unisonmoneytalk · reduce the amount of income tax you pay. if you are over 65 you may want to keep...

Hurry – time is running out to put the tax back into your savings!

Why ISAs make sense for most peopleIf you have any savings or investments you should consider holding them in an ISA – there is no tax to pay on any income or interest you receive from them or on any gains you have made when you cash in your ISA. This makes them an attractive, flexible way of saving for the future – whether to pay for your children or grand children’s education, or to boost your income later in life. Plus, you can take money out whenever you want.

Which type of ISA?There are ISAs to suit most people – cash, investment funds (known as stocks and shares), or a mixture. Cash ISAs are like savings accounts but with the tax advantages of an ISA. As they pay interest and are not invested in the stock market, they could be suitable if you are saving for a wedding, the holiday of a lifetime or similar event and you expect to keep your ISAs for five years at most.

Stocks and shares ISAs are exactly the same as putting your money directly into investment funds which invest in stock markets (or even directly into individual stocks and shares), again with the tax advantage of an ISA. In the past, investments in stocks and shares have provided a better return than savings accounts over the longer term, although there is no guarantee that they will continue to do so. They could be suitable if you want to boost your income later in life, or you expect to keep your ISA for at least five years and preferably a lot longer. Once you have taken out an ISA you can move your money between stocks

and shares and cash, although this can involve switching to a different provider.

One ISA every tax yearYou can take out one ISA every tax year, so if you don’t take out an ISA by 5 April 2015 you will lose the opportunity to shelter up to £15,000 from tax. The allowance

applies to all adults resident in the UK for tax purposes, so a couple can

shelter up to £30,000 from tax in this tax year. The allowance usually increases each

tax year in line with inflation.

If, like most people, you don’t have a lump sum to invest you can still benefit – most ISAs allow you to make monthly contributions, often as little as £25. With careful investment and tax-free growth, you could build up a surprisingly large amount over the years.

Transfer savings or investments you haveIf you already have investments or savings you should consider transferring them into an ISA and stop paying more than you need to the taxman.

Unsure which ISA to choose?A huge number of ISAs are available and it can be hard to know which to choose. Do you want income or growth, or both? How much risk are you able and prepared to take? We’re here to help. As professional financial advisers we will recommend ISAs specifically for you.

The value of your investments can go down as well as up, so you could get back less than you invested.

You have until 5 April to take out an ISA in this tax year. You can’t carry forward your allowance, so it is a question of use it or lose it. ISAs, or Individual Savings Accounts to give them their full name, were created by the government to encourage people to save in a tax-efficient way.

1 UNISONMONEYTALK SPRING 2015

Hurry – before it’s too lateCall 08000 85 85 90 or email [email protected] and book an appointment with one of our professional financial advisers. He or she will have the knowledge and expertise to help you find an ISA that suits you.

UNISONMONEYTALKThe personal finance newsletter for UNISON members published by Lighthouse Financial Advice SPRING 2015

While Lighthouse Financial Advice endeavours to provide correct information, it cannot guarantee the accuracy of any information contained in this newsletter and no action should be taken or not taken solely based on the information contained in it. Professional financial advice should be sought before taking any action. Threshold, percentages, rates and tax legislation may change in the future. Lighthouse Financial Advice Limited is an appointed representative of Lighthouse Advisory Services Limited which is authorised and regulated by the Financial Conduct Authority. Lighthouse Financial Advice Limited is a wholly owned subsidiary of Lighthouse Group plc. Registered in England No. 4042743. Registered Office: 26 Throgmorton Street, London EC2N 2AN.

Also in this issue

Be more tax aware! 2

Little by little ... 2

Pension freedom – what it means for you! 3

How Mary could use the new rules to boost her pension pot 4

Financial advice at work 4

www.lighthousefa.co.uk/unison


LIGHTHOUSEFINANCIAL ADVICE Making your money work harder

Be more tax aware!

Yet, organising your and your household’s finances tax-efficiently is part and parcel of

sensible financial planning. In fact the government actively encourages us to take advantage of many legitimate tax reliefs and allowances.

Here are a few things you could do by 5 April that could improve your tax efficiency:

● If you have additional voluntary contributions or a personal pension, you could pay in more – not only will this boost your pension provision, but as the money is taken out of pre-tax income it will reduce the amount of income tax you pay.

● If you are over 65 you may want to keep your adjusted net income below £27,000 (tax year 2014/15) in order to keep your full age-related

tax allowance.● Use both annual allowances –

yours and your spouse’s – fully, especially if you are in different income tax brackets.

● If you are thinking of drawing your pension under the new pensions freedom, think carefully about how you use your 25% tax-free allowance.

● Put your savings in an ISA.● Check that you are on the right

tax code.● Give to charity, as you can

deduct charitable gifts from your taxable income.

As ever, there are pros and cons to these suggestions and it is important to understand the full implications of what you are considering. It therefore makes sense to talk to one of our professional financial advisers before you act.

Like most people in the UK, you probably recognise the importance of paying your fair share of tax. After all, it helps fund the NHS, schools and all the other vital services that the state provides.

If you are thinking of drawing your pension under the new rules, think carefully about how you use your 25% tax-free allowance.

Little by little...Saving a small amount each month can soon add up!

Even if retiring is the last thing on your mind, you know that it makes sense to save whatever you can afford.

The earlier you start building up your pension fund the better. Depending on your job, you may be able to make additional contributions to your employer’s scheme, or you could take out a personal pension.

You get tax relief on money you pay in and your contributions can grow tax-free in the pension fund, making pensions one of the most cost-effective ways of saving.

With careful investment and tax-free growth, you could build up a surprisingly large amount over the years.

You pay £80 a month

Amount invested £100 a month

In 20 years it could be worth

£36,000

This example assumes you receive basic rate tax relief and that your fund grows by 5% a year and has an annual charge of 1%. The actual growth and charge could be more or less than this and will depend on the pension plan you choose.

Find out moreIf you would like to talk to an adviser about organising your finances more efficiently call 08000 85 85 90 or email [email protected] and book an appointment with one of our professional financial advisers. He or she will have the knowledge and expertise to help you take your pension in a way that suits you.

The value of your investments can go down as well as up, so you could get back less than you invested. Tax advice which contains no investment element is not regulated by the Financial Conduct Authority.


Pension freedom – what it means for you!

Are you affected?Probably not if you are a member of a traditional public sector pension scheme and you don’t have pensions from previous employers or make additional voluntary contributions (AVCs).

If you are a member of a defined contribution pension, whether from previous or current employers, pay AVCs or have taken out a personal pension you will be affected.

Defined contribution pension schemes, also known as money purchase, are not based on your final salary. They include personal pensions, group personal pensions (for instance company schemes where your pension is not based on your final salary), stakeholder pensions, and AVCs.

What will you be able do with your pension?Exchange it for an income for the rest of your lifeIn other words buy an annuity. However, once you have done this you generally can’t change your mind and you no longer own your pension fund. Also, you need to think about whether the income you get will keep pace with inflation – while it may cover your expenditure now, can you be sure it will do so in 10 or even 20 years’ time?

Take all your money outBut you would have little certainty about your income and you could use up your money too quickly. You could also end up paying a lot of tax on what you take out if you are not careful.

Leave all your money in You could do this if you are lucky enough to have enough income from other sources and you want to pass on your pension fund to your loved ones, but this is unlikely to be a viable option for most people.

A combination of the three options aboveYou could use part of your fund to secure the basic income you need and then draw the rest as income or capital as and when you need it or want to treat yourself. At least you would know that you would always have your basic income.

What do you need to think about:● Might you run out of money? If you did, would

your state pension give you enough income?

● Is the amount of income you need (and want) likely to increase or decrease at any time?

● Do you want your spouse or other dependants to receive income if you die before them?

● How healthy are you?

● Do you have income from other sources, or other savings and assets?

● What will happen to your pension fund when you die?

● How much tax you will pay whatever you decide.

Take specialist advice to secure your incomeYour pension provider will ask you a few questions, to help you with your decision. The government is offering free guidance, under the Pensions Wise brand, to help you understand your options. However neither will provide comprehensive advice that takes into account your particular situation and needs.

Some of the details of the new rules have yet to be confirmed. Taking specific advice from a pensions specialist can be invaluable – it could mean you have the retirement income you need.

Deciding how to fund your retirement is one of the biggest decisions you will ever have to make. Once you have made your decision it is unlikely that you will be able to change your mind later. And from April you will be in the driving seat when it comes to deciding how to take your pension.


Find out moreIf you are about to turn 55 or to retire in the next year or so call us now on 08000 85 85 90 or email [email protected] and book an appointment with one of our professional financial advisers. He or she will have the knowledge and expertise to help you organise your finances in a way that suits you.

Three things you may not know about the proposed new rules

● Some pension schemes may not allow you to benefit from the new rules, even if you qualify.

● You won’t have to take your 25% tax-free cash as a lump sum. You will be able to spread it across withdrawals as you wish, up to the 25% limit.

● Any money you withdraw over and above your 25% tax-free amount could result in you having to pay more tax than you expect. Make sure you understand the tax implications before taking action.



How Mary could use the new rules to boost her pension pot

The good news is that Mary will be able to pay up to £10,000 a year into her pension fund as of 6 April. This is because her current arrangement will automatically

convert to the new, flexi access drawdown fund on that date.

Although the new rules come into effect in the 2015/16 tax year, Mary’s financial adviser explains that she can claim the income tax relief in the 2014/15 tax year, while her earnings are higher. She is able to do this because his pension contributions year (also known as pensions input period) is based on a calendar year, not the tax year. Normally a twelve month period is based on the date of your first contribution.

Not all pension input periods are the same, so what worked for Mary might not work for you. As you will have gathered, even relatively simple pension planning is complicated unless you have a thorough understanding of the rules and what is allowed under different pension schemes. Also, some of the details of the new rules have yet to be confirmed. Taking professional advice from a pensions specialist can be, literally, invaluable.

The value of your investments can go down as well as up, so you could get back less than you invested. Tax advice which contains no

investment element is not regulated by the Financial Conduct Authority.

Find out moreIf you have already started drawing your pension, would like to start doing so soon, or are hoping to retire in the next year or so call us now on 08000 85 85 90 or email [email protected] and book an appointment with one of our professional financial advisers.

Mary is 63 years old and started taking income from her personal pension, which she has been paying into to boost her pension, using what is known as flexible drawdown in October 2012. She is still working and would like to pay more into her pension as she will need more income when she stops working.

Beware of pension scams!Pension scams are on the increase. If you are approached by a cold caller or similar do not be pressurised into acting.

Make sure that you ONLY take financial advice from an adviser who is approved and regulated by the Financial Conduct Authority, such as Lighthouse Financial Advice.

Financial advice at work

Do you and your colleagues understand how your pensions work and what you need to think about when you are about to retire? Or why putting your money into investments can be better than keeping it in traditional savings accounts?

We can run a seminar in your place of work explaining these or other financial issues of concern to you and other UNISON members.

To find out how we can help you help UNISON members please contact one of our regional representatives:

London, the Home Counties, the South West & South Wales: Helen Andrews Tel: 07771 804658 Email: [email protected].

The Midlands, the North West & North Wales: John Duffy Tel: 07535 991722 Email: [email protected].

The North East, Scotland & Northern Ireland Gillian McGrath Tel: 07887 788935 Email: [email protected].

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