Money Matters

Who would have thought it?

It only seems like a couple of weeks ago, that I was putting fingers to keyboard, and commenting on the possible outcome of the General Election. Now we know, and what a surprise that was. Who would be a pollster?!

Now that we have a new Government we can get back to the business of living our lives, safe in the knowledge that the newly shuffled administration will take good care of us. Or possibly not. What we do know is that investment markets are happy to see a working majority Government, and are inclined to prefer one of the current colour. The FTSE100 shot up on the news, and has settled itself around the recent all-time high. I would expect it to consolidate, and then build upon these levels in the fullness of time. This said, there will be many opportunities for markets to take umbridge at the bits and pieces of bad news that will, almost certainly, be a feature of the first couple of years of this administration. It is often the way of new incumbents to get the nasty stuff dealt with early so there is plenty of time for the electorate to forget before the next election rolls up!I have noticed though, even in the short time since the result became clear, a marked increase in the number of mortgage related enquiries, both domestic and residential. More so than the usual Spring phenomenon that often manifests itself. It would appear that the period of uncertainty having ended, people are more keen to press on with their plans and expect to see a degree of growth – and the associated prosperity. In addition, a number of lenders have announced rafts of new rates and deals in the last few days.

The other thing that has been high in people’s minds is the great change in the pension regulations. Those of us who are 55 or over have access to our pension funds in a way that a few years ago would have been unthinkable. Much was said, when these pensions changes were first announced, about people cashing in their funds and dashing off to buy a new Lamborghini!

I haven’t seen much evidence of this so far, but I have seen quite a few owners of relatively small policies cashing them in. It has been a shock to the system when they discover that only 25% of the fund is free of tax. The remainder is taxed at the individual’s maximum rate of tax. For most people this is going to be 20%, but if the taxable amount of the pension. added to any other income, goes over the threshold for a higher rate of tax, then that rate will apply. Additionally, in some circumstances, single drawings from pension plans can be treated by the HMRC as if they were recurring, and taxed as such. Any overpaid tax can, of course, be reclaimed, but it can be somewhat of a shock to the system, when a poor pensioner ends up paying the top rate of tax!

Whatever you do, take some advice, before jumping into anything. Despite the efforts of several Governments to simplify the pensions arena it can still be a minefield. But, given the freedom that has been introduced now, it makes more sense than ever to contribute to a pension plan.

On that sage advice, I’m off to mow the window box. See you in the Summer.

David Foot

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