Planning for retirement requires careful consideration of the best savings vehicles available, and two of the most popular options in the UK are pensions and ISAs (Individual Savings Accounts). While both offer tax-efficient ways to grow wealth, they serve different purposes and come with distinct advantages and limitations. A well-rounded retirement strategy may involve using both, depending on individual financial goals, tax considerations, and evolving regulations.

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The Role of Pensions in retirement planning

Pensions are designed primarily for long-term retirement savings, offering significant tax advantages that make them an attractive option. One of the biggest benefits is the tax relief on contributions—money paid into a pension receives tax relief at an individual’s marginal tax rate, effectively reducing the amount of tax paid on earnings. For higher or additional-rate taxpayers, this makes pensions particularly valuable, as contributions can benefit from 40% or even 45% tax relief, depending on income levels.

Additionally, pensions provide tax-free investment growth, allowing savings to accumulate over time without being eroded by capital gains tax or dividend tax. When it comes to withdrawing funds, 25% of a pension pot can be taken as a tax-free lump sum, while the remaining balance is subject to income tax. The trade-off for these benefits is that pension savings are locked in until at least age 55 (rising to 57 in 2028), making them less accessible in comparison to ISAs.

The flexibility of ISAs

ISAs, on the other hand, offer tax-free growth and withdrawals, making them an excellent complement to pensions in a retirement strategy. While contributions do not receive tax relief, the ability to access funds at any time without penalty makes ISAs more versatile. This flexibility can be particularly useful for those who may need to draw on savings before retirement or wish to supplement their pension income without triggering additional tax liabilities. ISAs have a limit of £20,000 per individual per tax year and this can be split across cash and/or stocks and shares.

Cash ISAs allow savers to earn tax-free interest, while Stocks & Shares ISAs provide the potential for investment growth with no capital gains or dividend tax on returns. This makes ISAs an attractive choice for those who want to retain control over their savings without the restrictions of a pension. However, recent discussions about potential changes to the Cash ISA framework have raised concerns about its long-term benefits, making it all the more important for savers to stay informed about policy updates.

The changing landscape of Pensions and Inheritance Tax

One of the most significant changes being proposed for pensions  is the planned inclusion of pension funds within the scope of inheritance tax (IHT) from 2027. Historically, pensions have been an efficient way to pass wealth down to future generations, as they have typically fallen outside of an individual’s estate for IHT purposes. This has led many financial advisers to recommend using non-pension savings first in retirement, preserving pension wealth to be inherited tax-free.

However, with the proposed new rule changes, pensions may no longer enjoy this exemption, potentially making them less favourable for wealth transfer. This shift may encourage retirees to draw down on their pensions earlier rather than leaving them untouched, making strategic planning even more essential. Individuals should review their estate planning strategies in light of these proposed changes to ensure they optimise tax efficiency while securing their financial future.

Balancing Pensions and ISAs for a stronger Retirement Plan

Given the unique advantages of both pensions and ISAs, a balanced approach can help individuals make the most of their retirement savings. Pensions remain a powerful tool for long-term wealth accumulation due to tax relief and employer contributions, but they have some limitations on access and flexibility and could soon be subject to inheritance tax. ISAs, while not offering tax relief on contributions, provide tax-free growth and withdrawals, making them an excellent complement for early or flexible access to savings – but are limited to £20,000 contribution per tax year.

Younger savers may prioritise pensions to take full advantage of employer contributions and tax relief, ensuring they build a solid foundation for the future. Meanwhile, those approaching retirement may benefit from shifting some focus to ISAs, allowing for accessible savings that can be drawn upon without incurring additional tax burdens. Given the proposed changes to pension inheritance tax, retirees may also need to rethink how they draw down their savings, potentially using pensions earlier than previously advised.

With tax laws and regulations evolving, seeking professional financial advice is crucial to navigating the complexities of retirement planning. A tailored strategy that considers tax efficiency, investment growth, attitude to risk, and changing policies can make a significant difference in long-term financial security. By carefully balancing contributions between pensions and ISAs, individuals can build a more resilient retirement portfolio that aligns with their goals and adapts to the shifting financial landscape.

We’re currently offering anyone with £100,000 or more in pensions, savings or investments  a free initial financial review worth £500. If you’d like to learn more, get in touch for an initial consultation to see how we can help.

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions. 

The Financial Conduct Authority (FCA) does not regulate tax planning.

Investment returns are not guaranteed, and you may get back less than you originally invested. Past performance is not a guide to future returns.

The information contained within this article is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change.

Who deals with the finances in your household? Would your family know where to look should something happen to you?

In the past, having a will would be how your final wishes were granted for the distribution of your assets after death…

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But is it enough in the new digital world?  

As the financial industry transitions towards increasingly using technology, your loved ones are unlikely to unearth your financial information by searching through a physical filing cabinet. Finder, a global fintech, estimates that in the UK alone, 47 million people use some form of online or remote banking – that’s 87%!  In the last decade especially, each of our digital footprints has grown exponentially. With multiple logins, passwords, usernames and accounts held across different websites and portals it’s hard to keep track yourself. The question is, how would your loved ones cope with this should you pass away?

No one can dispute that navigating the death of a loved one is one of life’s biggest challenges. To further complicate things, a recent survey by consumer group Which? has indicated that 76% of members surveyed had left no plan for what to do with their digital assets should they die.

Removing the additional complexity of trying to locate relevant documents to settle your estate can only be of benefit to those you leave behind. Although you can name a ‘digital executor’ in your will, this does not extend to consolidation of your financial affairs into one accessible place. TPO Wealth solves this problem for you.

What is TPO Wealth?

At The Private Office, all our clients have access to a digital filing cabinet, at no additional cost, through our secure online portal TPO Wealth. As with a physical filing cabinet, here documents can be stored safely and securely. By leaving behind instructions for family members on how to access this, the painful process of settling your estate can be expediated and enhanced.

With your consent, your solicitors and accountants can also access information you deem appropriate, such as tax returns. This capability allows for a seamless and effortless experience for you. You can have confidence that your information is safe, whilst allowing trusted contacts to have access to relevant documents.

Our clients use TPO Wealth to file personal financial documents and those they choose to share with professional contacts, such as their:  

• Tax Information 
• Will 
• Invoices 
• Details of professional contacts 
• In case of emergency details 

This can be particularly useful for the self-employed. As of October 2024, the statistical agency Statista estimates that 4,383,000 people in the UK are self-employed. That’s 13.1% of the workforce! Granting your accountant access to secure documents on TPO Wealth could substantially speed up the arduous process of filing tax returns and completing annual accounts.

With all the information neatly stored in one place, the need for time consuming back-and-forth is reduced. You’re free to get on with life’s more important things.

What about if you become incapacitated? 

Beside from the death of a loved one, information may be required, in other instances. Consider critical illness or incapacity. Should something happen to you, access to your TPO Wealth account and those within the remit of your Power of Attorney rights can be granted. Ministry of Justice data from 2024 indicates just how slow the Lasting Power of Attorney process can be – in fact, one application was finally processed in 2024 after a total of 2,777 working days!  

Would you like to take control of your finances?

Beyond secured storage of important files, with TPO Wealth you can track investment performance and the growth of your savings, across various accounts with different providers, all in one place. Using clear graphics, our clients can track the value of their net-worth in real time. Features such as an in-built property value calculator contribute towards overall peace of mind, as you can get a clear picture of the state of your finances, all at your fingertips.

If you’d like to learn more about how TPO Wealth can help to consolidate your financial affairs into one simple, easy-to-use place, we would be happy to help.

So why not get in touch?

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions. 

TPO Wealth is only available to clients of The Private Office.

The Financial Conduct Authority (FCA) does not regulate estate planning or tax advice. 

According to studies by the Financial Conduct Authority, there is a staggering number of people in the UK who do not seek financial advice. This is known as ‘The Advice Gap’ and the number has been put at 39 million.

As an adviser with nearly 40 years in the business it does not necessarily surprise me that there is a great deal of reluctance. Much of the UK’s wealth resides with the Baby Boomers, many of whom can remember what financial advice used to be like in the 70s and 80s. The high levels of professionalism which exist in the industry today, were a thing of the future. Even as late as the mid 80s (when there was no regulation) one insurance company rep (I will desist from mentioning any names) cited that in his first job (in Swansea) one of his best producing ‘advisers’ was a butcher who also sold life insurance policies to his customers, presumably in conjunction with two pounds of mince!

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I have witnessed the complete transformation of this industry. The advisers of today are well educated and highly qualified people with, perhaps most importantly, a high degree of integrity. There is no resemblance to the ‘wild west’ of old but, of course, I have sympathy for any individuals (and there are many) who had a bad experience in the past.

But baby boomers with unhappy memories aside, there is still a great deal of misunderstanding about the value an adviser can add.

In 2022 the Financial Conduct Authority (FCA) conducted research and found that 60% of people with investable assets of £10,000 or more considered that they wouldn’t benefit from financial advice. Another survey by the Financial Services Compensation Scheme (FSCS) indicated that 23% of people felt they didn’t have sufficient wealth to warrant advice and 38% considered advice to be too costly and didn’t represent value for money.

What does value for money represent?

In stark terms this can be viewed as asking the simple question “would I have more money at the end of the day with or without and adviser?” and this is a fair question. Most ‘sceptics’ will simply look at portfolio returns only. Of course, performance returns are very important but in the context of holistic financial advice, it is only one factor.  

This point can be illustrated well by an experience I had with a client I had just acquired back in 2017, who was drawing down money from a pension and paying 40% tax for the privilege. The same client had considerable wealth held outside of the pension and by running cashflow projections, I was able to demonstrate that by directing the income away from the pension and taking it from pension investments, at the end of his life (assumed to be the life expectancy given his age) his estate would be over £300,000 better off. This was simply a tax observation and had nothing to do with the performance of underlying portfolios.

We would all be great investors if we had a crystal ball!

On the subject of portfolios there is also a tendency for would be clients to look at performance in the rear mirror and conclude that self-investing would result in a higher net return. We would all be great investors if we had a crystal ball! The most common trait of the amateur investor, particularly when markets are doing well, is to increase the risk of the portfolio and then, when a market crash comes, all of a sudden, those high performing investments are often the first to fall off a cliff.  

One of the responsibilities of a good adviser is not only to ensure that your money grows well but to ensure than when times are tough, you are sufficiently protected. This is particularly true for retired clients who are in the ‘decumulation’ stage, the point at which you start to draw on your retirement funds. They have worked hard all their lives to build up a pot for retirement and it must be structured in such a way that, if there is a market crash (and there will be one sooner or later), they can continue to draw an income without losing sleep. This can only be done by managing the overall risk and making sure there is sufficient ‘low risk’ investment in the short term to ride the market turmoils.

How to quantify the Value of Financial Advice

In 2019 the International Longevity Centre (ILC) conducted a survey to quantify the value of advice in monetary terms. Over the course of a 10-year period, on average, those who sought advice saw their wealth increase by a whopping £47,706, twenty-four times higher than the average initial fee for the advice.

It is not only the hard benefit of pounds and pence. A Royal London study examined the emotional benefits of having a trusted adviser on board. Peace of mind scored highly. Most people want to enjoy their lives without feeling anxious about their finances. 

A good financial adviser can often provide reassurance, particularly if a projection of finances (using cashflow tools based on cautious assumptions) indicates that life goals can be achieved.

Achieving one’s goals is like climbing a mountain. It takes preparation, equipment, skill and determination to get there, and I don’t know about you, but if I were taking on Everest, I’d rather do it with a good sherpa by my side!

Ultimately, it hinges on trust, and the industry has created a landscape populated by well-equipped advisers who are highly regulated, and duty bound to work in the clients’ best interests. According to the Langcat Report 91% of people considered their advice to be helpful and valuable.  

Some readers will be old enough to remember Red Adair. A colourful character, Red was the only person in the world capable of extinguishing raging fires on oil rigs (an alarmingly regular occurrence back in the 70s). He also charged accordingly and when challenged on his fees he replied “If you think it’s expensive hiring a professional, you should try hiring an amateur!”.

If you would like to learn more about how we can help, why not get in touch and speak to one of our qualified advisers for a free initial consultation.

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

Investment returns are not guaranteed, and you may get back less than you originally invested. Past performance is not a guide to future returns.

The Financial Conduct Authority (FCA) does not regulate cash flow planning, estate planning, tax or trust advice.

In one of the longest ‘Budget’ speeches in memory, Chancellor Rachel Reeves gave the first Labour Budget speech for nearly 15 years on 30 October 2024.  

Here we’ve summarised the main elements of interest for financial planning, with further details on tax rates and allowances for 2025/26 (to compare to 2024/25) available on the government website.  

If you have any concerns or questions about any of the announcements and would like to speak to one of our expert financial advisers, contact us for a free initial consultation to see how we can help.

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Non- domicile changes

The non-domicile tax regime is to be abolished from 6 April 2025. Domicile will no longer be a feature of the UK tax system and will be replaced by a system based on residency.

The government will:  

• Introduce a new 4-year foreign income and gains regime for new arrivals who have not been UK tax resident in the previous 10 years
• Allow individuals previously taxed on the remittance basis to remit pre-6 April 2025 foreign income and gains using a new Temporary Repatriation Facility
• Reform Overseas Workday Relief
• Replace the domicile-based system for inheritance tax with a residence-based system

VAT on private school fees

From January 2025, 20% VAT will apply to private school fees across the UK and the business rates charitable rates relief for private schools in England will be removed.

Income tax and personal National Insurance (NI)

Income tax bands and personal NI thresholds remain frozen until April 2028. This time period hasn’t been extended and from 2028/29 these bands/thresholds will increase with inflation.

Capital gains tax (CGT) changes

Investors’ Relief

Investors’ Relief (IR) provides for a lower rate of CGT to be paid on the disposal of ordinary shares in an unlisted trading company where certain criteria are met, subject to a lifetime limit of £10 million of qualifying gains for an individual.

This measure reduces the lifetime limit from £10 million to £1 million for IR qualifying disposals made on or after 30 October 2024.

CGT rates

The main rates of Capital Gains Tax (that apply to assets other than residential property and carried interest), will increase from 10%/20% to 18%/24% respectively for disposals made on or after 30 October 2024.

The main rate of Capital Gains Tax that applies to trustees and personal representatives will increase from 20% to 24% for disposals made on or after 30 October 2024.

The rate of Capital Gains Tax that applies to Business Asset Disposal Relief and Investors’ Relief is increasing to 14% for disposals made on or after 6 April 2025 and from 14% to 18% for disposals made on or after 6 April 2026.

Carried interest

Carried interest, which is a form of performance-related reward received by fund managers, primarily within the private equity industry, will be subject to a CGT rate of 32% from April 2025 (current rates are 18% and 28%). From April 2026, carried interest will be subject to a revised regime within the income tax framework.  

Inheritance tax (IHT) changes

Freezing of IHT thresholds

The Inheritance Tax thresholds were already fixed at their current levels until April 2028. This time period has been extended to April 2030. This measure will fix the:

• Nil-rate band at £325,000
• Residence nil-rate band at £175,000
• Residence nil-rate band taper, starting at £2 million

Inherited pensions

From 6 April 2027, when a pension scheme member dies with unused funds or without having accessed all of their pension entitlements, those unused funds and death benefits will be treated as being part of that person’s estate and may be liable to Inheritance Tax. The current distinction in treatment between discretionary and non-discretionary schemes will be removed.  

The change will apply to both DC and DB schemes. It will apply equally to UK registered schemes and QNUPS. This will ensure that most pension benefits are treated consistently for Inheritance Tax purposes, regardless of whether the scheme is discretionary or non-discretionary, DC or DB.  

A small number of specified pension benefits will remain outside scope for Inheritance Tax, including where funds can only be used to provide a dependants’ scheme pension. These are currently out of scope in non-discretionary schemes and so will remain out of scope under this change.  

Pension scheme administrators will become liable for reporting and paying any Inheritance Tax due on pensions to HMRC. This will require pension scheme administrators and personal representatives to share information with one another.  

A technical consultation has been issued on the processes required to implement these changes for UK-registered pension schemes. After the consultation, the government will publish a response document and carry out a technical consultation on draft legislation for these changes in 2025.

The government will continue to incentivise pension savings for their intended purpose of funding retirement, supported by ongoing tax reliefs on both contributions into pensions and on the growth of funds held within a pension scheme.  

Agricultural relief and business relief  

From 6 April 2025, the existing scope of agricultural relief will be extended to include land managed under an environmental agreement with, or on behalf of, the UK government, devolved governments, public bodies, local authorities, or relevant approved responsible bodies.  

From 6 April 2026, agricultural relief (AR) and business relief (BR) will be reformed, as summarised below:

• The 100% rate of relief will continue for the first £1 million of combined agricultural and business property to help protect family farms and businesses, and it will be 50% thereafter.  
• The rate of business relief will reduce from 100% to 50% in all circumstances for shares designated as “not listed” on the markets of recognised stock exchanges, such as AIM.  

The reforms are expected to only affect around 2,000 estates each year from 2026/27, with around 500 of these claiming agricultural relief and around 1,000 of these holding shares designated as “not listed” on the markets of recognised stock exchanges.  

The government will publish a technical consultation in early 2025. This will focus on the detailed application of the allowance to lifetime transfers into trusts and charges on trust property. This will inform the legislation to be included in a future Finance Bill.

More detail is available at gov.uk. 

National insurance

Employer NI is to increase to 15% (from 13.8%) from April 2025 and the secondary threshold will reduce to £5,000 (from the current £9,100), i.e. employer NI will become payable on an employee’s earnings above £5,000pa.

The Employment Allowance, a National Insurance exemption for smaller businesses, will increase to £10,500 (from £5,000).  

Pensions

Qualifying recognised overseas pension scheme (QROPS)

The Overseas Transfer Charge (OTC) is a 25% tax charge on transfers to QROPS, unless an exclusion from the charge applies.

The government has announced that they are removing the exclusion from the OTC for transfers made on or after 30 October 2024 to QROPS established in the EEA and Gibraltar.

Also, from 6 April 2025, the conditions of OPS and ROPS established in the EEA will be brought in line with OPS and ROPS established in the rest of the world, so that:  

• OPS established in the EEA will be required to be regulated by a regulator of pension schemes in that country
• ROPS established in the EEA must be established in a country or territory with which the UK has a double taxation agreement providing for the exchange of information, or a Tax Information Exchange Agreement

From 6 April 2026, scheme administrators of registered pension schemes must be UK resident.  

Aligning the treatment of transfers to QROPS established in the EEA and Gibraltar with that of transfers to QROPS established in the rest of the world will help to ensure that some UK residents do not benefit from a double tax-free allowance whilst remaining in the UK and reduces the risk of around £1 billion of UK tax-relieved pension savings being transferred overseas across the scorecard.

Changing the conditions EEA schemes need to meet in order to become an OPS or ROPS will mean that they will have to meet the same conditions as those which are established anywhere else in the world.

Requiring scheme administrators of registered pension schemes to be UK resident will mean that all administrators of registered schemes will need to meet the same conditions.    

Further details are available at gov.uk. 

Employee Ownership Trusts and Employee Benefit Trusts

Targeted reforms are to be made to the Employee Ownership Trust tax reliefs to ensure that the reliefs remain focused on the intended purpose of encouraging and supporting employee ownership, whilst preventing opportunities for the reliefs to be abused to obtain tax advantages outside of these intended purposes.

Details are available at gov.uk

Stamp Duty Land Tax (SDLT)

The higher rates of Stamp Duty Land Tax (SDLT) for purchases of additional dwellings (second properties) and for purchases by companies is increasing from 3% to 5% above the standard residential rates of SDLT.  

This measure also increases the single rate of SDLT payable by companies and other non-natural persons purchasing dwellings over £500,000, from 15% to 17%.  

Both changes apply to transactions with an effective date on or after 31 October 2024.  

National Minimum Wage

The National Living Wage will increase from £11.44 to £12.21 an hour from April 2025.  The National Minimum Wage for 18 to 20-year-olds will also rise from £8.60 to £10.00 an hour.

State benefit and state pension increases

From April 2025, a 4.1% increase to the basic and new State Pension meaning the full new State Pension will rise from £221.20 to £230.25 a week, while the full basic State Pension will increase from £169.50 to £176.45 per week.

The Pension Credit Standard Minimum Guarantee will increase by 4.1% from April 2025, meaning an annual increase of £465 in 2025/26 in the single pensioner guarantee and £710 in the couple guarantee.

Working-age state benefits and the Additional State Pension will rise by 1.7% in April 2025, in line with inflation.

Furnished holiday lettings (FHL)

As previously announced, the furnished holiday lettings (FHL) tax regime will be abolished from April 2025, removing the tax advantages that landlords who offer short-term holiday lets have over those who provide standard residential properties.

The current rules provide beneficial tax treatment for furnished holiday lettings compared to other property businesses in broadly four key areas:

• Exemption from finance cost restriction rules (which restrict loan interest to the basic rate of Income Tax for other landlords)
• More beneficial capital allowances rules
• Access to reliefs from taxes on chargeable gains for trading business assets
• Inclusion as relevant UK earnings when calculating maximum pension relief

The abolition of the FHL regime will mean that income and gains will then:

• Form part of the person’s UK or overseas property business
• Be treated in line with all other property income and gains

If you’d like to discuss any of the changes announced in the Autumn Budget or would simply like to explore ways that you can minimise the amount of tax you pay on your wealth, why not get in touch and speak to one of our expert team of advisers. We’re offering anyone with £100,000 in savings, investments or pensions a free financial review worth £500.

Arrange a free initial consultation

This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions. 

The Financial Conduct Authority (FCA) does not regulate cash flow planning, estate planning or tax. 

The information contained within this article is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change. 

Nearly 4 months after the general election, Chancellor Rachel Reeves finally delivered her eagerly anticipated Budget this afternoon.

It had been widely reported that there would be tax rises and speculation had been rife that pensions, capital gains tax and inheritance tax could be targeted to raise tax revenue following Labour’s manifesto commitment not to increase taxes on “working people”.

In the end, changes to all three of these areas were announced as Reeves looks to raise taxes by £40bn, though the changes were not to the extent that many had feared.

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Capital Gains Tax

The main rate of Capital Gains Tax will increase for basic rate tax payers from 10% to 18% and for higher rate tax payers from 20% to 24%. This change will take effect immediately. Capital Gains Tax on second properties will remain unchanged.

There had been rumours that capital gains tax rates would be equalised with income tax rates, so the changes could be viewed as relatively modest compared to potential increases of this level.

Pensions

Investors will have been pleased to see that no changes were announced to the maximum tax free cash that can be taken from pensions or the tax relief available on pension contributions. However, it was announced that unused pension funds and death benefits payable from a pension will be included in the value of estates for inheritance tax purposes from 6 April 2027. This will affect individuals who were previously planning to leave their pensions to beneficiaries rather than to spend them in their lifetimes, though income taken from pensions in excess of tax free cash entitlements is subject to income tax and will then form part of the estate for inheritance tax purposes if not spent, so careful planning will be needed to ensure funds are not taxed twice.

Inheritance Tax

Aside from inherited pensions entering the estate for inheritance tax purposes in 2027, there were a couple of additional changes to inheritance tax rules.

Firstly, the freezing of the nil rate band (£325,000) and Residence Nil Rate Band (£175,000) until 2030 was announced. For reference, the Residence Nil Rate Band is generally available when a main residence is passed to direct descendants and this, combined with the nil rate band, generally gives married couples £1m which can be passed to direct descendants inheritance tax free on the second death of them both.

Additionally, there had been rumours that the inheritance tax break on shares listed on the Alternative Investment Market (AIM), if held for two years before death, would be scrapped. However, the Chancellor instead took a ‘half way’ approach by introducing a 20% inheritance tax rate in respect of these shares.

The Chancellor also announced changes to two lesser-known inheritance tax reliefs, Business Relief and Agricultural Relief, which will now be subject to a 20% inheritance tax charge on qualifying asset values over £1 million.

Income Tax, Employee’s National Insurance and VAT

As expected there were no increases in these three areas given they affect “working people”. However, with income tax bandings already frozen until 2028, there was an expectation the Chancellor may extend this date, but this did not prove to be the case, as the Chancellor confirmed the freezing of these bandings would end in 2028.

Given the above changes were not to the level expected, how has the Chancellor raised £40bn?

Employer’s National Insurance

A large proportion of this £40bn (an estimated £25bn) will be funded by a large increase in employer’s National Insurance contributions from 13.8% to 15% and a reduction in the threshold from which these are paid from £9,100 to £5,000.

Stamp Duty on second properties

Landlords will be disappointed to see the stamp duty surcharge on second properties increasing from 3% to 5% with effect from 31 October.

Non-Dom tax status abolished

As expected, the Chancellor confirmed Labour’s plans to abolish “non-dom” tax status.

Overall, after weeks of speculation, the tax rises announced in the budget were not to the extent that many had feared. Individuals with pensions will be relieved to see no reduction in their maximum tax free cash entitlement and no change to the tax relief they can receive on pension contributions. Investors may also feel increases in capital gains tax rates could have been worse. Instead, businesses were left to fund the majority of the tax rises through their National Insurance contributions.

However, these changes to inheritance tax, pensions and capital gains tax rules will mean financial plans will need to be revisited. To discuss the implications of the budget for your personal financial situation, please contact your TPO Independent Financial Adviser.

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The Financial Conduct Authority (FCA) does not regulate estate planning or tax advice.

This article is intended as information only and does not constitute financial advice.  

The opinions shared in this article are solely those of the individual and they do not necessarily reflect those of The Private Office.

The information contained in this article is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change.

In today’s complex financial landscape, the issue of ‘ghost’ pensions - pension plans that exist on paper but are not actively funded nor ‘managed’ - has garnered increasing attention. As globalisation and the job universe evolves, so too does job mobility. As a result, many individuals find themselves grappling with lost or forgotten pension benefits. With this backdrop, it is easy to see how ghost pensions begin to emerge over time. This article delves into why the issue of ghost pensions is growing, the importance of finding lost pensions, and what steps to take once they are found.

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Why the issue of ‘Ghost Pensions’ is growing

Recent estimations by the Centre for Economics and Business Research revealed that 22% of UK workers believe they have lost a pension pot, with total misplaced retirement savings likely to exceed £50 billion. Between 2012 and 2017, the Government introduced auto-enrolment in stages, which involved a minimum commitment of 8% of a worker’s qualifying earnings being added to a workplace pension scheme (subject to conditions). Consequently, we have seen a significant uplift in the number of people putting money aside for their future. However, prior to auto-enrolment, only around half of UK employees had a workplace pension. 

Increased job mobility:

With auto-enrolment in mind, as individuals change jobs more frequently than in previous generations, they often leave behind pension plans that can become difficult to track. This is particularly true for younger workers who may work for multiple employers throughout their careers. Each transition increases the risk of losing track of benefits and in turn, this could eventually lead to a lower pot to fund your retirement if forgotten about.

Poor record-keeping: 

Many companies, particularly smaller ones or those facing financial difficulties, may not maintain accurate records of their pension plans. Over time, this neglect can lead to individuals losing track of their benefits, particularly if they do not receive regular statements or updates.

Aging population: 

As the baby boomer generation retires, the number of individuals searching for lost pensions is increasing. Many retirees are discovering that their pensions, which they believed would be a stable source of income, are actually ghost pensions due to lack of funding or proper management.
These three factors heighten the importance of ensuring you have a clear understanding of all the retirement benefits you have accumulated over your life, so that you know what is available to you in your years after work.

The importance of finding lost pensions

We are all busy people and as the weight of day-to-day life takes hold, people often tend to put bureaucratic, paperwork-heavy tasks to the bottom of the proverbial pile. However, your future self will one day thank you for taking the time to get ahead of your pension management as early as possible. 

Financial security: 

Pensions represent a significant part of an individual’s retirement income. Finding a lost pension can make a substantial difference in financial security during retirement. Many retirees rely on these funds to maintain their standard of living, and any lost benefits could dampen your retirement expectations.

Legal rights: 

Individuals have legal rights to their pension benefits, and understanding these rights is vital. Failing to locate and claim a pension can result in forfeiture of funds that the employee has earned over the years. Knowing your rights ensure you take necessary actions to reclaim your benefits.

Emotional well-being:

 The uncertainty surrounding lost pensions can lead to anxiety and stress, particularly as you approach retirement age. Finding and securing these funds can provide peace of mind, allowing retirees to focus on enjoying retirement rather than worrying about financial instability.

How to find a Ghost Pension

Finding a ghost pension can be a challenging task, but several strategies can help streamline the process:

1.  Start by collecting as much information as possible about your previous employment. 
   This includes:

• Names of past employers
• Dates of employment
• Job titles and departments
• Any pension scheme details you might remember

          2.  Check with Former Employers

Contact the HR department of your previous employers. They should be able to provide information about any pension schemes you were enrolled in. If the company has merged or gone out of business, try to find out who took over the pension obligations.

          3.  Use the Pension Tracing Service

The UK government offers a Pension Tracing Service, which is a free service to help you find lost pensions. Here’s how to use it:

• Visit the Pension Tracing Service website.
• Fill out a form with the details of your former employers.
• The service will help connect you with the pension scheme administrators.

What to do once you find your Pension

Once a ghost pension has been located, the next steps are crucial to ensure that benefits are secured:

Gather documentation: 

Collect all relevant documentation, including any statements or correspondence related to the pension. This may include records from previous employers, plan documents, and identification information. You can then provide the pension provider with the details to obtain your plan information.

Review your options:

Once you have clarity on your benefits, review your options. Depending on the plan, you will have a variety of income options available to you. These typically vary from each plan, and older pensions can have much more limited options available to you. Consider what features are right for you and whether this is offered in your existing arrangements. 

Stay informed: 

After reclaiming your pension, keep abreast of any changes to the plan or funding status. Regularly update your contact information with the pension plan administrator to ensure you receive timely communications.

Consider financial advice: 

Depending on the amount and nature of your pension, it may be beneficial to consult with a financial adviser. We at TPO provide holistic advice on pension and retirement planning to remove the anxiety you may have around your future. 

How we can help

Navigating the complexities of pensions is essential for securing a stable financial future in retirement. With the potential for lost or forgotten pension benefits increasing, it’s crucial to take proactive steps to locate and reclaim these funds. Utilising resources like the Pension Tracing Service, consulting with former employers, and exploring online databases can significantly help.

At The Private Office, we understand the challenges individuals face when planning for retirement, with our team of experienced financial advisors dedicated to helping clients navigate these complexities. If you’re concerned about your financial future, why not get in touch. We’re offering all those with £100,000 or more pensions, savings or investments a free cash flow forecast worth £500, to visualise if you’re on track for the retirement you want.

Arrange a free initial consultation

This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

The Financial Conduct Authority (FCA) does not regulate cash flow planning.

The clock ticks down with only six months remaining to plug National Insurance (NI) gaps. The government is encouraging people to act now and check their National Insurance record as there is no guarantee of a further extension to the deadline.  

As discussed in our previous article on National Insurance contributions (NICs), the government extended the deadline for NI contributions from the original 31 July 2023 to 5 April 2025 to allow eligible individuals to retrospectively fill gaps in their National Insurance record for the period covering April 2006 to April 2016. This extension was intended to give people more time to fill gaps in their National Insurance record that would otherwise prevent them from accessing the full State Pension.  

Plugging the gaps online

Earlier this year, the government launched a tool enabling people to pay to fill in gaps online. So far, more than 10,000 payments totalling £12.5m have been processed, according to figures from HM Revenue and Customs (HMRC). However, many still have gaps in their National Insurance record and are at risk of losing out on their full State Pension.  

• Key figures from the new online service shows the majority of customers (51%) topped up one year of their NI record
• the average online payment is £1,193
• the largest weekly State Pension increase is £107.44

After the 5 April 2025 deadline, people will only be able to make voluntary contributions for the previous 6 tax years, in line with normal time limits.

About National Insurance Contributions

National Insurance is an umbrella term for universal health care, unemployment benefits and the public pension programme.

National Insurance contributions are a form of tax that employees and employers pay to the government through payroll deductions. NICs are paid automatically through the PAYE (Pay As You Earn) system, which deducts an amount based on a percentage of your income, and this generally continues until you reach retirement age. Employees are able to make additional voluntary payments to increase the pension amount that they will be entitled to receive.  

NICs are collected in order to fund various state benefits, such as the NHS and state pensions.  

There are many reasons why you might have gaps in your NICs. If you were unemployed, in education, took a career break to raise a family or even if you were not earning enough, you may have periods where no NIC payments were made. You need to have been paying NIC for at least 10 qualifying years in order to receive any kind of State Pension, and you need to have been paying for a full 35 years to receive the maximum amount possible.

If you’re thinking about your retirement options and would like to speak to someone to map out your financial future, why not get in touch. We’re offering anyone with £100,000 or more in pensions, savings or investments a free review worth £500.  

Arrange your free initial consultation

This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions. 

In order to prepare for later life, we’re often told to put aside as much as possible into our pension pots. But is it possible to overpay into our pensions? And can this have a knock-on effect when it comes to the tax we pay?

It’s important to know the rules around how much you can pay into your pension, and the tax considerations. 

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What is the pension annual allowance?

In the UK, there is no limit on the amount of money taxpayers can pay into their pension annually. However, there is a limit to how much you can contribute tax-efficiently. 

Whenever you pay into your pension, you get tax relief from the government. How this tax relief manifests will depend on your tax banding and your pension scheme. Most employers operate a salary sacrifice arrangement, which provides you with income tax and NI relief at source, regardless of your tax-banding. However, if you pay privately into a pension, the tax treatment is slightly different. Basic rate tax relief (20%) is applied to the contribution, meaning higher and additional rate taxpayers, are still owed a further 20% and 25% tax relief respectively. This relief must be reclaimed by the individual separately via a self-assessment tax return.  

The pension annual allowance is currently £60,000. This allowance is inclusive of personal contributions, employer contributions and any government tax relief you receive. Contributions which exceed the Annual Allowance (AA) will be subject to a tax charge, known as an Annual Allowance charge, which is the removal/reclaim of any tax relief applied to the excess.  

However, it is important to note that if your income is less than £60,000 per annum, you are restricted to contributing up to a maximum of 100% of your relevant UK earnings (unfortunately, rental income and dividends don’t count).

Equally, if your ‘adjusted income’ exceeds £260,000 per annum, you may be subject to the Tapered Annual Allowance (TAA), which sees your annual allowance reduced by £2 for every £1 of adjusted income above £260,000. Therefore, for adjusted income £360,000 per annum or above, your annual allowance is reduced to £10,000 per annum. 

Can you carry forward unused annual pension allowance? 

In certain circumstances, you may be able to carry forward annual pension allowances from up to three previous tax years. In this instance, you are given permission to exceed your annual allowance and still receive tax relief. 

To benefit from carry forward, you must meet the following conditions: 

• You have been a member of a UK pension scheme (not including State Pension) in each of the years you wish to carry forward from. 
• You must have fully utilised your available Annual Allowance in the current tax year first 
• Unused Annual Allowance is then drawn from the furthest year first I.e. 2021/22 is the third year back from the current tax year. 
• You cannot contribute more than 100% of your relevant UK earnings in a given tax year. I.e. if your gross earnings are £70,000, this would be the total pension contribution you can make in the current tax year, regardless of whether your available carry forward allowances are higher. 

What is the Lump Sum Allowance and Lump Sum Death Benefit Allowance? 

The Lump Sum Allowance (LSA) refers to the maximum amount of tax-free cash that can be taken across all of your pension arrangements throughout your lifetime (including lump sums from defined benefit pensions). 
Whilst the previous Lifetime Allowance (LTA) was abolished as of 6th April 2024, it does still have some relevance.

The LSA is capped at £268,275, which is 25% of the old Lifetime Allowance (£1,073,100)

The Lump Sum Death Benefit Allowance (LSDBA) refers to the total amount of pension wealth that can pass tax-free by way of a ‘death benefit lump sum’ to your chosen beneficiaries on death before the age of 75.

The standard LSDBA uses the value of the former Lifetime Allowance - £1,073,100. However, if you hold transitional protection, protecting your Lifetime Allowance at a higher value, this remains the appropriate figure.

For example, if you hold Fixed Protection 2016, your LSDBA will remain at the higher protected amount of £1,250,000.

Should your total pension wealth exceed the ‘standard’ or ‘protected’ amount on death before age 75 and your pension is paid as a lump sum, your beneficiaries would be subject to income tax at their highest marginal rate on the excess.

If, however, your pension is passed to your beneficiaries as a pension, rather than a lump sum, the amount will not be tested and remains tax-free on death before age 75.

The rules remain the same on death post-75, in that any pension benefits passed as either a lump sum or as a pension will be subject to income tax at your beneficiaries highest marginal rate, either on payment (if received as a lump sum), or upon withdrawal (if received as a pension).

The Benefits of Pension Contributions

Pension contributions come with several valuable benefits that make them an attractive option for long-term savings:

• Tax Relief: Contributions are tax-efficient, with immediate relief for basic rate taxpayers and the ability to reclaim additional tax relief for higher and additional rate taxpayers (20% and 25% respectively).
• Employer Contributions: Some employers offer generous contributions above the statutory minimum (3%), effectively increasing your retirement savings at no extra cost.
• Investment Growth: Pensions are invested in markets and have the capacity to grow over time. Returns are compounded which can be enhanced by regular contributions. 
• Inheritance Benefits: Defined Contribution pension benefits sit outside your estate, meaning they are not subject to inheritance tax on death, resulting in a potential 40% tax saving. 
• Financial Security in Retirement: Maximising your pension contributions throughout your working life helps ensure you have sufficient income to meet your lifestyle requirements in retirement. For most people, the full State Pension (£221.20 per week) is unlikely to be sufficient alone to meet expenditure requirements. 

How much should I pay into my pension? 

How much you should pay into your pension will depend on a number of factors, including your age, earnings and financial goals. 

According to Fidelity International, a rough rule of thumb for determining your ideal pension contributions is to aim to save 10 times your pre-retirement income salary by the age of 67. So, if your average salary is £40,000, it’s recommended that you aim for a pension pot of around £400,000.  

Others say that you should aim to save 12.5% of your monthly salary. If your employer offers a more generous contribution than the statutory 3% then this figure can be reduced accordingly.  

Beyond these generalised points, however, there are a number of factors influencing the amount you should pay into your pension. Below are some of the most important: 

• What is your target income for retirement?   
• What age do you plan to retire? / What timeframe does this give you to save?
• What is your state of health/family history?  
• What level of income/expenditure are you expecting in retirement?  
• Do you have other assets/income that can support you in retirement?  
• Target income is often considered the amount you will need to maintain your current lifestyle. To get an idea of this, you can add up your current monthly expenses and deduct any that will no longer apply by the time you reach retirement (mortgage, commuting costs, etc.).
• Adding in any extra money you anticipate needing - This is for things like holidays, home renovations, or supporting family members, hobbies and interests.  
• Increases to inflation - The cost of living typically doubles every 25 years, so it’s worth incorporating this into any financial projections.  
• Length of retirement - This is a combination of the age you intend on retiring at and how long you expect to live. The latter is obviously a little less predictable, but you can find a good estimate by considering lifestyle factors and family history. 
• How much state pension you will receive - If you qualify for the full new state pension, you will receive £221.20 per week, or £11,502.40 a year for the tax year 2024/25. This is not likely to be enough to live on but could be a good top up tp your personal pension pot and other savings and investments. 

Despite the pension annual allowance of £60,000, if you’re getting close to retirement age, it may still be worthwhile making contributions in excess of this. Despite the annual allowance charge that would apply (ignoring any carry forward allowances), pensions offer additional tax benefits on death, sitting outside of your estate, so they can usually be passed onto your loved one's tax-efficiently.

It’s worth bearing in mind that pensions cannot be accessed before age 55 (57 from 2028), unless you are diagnosed with terminal illness. Therefore, it is important to maintain sufficient funds that can be easily accessed in the short and medium term to facilitate expenditure.  

Does my employer have to pay into my pension? 

By law, all employers must offer a workplace pension scheme. This means that three bodies contribute to your pension: you, your employer, and the government. 

If you qualify for automatic enrolment, then your employer is obliged to enrol you into a pension scheme and make contributions to your pension. If your employer is not obligated to enrol you by law, then you can still opt into their pension scheme — and your employer cannot stop you. 

However, they do not have to contribute if you earn an amount equal to or less than £520 a month, £120 a week or £480 over 4 weeks. 

Once you’re enrolled in your employer’s pension scheme, they must, by law, punctually pay at least the minimum contributions to the pension scheme, allow you to opt out of the pension scheme and refund you the money you’ve paid into it (if you do so within 1 month). Plus, they have to allow you to re-join the scheme at least once a year if you have previously opted out. 

Under no circumstances can your employer try to encourage or coerce you into opting out of the scheme, terminate your employment or discriminate against you if you decide to stay in a workplace pension scheme. Nor can they insinuate that somebody is more likely to get hired if they choose to opt out of the pension scheme or end a workplace pension scheme without automatically enrolling all members into another one. 

So in summary, there is no limit to how much you can pay into your pension. However, the limit for tax free contributions is £60,000 annually, which is known as the pension annual allowance, or 100% of relevant UK earnings (whichever is the lower figure). Exceed this, and you’ll be expected to pay an annual allowance charge. 

How can we help? 

Here at The Private Office, our experienced pension planning advisers can provide you with clear advice on your options for your pension, tailored to your unique circumstances and individual needs. Get in touch to arrange a free initial consultation.

Arrange a free initial consultation

This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.  

A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

Investment returns are not guaranteed, and you may get back less than you originally invested.  

The information contained within this article is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change. 

​

What does Rachel Reeves’ first budget have in store for your finances, and what action should you take now to protect against the possible changes?

When Keir Starmer stood in the garden of Downing Street on 27 August, he spoke of ‘Fixing the Foundations’ of the country and of a ‘£22 billion black hole in public finances’.  This has led commentators to conclude that if tax rises weren’t planned in Rachel Reeves’ first budget before, they certainly will be now.

When is the Autumn Budget?

The Autumn Budget will take place on 30th October 2024.

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What is likely to be in the Autumn Budget?

When Labour ran for election, they ruled out raising taxes on ‘working people’ and specifically pledged not to increase Income Tax, National Insurance, VAT or Corporation Tax.  This potentially limits the taxes they can look at (though we would expect Income Tax thresholds to remain frozen until 2028 as announced by the previous government) and we have summarised our views on these various taxes below:

Pensions

Though this would technically be a change to income tax, one possibility for the Government would be to reduce tax relief on pension contributions for high earners.  We already have the pensions’ ‘annual allowance’; which limits pension contributions for very high earners, but there is currently the opportunity for those paying higher rates of income tax, but with overall income below the threshold required to have a tapered ‘annual allowance’, to benefit from significant tax relief and the Government could look to limit this.

Another potential change to pensions is reviewing their beneficial tax treatment upon death, where they fall outside the individual’s estate for inheritance tax purposes and can be passed to future generations at attractive rates of tax.  Though taking action in the anticipation of potential future legislation changes would be inadvisable, if changes to pension death benefits are announced in the budget, financial plans will need to be reassessed.

Finally, the 25% tax free lump sum available from pensions has been talked about as an ‘at risk’ benefit for years, but it would certainly be viewed as unfair if this was targeted now, given that people have been saving towards retirement expecting to benefit from this.  Additionally, changes to the ‘Lump Sum Allowance’ have only just come into force in the current tax year and the Government has already said it will not be reintroducing the Pensions’ Lifetime Allowance, so they may be reluctant to tamper with this area further.

Capital Gains Tax (CGT)

With capital gains above the £3,000 annual exemption taxed at just 10% for basic rate tax payers and 20% for higher rate tax payers (higher rates apply for second property sales), there are rumours that the Government will review CGT rates. 

However, HMRC’s own projections indicate equalising capital gains tax and income tax rates could actually reduce the Government’s overall tax take, given this would discourage individuals from selling assets (and crystallising gains) so they may instead decide to retain them.

Additionally, it should be noted that cost prices for capital gains tax purposes are currently rebased on death (meaning gains essentially die with the individual) and if this was changed, financial plans would need to be revisited.

Inheritance Tax (IHT)

With the UK inheritance tax rate currently 40%, it is somewhat surprising that the tax only raises c. £7bn p.a. (of a total tax take of c. £1trillion in 23/24).  The reasons for this are the various reliefs available, including:

The ability to gift unlimited amounts to individuals with, broadly speaking, no tax consequences if the donor lives seven years following the gift).

The ability for couples to pass up to £1m between them tax free to direct descendants upon death.  

The Government could look to limit some of these reliefs and with £1 trillion of wealth expected to change hands in the UK in the 2020s alone, according to the Financial Times, the Government could see this as an area to focus on.

How will the Autumn Budget affect me?

We of course do not know what changes will be announced in the Autumn Budget on 30th October and, crucially, from when they take effect. 

So, what can you do to protect your wealth? 

This means there may or may not be time to take action following the budget, and while we would discourage taking action on the basis of rumours, there are actions that can be taken before the budget to take advantage of reliefs that are available now but could be at risk post 30 October.  

To speak to an Independent Financial Adviser about how the Autumn Budget might affect you and any actions you could consider ahead of the budget, please contact us for a free initial consultation.  

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The details in this article are for information only and do not constitute individual advice.

The Financial Conduct Authority (FCA) does not regulate estate planning, tax or trust advice.

The information contained within this article is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change.

The value of your investments can go down as well as up, so you could get back less than you invested. Past performance is not a reliable indicator of future performance.

A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available.  Your pension income could also be affected by the interest rates at the time you take your benefits.

A popular question often asked by clients is whether they should contribute into a pension or invest in a property portfolio to fund their retirement.

The reality is there are pros and cons for each investment vehicle, so it’s important to look at these along with how returns compare over the last 10 years. Here we break these down so you can better understand which option may be better suited for you. Although we would always recommend speaking to a financial expert before embarking on your decision.

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Pension

  Advantages

• Personal pension contributions attract income tax relief at your marginal rate. This means for basic-rate taxpayers, a £1 contribution essentially costs you 80p, as 20% tax relief is provided by the Government under the ‘relief at source method’. Your contributions can also help you reclaim certain tax allowances, such as the personal allowance, tax-free childcare, and child benefit entitlement. If you’re a higher rate taxpayer, you can claim an additional 20% or even 25% tax relief for an additional rate taxpayer. 
• Employer pension contributions are essentially ‘free money’ as your employer is providing this as an additional benefit in your remuneration package – often if you don’t take up the contributions, they won’t provide an alternative income instead. Business owners can reduce their Corporation Tax liability by making contributions into their own name.
• Any investment growth is free of Income Tax and Capital Gains Tax.
• Usually, 25% of the value can be withdrawn tax-free in retirement.
• Ability to invest in a diversified range of asset classes (cash, fixed interest, shares, property, and other instruments). Further diversification can be achieved by diversifying assets geographically.
• Flexibility to draw an income in retirement through various methods such as a Lifetime Annuity, Fixed-Term Annuity, and Flexi-Access Drawdown.
• If structured appropriately, any remaining funds after your death can sit outside of your estate for Inheritance Tax (IHT) purposes. This can be a tax-efficient way of passing wealth on between different generations.

 Disadvantages

• You are unable to access your pension funds until age 55. This will be increased to age 57 from 6 April 2028.
• The value of your pension is subject to investment risk.
• Depending on how much you spend and how long you live for, your pension pot could be exhausted during retirement if not managed appropriately.
• Legislation can be complex, and rules are often changed.
• On-going charges will apply (pension provider/platform, investment related charges and financial adviser fees).

Property

 Advantages  

• Potential for long-term capital appreciation and an opportunity of outperforming inflation over the long-term.
• Potential for a regular rental income stream. This can provide a consistent cashflow which can be reinvested into property or other assets.
• A diversifying asset as part of an overall investment portfolio, which means that it can provide a hedge against market volatility.
• Property improvements can add to the value and/or increase rental yields.
• Physical asset and you own something tangible.
• 20% tax-credit available on mortgage interest.

 Disadvantages  

• If capital is required, it can often be a lengthy process to release equity.
• High initial costs (legal fees and stamp duty etc). A surcharge of 3% on top of normal stamp duty rates applies on purchase of an additional property.
• Potential debt if you require a mortgage to fund the purchase.
• Property management. This can be a hassle, stressful, and time consuming. Paying a professional will eat into your rental yield.
• Maintenance – any repairs will need to be carried out swiftly and the costs are funded by you.
• Potential void periods. This can be a tricky situation to find yourself in if you have a buy-to-let mortgage.
• Tax credit on mortgage interest restricted to 20%, even if you are a higher-rate or additional-rate taxpayer.
• Capital Gains Tax will be applied on any profit when sold.
• Included as part of your estate for IHT if held until you pass.

Pension vs Property Performance  

A common issue UK property investors face is that the value of their portfolio is influenced by the UK economy and sentiment.

Investing through a pension can be a much simpler way to diversify globally and across different asset classes through a basket of funds. This can help smooth out governmental decisions or country specific issues, and benefit from growth in other economies. 

Past performance is not a reliable indicator of future performance.

Figure 1: Stock market performance VS Property - Source: FE Analytics, 2024.

The chart above demonstrates the stock market has outperformed UK property over a 10-year period.  

The MSCI World Index measures the performance of equity markets across developed countries and has returned 221.85% over this period. UK property returns range between 46.88% - 66.77%.  

However, it is important to note these property returns are based on capital appreciation only and do not include any rental incomes received. According to NatWest, as of 2024, the average annual UK rental yield is between 5% and 8% gross.

Should I invest in property or a pension?  

Both investment vehicles provide different advantages and disadvantages, as detailed above, and each have a place within a diversified portfolio. As each of our personal circumstances can vary widely, is important to seek advice. An independent financial planner will be able to help you establish which solution is most suitable for your own personal needs. If you’d like to speak to one of our expert advisers, why not get in touch for a free initial consultation, to see if we can help.

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions. 

The Financial Conduct Authority (FCA) does not regulate estate planning, tax advice or most types of buy-to-let mortgages. 

Your property may be repossessed if you do not keep up repayments on your mortgage.

Investment returns are not guaranteed, and you may get back less than you originally invested. 

A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can go down as well as up which would have an impact on the level of pension benefits available.  Your pension income could also be affected by the interest rates at the time you take your benefits.

The information contained within this article is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change.