News Updates - February
13th February 2020
An extra £20,000 for spouses
From 6 February the fixed amount a surviving partner is entitled to when a spouse or civil partner dies without making a will, is rising from £250,000 to £270,000. The fixed sum is known as the ‘statutory legacy’ and is designed to balance the interests of the surviving spouse with those of the deceased’s children when no will is in place. For the millions of adults in the UK without a will, the fixed inheritance sum increase is a safety net – but is no substitute for making sure the right people get what you want them to have after you die. So, if you have children, your spouse will get the first £270,000 and half of everything else. The other half will be divided equally between your children. While at first glance, extra inheritance for the remaining partner looks like their interests have been protected from erosion by inflation. However, they could still be at risk of far worse – of losing their home and lifestyle. For the remaining partner, with no will in place the statutory legacy sum means:
- Assets or money you might need is automatically shared out among the deceased’s children.
- It may be down to the children to decide whether they help you out.
- You stand to lose money or assets that your late partner had held even though they had intended to share these with you.
- You could be landed with an inheritance tax bill that could have been avoided.
Should you invest in VCTs
This year marks the 25th anniversary of the introduction of venture capital trusts (VCTs). The idea was to encourage investors to support young and innovative businesses in exchange for generous tax concessions. Since 1996, VCTs have raised £8.4bn and helped thousands of private companies grow – from GO Outdoors, Secret Escapes, Everyman Cinemas and Five Guys to Zoopla, the first VCT-backed £1bn company. When you invest in a VCT you receive up to 30% tax relief. So on a £10,000 investment you could get back £3,000. All returns, typically paid through dividends, are tax-free. The annual allowance of £200,000 is both generous and straightforward. There is a catch, though. VCTs are not open all year round. Demand for the popular ones far outstrips supply and they sell out quickly. So if any of the below whet your appetite, to avoid missing out invest now rather than waiting for the new tax year. Venture capital trusts' steady income streams mean they are also being increasingly used for intergenerational wealth planning despite their lack of inheritance tax benefits. Even though base dividends may have dropped a little since the rules over payout taxation were changed in 2015, there is usually a special dividend payout from the types of companies VCTs invest in, which helps to boost the tax-free income. This is cementing in people's minds that these are good investments. When you consider the low-interest-rate environment we have had for such a long time, shareholders consider these as investments worth hanging onto.
Rise of the self employed
PUK job growth was the strongest in nearly a year in the three months to November, according to new government data. The Office for National Statistics said the strong jobs growth reflected a particularly weak three-month period to August when jobs fell, but the data also showed the employment rate hit a record high of 76.3% with jobs growth driven particularly by self-employment and the numbers of women in full time work. The number of people out of work dropped by 7,000 to 1.31 million and the unemployment rate of 3.8% remained at its lowest level since early 1975. Over two-thirds of the growth in people in work in the last year came from women working full-time while self-employment has also been growing strongly, and the number of people working for themselves has now passed five million for the first time ever.’ IPSE (the Association of Independent Professionals and the Self-Employed) has welcomed the news that self-employment has passed the 5 million mark for the first time ever, attributing this to the rise in the number of female self-employed. IPSE has also pointed to its own recent research showing freelancers are choosing to work for themselves for overwhelmingly positive reasons.
Pension schemes failing on climate change investment
The UK Sustainable Investment and Finance Association (UKSIF) says pension scheme trustees are failing to comply with their investment duties around ESG and need government intervention to get back on track. In a report released last month the think tank said schemes have adopted a "thin and non-committal" approach to policies to tackle environmental risk. This comes after UKSIF reviewed a collection of statements of investment principles (SIPs) published by trust-based pension schemes offering defined contribution (DC) benefits between October and November 2019. Trustees were required to outline how they factor ESG issues into their investment decisions in SIP statements from October last year. While a majority of trustees surveyed by the think tank said they believe ESG issues will affect scheme asset performance, it also found only one third have complied with the legal transparency requirements. UKSIF said The Pensions Regulator (TPR) must carry out a full review to investigate the level of compliance across the UK pension sector, while the government should create a new public registry for pension scheme investment policies.