NEW PENSION OPTIONS AVAILABLE NOW

While we will have to wait until next April to see if the Chancellor does introduce all the pension freedoms he has promised, those who are 60 years of age or older can take advantage now of what are called the Trivial Pension options. These have been improved with effect from April 2014, enabling an individual with a pension plan with £30,000 or less in it to take all of the money as cash. 25% is tax-free and the balance is added to their existing income and taxed accordingly. The same individual can also take a further 3 pension pots in this same way - as long as there is less than £10,000 in them. So a person with £30,000 in his main pension, and 3 smaller pensions of £10,000 each, could take them all as cash. It is important to understand, however, that the non-tax-free element will be added to the person’s other income for the year so some care needs to be taken so as not to end up paying higher rate tax on some of the money being taken out.

EFFECTS OF THE MMR (Mortgage Market Review)

The Mortgage Market Review has resulted in new rules being introduced which have put extra requirements on lenders from April 2014. This is already resulting in major slows in processing applications and also is resulting in many lenders starting to raise interest rates on the new mortgages they are offering because of the extra costs resulting from having to implement these rules.

What we are also seeing is generally a tightening up in lending. Cases which would have gone through smoothly in previous years are hitting major obstacles which, in some cases, have resulted in the mortgage being declined. There is also an even greater reluctance to provide new interest only

mortgages. This is bound to impact on the many who still have an interest-only mortgage which is reaching its end.

We will be happy to assist wherever possible with new mortgage arrangements and we are still recommending that those with mortgages on the lender’s standard variable rate should seriously

consider moving to a rate fixed for 3 to 5 years, or longer. We are of the view that interest rates are likely to start creeping up within the next year or so.

THE NISA!

From the 1st of July 2014 all Individual Savings Accounts (ISA s) will become New ISA s

(NISA s).

It applies to all existing ISAs and to new accounts opened up after the 1st of July. The NISA has three major advantages over the previous ISAs:

First, it has a higher limit of £15,000 per tax year;

Second, the £15,000 can be made up of any combination of cash and stocks and shares, including investing it all as cash;

Third, the new ISA will allow for transfers from current Stocks and Shares ISAs into cash holdings and vice versa (up to now it was only possible for a Stocks and Shares ISA to transfer to cash; now it can go either way). Any payments already made in this Tax Year, i.e. from the 6th of April 2014, into an ISA will count towards the £15,000 total. If you have made payments so far this Tax Year into both a Cash ISA and a Stocks and Shares ISA, you can add to either or both of them as long as the total contribution made in the current tax year does not exceed the £15,000 limit. You can pay into only one Cash ISA and one Stocks and Shares ISA in this tax year, but you should speak to your ISA provider to establish what options they have available for existing ISAs.

Those aged between 16 and 18 can open up a Cash NISA and pay up to £15,000 into it. For those under 16 there is the Junior ISA which, from the 1st of July, will allow up to £4,000 to be paid into it each Tax Year.

QUEEN’S SPEECH

With all of this pension change going through the system, it was surprising to see that the Queen’s

Speech included an announcement that even yet another change was being planned. This change follows the Dutch pension system where pension funds are pooled for better and cheaper results, as opposed to having individual pots for each saver. We are sceptical about this as it seems at odds with some of the other changes, and even the Dutch apparently are looking to move away from this approach.