Top Ten Financial Planning Tips for HNWIs

Roger Clark, Head of Wealth Management, and Rebecca Williams, Client Director at Brown Shipley, share their top tips to help you plan for the future you want for yourself and your loved ones.

It is common practice for people to begin thinking about retirement and their longer-term savings plans as they approach their mid-50s.

Inheritance Tax, pensions and personal tax allowances can sound complex as savers begin to think about the transfer of wealth to future generations and it is only natural to want the best for your family when you are no longer around.

1. Consider a cashflow plan:

As a starting point, we always suggest a cashflow plan. This brings together all of your assets, income and expenditure in one place and acts like a personal balance sheet. One of the uses of cashflow planning is to look at income sustainability in retirement and help inform a discussion about appropriate levels of investment risk.
It is important to review cashflow plans regularly, particularly when you experience any changes in your personal circumstances.

It is important to review cashflow plans regularly, particularly when you experience any changes in your personal circumstances

2. Invest in ISAs:

ISAs were first introduced over 20 years ago and essentially protect savers from Income and Capital Gains Tax on the underlying investments. This year’s ISA allowance is £20,000, so if you have any surplus income you would be well advised to maximise your ISA savings via this route.

3. Prioritise your pension:

If you are enrolled in a workplace pension scheme, you should enquire into the maximum amount your employer can contribute on your behalf and consider raising your own contributions if there is scope for the company to match them. If you receive an annual bonus, it is also a good idea to consider sacrificing sacrifice some of it into your pension pot; this will save income tax and National Insurance contributions immediately and tax on the income and growth in the pension fund over the longer term.

If you receive an annual bonus, it is also a good idea to consider sacrificing sacrifice some of it into your pension pot; this will save income tax and National Insurance contributions immediately and tax on the income and growth in the pension fund over the longer term

4. Split your investments with your partner:

If there is an unequal division of income married couples or civil partners, you should where possible seek to equalise, ensuring that each partner utilises their ISA allowance, income tax and capital gains tax allowances and pension contribution limits.

5. Gifts to children:

Creating tax-efficient funds for children will enhance the investment return. Junior ISAs (JISAs) offer tax-free income and growth. Establishing a pension for your children provides immediate income tax relief on the contribution and tax-free income and growth for the future

Establishing a pension for your children provides immediate income tax relief on the contribution and tax-free income and growth for the future

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Top Tip

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Lee Goggin - Co-Founder

Lee Goggin

Co-Founder

6. Lifetime gifts:

Once you are comfortable that you have sufficient capital and income for your chosen lifestyle, consider lifetime gifts to the next generation. Outright gifts which utilize the small gifts exemption (£250), the annual exemption (£3,000) or are normal gifts from excess income all offer immediate relief from Inheritance Tax.

7. Make time for trusts:

Trusts can be complex and costly, but they don’t have to be. Grandparents might consider using a bare trust to gift money to minor grandchildren which can be used to pay school fees. The advantage of a bare trust is the money inside the trust is treated as belonging to the child for tax purposes, allowing them to maximise personal tax allowances and exemptions which may otherwise go unused.

8. Invest in VCTs or an EIS

Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EIS) were introduced by the Government to encourage investment into early stage, innovative companies and offer investors a range of tax incentives. They can be of interest to those who pay higher or top rates of tax or who are restricted or not able to make pension contributions. However, these investments are high risk and should be considered carefully as part of a diversified portfolio.

9. Don’t forget life assurance:

Life assurance won’t reduce your potential inheritance tax liability but written under trust, will provide your beneficiaries with money to pay the bill. This could avoid your executors having to liquidate assets, like property or investments, in your estate. You need to be comfortable with paying premiums until you die and life assurance is therefore often a long-term commitment.

Life assurance won’t reduce your potential inheritance tax liability but written under trust, will provide your beneficiaries with money to pay the bill. This could avoid your executors having to liquidate assets, like property or investments, in your estate

10. Family investment:

If you have significant capital, perhaps from the sale of a business, you may want to consider establishing a Family Investment Company (FIC). A FIC is a private investment company whose shareholders are ordinarily family members. The company’s articles of association and memorandum are drafted to fit the needs of the family. A FIC offers certain tax advantages and can be used to pass wealth tax efficiently to the next generation whilst at the same time safeguarding family assets.

Disclaimer

The information contained in this document/presentation is provided by Brown Shipley for information purposes only and must not be communicated to any other person. It does not constitute investment advice and must not be treated as a recommendation or an offer or solicitation for investment. 

The value of investments and any income from them may fluctuate and are not guaranteed. The past performance of an investment is not a reliable indicator of future results. Investors may not get back the amount originally invested. Currency fluctuations may cause the value of underlying investments to go up or down. The tax reliefs referred to in this document/presentation are those available under current legislation, which may change, and their availability and value depend on individual circumstances.

Brown Shipley does not provide tax advice. Investors should refer to their tax adviser for information on the effect of tax legislation on their individual circumstances.  

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