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Press comment: Finance Bill amendments

25/04/2017

Following today’s amendments to the Finance Bill, please see comments from Old Mutual Wealth’s financial planning and pensions experts.

The briefing note below covers:

  • Dividend allowance
  • Deemed domicile & enveloped dwellings
  • The pension money purchase annual allowance
  • Employer-funded pension advice

Dividend allowance

From 2018 the dividend allowance was expected to be reduced from £5,000 to £2,000. Now this has been put on hold and the future of the dividend allowance is uncertain.

Old Mutual Wealth financial planning expert Rachael Griffin says:

“The main driver for the change was to create a fair and sustainable tax system and that issue has not gone away. If the elected party decides to ditch this policy entirely they may face criticism over the   tax differential between the employed and business owners.”

 

Deemed domicile & enveloped dwellings

The deemed domicile amends came into force on 6 April 2017, and reduces the period of time someone needs to be living in the UK before they become deemed UK domiciled for tax purposes from 17 out of 20 years down to 15 out of 20 years. This announcement means these changes will no longer apply and are on hold.

From 6 April 2017 anyone who has purchased property in the UK through an overseas corporate structure (commonly known as enveloped dwellings) will no longer be exempt from IHT. This announcement means these changes will no longer apply and are on hold.

Old Mutual Wealth financial planning expert Rachael Griffin says:

Rachael Griffin“The announcement today that certain clauses have been cherry picked for exclusion from the Finance Bill has come as a surprise. The clauses which have been put on hold are expected to be included after the general election in a third Finance Bill, but when this will be is, as yet, unclear. This will undoubtedly create confusion and uncertainty for many people – both inside and outside the UK.

“Some areas are more controversial than others; especially where it effects legislation which has already come into force – such as the deemed domicile changes. Any non-domiciles approaching the 15 year point who have already taken action to rearrange their finances in light of the 6 April deadline may be disappointed by this latest announcement. They may have already sold overseas property or placed assets into a trust, many may have even left the UK and relocated overseas.

"I can understand the frustration of those who have sought advice in order to put their financial matters in order with the 6 April in mind.  However, we do expect to see a new Finance Bill with the clauses firmly reinserted shortly after the election – provided the Conservatives win.”

 

The pension Money Purchase Annual Allowance

The controversial Money Purchase Annual Allowance reduction has been placed on hold. It would bring down the pension funding allowance to £4000 for those that have taken accessed their pension flexibly.

Old Mutual Wealth pension expert Jon Greer says:

Jon Greer“The hiatus on the Money Purchase Annual Allowance cut causes confusion, particularly since the policy has been implemented since the beginning of April.  While placing part of the finance bill on hold was inevitable with the announcement of the snap election, the government are reducing it to the bare bones in order to get it through.

“People will have already started planning for this change and a sensible approach for the moment would be to continue to do so in case it continues to be backdated and still be applicable from April 6 this year.

“However, the cut to the MPAA is totally at odds with the direction of travel in the retirement market and those planning for retirement would be relieved if it became a casualty of the finance bill.

“Giving people the freedom to withdraw retirement income as and when required has made a flexible transition to retirement possible. Many will prefer to phase into retirement, reducing their working hours and topping up income with pensions.

“But under the MPAA, those that chose to top-up income with a retirement fund and then later make contributions during period of work could be punished by this regressive curb on the standard annual allowance.”

 

Employer-funded pension advice

Under existing rules employers are able to fund pension advice for each employee up to £150 without any income tax due.

The tax-exempt amount was due to rise to £500 per employee under clause 12 of the Finance Bill, however that has today been removed. The Pension Advice Allowance, which allows people to withdraw their own pension savings to fund the cost of advice, will not be affected.

Old Mutual Wealth pension expert Jon Greer says:

“The Financial Conduct Authority last week announced that it would be reviewing the non-advised drawdown market because it is concerned about consumers that are at risk of failing to access the necessary help to make an informed decisions.

“And the Financial Advice Market Review, led by Treasury and the FCA, has found that employers want  to do more to help their staff manage their finances.

“Removing the employer-funded advice reforms from the Finance Bill runs seems to run contradictory to these findings and we hope to see it re-introduced in future legislation.”

 

For more information contact

Sophie HeywoodOld Mutual Wealth02380 91677007834 499558sophie.heywood@omwealth.com
Michael GlenisterOld Mutual Wealth020 7778 963807469 144535michael.glenister@omwealth.com
Kathleen GallagherOld Mutual Wealth023 8072 629307990 004932kathleen.gallagher@omwealth.com

Notes to editors:

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

On a ‘go forward basis’, Quilter oversees £ 111.6 billion in customer investments (as at 31 March 2018).

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.

The Quilter businesses will be re-branded to Quilter over a period of approximately two years following separation from Old Mutual:

  • Intrinsic to Quilter Financial Planning
  • Private Client Advisers to Quilter Private Client Advisers
  • The Multi-Asset business to Quilter Investors
  • The UK Platform to Quilter Wealth Solutions
  • The International business to become Quilter International
  • The Heritage life assurance business to Quilter Life Assurance
  • Quilter Cheviot will retain its name.

On 19 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. 

Quilter is part of Old Mutual plc, a FTSE 100 group that provides investment, savings, insurance and banking. For the year ended 31 December 2017, Old Mutual reported an adjusted operating profit before tax of £2.0 billion. For further information on Old Mutual plc and the underlying businesses, please visit the corporate website at www.oldmutualplc.com.

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