Five tax threats to your pension
The Financial Times ponders five potential tax threats that HMRC could enforce on pensions. Due to the coronavirus pandemic, the Treasury is trying to find avenues to save more money.
Unfortunately, this could mean reductions to the tax advantages pension enjoy. The possible areas at risk include the lifetime allowance (LTA), the annual allowance and tax relief for high earners.
For the LTA, large reductions over the last decade mean it is not just the higher earners who risk getting caught by it. Even though experts think Sunak does not want to tinker with the tapered allowance, he may alter the annual allowance instead.
A cut to the tax-free lump sum and a squeeze on death benefits might also happen. The FT gives this a medium-to-high likelihood of this happening.
Over the last decade, pension rules have changed repeatedly. The best way to keep abreast of these changes is to regularly review your planning. This would preferably happen with a pensions expert to guide you.
Investors urged to buy gold as inflation surges higher
To protect portfolios against an inflation surge, “experts” have encouraged investors to buy gold. This is according to this article from The Telegraph.
Goldman Sachs has recommended its clients buy gold as economies around the globe begin to reopen. They and other fund managers believe investors need an “insurance policy” for their portfolios.
In contrast to other currencies, gold is considered to be a store of value when inflation rises. In The United States, inflation has reached a 13-year high. In Britain, the consumer prices index measure of inflation hit 2.4%.
However, gold has performed poorly this year. Arbuthnot Latham’s Gregory Perdon says gold has suffered because investors have been selling their bonds. “The key to the gold price over short periods is the yield on 10-year American government bonds. When it rises, as has happened this year, investors sell gold.”
You can find our thoughts on gold here.
Inheritance tax: HMRC launch ‘welcome’ IHT planning tool – can it save you time and money?
The Express covers how HMRC has launched a free-to-use INHERITANCE tax (IHT) planning tool.
Inheritance tax is usually levied on the estate of someone who has died and is passing on their assets, so long as their total estate value is over a certain level. Where IHT is due, it is usually charged at 40 percent.
Kim Jarvis, a technical manager at Canada Life, said: “IHT is by its very nature a complex area of financial planning, but this tool should prove valuable to those who are unfamiliar with the process and the forms requiring completion. “Although HMRC has been clear the tool should only be used as guidance, it will helpfully show if the estate will need to pay IHT. “The tool is not a calculator and clearly doesn’t replace good financial planning or the role of advice, but it is a welcome development by HMRC.”
You can find more on IHT here.