help you and work with you in providing independent financial advice. Reviewing your finances and existing arrangements regularly is recommended to meet your ongoing needs and circumstances.

This Newsletter provides general information and should not be used as individual advice.

If you would like to receive this information in email format please let us know.

Chapters Financial Limited is authorised and regulated by the Financial Conduct AuthorityRegistration number: 402899