Friendly Money Newsletter
No rest for the wicked!
A very Happy New Year to one and all! It’s been a gratifyingly busy start to 2023 with lots?of coaching and speaking engagements either done already or booked.
Global chaos seems to be good for business, especially if your business is anything to do with finance, investment or pensions!
Impending deadlines also seem to focus the mind with U.K. self-assessment tax returns due by January 31st. Vicky and I are always last minute submitters, so we’ve been busy doing ours this week.
Another date for your diary is April 5th. Back in 2016 the UK government introduced a new state pension, which is?supposedly both simpler and more generous. Crucially though it requires?35 years of National Insurance contributions rather than the 30 needed for the old system.
To ease the transition, the government has been allowing people to make up for missed contributions as far back as 2006?instead of the normal 6-year catch-up period. That dispensation though ends April 5th.
This is something that I’ve already spoken to many of you about, if not for yourself, for your spouse. Thanks to the triple inflation lock, the full state pension for a couple?will?exceed ￡21,200 a year index-linked in 2023-24. As such it is a very handy base to start from for retirement planning.
Topping up is also exceptional value. It costs ￡824.20 to make up a missing year of contributions. Another way of expressing that is to consider the case of someone who hasn’t?made a single contribution since 2006. They can top up 16 years in one go at a cost of just under ￡13,200. That seems a huge sum until you consider that even just those 16 years will entitle you to an additional index-linked pension of?￡4,845 a year for life. Given the current rate of inflation, it will likely pay for itself in barely 2.5 years of retirement!
I wrote about this in an article for?Bloomberg. I know it’s annoying that it’s behind a paywall now, but it pays the bills! In any case, you might have more?luck reading it in the?Washington Post, which allows a certain number of free views.
One thing I would add though is that a friend who contacted the National Insurance helpline (0300 200 3519), was told that the deadline for making contributions back to 2006 is actually much sooner: namely February 6th! That is definitely not what it says on the government’s own website, but if you are planning to take advantage of this offer it might be better to do so?sooner rather than later!
April 5th is also a notable deadline for another reason. Financial year end?is always important, but is even more so this year as it?heralds a far more aggressive capital gains tax regime. From April 6th the personal capital gains tax allowance drops from ￡12,300 a year to just ￡6,000 for 2023-24. It will be slashed further to ￡3,000 for the year 2024-25. As such it represents a significant escalation in what is likely to be a concerted tax raid against assets and wealth.
And finally, this week I was involved in my first Twitter Space broadcast with Bloomberg colleagues Merryn Somerset Webb and John Stepek entitled “Your pension: Everything you need to know.” Many wise words from Merryn and John and maybe even the odd one from me!
领英推荐
NB Recording starts at 5 minutes for some reason!?
Thank you for your continuing support and remember if?you’d like to discuss this, or anything else with me, please feel free to reach out for a coaching session.
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Take care out there,
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Stuart
Disclaimer: Stuart Trow is a financial educator, not a regulated financial adviser, so cannot provide specific financial or investment advice.?The opinions expressed do not constitute investment advice and regulated independent advice should be sought where appropriate.