Weekly News Bulletin - 29/11/2021

Tax Free Savings

Savers are avoiding dipping into their pension pots so they can leave them to their children and make the most of inheritance tax perks

A growing number of savers are avoiding dipping into their pension pots so they can leave them to their children and make the most of inheritance tax perks. Financial advisers have reported a rise in the number of clients planning to live off other sources of income and pass all their retirement savings to their beneficiaries - potentially tax-free. Helen Morrissey from Hargreaves Lansdown notes that it is more tax efficient to pass on your pension than any other form of savings. While Isas and general investments are usually subject to IHT (other than Isas invested purely in certain Alternative Investment Market stocks, which are free from IHT), most pensions escape the 40% tax bill. The Times

Workplace pensions: Expert shares what to do when changing jobs

An estimated £19billion is left in lost workplace pension pots. An average Brit will have around 11 different jobs in their lifetime, usually leaving a trail of forgotten pension pots behind them. Romi Savova, CEO of PensionBee shared some advice. In the majority of cases, workers are able to transfer their workplace pensions. What many don’t consider is the fact that this doesn’t always mean moving it into another workplace pension. They may be able to transfer it into a variety of other possibilities such as private or personal pension or self-invested personal pension, known as SIPP. Ms Savova said “Combining numerous pensions into a single plan not only helps to reduce the stacks of paperwork associated with scattered savings, but can also provide a clearer picture of how investments are performing.” “Some pensions come with valuable benefits - such as guaranteed annuity rates or a final salary promise - which could be lost if a saver decides to transfer out from the scheme. It may be the case that a benefit is too good to give up, and consolidation isn’t suitable.” It’s usually advised that savers get some professional financial advice before transferring their pension and the government insists that those with more than £30,000 in their pots seek this advice from the Financial Conduct Authority. Daily Express

NS&I cancels Premium Bonds prizes as savers unwittingly break rules - are you affected?

A Premium Bonds alert has been issued as thousands of savers could face the retrospective removal of their prize winnings due to a vital rule. Premium Bonds are overseen by National Savings and Investments, and the Government-backed savings provider has spotted a vital issue with the way in which some prizes were administered. They are now beginning to cancel prizes won with Bonds which unknowingly pushed savers over the £50,000 mark. Under Premium Bonds rules, savers can only invest up to £50,000. In some cases, Premium Bonds which are decades old may have broken the rules and are now subject to checks. Daily Express

Families with disabled children set to be allowed to withdraw £2,500 from Child Trust Funds and junior ISAs without the need for court approval

Families with disabled children will be able to withdraw up to £2,500 from Child Trust Funds (CTFs) or junior ISAs (JISAs) without first needing court permission under new proposals to try to reduce the financial burden for parents and guardians with vulnerable kids. Under the relaxed rules, financial providers will, however, be required to maintain important safeguards. These will include requiring medical evidence to certify the account holder lacks mental capacity to manage their own financial affairs and verification that funds will be used in the best interests of the account holder. The Liberal Democrat leader Ed Davey welcomes the move in the Times saying that an injustice is finally being corrected. He adds, however, that the £2,500 cap is very low, and will still block many disabled young people from accessing hundreds or even thousands of pounds of their own money. Money Saving Expert | The Times

Capital Gains Tax

30-day reporting system for capital gains tax on residential property extended

Nick Giles, tax consultant at Page Kirk, reports that the 30-day reporting system for CGT on residential property has been extended. The Chancellor announced that for residential property disposals that occur after October 27, 2021, taxpayers will now have 60 days to report their sale to HMRC and pay any CGT due. Unfortunately, sales before this date are still bound by the original 30-day deadline. Giles cautions that it should be remembered that a gift of a property is still a chargeable disposal for CGT purposes. Business Live

Property

Landlords enjoying more favourable rates

The cost of Buy-to-let mortgage rates has continued to fall, as residential mortgages become more expensive. The average buy-to-let two-year fixed rate at 60% loan-to-value (LTV) is 1.94% and has fallen every month for a year, according to data from Moneyfacts. The comparison site said that 12 months ago the average rate was 2.53%. The lowest rate is also still at a record low of 0.99% from The Mortgage Works, the buy-to-let arm of Nationwide at 65% LTV, although this has a fee of 2% of the loan amount. Aaron Strutt from the mortgage broker Trinity Financial said that banks were comfortable with low rates for buy-to-let borrowers because there were far fewer of them than homeowners. He said they would worry about having lots of cheap residential mortgages on their books with interest rates set to rise. Residential mortgage rates have crept up amid growing speculation that the Bank of England will raise interest rates. The Times

First-time buyers can purchase a property worth 10 times salary

First-time buyers can now purchase a home worth 10 times their salary via a privately funded shared ownership scheme. Wayhome has made it possible, in theory, for a household with a £50,000 salary to afford a property worth up to £500,000. These income rules are significantly more relaxed than those used by high street banks, which typically hand first-time buyers loans of up to three-and-a-half times their salary. One outlier to this rule is Nationwide, whose Helping Hand mortgage will lend up to five-and-a-half times a buyer's income. Its lending capacity is capped at this level because of tight restrictions introduced in the wake of the financial crisis, intended to prevent lending to overstretched borrowers. But Wayhome does not lend any money to buyers directly, meaning the same strict rules do not apply. The buyer has no mortgage on the property, but instead pays market rent on the share owned by the fund. Buyers can make payments to increase their share in the property, without fees. The Daily Telegraph

Homes outstrip pensions as source of wealth

More than half of retired homeowners can now unlock more wealth from their property than they own in pensions, according to research from Legal & General Home Finance. The average pension pot is worth £61,930, but homeowners in England and Wales could release on average £72,988 worth of capital from their homes via equity release. That is a rise of £14,000 in just five years, as the average house price has jumped by 24% in that time. One in seven over-50s says they will use equity release when they retire or raise money from their property by downsizing, the research revealed. Daily Express

House prices prediction: North-South divide will continue to ‘narrow dramatically’

The North-South house price divide “will be smaller" as we move out of the pandemic, according to an expert. Figures released by the Land Registry show over the past three months, prices in the North West have risen by 5.3% to an average of £203,661. Prices in the North East have gained 13.3% over the past year to an average of £152,776. Jonathan Rolande, from the National Association Of Property Buyers, commented: "The pandemic has had a positive effect on the market and there has been a re-balancing of prices between North and South." Daily Express