Money Mum

Local Mum and Financial adviser Amy Shepherd is blogging for us about everything money-related

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A slow start can be costly
Planning for retirement is just one area in which, with the benefit of hindsight, many people wish they had taken action earlier. 

Research from Aegon found that 51% of workers wish they had started saving for a pension earlier, or regret having taken a break from saving; 14% of workers said their biggest regret was not making a financial plan for their pension.

The biggest regret of those retired was, for 38% of respondents, putting off making a savings decision; for 18% it was poor planning. 

On the positive side, 42% of those surveyed said their best savings decision was joining their workplace pension or saving into a personal pension; 19% felt their best pensions decision was to save for retirement from an early age.1

Indeed, an earlier study by Prudential found two in five pensioners regret retirement-planning mistakes which have left them struggling financially. Nearly one in five said that they didn’t save enough for retirement, and 15% regret not starting to save earlier in their working lives.2

Save for tomorrow
Understandably, many of us still have misgivings about locking our money away for decades – especially if we have more immediate calls on our income. Nevertheless, if we’re serious about planning for the future, we need to put away surplus income today, since doing so funds our lifestyles tomorrow. 

Pension contributions attract tax relief on the way in and they accumulate capital gains free of tax once inside. When you access your pension savings, the first 25% is normally tax-free. While you cannot draw on the funds until your 55th birthday, this does protect your pot against the temptation to tap into it until then. 

Getting off the mark
How much pension income you need in retirement will be determined by many factors, including your health, your living expenses and your desired lifestyle. Unfortunately, there’s no one-size-fits-all answer. However, as stated in August 2019 by the Office for National Statistics, the average (median) earnings in the UK are £29,588 per year; so a pension income of around £20,000 may be on average the minimum requirement. 

Therefore, even if you qualify for the full single-tier State Pension of £9,110 a year, you would be looking to find at least £11,000 a year from your other pensions. Achieving this, however, can be very challenging for those on low incomes, or those with unpredictable earnings – but especially for those who delay saving.

Assuming that the fund would be used to purchase an annuity, someone in their mid-20s who starts saving into a defined contribution (money purchase) pension today would need to save around £297 a month to achieve an income of £12,000 by the time they reach State Pension age. Someone who delays until their mid-30s would need to put away £420 a month; and a 45-year-old who hasn’t started a pension would need to start saving around £714 a month.3 

These figures are only examples and are not guaranteed: they are not minimum or maximum amounts. The amount achieved would depend on how the investment grew and on the tax treatment of the investment. The amount achieved could be more or less than this.

Playing catch-up
The sooner we start, the more choices we have later. The power of compound returns, or gains on gains, means 10 or 20 years can make a big difference. However, you should never think that it’s too late to start saving, or that you can’t catch up. There are real opportunities to make up lost ground if you have the available means and allowances.

You can put as much as you want into your defined contribution pension, but you’ll only get tax relief on pension contributions up to £40,000 each year, or 100% of your earnings if lower. (High earners have a reduced, ‘tapered’, annual allowance.) Pension providers generally claim tax relief for you (called ‘relief at source’) at a rate of 20% and add it to your pension pot, which actually creates a 25% uplift in the sum; therefore £80 becomes £100. Higher rate taxpayers can claim an extra 20% via their annual tax return; a £40,000 contribution could effectively cost a higher rate taxpayer just £24,000. 

Moreover, you can make use of allowances from the three previous tax years if these haven’t been utilised.

In any case, the fact remains that the best way to secure a comfortable retirement is to save as much as possible as early as possible in your working life, and take financial advice. The longer you delay saving, the harder it will be to build the kind of fund that will see you through retirement. 

1 Aegon study of 657 working adults over the age of 18 and 227 retired people, February 2018

2 Prudential, ‘Regrets? They’ve got a few – but pensioners are happy in retirement’, April 2016

3 Nutmeg, accessed 6 September 2019; with an annual return assumption of 5%

To receive a complimentary guide covering wealth management, retirement planning or Inheritance Tax planning, contact Amy Shepherd Financial Planning on 07539 490854 or email


Dividend magic

Pedestrian as they can appear, dividends end up doing much of the work for long-term equity investors.

UK dividends paid out £110 billion in 2019 – a record high.1

But there are also the lean years, when a company might not pay anything at all; in the aftermath of the financial crisis, several major banks simply couldn’t afford to. And in the wake of COVID-19, investors are unlikely to see another record year in 2020. 

Even in a good year, dividends can appear unexciting – at best, they offer only a few pence on the pound. The impact on your total capital barely seems to move the dial – in the short term.

Yet over the long term something miraculous begins to happen, something that Albert Einstein reportedly named as man’s greatest invention and called “The eighth wonder of the world”2. That something is compound interest and reinvesting dividends achieves a similar effect. The power of compounding lies in the exponential rate at which it increases the value of the initial capital sum over time.

It certainly pays off. Data provided by Morningstar/Ibbotson shows that, between 1926 and 2009, share price appreciation on the S&P 500 averaged 5.47% per year, while dividends delivered 4.13% per year. In short, dividends delivered more than 40% of the total return for investors.3

One of the more remarkable implications of this compounding-via-dividends effect is that a temporary fall in the share price can in fact have a silver lining. So long as the company continues to pay a dividend, then the shareholder who reinvests his or her next payment will receive a greater number of shares as a result. Not only does this help to balance out the loss in capital value, it also means the investor is effectively buying up more shares when they are cheaper; yet doing so without committing fresh capital.

As for the size of dividends themselves, data show that dividend growth has remained relatively sustained since World War II. Five-year growth only dipped briefly into negative territory in the aftermath of the tech bubble – growth even persisted in the aftermath of the global financial crisis.4

The same report shows that, had you invested £100 across UK stocks in 1899, but without reinvesting the income, then, in inflation-adjusted terms, you would end up with £195. If, on the other hand, you had reinvested all the dividend income generated, the figure would be £32,051.5

In short, dividends are far more than a seasonal bonus. Over the long haul, they can even end up doing most of the work.

1 Morningstar, ‘Record 2019 for UK Dividends’, January 2020
2 It is far from clear that he said either of these things, but they have been attributed to him for decades


4, 5 Barclays Equity Gilt Study 2017, page 145 © S&P Dow Jones LLC 2020; all rights reserved

To receive a complimentary guide covering wealth management, retirement planning or Inheritance Tax planning, contact Amy Shepherd Financial Planning on 07539 490854 or email


Coding error

If you are one of those over-55s who have accessed your pension pot recently, there’s a good chance you’re paying the wrong amount of tax on your withdrawals.

Figures from HM Revenue and Customs (HMRC) confirm that, in the final three months of 2019, £32 million in overpaid tax was returned to people having made a pension withdrawal. It was £165 million for the year ‒ and around £3,000 per person.1

In 2015, George Osborne, the then chancellor, introduced an unprecedented package of pension reforms. The changes meant that individuals aged 55 and over could access their defined contribution pension savings whenever they wanted and in a variety of ways, subject to their marginal rate of Income Tax. 

Millions of people have since taken advantage of these reforms, with 327,000 doing so in the fourth quarter of 2019 alone. Savers withdrew £2.2 billion in Q4, an increase of 18% from the equivalent period in 2018, with £33 billion withdrawn since April 2015.2 

Root cause
But despite being able to take benefits in a variety of different ways, including as cash and flexible income, vast swathes of individuals are at risk of paying too much tax on their pension income. 

Thirty-one million people in the UK pay Income Tax. Around 11 million file tax returns, while the remaining 29 million are taxed on the ‘pay-as-you-earn’ system3, which is built around tax code allocation and designed to collect the right amount of tax from everyone over the course of the year. But if tax codes are incorrect, then it follows that the wrong amount will be collected.

Because many over-55s have multiple sources of taxable income, such as a salary and one or more pensions, it is believed that 800,000 of them could be at risk of being allocated the wrong tax codes.

The problem lies in the way HMRC applies the ‘personal allowance’ when you have more than one source of income. Your ‘personal allowance’ is the amount you can earn tax-free and, in some cases, HMRC applies it only to income from one source; for example, a part-time job. HMRC then taxes other sources of income, such as a personal pension, at the full rate. 

This means that even if your total income is below the personal allowance of £12,500, HMRC assumes you have already used your allowance for one income source and disregards it for other sources.

Tax take 
Individuals are being urged to check their tax code to ensure that they are paying the correct amount, and to apply for a refund if they have been overtaxed. In some cases, overpayment of tax could have been going on for many years – so some diligence is needed.

“Most people are understandably baffled by the whole system of tax codes,” says Sir Steve Webb, former minister of state for pensions. “Employers and pension providers are issued with tax codes by HMRC and we generally assume they must be right.”

However, HMRC is not infallible, and Webb highlights the importance of individuals knowing how to spot mistakes with their tax code and to get things put right. “Although computerization of tax records is designed to help improve things, I have no doubt that there are many people still paying the wrong amount of tax.” 

Paddy Millard MBE, founder of the charity Tax Help for Older People, shares some of Webb’s concerns.

“Tax codes are probably one of the biggest single causes of confusion and problems among the people who contact us via our helpline,” he says. “People should not simply assume that HMRC have got things right, but should check to ensure they are paying the right amount of tax.”

HMRC certainly believes its record is strong in this area, as a spokesman for the department recently made clear: “The overwhelming majority of tax codes are accurate, based on information provided to us.”

Nevertheless, it is crucial you check your tax codes to ensure you are paying only what is due, as mistakes are far from impossible.

If you have a Government Gateway account, you can check you are paying the right amount of tax using HMRC’s online service. Alternatively, you can write to them, or phone on 0300 200 3300.

1, 2 HMRC, January 2020
, 3, March 2020

4 Royal London, April 2017

To receive a complimentary guide covering wealth management, retirement planning or Inheritance Tax planning, contact Amy Shepherd Financial Planning on 07539 490854 or email


Letting your heir down?

Britons are ignoring estate planning tools that could help them to pass on more of their estate to the next generation.

Over recent years, property inflation and rising asset values have combined to push a higher proportion of estates over the nil-rate band for Inheritance Tax (IHT). The residence nil-rate band helps to a degree, but with the IHT threshold frozen at £325,000 per individual, and government receipts still rising, to £5.4 billion per year in the latest figures1, and £10 billion by 20302, IHT is not a tax just for the rich – or even moderately wealthy.

Despite the fact that more estates are paying IHT, there are ways to prevent families paying over the odds. For example, those with sufficient assets to trigger an IHT liability when they pass away could use the exemption which allows anyone to give away up to £3,000 worth of gifts each tax year without them being included in the value of their estate.

However, according to surveys by Canada Life, only a fifth of respondents aged 45 or over with assets worth more than £325,000 said they had gifted money3, and over half do not know that ISAs are liable for IHT4, which could result in their families paying more IHT than they need to. 

Another way to minimise the impact of IHT is to take out a ‘whole of life’ insurance policy. This pays a lump sum on death, and when the policy is written in trust, the pay-out can help offset or eliminate an IHT bill. Yet nearly three quarters of those with a potential IHT liability said in the Canada Life study that they didn’t see a need to use life insurance, indicating an acute lack of understanding.5

The research also revealed that 77% of people think IHT rules are too complicated; yet only 33% have sought professional advice on IHT planning. Of those who sought advice, 42% wisely spoke with a professional financial adviser.6

Heir care
Whilst inertia and ignorance of estate planning is good news for the Treasury, which relies on it to ensure its tax receipts, the widespread lack of knowledge will worry many potential heirs. But taking the appropriate advice can go a long way to alleviating those concerns.

A financial adviser can help families with the transfer of wealth in an orderly and tax-efficient manner, establishing trusts, life insurance and so on, while also ensuring that the person who is arranging their estate has enough income to maintain their normal standard of living.

With the right advice, more estates could be removed from the grip of IHT and bereaved families could be spared the extra heartache of paying unnecessary tax. 

“There is a strong relationship between the lack of understanding of simple estate planning tools by the wealthy and the lack of take-up of financial advice,” says Karen Stacey, Head of Distribution Services at Canada Life.

“There is a perception that planning is too complicated and time-consuming, which is not the case. Writing a will is an absolute must, while gifting money is incredibly simple. Even options seen as complicated, such as setting up a trust, can be very simple when consumers know who they want to benefit from their estate and get advice from a professional on how to achieve their objectives,” she says.

“There are a wealth of solutions out there,” adds Neil Jones, Market Development Manager at Canada Life. “We’d urge people to consider meeting with a financial adviser,” he counsels. “The rewards for future generations can be enormous.”

1 HMRC for tax year 2018/19, September 2019

2 Canada Life, April 2019

3, 4, 5, 6 Canada Life: survey of 1,001 UK consumers aged 45 or over with total assets exceeding the individual Inheritance Tax threshold (nil-rate band) of £325,000

3, 5 Survey conducted: September 2016

4, 6 Survey conducted: October 2017

To receive a complimentary guide covering wealth management, retirement planning or Inheritance Tax planning, contact Amy Shepherd Financial Planning on 07539 490854 or email

February 2021

Volatile times

When you live in volatile and uncertain times, should you put your long-term plans on hold?

Read or watch the news, and you will encounter a world that’s volatile, uncertain, complex and ambiguous. Glance at a stock market’s performance over the course of a few weeks, and what stands out is probably not the general direction of travel, but the short-term seesawing of prices – especially during a volatile period. 

Those characteristics can make the task of planning for you and your family’s future feel all the more daunting.

As investors, it can be all too tempting to try to predict the future, or react to events as they happen. However, on the one hand, even long-term investors can all too easily respond emotionally to short-term volatility; and make bad decisions as a result. On the other, events are unpredictable at the best of times, and perhaps especially just now. On top of all this, it’s not always easy to sort the facts from the fake news.

The wide range of current challenges make the world highly unpredictable. In the context of saving and investing, the products and services we need to help us are similarly numerous and complex. Do you take the DIY approach to investing, seek guidance, or look for professional financial advice? 

Do you know your ISAs from your pensions and unit trusts – and how do you choose? Where should you invest? In public or private markets? In equities, bonds, or property? And should you seek out active managers or passive funds?

The weight, number and nuance of such questions can make us yearn for simpler times – and bury our heads in the sand. Yet that will not help you secure a brighter future for you and your family. In times like these, it’s important to take action and speak with someone you trust. 

A professional financial adviser can help guide you through the wealth of options available, to keep your eyes focused on the horizon, and to help you to achieve your long-term financial goals.

January 2021
A pandemic financial plan for all the family
Ensure a safe financial future for yourself, your parents and your children during the coronavirus pandemic

Members of the sandwich generation, those individuals in their 40s, 50s and 60s who are bringing up their own children while also providing care for their parents, face increased financial strain in the best of times. Pulled in different directions, they are also trying to save for their own retirement during a critical period in their working life.

In the current coronavirus crisis, the sandwich generation is facing additional challenges, with the pandemic impacting jobs, businesses, schools and home life.

It’s the perfect storm of financial, emotional and time pressure. You might be in a senior role at work and have to juggle management responsibilities with the challenge of working from home. Or you might run your own business or have been furloughed from your current role and face the prospect of a cut in income. Added to this, there are concerns about the performance of your pension and other investments given recent stock market falls.

So, amid this perfect storm, what can members of the sandwich generation do? A financial adviser can help to work out your priorities and put a plan in place to build wealth for the future. In the meantime, here are some tips on how to support your parents and your children – while also taking care of yourself.

How to help your parents
Whether your ageing parents live with you, by themselves or in a care home, this is an anxious time. And while money is never an easy topic to talk about, having a conversation will allow you to plan for this period of uncertainty more effectively.

Do you have a clear understanding of your parents’ assets, income sources, living expenses and debts? Do they have life insurance or long-term care insurance? Are they claiming all the benefits they are entitled to?

Involving a financial adviser at this point can remove emotion from the equation and restrict the discussion to the facts and figures – for example, if you need to adjust your financial plan due to a change in circumstances caused by the coronavirus crisis.

Talk to your parents about financial scams in order to help prevent them from falling victim to online or telephone fraud. Keep in regular contact (via phone or digitally) and make sure they’re aware that you’re happy to discuss any money concerns that they may have.

And though it is a difficult subject, it’s important to check that your parents’ affairs are in order. Will creation and legacy planning will be front of mind for many people during this time of uncertainty, and it’s worth taking a look to make sure everything is up to date. Also note whether they’ve specified who can legally take control of their finances should they become unable to make decisions on their own.

How to help your children
Whether your children are younger and home from school, or older and back living at home after their university has closed, or they have been laid off from their job, they will likely need increased emotional – and possibly financial – support.

Thinking about money as a family, rather than each generation trying to manage alone, is a great place to start, and has the added benefit of introducing younger generations to financial planning.

Ask yourself: what are you currently paying for childcare or schooling? Are you saving for a child’s education, or to help with a first-home purchase? Are loans and gifts to your children being structured in the most flexible or tax-efficient way?

The impact of the coronavirus may change the answers to these questions, and a financial adviser can help you identify what to prioritise and how to adapt to current circumstances if needed – while still saving for the future.

Pensions and Junior ISAs are great opportunities to give children a financial head start, and it’s worth contributing even in times of volatility. In the Budget in March, the annual allowance for a Junior ISA was more than doubled to £9,000. A parent or guardian must set up the Junior ISA, but anyone can pay into it, and there is no tax to pay on any income or gains. And even small contributions into a child or young person’s pension can make a big difference over the long term.

How to help yourself|
Remember, to continue caring for your children and your parents, you need to take care of yourself.

It can be tempting to try to predict the future, or react to events as they happen. Talking to a financial adviser can help you make a financial plan in a calm, rational way, rather than reacting to news stories or your own emotions. Putting the right plan in place will allow greater opportunities to build wealth over time – fulfilling your retirement plans while still supporting other generations.

If you can, continue contributing to your own pension and savings. Sacrificing saving today could result in financial strain tomorrow. In addition, life insurance and financial protection are relevant now more than ever – we may not like to think about death, serious illness and long-term sickness, but they’re especially important if others rely on you financially.

Use your time in lockdown to give your budget a spring clean. Are there monthly costs that you could eliminate or reduce? Are you using available tax breaks? You may even find there is an opportunity to make the most of a fall in share prices and invest for the future.

When markets have dropped, it can be a good time to save and invest. It may seem counterintuitive, but you are buying cheap stocks.

Look after you and yours. If you have any questions or concerns about intergenerational financial planning, just ask a qualified financial adviser - Amy Shepherd. They’re there to help.

To receive a complimentary guide covering wealth management, retirement planning or Inheritance Tax planning, contact Amy Shepherd Financial Planning on 07539490854 or email


Uncovering the wider benefits of financial advice

New research shows that sound financial advice boosts confidence and emotional wellbeing

Financial advice is more important than ever. Not only have changes in pensions and financial regulation placed more responsibility for planning retirement income into the hands of individuals, but the coronavirus pandemic has also reminded us all of how unforeseen events can rock the foundations of what we had thought was a stable financial footing.

The financial benefits of taking advice are well documented. Research undertaken by the International Longevity Centre UK (ILC) in 2019 showed that those who take advice are on average £47,706 better off in retirement than those who don’t1. But that’s not the end of the story.

Building on this study, the ILC has undertaken new research this year that shows financial advice could be an important factor in promoting mental health and wellbeing. Its report “Peace of mind: Understanding the non-financial value of financial advice” finds that non-financial benefits may be at least as important as the more easily visible financial ones in achieving this.

Participants in the study who had taken financial advice reported that they felt less worried about their future, enjoying the peace of mind that comes from knowing that proper preparation has been made for their later years – and that included those who were already in retirement.

Reassured and less worried
They felt more confident that they would achieve their long-term goals and, through their interactions with an adviser, felt more financially literate and able to understand how those goals would be achieved – and more empowered to make complex financial decisions for themselves. Being in control of their financial future in these ways left them feeling reassured and less worried than they would otherwise have been.

But despite these benefits, there remains a significant ‘advice gap’, with fewer than one in six people taking advice. This stems partly from a lack of awareness of the benefits of seeking advice and of how and where to find it. Among those who haven’t taken financial advice, some – especially women – were worried that doing so would actually result in a loss of control, and that decisions would be taken out of their hands, but the experience of the advised participants showed this to be an unfounded fear

However, it remains clear that identifying long-term goals and establishing a financial structure to achieve them results in greater emotional wellbeing. Closing the ‘advice gap’ is a vital next step in giving that peace of mind to all.

So, the ILC is calling on government, the industry and the FCA to work together to remedy the situation by highlighting both the non-financial as well as the financial benefits of advice, and reassuring individuals that advice will be tailored specifically to their goals.

A financial adviser can help with your own financial planning. To receive a complimentary guide covering wealth management, retirement planning or Inheritance Tax planning, contact Amy Shepherd Financial Planning on 07539490854 or email

1ILC, What it’s worth – Revisiting the value of financial advice, November 2019, based on 2014/2016 calculations



Avoid the rush

Investing your ISA allowance early in the tax year can prove rewarding over the long term.

The traditional last-minute dash again saw UK savers rush to beat the tax year-end deadline to invest their ISA allowance. And having done so, many will do the same thing as next April approaches.

Human nature dictates that we are often only prompted to act when faced with a deadline, particularly when it’s a ‘use it or lose it’ opportunity such as the annual ISA allowance. But there are many reasons why it makes sense to invest in an ISA earlier in the tax year instead.

Perhaps most obvious is the peace of mind that comes from getting ahead with your ISA planning and avoiding any end-of-year panic. It also makes things simpler, as you don’t need to worry about any more tax returns for your investments once they’re held inside an ISA.

However, what’s most important is to remember that investing is a long-term game; the longer you leave your money invested, the greater the chance of achieving better returns. Investing your ISA allowance at the start of the tax year gives your money the opportunity to grow for up to an extra 12 months.

Make your money work harder
Of course, you are not guaranteed to do better by investing earlier, but by doing so you can get your money working harder for longer in two ways. 

The sooner you use your ISA allowance, the greater the potential tax benefit because your investment is sheltered from Capital Gains Tax and Income Tax for longer.

Similarly, your investment has more chance to benefit from compound interest – what Albert Einstein reportedly referred to as the ‘eighth wonder of the world’. Over the long term, the opportunity to make gains on the gains you have already made can make a big difference to your future wealth.

Taking steps to minimise the impact of tax on your wealth should be a year-round activity, not something that we only think about in the last few weeks of the tax year. Whether through investing a lump sum or by setting up regular savings, making an early start with your ISA plans is one way to shelter more of your money from HMRC.

To receive a complimentary guide covering wealth management, retirement planning or Inheritance Tax planning, contact Amy Shepherd Financial Planning on 07539 490 854 or email

Inherently Unfair?
Inheritance Tax is widely viewed as unfair, and even the experts agree it’s complex: only effective and early planning can minimise its impact on your estate.

Back in January 2018 the chancellor of the day, Philip Hammond, asked the Office of Tax Simplification (OTS) to review Inheritance Tax (IHT) with a view to simplifying the regime. In writing to the OTS, he acknowledged that “IHT, and the system within which it operates, is particularly complex”. On 5 July 2019, OTS produced its latest simplification proposals.1

Currently, if your net estate is worth more than the standard nil-rate band of £325,000, 40p in tax is charged for every pound that exceeds the threshold; except that, broadly, if you leave your main residence to a lineal descendant, £175,000 is added to that nil-rate band. Unused elements of both allowances are transferrable on death to a surviving spouse or civil partner.

The regime has been criticised also for being discriminatory against those who do not own their own home, those who do not have children, and those who are not married or in a civil partnership.

Even if there is potential to simplify IHT exemptions, it’s probably too much to hope that the tax will be scrapped. After all, a cash-strapped Exchequer seems increasingly reliant on taxing people’s estates posthumously. In 2023/24, the UK’s Exchequer is expected to raise £6.3 billion from IHT.2  

That said, several developed countries, including Australia, New Zealand, Canada and Israel have abolished inheritance taxes to create simpler tax systems and encourage creation of wealth through investment and entrepreneurship. There are no death taxes in Singapore, Portugal or Mexico.3 Sweden abolished the practice in 2004, while Hong Kong and Russia did the same in 2006. In Norway, inheritance and gift taxes were abolished in January 2014.4 Fifteen OECD countries levy no taxes on property passed to lineal heirs.5 In May 2018, Donald Trump doubled the value that can be passed to heirs to about $22 million for a married couple.6

A study by the international accountancy network UHY Hacker Young in March 2014 showed that the UK and Ireland take the highest proportion of inheritance or estate taxes of all major world economies.

However, IHT in the UK is often referred to as a ‘voluntary tax’, and it does seem that inertia or ignorance is largely to blame for wealth ending up in the hands of the taxman rather than surviving family members. The fact is that with some careful planning, those with estates currently worth more than the nil-rate band can legitimately reduce their IHT liability, or possibly pay nothing at all.

In your gift
Gifts are normally included in the net estate for IHT purposes if they were made less than seven years before death. However, these gifts are ignored if they total less than £3,000 in any one tax year. This means that you can make gifts of up to £3,000 in total in any tax year without attracting IHT. The £3,000 can be given to one person or it can be split between several people. If the exemption is not used in one tax year, it can be carried forward to the next year, potentially enabling a couple to remove £12,000 from their joint estate in just one tax year.

That money could be used to help with the financial challenges faced by younger family members; for example, topping up a child’s pension or Junior ISA could go a long way to providing them with an invaluable head start in life. And for 2020/21, the Junior ISA allowance is £9,000, up from £4,368.

Those with sufficient surplus income may also want to take account of the ‘normal gifts out of income’ rule – if you make regular gifts out of income and in doing so don’t affect your standard of living, the gifts are exempt from IHT. However, to reduce the possibility of a disagreement with HMRC, it is wise to seek professional help from a financial adviser or accountant.

While lifetime gifts can significantly reduce an IHT liability, it’s worth noting that if you don’t take time to write a valid Will, your estate will be handled according to the laws of intestacy. If you die intestate, you will have no control over how your estate is distributed, and rather than everything passing to a spouse or civil partner, a proportion could be transferred to descendants, triggering a potential IHT liability.

If your children’s share is worth more than the individual IHT threshold, they could be liable to pay 40% tax on anything they inherit over that amount. This could be avoided by writing a Will that leaves assets worth up to the tax-free threshold of £325,000 to children, with the balance of the estate left to a surviving spouse. But there may be even better options, depending on circumstances, through the use of trusts.

Take advice
IHT often falls on the ill-prepared and unadvised. That’s why it’s important to seek financial advice, so that all your assets are properly protected. Shockingly, fewer than a fifth of over-55s have taken action to reduce their potential IHT bill.7

1 OTS, Inheritance Tax Review – second report: Simplifying the design of Inheritance Tax, July 2019

2 Office for Budget Responsibility, April 2019

3, 5 Nomad Capitalist, December 2019

4 EY, Worldwide Estate and Inheritance Tax Guide 2019

6 Bloomberg, May 2018

7 Prudential, May 2017


To receive a complimentary guide covering wealth management, retirement planning or Inheritance Tax planning, contact Amy Shepherd Financial Planning on 07539 490 854 or email


Footing the bill
To what extent are people prepared, both emotionally and financially, to provide care for themselves or their families?

More of us than ever will come to need it. But few of us have any idea how we’ll pay for it. The growing cost of long-term care – and the strain that can come with providing support to elderly family members – is fast becoming one of the biggest challenges facing society today.

Understandably, moving into a care home can be an emotionally difficult time. One of the toughest challenges we all face is how to deal with change and how to make it as positive as we can for ourselves and those closest to us.

Practical and emotional
Unfortunately, there is no instruction manual for how families should work together to handle care-giving and the many practical and emotional issues that go with it. Anxieties are bound to arise, along with a level of stress that you might not have expected, often made worse by financial worries.

According to research by the Local Government Association, only 15% of adults are planning for how to pay for care in the future, and half say they have never thought about how they would pay for care.1

Further, the Centre for the Modern Family found that half of UK adults say they will have to rely on a relative to help them afford care fees2, which cost from £623 to £726 per week3.

One in ten people who provide financial support to a loved one have been forced to make sacrifices, with a quarter of those individuals making major adjustments such as remortgaging their house.4

“Our research shows that an over-reliance on relatives and the state could put families in serious financial difficulty,” says Jane Curtis, Chair of The Centre for the Modern Family. “It can seem difficult to know how to prepare for the future, but to avoid a financial care crisis we all need to have an honest discussion on later-life care as early as possible so no one is left footing a bill they can’t afford.”

Preparation pays
The study draws further attention to the need for individuals and families to anticipate future care needs and invest appropriately, or buy the right kind of financial protection. It recommends that saving for care “needs to become as inherent as paying off a mortgage, saving into a pension, putting money into an ISA, or making a will”.

Understandably, many of us will have misgivings about putting money aside for elderly care, especially if we have more immediate calls on our income. However, without a robust plan in place, it could fall to our families to make very expensive decisions at what could be an emotional time.

While equity release or selling a property could free up the money needed, many people will view this as a last resort. That’s why it’s worth talking to a financial adviser. They will go through a fact-finding process with you to understand your needs and help you decide the most suitable approach.

Know the rules
If you end up having to pay fees yourself, known as ‘self-funding’, and your capital drops below £23,250 (in England and Northern Ireland only), the local authority may assist with funding. However, the local authority might still take some of your income if you have less than this amount. It’s therefore important to seek expert advice so that you know the rules.

A financial adviser will also help you to avoid making some common mistakes, such as ‘deprivation of assets’ – when you are judged to have purposefully given assets away to avoid these being included in the local authority’s financial assessment. Additionally, they will ensure you are receiving all the state benefits to which you are entitled.

“It’s clear that many people simply don’t understand the social care benefits and support system,” says Curtis. “Providing clarity and raising awareness of what is and isn’t available is critical to helping people prepare for the longer-term future.”

The report’s findings are also a good reminder of the need for people to talk with their relatives about their plans for the years ahead. Aspects concerning care, downsizing, Wills and lasting powers of attorney are not always easy to approach, but they are vital if future decisions are to be based on a clear understanding of the recipient’s wishes. The sooner those conversations are had, the better.

1 Local Government Association, ‘Majority of people unprepared for adult social care costs’, October 2018

2, 4 Scottish Widows, The Centre for the Modern Family, The cost of care: the financial and emotional impact of providing social care for family members, August 2017 

3 LaingBuisson, Care of Older People, Twenty-ninth edition, July 2018

To receive a complimentary guide covering wealth management, retirement planning or Inheritance Tax planning, contact Amy Shepherd Financial Planning on 07539 490 854 or email


Make 2020 a less taxing year
This year, make the best use of tax reliefs and allowances to help secure your financial future and the inheritance you leave to your loved ones.

Well over a decade since the financial crisis, the world is still a very uncertain place. Until recently, investors enjoyed the benefits of a strong bull run by stock markets around the world, coupled with low volatility1. But it is always wrong to believe that market shocks are a thing of the past. From uncertainty over Brexit to trade wars, and now of course to COVID-19, there are always many risks that pose a challenge to investors at any given time; and any number of unforeseen factors in the years to come.

But these are beyond our control; they cannot be allowed to prevent us from planning our financial futures. Indeed, we will give ourselves the best chance of achieving our financial goals if we focus on what we can control: how and where we invest our money, how much tax we pay, the size of our retirement fund, and how much of our estate passes to our family free of Inheritance Tax (IHT).

Effective financial planning should be a year-round activity. Valuable reliefs and allowances can help to create long-term financial security for ourselves and our family.

ISAs have become one of the most popular ways to save, principally because they are simple and readily accessible.

The substantial increase in the ISA allowance to £20,000 was a very welcome step in encouraging individuals to invest for their future. However, as interest rates in the UK are lower than ever, money being held in Cash ISAs is failing to achieve the very basic objective of keeping pace with inflation. The result is real losses for savers.

Those who are investing their ISA allowance for the long term – in assets offering the scope for attractive levels of income and capital growth – are giving themselves a better chance of maximising the tax-saving opportunities on offer.

Individuals yet to use their ISA allowance, or with accumulated ISA savings, need to carefully consider their options to ensure that they are maximising this valuable opportunity to generate tax-efficient capital and income for the future.

Saving into a pension is an even more attractive prospect than it was a few years ago. This is because there is much greater freedom for taking benefits; and pension savings can now be more easily left as part of a tax-free inheritance. However, the advantages extend further than just drawing benefits and passing money on to loved ones: the government still rewards savers by giving them tax relief on their pension contributions.

Subject to certain limitations, for every 80p you contribute to a pension, the government automatically adds 20p in tax relief. Higher earners can claim extra tax relief through their annual tax return, so a £1 pension contribution can effectively cost just 60p.

While tax relief is seen as a means to encourage pension saving, the annual cost to the Exchequer of providing it is around £40 billion2. With the government under increasing pressure to reduce public spending, there’s no guarantee that the higher rates of tax relief will be maintained into the future.

Those wishing to make their retirement plans a reality should consider fully utilising their annual allowance for this tax year to make the most of the tax breaks on offer. Unused allowances can be carried forward, but only from the three previous tax years. This financial year is the final chance for pension savers to use the 2017/18 allowance.

Inheritance Tax
There are few more confusing – or unpopular – taxes than IHT. But continued confusion and inertia means that the Office for Budget Responsibility expects to see a 19% increase in IHT revenues over the next four years3.

However, there are a number of exemptions that allow individuals to reduce future bills. Perhaps the best known is the annual gifting allowance, which gives individuals the opportunity to remove £3,000 of assets from their estate immediately (£6,000 if they use the previous year’s allowance as well).

Taking steps to reduce your taxable estate by topping up a child’s pension or Junior ISA could go a long way to providing them with an invaluable head start in life. The Junior ISA allowance rose from £4,368 to £9,000 on 6 April 2020. Also, make this year’s £3,000 gifting allowance count – and carry forward last year’s, if you haven’t used it already.

It’s a time of the year when individuals and couples are given an opportunity to put their long-term plans back on track by using reliefs and allowances that would otherwise be lost. Nevertheless, this requires some knowledge and expertise. That’s why you should speak with a financial adviser to better understand how you can gain maximum advantage for this year and the years to come. 

1 CBOE Volatility Index (‘VIX’), accessed 5 September 2019

2 HM Revenue and Customs, ‘Estimated Costs of Tax Reliefs’, October 2019

3 Office for Budget Responsibility, Economic and fiscal outlook – March 2019

To receive a complimentary guide covering wealth management, retirement planning or Inheritance Tax planning, contact Amy Shepherd Financial Planning on 07539 490 854 or email

Be alert to fraud during this pandemic
How to protect your finances from fraudulent activity during these uncertain times.

The conditions we’re experiencing now, we have never seen in our lifetimes. But the present does have several things in common with previous periods of turbulence: we are currently living through a climate of uncertainty, confusion and fear – and these are ideal times for criminals to take advantage of us.

While the chances of being targeted by a financial scam remain low, the consequences of falling victim can be devastating. Knowing what to look for, what to do and what not to do will help keep you safe.

The scams we’re seeing
The global financial crisis came with an increase in fraudulent activity such as ‘phishing’ scams. These seek to trick people into disclosing personal information, such as bank account numbers and passwords, that could result in identity theft or financial loss. 

The coronavirus outbreak has seen a similar rise in fraudulent activity. Particularly prominent are scams in which criminals aim to exploit trust in public bodies by imitating them in order to obtain personal information or money. 

For example, some people have received emails purporting to be from the World Health Organization, with its logo, offering details of safety measures. Following the link, you are asked for an email address and password. 

There’s also a text message that looks like it was sent by the UK government. It tells the recipient they are being fined for leaving the house during lockdown and requests their card details in order for the fine to be paid. One bogus email claims to be from HM Revenue and Customs, offering a goodwill coronavirus payment and asking for account details so that the payment can be made.

The prospect of an economic slowdown may also increase the risk of criminals promoting unsafe and unregulated investment and pension opportunities. 

The procedures to protect us
Authorities such as regulators and police are always seeking to identifying such activities. Financial services companies are also always working to foil fraud, to increase their digital security, and to improve their practices. Usual procedure is always to:

Provide a secure website to log into, which is an HTTPS site, with a green padlock symbol in the address bar

Send withdrawal funds only to a verified bank account in your name

Ask you security questions to verify your identity when speaking to you on the phone

It’s also useful to be aware of certain things that your own bank or financial services company will not do:

Ask you for your password over the phone

Send you an unsolicited email with a link to its login page, asking you to enter your credentials

Ask you for payment or credit card details

Notify you of a problem and request you call back immediately to discuss the problem further

What we can do as individuals
Be aware of these risks, and the practices that reputable companies follow; then if anything is out of the ordinary, you will know to leave it alone. 

Remember too that if you’re not sure if a communication has come from a trusted source it claims, the customer services support of the genuine organisation is there to help with any concerns or queries. Always look those contact details up rather than following a link in a suspect communication. Expect waiting times to be longer than usual. And if in doubt, don’t respond: genuine providers don’t need you to make a quick decision, or act immediately.

No legitimate individual or organisation would ever ask you for information such as bank account numbers or login details

Banks will never ask clients to transfer money or move it to a safe account

Banks, HMRC, the police, the government, regulators and other bodies never cold call people asking for some form of banking identification

Don’t give your personal or financial details to anyone you don’t know or don’t trust

If you’re going to update your information or make payments, always log in to your account

Hang up if you’re ever cold called about an investment opportunity; it’s almost certainly a high-risk investment or a scam

An additional layer of online protection can be created by regularly changing passwords and using unique passwords for each account

Further advice
Use authoritative and reliable sources for information and guidance on the coronavirus. There are also fact-checking bodies such as Full Fact (, which now includes a dedicated coronavirus section.

Check the online security guidance from your banks and financial services providers.

Additionally, the following are all dedicated to tackling fraud:

Action Fraud ( report fraud by calling 0300 123 2040 or using Action Fraud’s online fraud reporting tool.

Take Five ( this national campaign offers free, impartial advice on email, phone-based and online fraud. 

Text 7726: report any suspected scam texts by forwarding them to your mobile network provider on this number.

Are you planning on retiring?

Just because saving for retirement is difficult, it doesn’t mean you should give up; and the current reliefs and allowances on pension contributions should give cause for optimism.

If you expect to retire on a final-salary pension and with no mortgage, your perspective on retirement may well be rosy; if you are grappling with debt and worried about having insufficient pension savings, it may be a different picture.

For some, the question is not how to retire successfully, but how to retire at all, given that there may be precious little in the way of a state safety net to fall back on.

Research from the Financial Conduct Authority reveals that around 15 million individuals are not saving anything towards their retirement and will have to rely entirely on the State Pension in their later years.1

Screen Shot 2020-04-20 at 17.32.40

Of particular concern is the group of pre-retirees aged 55–64, only half of whom have given thought to how they will manage in retirement; and only a quarter know how much they have in their pension pot.2 These people may only have a few working years left to build their nest egg.

Why do so many people fail to plan their retirement? This could be partly due to massively underestimating the amount of money they need to save. According to BlackRock, those who were asked to calculate how much they would need for their desired retirement income of £26,000 a year estimated they would require £233,000 in savings; and yet they would need a pot of £525,000 for this income, even including the State Pension.3

People also underestimate longevity and therefore how long retirement could last. Only 7% of people aged 55–64 today expect to live to 90, but research indicates that half of them can expect to live that long.4 The obvious implication is that many retirement pots will run out too soon.

Many experts are warning that the end of final-salary pension schemes, chronic underfunding of defined contribution pensions, and increasing life expectancy are creating a perfect storm that threatens to destabilise the financial wellbeing of the coming generation of retirees.

Screen Shot 2020-09-28 at 10.23.36

The solution is to plan
You have to ask yourself: how much will I need, and how much can I afford to put away? Then you need to factor in any other sources of retirement income and you can see the size of the gap you are trying to fill.

Obviously, the younger you are, the longer the investment time horizon and the most you will have to gain when thinking ahead. However, middle age is a time when incomes are at or near their peak, so there are significant opportunities to catch up.

Subject to limitations, people in the UK can make pension contributions of up to 100% of their earnings or £40,000, whichever is lower. While paying the maximum may seem a tall order, remember that the government rewards you for saving into a pension in the form of tax relief.

Worryingly, according to BlackRock’s research, 50% of people are unaware that the government boosts pension contributions; the research also showed that fewer than a third of people are aware of ‘pension freedoms’ changes and how these impact on their retirement prospects.6 This is further evidence that lack of awareness remains one of the key barriers to making adequate retirement provision.

It’s vital savers know and understand all their options for using their pension; but also that they make the most of the current tax breaks while building one.

1,2,4,5 Financial Conduct Authority, Financial Lives Survey 2017

3, 6 BlackRock, Global Investor Pulse Survey 2017


About Amy
Amy Shepherd is a Cheam Mum of two daughters aged seven and two and a financial adviser running her own business,  Amy Shepherd Financial Planning. To receive a complimentary guide and discussion covering wealth management, retirement planning or Inheritance Tax planning, contact Amy on 07539 490 854 or email

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