Category: Lifestyle

Well that’s the budget over and done with.  You heard it all in the budget speech in the House of Commons.  Didn’t you?  Well no you didn’t.  There are a number of items that never came to light in the budget speech, but are published in the small print that maybe, just maybe, the Government doesn’t want people’s attention to be drawn to.

As always, the devil is in the detail and here’s some of what was in that small print

And guess what? Some of it will leave you and your family worse off.

Here’s a few things you might not have spotted.

The welfare, housing and justice departments are all being slashed

Philip Hammond made a big play of pumping more money into defence and the NHS, but there is no new money for key departments such as The Department for Work and Pensions whose budget is being cut from £6bn to £5.4bn in 2019/20 (not including benefit payments), The Ministry of Justice whose budget is being cut from £6.3bn to £6bn and the Housing and Communities section of Whitehall whose budget is being cut from £2.6bn to £2.3bn.

That’s despite a welfare crisis, a prisons crisis and a housing crisis.

That plastic tax will take FOUR YEARS to come in

Philip Hammond is not going to become a “world leader in tackling the scourge of plastic” any time soon.

Chancellor Philip Hammond claimed he’d become “a world leader in tackling the scourge of plastic littering our planet.”  Not only did he resist any call to tax plastic cups, his big signature move – a tax on packaging that doesn’t have at least 30% recycled plastic – will only come in April 2022.

The tax on Amazon, Google and Facebook will cost tech giants a ‘pittance’.

According to the OBR forecast, Google and other online giants could pay a mere £30m each under teh Chancellors’s new tax.   But the new tax won’t come into force until 2020!

The maximum stake on fixed-odds betting terminals (FOBTs) will be reduced to £2 under new rules unveiled by the government.

But the move to slash maximum stakes on gambling from £100 had been expected to come into force next April.  But the Budget small print revealed the move will not take place until October.

Even The Queen got a Rise

The Sovereign Grant – the money paid by the government to support the Queen in her royal duties is going up. Again.

Last year the figure was 76.1m – this year it’ll go up to £82.4 million.

The Government have finally admitted they’re delaying Universal Credit

Ministers have finally admitted they’re delaying Universal Credit, the small print reveals.

The rollout of the six-in-one benefit will officially end in December 2023 – the ninth delay after its last end date of March 2023.

But it may only finish in June 2024, because the Office for Budget Responsibility “assumes” it will take six months longer than the Department for Work and Pensions (DWP) says.

And one cut that isn’t even in the small print

This one is not in the Budget itself, but the report from the Office for Budget Responsibility.

It says capital spending – long-term one-off hits on building projects and the like – has been cut, and the Treasury hasn’t spelt it out.

The OBR says: “Departmental capital spending has also been cut from 2019-20 onwards, a decision that does not appear on the Treasury’s scorecard of policy measures.”

Dementia is a big and growing problem (Part 2)

In Part 1 we looked at the astronomical cost of Care.  In Part 2, we look at how Advisers can help.

Means tested support starts when capital is below £23,250

The financial limit, known as the ‘upper capital limit’, exists for the purposes of the financial assessment. This sets out at what point a person is entitled to access local authority support to meet their needs. The upper capital limit is currently set at £23,250. Below this level, a person can seek means-tested support from the local authority.

Where a person’s resources are below the lower capital limit of £14,250 they will not need to contribute to the cost of their care and support from their capital.

The Government is proposing to replace these capital limits with a single floor set at £100,000. They have also said there will be an overall cap on how much someone has to pay – though they have not said what this cap will be. Retaining this £100,000 in the family home is the primary aim. Retaining this amount in a pension is not the aim.

Flexi-access drawdown is means tested

With flexi-access drawdown becoming more popular, it is important to understand how this is assessed for means testing.

The basic rules today

• If a person is only drawing a minimal income, or choosing not to draw income, then a local authority can apply notional income. This must be the maximum income that could be drawn under an annuity product. If applying maximum notional income, any actual income should be disregarded to avoid double counting.
• If a person is drawing down an income that is higher than the maximum available under an annuity product, the actual income that is being drawn down should be taken into account.

It is worth pointing out that there is a deprivation of income rule. Stripping out your income at the last minute is ignored.

It will be interesting to see if these rules change when the Government consults on its proposed policy.

How we advisers can help you.

• During our Reviews we will probably have a conversation about this subject. We will highlight the risks of dementia to you and the impact it can have on your income and savings.
• We will the help you to put a plan in place to ensure part of your financial plans takes into account if you or a loved one is diagnosed with dementia.
• And then we would regularly review your situation.

 

Remember, Government policy is set to change and the details will have an impact on all of us.

 

Dementia is a big and growing problem (Part 1)

One of the most frightening changes in the health of society today is the increase in the incidence of Dementia.

What we are seeing is a shift in the types of illnesses that are killing people in old age. While some chronic illnesses are beaten by modern medicine, others rise in prominence. To put it bluntly, what would have killed you in your 60s or 70s is now being overcome and instead you die in your 80s and 90s of something else. As indicated above, one of the fastest growing causes of death in old age is dementia and it is important to understand the impact of this on pensions.

The key statistics about dementia

People with Dementia in the UK in 2015 numbered 850,000*

The estimated increase of dementia in the next 10 years is 29%*

And the estimated increase in next 10 years is a staggering 235%*

Overall Cost of Dementia in the UK

The cost of Healthcare which includes both Public and Private Care and, more importantly, Unpaid Care provided by family (and friends) is £26.2 Billion*.  This is enough to pay the energy bills of everyone in the UK!

*Source – The Alzheimer’s Society

The statistics reveal two important things

1. More and more people are going to suffer from dementia in old age as the number of people in retirement grows, and
2. A ‘dementia tax’ exists, as the financial burden is 66% (two thirds) on privately funded care and unpaid care (such as your spouse or children looking after you).

The ‘dementia tax’ takes two shapes

1. For the person who is suffering from dementia – their own financial assets to pay privately for care
2. For the people who are caring for someone with dementia – there is an impact on their financial assets as well and, the loss of their ability to earn (as they are caring rather than working).

Both of these have a significant impact on pensions.

People usually meet the cost of their care & support

People usually meet the costs of their care and support from a combination of any of 4 primary sources:

• Income, including pension income.
• Savings or other assets they might have access to. This might include any contributions from a third party.
• A financial product designed to pay for long-term care.
• A deferred payment agreement which enables them to pay for their care at a later date out of assets (usually their home).

Frightening isn’t it?  And I’m sure you will already have come across this type of problem personally or know somebody in this situation.  Part 2 will be addressing how your financial adviser can help

Older people are holding onto their savings and are reluctant to spend money impulsively, according to research from the Institute for Fiscal Studies.

A survey recently published looking at how individuals use their wealth once they retire finds many are not drawing down as much wealth as they could.

It says, on average, individuals will draw down just 31 per cent of net financial wealth between the age of 70 and 90.

Even among individuals in the top half of financial wealth distribution, net financial wealth appears to be drawn down by just 39 per cent, on average.

The IFS suggests this wealth, whether held in housing or in financial assets, is likely to be passed on to later generations.

However, inheritances will typically only be received at relatively older ages and so someone currently aged 40 might expect to receive a bequest from their parents at age 63.

An Associate Director of the IFS says the way wealth is inherited will have implications for the level and distribution of resources among current working age individuals, particularly those with wealthy parents and few siblings.

Therefore the increased freedom people now have over how they spend their pension wealth in retirement will require careful monitoring, she adds.

Royal London policy director Steve Webb says: “This report confirms that the vast majority of pensioners who have saved through their working life are cautious with their money and leave unspent wealth at the end of their lives.

“This is great news for those who believe in pension freedoms. The IFS research suggests that the biggest concern about pension freedoms is likely to be about excessively cautious retirees spending too slowly than it is about reckless retirees blowing their pension savings on lavish living.”

Two thoughts come to mind.  If you can afford it, i) use your income in retirement while you can enjoy it and ii) shrouds don’t  come with pockets!

 

The “Bank of Mum and Dad” may be running out of money as parents are now providing smaller sums, according to research by Legal & General.

Forecasts from L&G and the Centre for Economics and Business Research found the average contribution from parents towards a child’s mortgage deposit will decline from £21,600 in 2017 to £18,000 in 2018.

L&G’s data found 316,600 property transactions in 2018 would rely on at least some help from parents, up from 298,300 in 2017.

This means parents will give their offspring a total leg-up of £5.7bn in 2018 – less than the £6.5bn they gave in 2017 but still an overall increase on the £5bn in 2016.

Despite the fall predicted in 2018, the “Bank of Mum and Dad” will remain a big factor in the UK housing market, with 27 per cent of buyers forecast to receive help from friends or family.

A spokesman for L&G, said: “The Bank of Mum and Dad remains a prime mover in the UK housing market, and will lend the best part of £6bn to buyers this year, with over 315,000 transactions being underpinned by parental help.

“However, it’s clear that households are feeling the pinch, as contributions have reduced by an average of 17 per cent from nearly £22,000 to a still very generous £18,000.

“The fact that in 2018, one in four housing transactions in the UK will be dependent on the Bank of Mum and Dad, while hard-pressed parents are finding it more difficult to provide the funds to help their family with deposits, will further exacerbate the UK’s housing crisis.”

 

If you are reading this, a week after the holiday weekend, well done;  you have survived the great GDPR email frenzy, which finally reached fever pitch last Friday afternoon.

Did you all get the emails  saying “we don’t want to say goodbye” which landed in the inbox on Friday.  Did the senders not get the message?  Perhaps you had already sent a response to earlier emails which you thought had made it clear that “no” meant “no”, and so a last-ditch effort to keep you on their list, probably for possible onward sale to someone else, did little to endear them to you or me.

There were some strange bits to all this.  Firstly, it was very strange to find that many large firms waited till the last minute on Friday afternoon, ahead of a long weekend.  If they were looking for positive replies, it was a risky strategy.  Second, I’m sure everyone received emails from businesses whom they had never heard of or done business with.

Did this suggest that proof of the sale of email lists is alive and well.  I even received a phone call on Tuesday offering me a place on a seminar which would ensure that I could use their appointment making techniques without breaking the law.

One wonders what the cost was (is!) of implementing GDPR across the world, and whether it will actually make any great difference to the storage of our personal data.

So, if your inbox is remarkably clutter free this week, be sure to make the most of it.  I don’t think it will stay that way.   Oh, and by the way, I am pretty sure the volume of emails in my inbox  has NOT decreased!