Check your National Insurance Contributions Record NOW. A window of opportunity is closing.

Currently, there is an extension in place allowing people to make good missing years of NI contributions as far back as 2006/2007 – so 16 years. The usual time period allowed for topping up past NI contributions is six years, and the system will revert back to this after April 5, 2023.

The State Pension is an important source of income for most people in retirement. In April this year it will increase by 10.1% to £10,600 per year. Therefore a couple who each receive a full State pension can receive £21,200 per year before taking income from other pensions and savings. This assumes the full new State Pension is received, and this requires a minimum of 35 qualifying years of NI contributions. Quite often, people have patchy records and they may be some years short when it comes to retirement age.

My advice to clients is to ensure their State Pension is fully funded. The cost of making up missing years is extremely attractive when compared to the additional pension you will receive as a result – it really is the best deal in town where pensions are concerned! You need 35 qualifying years of NI contributions on your record to receive the full State Pension, and a minimum of 10 qualifying years to get a partial pension.

You can check your National Insurance record online at but you may need to set up a Government Gateway ID and password first. When you do so, try to identify any discrepancies between your own PAYE records and what HMRC have recorded, and followed them up promptly. And see about paying for missing years if they won’t be made up by future years’ contributions.

The timeframe to make voluntary contributions to top up missing years will revert to 6 prior years only on April 5, 2023 so do take the time to check this if you think there is any doubt as to the completeness of your National Insurance contributions payments record.

Tony Devine

Does it make sense to gift surplus pension income?

Pension freedom changed the dynamics of estate planning, with many individuals now gifting or spending assets which are part of the estate before touching their pension pot which remains IHT free. So does it make sense to gift surplus pension income? Gifting surplus pension income using the ‘normal expenditure out of income’ IHT exemption might seem a pointless exercise. After all, why give away something which isn’t in your estate in the first place?

But if pension withdrawals can be taken tax free (or at least at a lower tax rate than the beneficiary may pay on any inherited pension) there may still be a strong motivation to do so as part of an effective estate planning strategy.

There is no statutory limit on what can be given away and successful claims on regular gifts are immediately outside the estate. Combined with the flexibility offered by pension freedom, this can be remarkably efficient.

Estate planning with pension income

Many clients don’t start thinking about estate planning until after they have ceased working. The first priority must, of course, be ensuring their own income security in old age. But once this is done, should thoughts turn to gifting? Even with a fall in income in retirement, some clients may still have more coming in than they need.

Fixed incomes

Income from annuities or DB pensions can’t be adjusted, so any excess may end up simply being accumulated in the estate and could be subject to IHT on death. Even if it’s subsequently given away as a lump sum it would take seven years to be outside the estate.

However, if that surplus income is given away on a regular basis and the exemption claimed it is immediately outside the estate and offers an opportunity to pass on pension wealth tax efficiently.

This is perhaps an easier decision to make for these clients as the question is simply about what to do with their surplus income, and not whether to take more income from a flexible pension, unless they also have one of these.

Flexible incomes

Those in drawdown have greater freedom to pass on their accumulated pension savings. Any unused funds on death are available as either a lump sum or as inherited drawdown.

The remaining pension funds are typically free of IHT, so there’s unlikely to be an IHT advantage in taking more drawdown income than is needed. But there could be other motivations for doing so.

On a practical level, beneficiaries may need the money now rather than after the client has died. Or the client may simply wish to see their loved ones enjoy the money.

There could also be an income tax benefit. If the client dies after 75, any undrawn tax free cash entitlement will be lost. So what could have been taken tax free before their death would become taxable in the beneficiary’s hands.

However, if surplus income can be generated by making withdrawals which are tax free (or at a lower tax rate than the beneficiary is likely to pay) then there may be good reason to do so.

This takes us to a critical question.
What counts as  ‘income’ from a flexible pension? Flexi-access drawdown, (where there are no limits on what can be taken and withdrawals can be taken as combination of tax free cash and taxable income), gives significant scope to take withdrawals tax efficiently.

When it comes to gifting those withdrawals, the IHT rules also help here. The ‘normal expenditure out of income’ exemption doesn’t use the income definition used for income tax purposes. As income is not defined in the IHT Act, it follows normal accountancy practice to determine what is income.

HMRC have confirmed to us that regular withdrawals from flexible pensions, irrespective of the levels withdrawn and whether taken as tax free cash or taxable income, always count as income for the purpose of the IHT exemption. This creates an opportunity for at least 25% of the pension fund to be taken and gifted both income tax and IHT free.

Other conditions

But it is important to remember that the gifts still have to satisfy two additional conditions.

Firstly, the gifts have to be part of normal expenditure. Taking the full 25% tax free cash entitlement and giving it away is a one-off gift. The exemption clearly will not apply and the gift will be a potentially exempt transfer. There has to be an established pattern of gifting. Spreading the gifting of tax free cash over a number of years using a phasing strategy, so that all the tax free cash is taken by the client’s 75th birthday, is a better option.

The second condition is that the gifts should leave the client with sufficient income to maintain their usual standard of living. Any pension withdrawals needed to maintain this standard will not be ‘surplus’. Similarly, the amount of the gift which qualifies for the exemption may be limited if the client has to draw on other capital assets, such ISAs, bonds or OEICs, to supplement their lifestyle.

There is an obvious estate planning advantage to making gifts of assets which form part of the estate before giving away pension funds which do not. So capital gifting may take precedence over income gifts unless other savings have already been exhausted.

Record keeping

Last but not least, it is good practice for anyone who intends using the exemption to keep not only details of the gifts made but also their income and expenditure. This can be captured on the IHT403 form. Ultimately it will be down to the executors to make the claim. And it can be extremely difficult to collate this information post death.

Source: Standard Life technical consulting –
Information correct at 11/12/18

Exit Charge removed by Scottish Widows on Saving Plans & ISA

Scottish Widows is removing the exit charge that applies to certain Savings and Investment products. Following a review, they are removing the exit charge on the Savings and Investment products listed below by 23rd October 2017.

Scottish Widows Unit Trust Managers Ltd:
● Scottish Widows Open Ended Investment Company
● Scottish Widows Individual Savings Account

HBOS Investment Fund Managers Ltd:
● Halifax Collective Investment Plan

This will be of potential benefit to many account holders, who can now move their investments to lower cost platforms, and also access a wider range of funds with better track records.

We work with several low-cost platforms for ISA and non-ISA (Unit Trust / OEIC) funds and can help you design an optimum asset allocation and populate it with leading funds from a wide choice, giving you the portfolio you that is designed for you. We don’t force people into categories or into one of a handful of model portfolios – our portfolio design is bespoke.

Here’s a little example. For clients with both ISA and Non-ISA holdings, we design the portfolio and then split it so that the income bearing stocks are in ISA , and the growth stocks (with typically lower dividends) are in non-ISA. This is very effective in mitigating any tax from the non-ISA element, and the growth in the non-ISA element is also usually largely untaxed as as you can carefully use your CGT allowance each year (which otherwise is lost!) You’d be surprised how many high street bank “advisers” and indeed other financial advisers across the country will simply lump your money into the same portfolio across both accounts. We don’t, because to do so is poor advice.

Higher Earners – are you affected by the new tapered (restricted) tax relief on pension contributions? Read on for Possible Solutions…

My previous post November 23rd 2016 set out the rules for the tapered annual pension contributions allowance. Many higher earners are getting to grips with this and seeing that their ability to obtain (higher / additional rate) tax relief on pension contributions is severely restricted. This is bonus season, and a recent bonus may push you into this tapering calculation for your allowable pension contributions.

This is the first year of operation and  where an individual did not maximum-fund his pension contributions in previous years, they can use up available headroom from the previous three years (after first making maximum contributions in the current tax year). The maximum annual allowances are:

2016/17: (current tax year) £40,000 or as low as £10,000 if subject to tapering

2015/16: £40,000

2014/15: £40,000

2013/14: £50,000

So provided an individual was UK-based AND a member of a UK pension scheme at the time (regardless of whether  any contributions were made) in those three previous tax years, if their aggregate gross pension contributions (including employer contributions) were below the annual allowances, then the headroom can be carried forward and used in the current tax year. To do so, one must first use the current year’s, then you may go back up to three previous tax years, using the oldest first. As you can see, after we pass into a new tax year, the oldest of the three years falls away. Therefore, even if you cannot fully fund all of the headroom available, it would be sensible (where funds permit) to fund the current year and then go back and use the remaining allowance from three years ago – 2013/14 as it currently stands.

Give me a call if you have questions or need help with the calculations – 0345 013 6525.

Where carry forward is exhausted, higher earners may wish to look elsewhere for tax efficient long-term investments. These will include ISAs, Venture Capital Trusts (VCTs), (Small) Enterprise investment Schemes (SEIS and EIS),  investment bonds (onshore and offshore), maximum investment plans and other vehicles. Not all types of investment are suitable to an individual, so advice is needed when considering them.

I’ll be blogging more about these areas as we approach tax year-end, but since demand is high if you are contemplating making a last minute lump sum contribution into pension I suggest you do so several working days before April 5th, 2017 to ensure properly received and recorded by the pension provider.

The obscene lifestyles of the new global super-rich


responsive web pic

Our New Website

Our new website is, apparently, responsive. Rather then meaning something to do with good handling, accelerates at the slightest touch of the throttle etc. it means it responds to whatever kind of viewer the user has – PC, tablet or smartphone, and displays itself accordingly.

So please let me know if you see any problems with it on your smartphone or tablet, or indeed if it refuses to render properly on IE, Firefox or Chrome on your pc, and I’ll try and get it sorted.

More to the point, please feel free to comment on this blog – the more comments the better. And please do share using the social media buttons at the foot of every blog.

Best regards


Pandering to one’s ego – A Daft email campaign

A light diversion from the usual more serious stuff in this blog. I exchanged emails with a lovely lady called Laura Hunter last month and thought you might like to share .


As you can imagine I was suitably impressed with their offer, but had to politely decline, because…..