LG Investment News

Welcome to our latest issue of Lyon Griffiths’ Investment News.

We aim to communicate the key current topics in the world of financial advice and highlight the up and coming issues in an understandable and digestible format.

In this Edition:

  • The Pensions Regulator
  • Power of Attorney fee refund
  • Inheritance Tax hits new Heights
  • Pension tax relief
  • Financial Scams
  • The work/ life balance
  • Helping children to buy homes
  • The Nantwich Show


The Pensions Regulator

The Pensions Regulator (TPR) has been active this year.  In February 2018 a bus company and its owner were fined just over £31,000 for ‘wilfully failing to comply with the law on workplace pensions’ by failing to Auto Enrol a total of 36 staff into a pension scheme.  That was the first prosecution for auto-enrolment offences although TPR has issued numerous penalty notices.  As the case ended up in a magistrate’s court the business owner now has a criminal conviction on top of the reputational damage to the business itself.

Non-payment of fines for Auto Enrolment (AE) and other breaches can result in Court Orders and TPR has announced High Court Enforcement Officers (HCEOs) and their equivalents in Scotland and Northern Ireland will enforce such orders.  Those failing to pay could find business assets being seized.  Unlike bailiffs, HCEOs can make forced entry into premises.

The TPR has launched a programme of ‘spot checks’ across North East England to identify businesses not complying with the Auto Enrolment rules.  This is part of a programme which began in London and has already covered Manchester, Northern Ireland, Glasgow and many other parts of the UK. 

It’s not just AE on TPR’s radar, they are currently prosecuting Samuel Smith Old Brewery (Tadcaster) and its Chairman for failing to supply information and documents required for an investigation.

TPR is becoming more active all the time and employers need to ensure they are just as aware of them as they are of HMRC.

Power of Attorney fee refund

The fee charged by the Office of the Public Guardian for registering Powers of Attorney was reduced in April 2017 from £110 to £82.  Anyone who paid the higher fee between April 2013 and March 2017 is entitled to a partial refund and applicants are asked to seek this refund via the web site www.gov.uk/power-of-attorney-refund.  Nearly 2 million people are estimated to be entitled to claim.

Inheritance Tax hits new Heights

In the 2017/18 tax year, some £5.2 billion was paid in inheritance tax (IHT) - £400 million more than 2016/17 and the highest IHT ‘take’ on record.

On one level, this isn’t a surprise, the ‘nil rate band’ – the amount of an estate which is not subject to IHT – has been frozen at its current level of £325,000 since the 2009/2010 tax year while stock market investments and residential property have seen significant increases in the same period.

But the introduction of the ‘main residence nil-rate band’ in April 2017 was expected to reduce IHT overall.  This ‘new’ relief served as an additional nil rate band of up to £100,000 (£40,000 reduction in IHT) where an estate exceeded the £325,000 nil rate band and the deceased’s main residence passed to a direct descendent (child, step child, adopted child and their lineal descendants).  The allowance was capped at £100,000 or the net value of the residence, whichever is the lower.  I’ve used the past tense as the main residence nil-rate band is currently set at £125,000 and will increase in stages to £175,000 for the 2020/21 tax year after which it will be linked to CPI.  The allowance does taper downwards for estates of £2 million or more.

Like the main nil-rate band, this residential band can be transferred to a surviving spouse if not used by the first to die.

Given that the freeze on the main nil-rate band is now set to continue until the end of the end of the 2020/21 tax year, the value of the main residence nil-rate band is considerable but it is a complex beast.

Continued freezing of the main nil-rate band suggests that despite increases in the residential nil-rate band IHT liabilities will continue to rise.

Philip Hammond has requested the Office of Tax Simplification to look into IHT to see if there are ways in which the process of assessing a potential liability, especially where gifts are made during lifetime, can be made more straightforward for tax payers.  So we can expect some simplification even if that just makes it easier to calculate increased liabilities.

Pension tax relief

Pensions have always been and still are the most tax-efficient form of investment, but limits on contributions and total savings have been reduced dramatically.

A major part of the reason is that higher rate tax relief on pension contributions is costing the Exchequer £38 billion annually, and questions remain as to how long the government can continue to ignore calls for the standardisation of relief at a lower level, perhaps 30%.

It was Chancellor George Osborne who initiated research into the issue, and insiders report that the Treasury has a large file the conclusions from which would enable it to act at fairly short notice.

For the time being, pre-occupation with the fallout from Brexit is likely to delay reform, but the writing is on the wall, and as ever, the clear message is to take full advantage of existing relief while it is available.

Financial Scams

It is estimated that financial crime costs the UK an eye watering £52bn, according to the Economic Crime Directorate at the City London Police.

And that may be the tip of the iceberg as, apparently 88% of all cybercrime goes unreported.  Many of these scams do look and sound perfectly legitimate so it does pay to be careful; it is  estimated that something like 80% of cyber ‘scams’ could be prevented if potential victims knew a little bit more about how scamming works and took a little more care.  There is a host of different scams, just looking at a few:

There are ‘Boiler-room’ schemes - which promise investors impressive returns, but actually just generate a loss of the whole ‘investment’.  Typically victims receive a ‘cold’ telephone call offering an investment scheme with huge returns.  Invariably there is a requirement to act fast, with money being transferred immediately.  The investment will sound plausible but not only is there every possibility that it won’t really exist, as the Boiler-room will not be authorised by the Financial Conduct Authority (FCA), there will be no chance of compensation under the Financial Services Compensation Scheme.

Then there are the most common scams, phishing attempts.  These revolve around contact – usually by ‘phone or e-mail – with someone claiming to be from a bank or building society or insurance company.  The scammer asks their victim to click on a link to verify log on, account and password details, the scammer reads the information and raids the connected account.  Again, there is very little chance of recovering any monies taken in this way.

And the fastest growing scams at the moment revolve around Pension Freedoms with scammers contacting the over 55s with supposed investment opportunities for their pension funds.  Commonly these investment opportunities will be overseas.

Low interest rates are tempting people to take extra risks, so they are vulnerable to such fake investments.  Fraudsters can approach their victims by post, email or telephone.  If you think that you may have been made a fraudulent offer contact Action Fraud on 0300 1232040 or visit the FCA’s Scam Smart site to see if the investment you’ve been offered is on their warning list http://scamsmart.fca.org.uk/warninglist/

The Scam Smart site also offers the opportunity to listen to a few demonstrations of these fraudulent ‘phone calls.

The work/ life balance

An American reporter, visiting the Soviet Union after the Russian Revolution in 1919, wrote “I have seen the future and it works”. The Calvinist Chancellor and Prime Minister Gordon Brown adapted the quotation to his own view of life, saying “I have seen the future, and it is work”.

The economic advantages of working after what many would regard as a normal retirement age are clear and are appreciated by a growing number of UK residents. The proportion of 50 to 64 year olds in work has risen from 65% in 2007 to 71% today.

To take an example of the financial benefit of delaying retirement, if someone with an income of £40,000 p.a. net of tax who spends £32,000 and saves £8,000 p.a. were to delay retirement by just one year they would be £40,000 better off. Their pension pot would not be depleted by £32,000 and an extra £8,000 would have been added to their savings.

Other advantages of delaying retirement are that the amount which can safely be withdrawn from a pension plan under ‘income drawdown’ will be increased as also will the rates available for those who choose to buy retirement annuities.

Set against this is the awareness that the clock is ticking and there may be more enjoyable things to do with one’s remaining years than work.  This applies particularly to employees.  Research has found that self-determination is an important factor in job satisfaction, and the self-employed enjoy higher levels of happiness than the employed.

Helping children to buy homes

The 3% stamp duty surcharge on the purchase of second homes which was introduced in April 2016 has posed a problem for parents wanting to help their children onto the housing ladder by buying in joint names.  However, some enterprising lenders have devised plans which avoid the problem.

These plans are called joint borrower sole proprietor (‘JBSP’) mortgages and allow parents to share in the financing of the purchase without becoming part owners of the property and thereby incurring the second home charge.

This would enable a buyer whose income did not justify the level of mortgage required, to involve a parent with a higher income to meet the lender’s income multiple requirement.

Another consideration is capital gains tax, which would be payable on the increase in value of a second home.  This is avoided by keeping the name of the parent off the title deeds.  The separation of ownership from financing also enables the first-time buyer to qualify for the £300,000 stamp duty exemption, which would not be available if the purchase were in joint names.

JBSP is available from a limited number of lenders and the criteria are strict.  There must be a direct family connection between the buyer and the joint mortgagor, and the buyer’s income prospects must be sufficient to enable them ultimately to afford the mortgage on their own.

An alternative scheme offered by one lender allows a borrower a 100% loan subject to a family member providing a 10% deposit.

The Nantwich Show

The Nantwich Show is on Wednesday 25th July this year at The Showground, Nantwich, Cheshire, CW5 8LD. We'll be there, Stand 20, and we hope to see you there too!

We have lots going on throughout the day including the View from the Cloud, Free Jewellery and Silver Valuations by the regions' experts and Complimentary Refreshments.

View from the Cloud

We will be in the Cloud all day, come and see the view!  We will be showcasing all the latest developments in cloud accounting and it’s benefits for you and your business.

Jewellery & Silver Valuation

David and Helena from Peter Wilson will be joining us for the day to provide complimentary valuations on items of jewellery and silver. Whether it's an item you are wearing on the day or a specific item that you bring along why not satisfy your curiosity and get the opinion of the experts!

Complimentary Refreshments

If that's not enough to have you dashing to our stand we'll have a glass of bubbly, canapes and nibbles waiting for you.....


 Past performance is not a guide to the future. We would always stress that the value of an investment as well as any income derived can go down as well as up. This document does not constitute personal advice; please contact us if you wish to discuss the suitability of any of the investments outlined.