Reading about M&G’s troubles, I can’t help putting them down to the obsession with running an expensive fund platform. But what do I know?

What I do know about is 21^st century advice – something I believe is built on the shoulders of giants, such as the Man from the Pru.

These advisers door-knocked, cold called and worked evenings to get families started on a lifetime of saving and self-preservation.

So, why is offering advice so hard these days?

It’s a real shame such a historical institution as M&G cannot remain committed to solving the challenges of advice regulation while making a profit.

It’s a real shame such a historical institution as M&G cannot remain committed to solving the challenges of advice regulation while making a profit

There remains a huge advice gap opportunity for any company who can de-mystify the world of investment and help the man in the street access the wonder of compound interest, just like they used to.

Providing advice seems to terrify those around the board table. Is it impatience from shareholders, short termism on the part of directors or just fear of liability? Probably all three.

I have previously voiced support for a simplified advice regime which could be a gateway to the markets for low value investors taking advice.

To those providers pondering on leaving or entering the advice market, here are my suggestions for making it work:

• Reduce the hurdle of cash savings: Three months spending in cash can take five to seven years for people to save and it is not mandatory as emergency provision. This restriction serves the anxiety of compliance staff more than it serves the interest of investors, and it can be done better.
• Know the outcomes of what you are offering: Charges need to be competitive, and easily justified. Funds need to be liquid, transparent and dependable in their expected returns. Projections need to be realistic and not woefully cautious.
• Think about the liabilities: How will they arise? How is the compensation calculated? Which investors complain? What triggers the complaint? By looking at this in full detail, you can inform the quality of your messaging and have more investors with confidence.
• Get the box tickers out from their desks: Give them sales training, teach them to advise, make them talk to clients.
• Focus on service: Of £198,798 complaints to the Financial Ombudsman Service in 2023/24, £1,459 (0.7%) of them were against advisers. Why fixate so much on the nuances of suitability? With a simple and reliable product proposition, 90% of advice can be algorithmic – making it both efficient and profitable.
• Know your target market and sell to them: Financial services have been a huge contributor to prosperity in the UK. We should believe in the benefit of what we do.

The regulation of financial services in the UK has been a been a huge success in improving the rights and security of consumers. But it is nothing to fear. Our faith in delivering advice to all must endure alongside the products and the markets that will deliver for investors.

Greg Neall is chartered financial planner at Wake Up Your Wealth

HUNDREDS of thousands of retirees are set to pay tax on their state pension for the first time next year.

This is due to a combination of hefty state pension rises and frozen tax thresholds.

1

It is expected that more than 300,000 pensioners will be told that they need to pay tax when the state pension rises by £473 in 2025.

The figures released this week have confirmed that the state pension is now expected to rise from £11,502.40 to £11,975 per year under the triple lock.

With tax thresholds frozen until 2028, this increase will drag even more pensioners into paying tax for the first time, it has been warned.

This is because the total annual amount of income they receive will be more than their personal allowance.

The allowance is the amount of money you can earn before you have to pay tax on your income.

Under the current rules, this is up to £12,570 each tax year.

It was previously expected that around 140,000 pensioners would receive a letter for the first time this year.

But because of the proposed increase in the state pension, more than 300,0000 people are now likely to get one.

Alice Haine of Bestinvest said: “Add in frozen tax thresholds, with the full new state pension gaining ground on the standard personal allowance of £12,570 and pensioners are edging closer to the point at which their state pension income becomes liable for tax.

“Retirees already receiving a higher state pension may already be paying tax on the benefit, while those receiving a private pension income will see more of that swallowed up by tax.”

Helen Morrissey, head of retirement analysis, Hargreaves Lansdown also pointed out that while rising state pensions are good news, the tax threat is “a hidden sting in the tail”.

She said: “While the full new state pension is currently set at £11,502 and is set to get close to £12,000 from next April it’s conceivable that in the next two years we could see it breach the £12,570 threshold and see pensioners landed with a tax bill.

“It’s also worth saying that many pensioners on the basic state pension system receive more than this as they get a top-up to their income in the form of the state second pension so receive a tax bill even if they have no other income.”

Many pensioners have other pensions – personal or workplace – and HMRC will usually take the income tax due through these pensions, Helen pointed out.

She said: “Those pensioners wholly reliant on the state pension who face paying tax will receive a simple assessment letter from HMRC telling them how much they owe.

“There have been concerns about pensioners being chased for small amounts of tax though HMRC has said they would not look to chase tax amounts that would cost more to collect than is actually owed.”

Why is this happening and is there anything I can do to avoid it?

High inflation rates mean more people in work are getting pay rises to try and keep pace with rising prices.

However, with income tax bands frozen, it means many are being pushed into the next tax bracket.

Laura Suter, director of personal finance at AJ Bell, previously told The Sun: “Pensioners looking to reduce their tax bill need to think about how they can maximise their tax-free income.

“For example, any withdrawals made from their ISAs will be free of any tax. so they can use that pot of money to boost their income without impacting their tax bill.”

An ISA is a type of savings account in which you can save up to £20,00 a year tax-free.

Laura also suggested that couples can organise their finances so they ensure they are each making use of their tax-free allowances, which might involve moving money or assets between themselves.

Helen also added that pensioners might want to use some of their pension to top up their income.

She said: “Most people can access 25% of their pension as a tax-free lump sum so they may decide to use this to top up their income without pushing up their tax bill.”

However, she also warned that pensioners below the personal allowance are going to find it increasingly difficult to avoid paying income tax in the coming years.

The finance expert added: “A full new state pension hits just over £11,500 per year and even relatively modest 3.5% annual increases would see people pushed over the threshold by the time the threshold freeze ends.”

Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk.

Plus, you can join our Sun Money Chats and Tips Facebook group to share your tips and stories

Britons Increasing Pension Withdrawals Ahead of Budget Announcement

As the budget announcement on October 30 approaches, Britons are withdrawing more money from their pensions, according to insights from an investment platform. Michael Summersgill, CEO of AJ Bell, highlights that many savers are opting to increase their tax-free cash withdrawals. Currently, individuals can withdraw 25% of their pension, with a maximum limit of £268,275. While there’s no definitive evidence suggesting a reduction in this percentage, left-leaning think tanks have advised the government that the 25% rule mainly benefits wealthier individuals.

Understanding Pension Withdrawals

Summersgill stated, “Pensions serve as the main savings tool for retirement in the UK, and it’s natural for customers to be concerned about any potential tax changes. With the heightened media focus leading up to the budget, we’ve observed a significant shift in both pension contributions and tax-free withdrawals.”

Conversely, Ross Lacey, a director and chartered financial planner at Fairview Financial Management, advises clients against making hasty decisions. “Given the increasing emphasis on self-funding retirement and the existing challenges pensions face in terms of public perception, it would be unwise to implement changes that could make pensions less appealing,” he noted. It’s worth mentioning that immediate tax changes are not uncommon but are still unexpected.

Should You Increase Your Pension Contributions Before the Autumn Budget?

With the Autumn Budget approaching, many are pondering whether to increase their pension contributions. There are speculations that higher- and additional-rate taxpayers might receive a reduced rate of tax relief on their pension contributions. However, specific details and implementation dates will only be revealed during the Budget.

While it’s generally wise to avoid hasty decisions, if you’re already considering boosting your pension and fall into a higher or additional-rate tax bracket, now might be the time to strategize for maximizing your contributions.

Potential Changes to Tax Relief

Currently, contributions to personal pensions receive tax relief based on the highest income tax rate. For instance, a contribution of £80 to a personal pension automatically includes an extra £20 in basic-rate (20%) tax relief. Higher-rate (40%) and additional-rate (45%) taxpayers can reclaim additional amounts through their self-assessment tax return.

However, rumors suggest the Chancellor may consider a flat rate of tax relief between 20% and 30% for all individuals. This change would aim for more equitable benefits across income levels but would result in lower advantages for those currently receiving higher rates of tax relief.

Related: More young home owners gamble their retirement with mortgages lasting past state pension age

Maximizing Your Pension Benefits

If the proposed changes are implemented, higher- and additional-rate taxpayers may miss out on certain tax perks. Nevertheless, most UK taxpayers will still benefit significantly. If you’re in a higher tax bracket, it may be wise to consider advancing your pension contributions before any potential changes take effect. This strategy allows you to maximize the higher relief rates currently available.

For those in workplace pension schemes, consulting with your employer about increasing contributions can also be beneficial. Many employers match contributions, significantly enhancing pension savings over time.

As of now, tax relief on pension contributions is available up to 100% of your gross relevant earnings, with a cap of £60,000 for the 2024-25 tax year. This cap, known as the ‘annual allowance,’ includes both your contributions and those from your employer before tax. Note that the annual allowance may be reduced if you have a high income or have accessed your pension pot flexibly.

Considerations Before Boosting Your Pension

While increasing your pension may seem like a prudent choice, it’s not suitable for everyone. First, assess whether you can comfortably afford to increase your contributions. Remember that you won’t be able to access these funds until at least age 55, rising to age 57 in April 2028. If you anticipate needing access to your funds before retirement, consider an Individual Savings Account (ISA) instead. Although ISAs don’t offer tax relief on contributions, you can withdraw your money whenever without incurring tax penalties.

For the 2024-25 tax year, you can contribute up to £20,000 to ISAs. Increasing your ISA contributions might also be timely, as there are rumors of a potential lifetime cap on ISA savings that could be introduced in the Autumn Budget or by a future government.

Diversifying investments across various accounts, including ISAs and pensions, can help mitigate risks associated with changes in tax laws or personal circumstances. Regularly managing contributions and withdrawals from different accounts can enhance tax efficiency, ultimately reducing your overall investment costs.

Conclusion

Regularly reviewing your monthly savings and ensuring you’re investing tax-efficiently is crucial as you work toward your retirement goals. By maintaining a long-term perspective and considering your financial objectives, you can set yourself up for a brighter financial future.

Please note that the tax rates and allowances mentioned in this article are based on information as of September 2024.

Related: The average savings based on your age

AS THE nights draw in many of us could benefit from insulating our homes to keep draughts out.

One way to do so is to install B&M’s Bubble Wrap, which can help your home feel warmer while saving you money on your energy bill.

2

2

Advertisement

It costs just £2 and can help to protect your home from cold gusts of air which can enter through cracks or gaps around your windows.

The bubble wrap has a diameter of 500mm by 5m, which is enough to insulate several windows.

The air pockets in the surface create a barrier which traps heat inside and keeps the cold out of your home.

Plus by stopping cold air from entering your house you could also save precious pounds off your energy bill.

Draught-proofing is one of the cheapest and most effective methods to save money, irrespective of what type of building you live in.

Reducing draughts around windows and doors could save you around £40 a year if you live in Great Britain, or £50 in Northern Ireland, according to the Energy Saving Trust.

Draught-free homes may also be more comfortable at lower temperatures, which could mean that you are able to turn down your thermostat.

Doing so could save you even more money on your energy bills.

To the bubble wrap to insulate your home, simply measure your windows and cut the bubble wrap to fit.

Next lightly spray your windows with water, which acts as an adhesive and allows the bubble wrap to stick directly to the glass.

Place the bubble wrap onto the window with the bubble-side facing into your home and gently press it to secure it in place.

If your home is particularly draughty then you can also double up the bubble wrap for extra insulation.

Bubble wrap is also easy to remove in the warmer months and doesn’t damage your windows as it is not permanent.

Make sure to seal draughty doors and windows with insulation tape to stop draughts getting in.

Before you install the bubble wrap make sure to shop around to get the best deal.

Sainsbury’s is selling 8 metre large rolls of bubble wrap for £4.25.

Meanwhile, The Works has a 5m x 300mm roll for £1.

Always check the length and width of the roll before you make a purchase to ensure that you are getting a good deal.

Never draught proof areas of your home that need good ventilation such as rooms where lots of moisture is produced such as the bathroom, utility rooms or kitchen.

Also avoid blocking up areas where there are open fires or open flues.

Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk.

Plus, you can join our Sun Money Chats and Tips Facebook group to share your tips and stories

Good morning and welcome to your Morning Briefing for Thursday 17 October 2024. To get this in your inbox every morning click here.

AJ Bell platform business grows

AJ Bell’s platform business has continued to grow, with customer numbers increasing by 66,000 to 542,000.

This represents an increase of 14% in the past year.

AJ Bell CEO Michael Summersgill said its dual-channel platform, which serves both the advised and D2C platform markets, has maximised the growth opportunity.

SJP records quarterly net inflows of £890m

St James’s Place (SJP) recorded net inflows of £890m in the past quarter.

These sustained inflows, together with “positive investment performance”, have resulted in record funds under management of £184.4bn as of 30 September.

The UK’s largest wealth manager also recorded gross inflows of £4.4bn in the third quarter, 20% higher compared to the same period last year.

CGT rise top of advisers’ minds

An increase in capital gains tax (CGT) is top of mind for advisers, the majority of whom think it is one of the most likely announcements in the upcoming Budget, research by Royal London has revealed.

In a survey, the life, pensions and investment mutual asked advisers their thoughts on the most talked about Budget in recent years.

Overall, 78% said they believe CGT changes are the most likely outcome.

Quote Of The Day

The US presidential elections on November 5 will have implications for China. Both Democrats and Republicans recognise the importance of reducing the trade deficit with China and reducing reliance on Chinese imports.

– Christopher Mey, head of emerging market credit at Candriam, comments on China’s economic outlook in the context of the US election and the potential threats

In Other News

Royal London has appointed Iain McLeod as director of investment proposition.

Reporting to chief commercial officer Julie Scott and heading up the Investment Proposition team, McLeod joins to lead the development of investment solutions for advisers across individual and workplace pensions, working closely with Royal London Asset Management.

He joins from M&G Wealth as head of investment proposition, following over 35 years at Abrdn and Standard Life in a variety of investment, saving and proposition roles.

His experience includes working closely with the UK adviser community to develop and deliver client-centric investment solutions.

The Chartered Institute for Securities & Investment (CISI) has announced the winners of its Financial Planning Awards 2024.

• Certified Financial Planner Professional of the Year Award

WINNER: Nicholas Grogan, PWS Financial Consulting

• Paraplanner of the Year Award, sponsored by The Association of Investment Companies

WINNER: Brad Sheridan, BRI Wealth Management

• CISI Accredited Financial Planning Firm™ of the Year Award, sponsored by Glascow Consulting

WINNER: Acumen Financial Planning

• Tony Sellon ‘Good Egg’ Award Memorial Prize

WINNER: Barry Horner, Paradigm Norton Financial Planning

• The Paul Etheridge Financial Planning Future Leader Award, sponsored by Lexington Wealth Management

WINNER: Emmelia Powell, Premier Wealth Solutions

CISI head of financial planning policy and engagement Chris Morris said: “Congratulations to all of our winners.

“These awards recognise both individual and firm excellence along with those who have made an outstanding contribution to the financial planning profession.”

Millionaire business owners urge Rachel Reeves to raise £14bn from rise in capital gains tax (Guardian)

Jamie Dimon charts JPMorgan expansion plan into Africa (Reuters)

Did You See?

Last week you joined us in London for Money Marketing Interactive London and what a day it was.

A huge thank you to all our incredible delegates. Your energy and participation made this year’s conference unforgettable.

We’re excited to see how you’ll take the knowledge shared and continue shaping the future of financial advice.

You can view a range of photos from the event here.