Tag: Bridgewater Wealth Protection

Social Care & Wealth Protection

What we gain on the swings needs to remain with us on the roundabouts

There are some interesting things afoot in the world of personal taxation. With two seemingly separate, but intertwined, taxes that all of us should be thinking about.

They are the freeze on Inheritance Tax (IHT) and the 1.25% levy and dividend tax the Prime Minister has just introduced to help fix social care. With hidden connections and implications that could directly affect your estate.

The cap on social care may generate some unforeseen problems for your estate

In order to help pay for on-going social care, on 7 September the Prime Minister announced an increase in the Dividend Rates in line with the 1.25% increase in National Insurance. This new levy will apply to everyone in work, including pensioners who had previously been exempt from NI payments after reaching state pension age.

The other significant announcement was that, coming into effect in October 2023, there will be an £86,000 cap on the cost of social care that any one person should pay during in their lifetime.

Until an individual reaches that cap, anyone with more than £100,000 in assets will be responsible for paying all their own care costs. Whilst those with assets between £100,000 and £20,000 will have their care partly subsidised, via local councils. With any individual with assets lower than £20,000 having all care costs paid for them.

While this is a long awaited reform to the current challenges concerning the funding of social care, it may have an unwelcomed knock-on effect regarding IHT.

It’s a stealthy attack on the wealthy

Retaining more of our assets could result in an increasing IHT liability.

The IHT nil rate freeze has resulted in the Government’s most recent Inheritance Tax receipts growing by £500 Million between April and July 2021. That’s a massive 33% up on the same period for 2020.

The reason for this dramatic increase in IHT revenues is simple. Whilst the IHT rate has stayed the same, asset values have continued to grow. This has been fuelled by increases in house prices, along with raises in the investment markets as the world’s economies come out of the Pandemic.

The hidden impact of this asset growth is that many of us will become unknowingly entangled in the Chancellor’s IHT net, as thresholds are silently crossed.

Add to that the impact of the Social Care cap and you’ll begin to realise why a refocusing on your IHT position is long overdue.

In an ever-changing landscape, reviews are essential

Just because there are no changes due to the IHT rate until April 2026 at the earliest, don’t fall into the trap of believing there is nothing to do with regard to IHT planning.

The increase of £0.5 Billion being collected in IHT should set the alarm bells ringing.

With the supercharged 10.2% increase in assets from March 2020-2021, that the housing market has caused, combined with the lack of access to one to one IHT planning with a financial expert, the pandemic has created the perfect storm for IHT.

As we emerge, blinking into the sunlight of the post-pandemic lockdown, now is the perfect time to re-evaluate the protection of your wealth. Not just from IHT and other stealth taxes, but also from other misfortunes that can befall your heirs, including the payment of care fees.

Depending upon your own unique circumstances, there will be all sorts of options available for you to consider. It may be as simple as revisiting your will and your gifting allowances. You may even want to explore setting up Trusts or making better use of your Pension.

According to Financial Service Industry data, in the past fiscal year alone, just 10% of clients have mitigated their IHT position. That means 90% of us are unaware that our IHT position may urgently need specialist advice to help avoid unnecessary payments. With many people unknowingly generating a large IHT legacy, because they are unaware of the impact of asset growth and don’t consider themselves as rich enough to worry about IHT.

The impact of care fees on those with estates below the IHT threshold, even allowing for the recently announced cap, can be even more severe than IHT, which only applies at 40% on joint estates over £650,000.

Protecting your wealth from IHT or care fees starts with a phone call to us. If you have any questions regarding how any of this could impact upon you, then please don’t hesitate to contact one of our team at Bridgewater Financial Services. One of our independent experts will be on hand to help in any way.

20-20 vision for your finances

Happy 2020!

We’ve just stepped into a new decade and all the surprises that brings. But as we set off on the next chapter, I always think that the exciting thing is the uncertainty. Yes we know some things are definitely going to happen, like most of our New Year’s resolutions will fall by the wayside, the UK will leave the EU and that we’ll all get older and hopefully a little wiser. 

However when it comes to the markets, we can’t know for sure how they are likely to impact our personal finances. Having said that, we do have the next best thing available to us; our ability to review and amend!

Whatever your long-term plans may be, now is the time to review how the last year or two has performed for you and to put yourself in the right position to take full advantage of the financial opportunities now available. A review of your Savings, Estate Planning, Insurance Covers, Investments and Pensions now will allow you to make any changes and tweaks in your finances in order to make sure that you reach the end of the 2020’s in the financial position that you set out to achieve.

Now’s the perfect time to inspect an ISA

If you don’t currently have an ISA in your portfolio, then can I suggest that you add one to your list of things to consider this year.

It’s a great tax-efficient way of approaching investments, as your returns are free of income and capital gains tax. You can invest in an ISA up to a limit of £20,000 of which £4,000 can be paid into a LISA (for those eligible). 

As the annual deadline for ISA’s is 5 April 2020, this means that you potentially have two bites of the cherry available to you throughout 2020. By that I mean that you can currently take advantage of the ISA Tax-free opportunity for the remaining of the tax year, plus you can then do the same again on 6 April 2020. Please don’t leave it too late though, as some providers take several working days to process new ISAs, so leaving things until the beginning of April may mean you miss the closing deadline.

Take a look at a LPA And Will

The chances are that you could be amongst over 50% of the UK adults, including many in their 50’s and 60’s, who don’t currently have a Will in place. If that’s the case, could I respectfully suggest that writing one really should be high on your financial agenda for 2020. 

Whilst you may already have a Will in place, or high on your ‘To Do’ list, can I also prompt you to consider Lasting Power of Attorney (LPA), as incapacity often strikes without warning. Which means that sorting out a LPA can save your estate and it’s beneficiaries considerable costs and avoid unnecessary and lengthy delays.

If this all sounds a bit daunting, please be assured that putting Will and a LPA in place is nowhere near as difficult or costly as many people think. If you are unsure regarding whom to approach to best sort these things out, then start by contacting us. We can easily arrange Wills and LPAs through our sister company Bridgewater Wealth Protection www.bridgewaterwp.com

If you do already have a Will or LPA, then please take this reminder as an opportunity to review it. Checking that it is up to date and that it reflects your current wishes.

Improve your Insurance

Even if you have insurance covers in place, now is an opportune time to review things. Our advice would be to just make sure that each plan covers you for everything you need and that the costs are correct. Your circumstances may well have changed since you took any cover out. If that’s the case, then it’s critical that you ensure you are covered for all you require and that there are no plans available that could provide better cover and possibly a lower premium too.

The wrong product can end up costing you a great deal of unnecessary expense and stress, so please take the time to review and compare cover options.

Investigate your Investments

After a bumpy year (The Queen’s words, not mine) in politics and the markets, now is an excellent time to take stock and to just check that your investment strategy is on course to achieve your goals. 

An excellent starting point would be the latest report regarding your mutual funds. There you can check to make sure that they still match your appetite for risk and that you are also happy with where your money is being invested.


A good tip, for when you consider your investments, especially when thinking about your exposure to risk, is to always include your pension, ISA’s funds and stocks together. Do this even when the funds are spread around different accounts and investment products, that way you will get a better feel for your overall portfolio.

Peer into your pension

Lastly and certainly not least, is your pension. 

Your pension is one of the most valuable assets you can have, yet it often gets overlooked; and I feel that more often than not, we don’t give pensions the attention that they deserve. 

Regular reviews of your Pension makes excellent financial sense, especially as legislation has changed massively in the last few years. So if you haven’t recently reviewed your pension position, then now would be a very good moment to do so.

During your review, ask yourself the following questions:

• Are the level of your contributions correct? Too little could leave you
wanting in retirement and too much could create problems with your
Reduced Lifetime Allowance
• Does the strategy still fit with your time horizon, changes in your current
situation or attitudes to your investment risk?
• Is your pension scheme up to date and able to take advantage of the new
pension freedoms, or is it an older scheme that can’t benefit?
• Does your pension fit with your retirement and estate planning?
• If your pension is a Final Salary Scheme, then with the increases in
transfer values, is it worth requesting a transfer value and restructuring
the pension?

Although this isn’t every question you should ask, they are certainly questions you should know the answers to, if you want to ensure that your pension is in the best place it can be.

We’re here to help whenever you need us

Although no one can see into the future, having a close look at your finances now is the difference between approaching 2020 with a clear financial strategy or setting yourself up for a cry of ‘I should have gone to Specsavers’ later in the year! 

I hope that this blog goes someway to starting the new financial year off on the right foot. If however there is something specific you would like to talk to us about regarding your plans, then please get in touch with us at Bridgewater Financial Services, where we will be delighted to help guide you through your individual options and strategies.

Wishing you all a Happy and Prosperous 2020.