How are cryptoassets taxed in the UK?

To begin with, tax is payable on any profit received from the disposal of cryptocurrencies. This includes when they are:

• Sold;
• Exchanged for another cryptoasset; or 
• Used to buy goods or services.

Cryptoassets are taxed according to their nature and how they are used, rather than the definition of the asset. 

The vast majority of cryptoasset investors who live in the UK are potentially liable to CGT on any profits or gains from any disposals that they may have made. CGT is only payable if total gains from all relevant assets are above the annual exempt amount (tax-free allowance), which is £12,300 in 2021-22.      

In rare circumstances, revenue from cryptoassets may fall under income tax rules, for example if the investor is:

• Actively ‘mining’ or ‘staking’;
• ‘Trading’, where HMRC deem it to be a job or profession; or 
• Getting paid for a job or service in cryptoassets or cryptocurrency.               

HMRC may view all of these activities as forms of generating income, which makes them subject to income tax (up to 45 per cent depending on your income), not CGT. 

Learn more here: https://www.ftadviser.com/investments/2022/01/17/what-you-need-to-know-about-tax-and-cryptoassets/

TAX ADVICE IS NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.

3.6 million Britons have lost track of their pension savings

The more old pensions you have, the easier it is to end up losing one.

Tracing pensions from years ago can be a hassle. Over 3.6 million Britons admit they have no idea how many pensions they have and risk paying more in fees than necessary, according to new research

The number of workers with small pension pots of under £1,000 has surged dramatically in recent years, as auto enrolment has allowed millions of people to benefit from workplace pensions for the first time.

PAYING FEES TO MULTIPLE PROVIDERS

However, with the average employee now changing jobs 11 times[2] in their working life, people are increasingly building up many small pots and are often losing track, misplacing paperwork or forgetting about previous schemes they are invested in.

The Pensions Policy Institute (PPI) predicts the number of small pots will triple by 2035 to 27 million. Although the government’s Pension Dashboard will allow people to see all of their pensions in one place when it comes into eect in a few years’ time, it will not solve the problem of savers paying fees to multiple providers across all their pensions.

CONSOLIDATE SMALL PENSION POTS

While savers already have the option of combining their pensions, one in ten (10%) have no idea how to do this, while 12% say it’s just too much hassle. As a result, more than two-fifths (44%) say they’ve never bothered to track down savings from a previous employer.

Almost three-quarters (72%) of Britons now support the introduction of a new system that would automatically consolidate small pension pots as they move jobs, reinforcing strong support from the industry for the change. This would make it easier for people to manage and keep track of their retirement savings, while making the system more ecient and eective for the UK’s 33 million pension holders.

COMPARE THE FEATURES AND BENEFITS

Even if you have not had that many jobs, you may still have a number of dierent pensions to keep track of. Pensions can be confusing, but there is an alternative way to help keep on top of them. Pension consolidation may allow you to combine some or all of your defined contribution pensions in one place. Consolidating your pensions means fewer statements to keep an eye on, along with fewer and potentially lower management charges. However, not all pension types can or should

be transferred. It’s important that you know and compare the features and benefits of the plan(s) you are thinking of transferring. It can be a complex decision to work out whether you would be better or worse o combining your pensions, so it’s essential to obtain professional financial advice.

HELPING YOU STAY ON TRACK FOR THE FUTURE YOU WANT

Deciding whether to combine your pensions can be a complex decision and is not for everyone. Whether you want to consolidate into an existing pension you have with us, or you want to combine your existing pensions in a new pension, we are here to help. Speak to us today and make sure your plans are on track for the future you want.

A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS 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 TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION WHICH ARE SUBJECT TO CHANGE IN THE FUTURE. YOU SHOULD SEEK ADVICE TO UNDERSTAND YOUR OPTIONS AT RETIREMENT.

Pension investments to harness a more sustainable planet

Few people are aware of what their workplace pension invests in, let alone how their pension provider incorporates Environmental, Social and Governance (ESG) matters into the process.

Almost two-thirds (64%) of UK pension holders say that didn’t know their pension could be invested in ways to help fight climate change. One in six (17%) of UK pension holders currently invest their pension responsibly, but 41% say they would like their pension to be invested responsibly, new research has revealed.

COLLECTIVE POWER

Over three-quarters (77%) of UK adults class themselves as ‘climate conscious’. Three out of five (59%) UK adults are familiar with the term ‘responsible investment’, but only 26 per cent actually know what it means and understand its collective power to protect the planet. Men are more likely to be familiar with the term ‘responsible investment’ than women (69% vs 50%).

More than half (56%) of pension holders said they would consider investing a portion of their pension responsibly. Around a quarter (23%) were willing for at least half their pension to
be invested responsibly, with one in ten (11%) wanting between 90% and 100% of their pension invested responsibly.

PROTECTING THE ENVIRONMENT

With over half (57%) of 18-24-year-olds wanting their pension investments to harness a more sustainable planet, compared to just over a quarter (29%) of 65-year-olds and over, it’s clear there is still more that can be done to build a better understanding of inter-generational financial resilience for the future.

Pension holders were also asked what criteria they would like a responsibly invested pension to consider, with climate change and protecting the environment (42%) being highly rated. Social factors such as health and safety (29%) and use of plastic (28%) followed closely behind. The research also found that more than half (53%) of pension holders do not know how their pension funds are invested.

DOING THE RIGHT THING FOR A SUSTAINABLE FUTURE

Ethical investing has a positive impact on the world while also aiming to make a profit. It also means you receive a financial return without sacrificing your social, moral or religious principles. Many pension providers oer ethical funds for their investors – meaning you can save for retirement with a clear conscience. Please contact us for more information.

A third of Gen Xers not confident they can fund their retirement

One in three (31%) Generation X members (those born between 1965 and 1980) do not feel confident they will be able to work for as long as they need to fund their retirement needs, due to concerns around health and age.

With 57% of Gen Xers wanting to save more for retirement but struggling to do so, a quarter (25%) plan to work part-time past the State Pension Age (SPA) to plug an expected income shortfall in retirement, while 17% plan to work full-time. However, they have serious concerns about whether they will be able to continue working later in life.

The findings, which are contained in a report from the International Longevity Centre (ILC)[1] show why many people in Generation X continue to be ‘Generation Vexed’.

As many as 37% of all Gen Xers plan to work later in life to boost their retirement income, while for 25% this is their only plan.

However, they have several concerns they fear will constrain their ability to do this:

• 59% are worried poor physical health will restrict their ability to work
• 31% are concerned poor mental health will impact them
• 31% fear age discrimination will restrict their ability to retain or find another job
• Other concerns include not having the right skills to adapt to the changing job market (19%) and a fear that the economic impact of the pandemic will make it harder to remain in work (17%)

These concerns are perhaps understandable, especially as 36% of all Gen Xers, and one in three (33%) of those whose only plan for retirement is to work longer, also have a health problem or a disability.

Meanwhile, almost two-thirds (62%) of those who plan to work past the SPA to address an income shortfall in retirement are confident they’ll be able to do so – but they may find this is not always possible as a quarter (25%) of this group currently have a health problem or disability, and some 7% expect to provide care to an adult in the next five years.

READY TO GET YOUR RETIREMENT PLANS IN MOTION?

There are many things to consider when planning for retirement. By understanding precisely what you’ll need to get to where you want to be, you can ensure you’re prepared for the future. We can help you by creating a clear plan and then delivering on it. To find out more, please contact us.

What are the financial consequences to stopping work in your 50s?

Early retirement may be the ultimate dream for some, but the coronavirus (COVID-19) pandemic made it the only option for many. Figures from the Office for National Statistics show that over-50s had the highest redundancy rate between December 2020 and February 2021.

Retiring early can give you that change of lifestyle you’ve been craving, open doors to new experiences and potentially improve your health. But there are financial consequences to stopping work in your 50s.

WHAT IS THE FINANCIAL IMPACT OF EARLY RETIREMENT?
Traditionally, people retired between the ages of 60 and 65, but there’s no set age that you need to give up work. In fact, anyone with a pension pot can access it from age 55 – although this is set to rise to age 57 from 2028.

Retiring early requires some careful planning. It can put significant pressure on your funds as your new income is likely to be less than your pre-retirement earnings. You might have various sources of income for your retirement ranging from your personal and/or workplace pension, the State Pension, investments and other savings. Reviewing your financial situation and determining how much money you need to live a comfortable life in retirement is an important first step.

Something to bear in mind: if you’re aged over 55, your State Pension won’t be paid until you reach age 67. If you stop working before then, you could be relying on income from your private pension savings for more than a decade.

It’s also worth bearing in mind the impact of inflation. Prices have steadily increased over the past decade, for example, holidays, luxury goods and even basic necessities have become more expensive. So if you’re looking at a retirement of 25 years or more, you could see the purchasing power of your pension income decrease due to rising prices.

HOW TO ASSESS YOUR FINANCIAL SITUATION

Understanding your individual financial situation can make a big difference when it comes to making decisions around your retirement savings. Fully assessing your personal finances can help give you a clearer picture of whether early retirement is feasible.

HERE’S A CHECKLIST OF WHAT YOU SHOULD CONSIDER:

1. HOW DO YOU PLAN FOR A VARIED RETIREMENT?
If you’re planning to retire early, think about what type of lifestyle you want to enjoy in later life. This will then help you determine what you’re saving towards. You might plan to travel, embark on a journey of further education or simply spend more time with loved ones – whatever you decide to do, you’re going to have demands on your retirement income.

When you’re reviewing your financial plans, it could be worth looking at those first early years of retirement as something separate.
For example, including more in the budget for multiple holidays a year, or dinners out and trips to the theatre. Then take a look at how your lifestyle may modify as you slow down in later life. There may be fewer trips and holidays to take, but there could be increased care costs.

Taking early retirement means that you almost have to plan for two different retirements. One that caters to the immediate future, where you’re likely to still be very active. And one where a slower pace of life comes into play. Each will have a different focus and therefore different demands on your money.

2. HOW MANY YEARS DO YOU EXPECT TO BE RETIRED?
There are obviously no guarantees on how long any of us will live, but when it comes to retirement planning, you’ll need to make an informed guess.

It’s worth considering family history, as well as factors such as your gender and geographical region. If you expect to live to around 85, but plan to retire at 55, you’ll need to save enough to support yourself for 30 years – but don’t forget, you may live a lot longer than you expect, and you’re likely to want leave something for your loved ones.

3. HOW MUCH WILL YOUR STATE PENSION BE?

In order to understand your income requirements in later life, you’ll need to know when you can collect your State Pension and how much it’s likely to be.

The State Pension age is under review and is gradually being pushed back so it’s in line with life expectancy. Other factors, such as your gender and the year you were born, make State Pension ages vary.

Currently, the maximum State Pension is £179.60 per week, or £9,350 a year. However, you’ll need to have made, or be credited with, 35 years of National Insurance contributions to qualify for the full amount.

4. HOW MUCH DO YOU HAVE IN YOUR PRIVATE PENSION POT?
As the State Pension is not really enough to live on, the likelihood is that workplace or private pensions will make up a significant part of your retirement income.

When you retire, you can use some or all of your pension savings to buy an annuity, which then pays you a regular retirement income for either a set period, or for life. Alternatively, you can keep your savings in your pension pot and ‘drawdown’ only what you need, as and when you need it. You must have a defined contribution pension to be able to do this (your workplace pension provider will be able to inform you on whether you do).

The first step, before making a decision, would be to track down all of your pension pots and ask for a pension forecast. Estimate how much you can achieve via a drawdown,
an annuity, or a combination of both. And remember, the value of any investments can fall as well as rise and isn’t guaranteed.

5. HOW CAN YOU ENSURE YOUR PENSION POT WILL LAST?
Having an understanding of your retirement income and outgoings can help you to plan for the future. Perhaps you’ve reviewed your finances and realised you can retire early, or you might decide to wait a few more years to help you boost your pension pot that bit more.

The key thing to understand is that your retirement is completely personal, and the amount you will need will depend on your specific circumstances and expectations. If you’re in any doubt about the financial impact of early retirement, you should obtain professional financial advice.

WHAT DOORS AND POSSIBILITIES WILL YOUR RETIREMENT OPEN FOR YOU?

Life is short and unpredictable. If you would like to retire early and explore a life away from work, you’ll need to put a carefully considered plan in place. Retirement can open many doors and possibilities. You may be thinking about seeing the world or starting your own business. To discuss how we could help you, please contact us for further information.

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 TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION WHICH ARE SUBJECT TO CHANGE IN THE FUTURE. YOU SHOULD SEEK ADVICE TO UNDERSTAND YOUR OPTIONS AT RETIREMENT.