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Financial advisers back inheritance tax reform

11/12/2014

Research* by Old Mutual Wealth has revealed adviser support for inheritance tax reform, with 44% of advisers in favour of lifting the IHT threshold to £1m.

IHT is currently charged at 40% of the value of the estate above the £325,000 nil rate band.

Some media reports had predicted the Autumn Statement would include an overhaul of IHT. However, the only change to IHT saw an exemption introduced for aid workers killed overseas.

Only a small of minority (13%) of advisers surveyed indicated they did not support IHT reform.

More than one in ten (11.5%) were in favour of abolishing IHT altogether, while 28% called for the exclusion of the primary home.

Old Mutual Wealth Financial Planning Expert, Rachael Griffin, says:

“Inheritance tax could be a key battleground approaching the next general election and David Cameron has already indicated that the Conservative party is likely to consider reform.

“The problem with IHT is that many individuals caught under the current £325,000 threshold will feel they are leaving a relatively modest inheritance to their family and yet it will be subject to a tax which is ostensibly supposed to target wealthier individuals. Advisers appear to feel the same way, with the majority supporting IHT reform and only a small number (11.5%) arguing that nobody should pay IHT.

“Exempting the primary home from IHT also received some support. However, this would have the knock-on effect of encouraging individuals to store wealth in their home for tax planning purposes. This may not be seen as a viable option considering the potential for loss of stamp-duty revenue.”

The survey polled financial advisers on a range of other topical issues:

Pensions

While this Parliament has introduced significant changes to the pension system, most advisers predict further changes after the next election.

Almost three quarters (73.2%) of advisers indicated they expect further legislative changes to the pensions system in the next Parliament.

As part of the Budget reforms, individuals seeking a DB-DC transfer must now take advice.

Over half of advisers (53.9%) said they view this as an advice opportunity.

Old Mutual Wealth Retirement Planning Expert, Adrian Walker, says:

“The Budget saw the biggest changes to the pension system in a decade. The Opposition has indicated it is broadly supportive of this Government’s reforms, although the forthcoming general election and the fact the current reforms are still going through parliament, means the possibility of further legislative change is a cause for some concern.

“The impact of the changes announced in Budget 2014 has the potential to revolutionise the way the UK public think about pensions.

“In order to develop appropriate and appealing proposition which match consumer’s needs, the industry needs a period of certainty. Equally, customers will appreciate certainty around the rules governing how they can withdraw their pension.”

Tax Planning

Asked if the Government crackdown on avoidance had impacted client attitudes toward legitimate tax planning, 12.9% of advisers said some clients had shown reluctance toward legitimate tax planning methods.

This Government has targeted tax avoidance through a variety of high-profile measures, including publishing lists of suspected tax avoidance schemes and proposing new powers to allow HMRC to dip into bank accounts where it believes tax is owed (Direct Recovery of Debts).

Old Mutual Wealth Financial Planning Expert, Rachael Griffin, says:

“While HMRC is right to target illegitimate tax avoidance, an aggressive and high-profile clampdown risks discouraging people from employing sensible tax planning strategies. The Government must make it clear that its intention is to punish only those attempting to abuse the tax system unfairly. It is important the public is aware that mitigating unnecessary tax through legitimate methods is not under attack.”

Protection

Advisers were broadly supportive of the introduction of simplified protection products, with 79.4% indicating they saw a place in the market for simplified products.

There is some optimism that simplified protection could help close the advice gap.

Among those that are supportive of simplified protection products, 44.7% think they would help close the advice gap while 51.7% believe they might help. A minority (3.6%) think they would not help close the protection gap.

Old Mutual Wealth Life Cover Expert, Ian Jefferies, says:

“The overwhelming majority (79%) believe there is a place in the adviser market for simplified protection products.

“And almost all advisers commented that they believe simplified protection products could go at least some way to closing the protection gap.

“While simplified protection is a bold solution to a serious problem, it is important that simplicity does not come at the expense of quality.

“The 2013 Sergeant Review of Simple Products illustrated that some simplified products run the risk of offering poorer quality cover by excluding certain benefits.

“Simplified products should be those which make it easier for customers and advisers to purchase cover without compromising quality.”

*Old Mutual Wealth surveyed 836 adviser between November 13 and 17 2014 as part of its Adviser Insights Survey

For more information contact:

Michael Glenister Old Mutual Wealth 0207 7789 63807469 144 535

Notes to Editors:

Old Mutual Wealth is a leading wealth management business in the UK and internationally, helping to create prosperity for the generations of today and tomorrow.

Old Mutual Wealth oversees £131.3 billion in customer investments (as at 30 September 2017).

It has an adviser and customer offering spanning: Financial advice; investment platforms; multi-asset and single strategy investment solutions; and discretionary fund management.

The business is comprised of two segments: Wealth Platforms and Advice and Wealth Management.

Wealth Platforms includes the Old Mutual Wealth UK Platform; Old Mutual International, including AAM Advisory in Singapore; and the Old Mutual Wealth Heritage life assurance business.

Advice and Wealth Management encompasses the financial planning network, Intrinsic; Old Mutual Wealth Private Client Advisers; discretionary fund management business, Quilter Cheviot; and Old Mutual Wealth’s multi-asset investment solutions business.

Old Mutual Global Investors (‘OMGI’) is the asset management business of Old Mutual Wealth with £39.8bn funds under management (as at 30 September 2017). On the 19th December 2017, Old Mutual Wealth announced that it has agreed to sell its Single Strategy asset management business to the Single Strategy Management team and funds managed by TA Associates. The proposed transaction is subject to customary closing conditions, including regulatory approvals. 

Following managed separation from Old Mutual plc, Old Mutual Wealth will rebrand to Quilter plc. Each of the businesses within the Quilter Plc group will be rebranded over a two-year period, with the exception of Quilter Cheviot, which will retain its existing name.

Old Mutual Wealth is part of Old Mutual plc, a FTSE 100 group that provides life assurance, asset management, banking and general insurance. Old Mutual is trusted by more than 19.4 million (as at 31 December 2016) customers across the world and has a total of £212.3 billion of assets under management (as at 30 June 2017).

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