The wizard quickly jinxed the gnomes before they vaporized.
The wizard quickly jinxed the gnomes before they vaporized.
The wizard quickly jinxed the gnomes before they vaporized.
Around the world central banks have printed money to help combat the impact of the coronavirus on the economy. Many economists are concerned that this will ultimately lead to serious inflation. The current inflation target for the UK is 2%.
“HMRC receives over £5 billion a year from IHT, and this figures is likely to increase“HMRC receives over £5 billion a year from IHT, and this figures is likely to increase.”.”
Let’s imagine the government manages to contain inflation to 2% here but it still leaves those IHT allowances frozen at their current level. In 10 years the Bamfords' £1 million house would be valued at over £1.2 million. Investments that are well managed and growing and surplus income all add to the issue.
Frozen pensions
I mentioned earlier that pensions are exempt from IHT, but these were also caught in the allowances freeze. The standard Lifetime Allowance — the amount you can accumulate in pension savings over your lifetime without incurring tax charges — was frozen at £1,073,100.
If James’s £1 million pension grows by 5% a year it will be worth £1,276,000 when he retires in five years’ time, taking him beyond the limit. He will pay 25% on any money he withdraws as income from his pension that is over the Lifetime Allowance — on top of income tax — or 55% on any lump sum.
However, he can currently leave his pension to loved ones. This is a great way of helping children and grandchildren with their own pension savings plans. And it may be worth considering giving some other surplus money away now.
I hope you and your family remain healthy and safe. We hope to be able to open offices more in the coming months, which should allow more opportunity to meet up. In the meantime, we will continue monitoring how the investment environment is evolving as the world reopens and we start to see what the ‘new normal’ looks like. Please visit rathbones.com to find out more about our latest views.
We hope you enjoy this edition of InvestmentInsights.
Julian Chillingworth
Chief Investment Officer
Read the latest version of Investment Insights, Q3 2021
Around the world central banks have printed money to help combat the impact of the coronavirus on the economy. Many economists are concerned that this will ultimately lead to serious inflation. The current inflation target for the UK is 2%.
“HMRC receives over £5 billion a year from IHT, and this figures is likely to increase“HMRC receives over £5 billion a year from IHT, and this figures is likely to increase.”.”
Let’s imagine the government manages to contain inflation to 2% here but it still leaves those IHT allowances frozen at their current level. In 10 years the Bamfords' £1 million house would be valued at over £1.2 million. Investments that are well managed and growing and surplus income all add to the issue.
Frozen pensions
I mentioned earlier that pensions are exempt from IHT, but these were also caught in the allowances freeze. The standard Lifetime Allowance — the amount you can accumulate in pension savings over your lifetime without incurring tax charges — was frozen at £1,073,100.
If James’s £1 million pension grows by 5% a year it will be worth £1,276,000 when he retires in five years’ time, taking him beyond the limit. He will pay 25% on any money he withdraws as income from his pension that is over the Lifetime Allowance — on top of income tax — or 55% on any lump sum.
However, he can currently leave his pension to loved ones. This is a great way of helping children and grandchildren with their own pension savings plans. And it may be worth considering giving some other surplus money away now.
I hope you and your family remain healthy and safe. We hope to be able to open offices more in the coming months, which should allow more opportunity to meet up. In the meantime, we will continue monitoring how the investment environment is evolving as the world reopens and we start to see what the ‘new normal’ looks like. Please visit rathbones.com to find out more about our latest views.
We hope you enjoy this edition of InvestmentInsights.
Julian Chillingworth
Chief Investment Officer
Read the latest version of Investment Insights, Q3 2021