Annual Allowance 2007/08 – don’t miss out
The Annual Allowance is the maximum amount an individual can receive into their pension fund during the current tax year from all sources without a tax charge. For 2007/08 this amount is £225,000. However, when a contribution is made, the policy is automatically set up with an input period of 12 months and this contribution is assessed against the Annual Allowance in the tax year in which the input period ends (i.e. 08/09 and an annual allowance of £235,000).
Therefore if no previous contributions have been made, it may be prudent for an individual to receive a contribution of up to £225k and adjust the input period to end in the current tax year 2007/2008. This utilises the Annual Allowance for the current tax year, and preserves the maximum contribution ability for all future years. This provides the maximum amount of flexibility and contribution potential for future years for some of your best clients.
If the input period is not adjusted, then the amount that can be contributed in 2008/09 is reduced and this years allowance is not fully utilised.
If you are planning to change a client’s input period to maximise contributions, make sure that the provider is able to do this.
Dealing with inflation and planning for recession
Not the most appetising of titles I agree. One thing I have found when employing junior paraplanners is a thirst for general knowledge of economics and how things like a recession or high inflation can have an impact on all our finances. I spend probably too much time seeking out information on a whole range of topics and one of the aims of this site is for paraplanners to share knowledge with others in the community.
Here are two well written articles both of which are highly relevant to the current uncertain economic conditions:
Both have been written by an American but the fundamental principals and conclusions are relevant to any economy. The comments below each article are well worth reading too.
Scottish Equitable invokes property moratorium
A rush to withdraw money from its commercial property funds has forced Scottish Equitable to introduce delays of up to 12 months for its customers. It affects investors in the Scottish Equitable Property fund, Select Reserve fund and Select Distribution fund. Aegon UK, which runs the fund, blames the rush to the exits on concerns about the US sub-prime mortgage collapse, recession worries and interest rates.
Friends Provident took the same action with its property fund last month.
Regular income payments, retirements and death claims will not be affected.
As real estate can take months to sell, property funds keep a proportion of their assets in cash to pay any investors who want to leave. But if unexpectedly large numbers of investors want to withdraw their money the fund can be forced into selling property cheaply because they need a quick sale.
“The level of withdrawals from our property funds has reached the stage where we now have to sell properties to raise cash to meet the requests for payments out,” the company confirmed.
FundsNetwork offer on Bond
Fidelity FundsNetwork is offering an allocation uplift for clients and additional trail commission for advisers on its Investment Bond this Spring.
For all applications received on or after January 21 until March 28 2008, clients aged under 80 and investing over £50,000 will qualify for the 1% uplift in the allocation rate on their bond. The additional commission offer of 0.25% can be claimed by advisers for all cases received.
With profits fund returns plummet
With Profits has long been out of favour with many advisers when investing new money for clients. At the same time, there has been a significant amount of money moved out of With Profits into alternative funds to escape from the very low annual bonus returns in the pursuit of greater returns. Several life offices have launched ‘with profits fund analysis’ tools as an aid for advisers considering switching funds.
The tide seemed to have turned back in favour of with profits last year as terminal bonuses were increased; providers seemed to be sharing in the good times of recent years although reversionary bonuses still lagged well behind cash deposits. Recent news published in this article on the Money Marketing site (shown below) indicates that returns have, rather unsurprisingly, fallen in 2007. Norwich Union and Friends Provident have been the first to report this and others are likely to follow. However, both companies have increased terminal bonuses on long term bond business.
What are your thoughts on With Profits; stay or go? Do you use any of the With Profits analysis tools and what do you think?
Martin Vaughan offers his view on the role
Martin Vaughan is a Senior Paraplanner at Cooper Parry Financial Services and has written this article which has been published on the company’s web site and will shortly appear in the Institute of Financial Planning’s magazine.
Paraplanning now plays a pivotal role in the modern financial planners practice but there are still advisers who are not sure what a paraplanner: is, does or should do. Because of this, many paraplanners are not used to their full potential and even worse, some are still merely used as administrators. Advisers are still unsure how to make the most of their paraplanning resource and the benefits a good paraplanner can bring to their business.
Advisers have always had assistants, however, as their businesses changed, the role of these assistants became more defined and developed into that of a paraplanner.
The paraplanner forms the bridge for an adviser between conducting the meetings with the client and getting the business issued. The paraplanner coordinates all the administration required, designs an appropriate solution in conjunction with the adviser, prepares all reports and post sale documentation and provides technical advice when required.
The Paraplanner however is not an administrator and it is important to differentiate between to two roles. Administration requires a different set of skills to that of Paraplanning in the same way that Advising requires different skills.
Outsourced paraplanning boosts productivity
Cost efficiency and having the flexibility of an ‘on-demand’ service are two of the main reasons for utilising an outsourced paraplanning service for financial advisers, financial planners and wealth managers. Richard Allum, Managing Director of outsourced paraplanning specialists Adviser Assist, identifies the most common scenarios for employing outsourced or freelance paraplanners; “Based on the feedback receievd from our clients across the UK, the main reasons for using an outsourced paraplanning service are:
- Utilising the tehcnical knowledge and experience of the team
- Providing professioanl reports to set themselves apart from their peers
- Cost efficiency
- Time saving, and
- Flexibility
With smaller businesses, it is often difficult to justify employing an in-house paraplanner and even then, one paraplanner is unlikely to have the same level of technical knowledge and market experience as a team of four or five. With larger businesses, where we would be doing the majority of their paraplanning, it would be to save them the hassle of managing a paraplanning division.” Succession planning for a paraplanner within a small practice is often difficult, and so another reason for outsourcing, although many larger practices have their own internal paraplanners for this reason.
Truth – Financial Planning Software
Truth is the financial planning part of the Prestwood software system which has been ‘re-packaged’ and launched by Paul Armson. I attended a demonstration and workshop given by Paul this week where I met Mike Linksey of Fincision. Mike has posted a thorough review of the software on his site which I have reproduced below.
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I’ve seen virtually all of the adviser-targeted financial planning tools & packages currently available in the UK, (plus a few that aren’t but might be soon) but for quite a time I’ve been intrigued by the enigma that is Prestwood, the system pioneered by Paul Etheridge. Until now, it’s been fairly low on most people’s radars, but a change in proposition and a tie-up with 1st Software has created a buzz in the adviser community.
Yesterday, I finally got around to making the trip to Stourbridge to catch Paul Armson’s seminar on Truth, the financial planning package borne out of the Prestwood system.
Paul has been running these seminars to full houses for the last month or so, and places on the remaining seminars are disappearing fast. It seems that some serious people are getting interested in Truth, with Richard Allum of Adviser Assist and James Hay Wealth Management’s recently-departed UK sales director Stefano del Federico being just two of the dozen delegates who joined me.
And it would appear that Truth is gaining traction, with Armson claiming to have signed up 120 people in the last 3 months alone, and having somewhere between 4-500 users in total less than 6 months on from launch. These numbers are bound to grow once 1st Software switches off it’s own tired-looking planning tools and releases the next drop of Adviser Office (next week?) containing the Prestwood export option. But, the real news is that Quay Software are very close to following in 1st’s footsteps, which would give Prestwood access to over 70% of the IFA back office market plus the tacit endorsement of the two biggest players. Looks like Ben Goss’s Distribution Technology has got some unexpected and serious competition…
Using your SIPP to buy student digs?
Since Gordon Brown decided to back track on the inclusion of residential property being a tax efficient investment in SIPPs, advisers and their clients have been seeking other ways to invest in the property sector. Commercial property funds have seen tremendous returns over the last 10 years but demand has started to outstrip supply in some cases thereby diluting returns. There have been several interesting property based investments launched recently, many on the back of the heightened demand in the run up to A-Day, including holding student property in the form of halls of residence.
However, potential investors should be aware of the very specific requirements HMRC have set out as to what a hall of residence is. The criteria have been clarified in August’s pensions newsletter in which HMRC states a “hall of residence” does not need to be owned by the educational establishment whose students are the sole occupants, but in order to be a “hall of residence” it does need to be connected to a particular educational establishment”. Read the rest of this entry »
Tax relief on employer pension contributions
As we all know, employer contributions are now unrestricted in the post A-Day world. However, what is now unclear is the deductibility of such contributions against corporation tax. HMRC has published some guidance on the issue which can be downloaded from here. However, we always recommended that an employer consults with the company accountant, and is some cases the Local Inspector of Taxes, in an attempt to gain some certainty.
