Caring for Elderly Parents

By | Financial Planning, Latest News

As advances in medical treatments continue apace, expected lifespans are increasing too. Sadly, for many, this means living with chronic illness for longer and an increased chance of cognitive impairment. This can put a strain on the family unit as children turn into carers.

It can therefore be vital that professional advice is sought to ensure that one’s parents’ welfare and finances are being properly managed and to take steps to ensure that should they become unable to deal with these matters independently, the children can step into their shoes. It is strongly recommended to discuss these topics with parents and ideally, with a solicitor and financial planner, long before any signs of mental frailty are evident.

Being involved with the management of one’s parents’ affairs, alongside a financial planner, can save substantial sums in Inheritance Tax if appropriate planning is put in place. It can also mitigate the payment of long-term care costs, if they are needed.

Subject to parental agreement, the children should have drawn up Lasting Powers of Attorney. These will only be effective if the parent has “capacity” at the time, i.e. the ability and understanding to make this decision.

A lasting power of attorney (LPA) is a legal document whereby the parent (the donor) appoints one or more people (known as ‘attorneys’) to stand in their stead and make decisions on their behalf, should they lose mental capacity – no matter how transient that episode may be.

There are 2 types of LPA:
• health and welfare – this covers their daily routine, medical care decisions, moving into a care home, life-sustaining treatment, etc.
• property and financial affairs – this includes managing their bank accounts, paying bills, collecting pensions, selling the home and the ongoing management of any investments either by them    directly or their appointed financial adviser, etc.

One can choose to make one type or both. A solicitor will provide the appropriate professional guidance and advice, particularly in regard to who might be appointed as an attorney. This is not something to be taken lightly and needs careful consideration.

When parents become unwell and care is needed which cannot be met by children, there are a number of organisations that offer free help and advice. The parent’s GP is often a good resource, particularly as they should be familiar with the patient and the medical history, diagnosis and prognosis. Experienced professionals can be engaged to meet with parents and children to discuss the best course of action, thus helping to ensure that a parent remains safe and well.

In some instances, “care at home” may only be a temporary measure and the long-term solution is a move into a care home. This is a major decision. It is highly recommended that the children obtain support and guidance from specialist organisations, of which, thankfully, there are many; Age Concern, the Alzheimer’s Society and Dementia UK to name but three. Private care homes are expensive, typically upwards of £1,000 per week in Greater London and if dementia care is required, considerably more.

Planning for and discussing such eventualities when one’s parents are fit and well may seem rather morose and it is understandable to put off these conversations for another day, however avoiding these subjects can be costly, frustrating and distressing in the future. Without timely action, decisions about a loved-one’s welfare can be taken out of one’s hands and the day-to-day dealing with finances and investments is entirely curtailed, without recourse to the courts. This can prove very costly indeed.

Inheritance Tax Simplified? By Senior Consultant Chad Atwal

By | Financial Planning, Investment News, Latest News

A recent report by the Office for Tax Simplification (OTS) proposing a series of changes in connection with the Inheritance Tax (IHT) system was on the whole welcomed and well received.
The report looked at making the administration around this deeply unpopular tax less complicated and published a series of proposals with the aim of simplifying IHT and in particular:

• Helping executors who administer a deceased person’s estate
• Helping us as individuals distribute our assets during our lifetime.

I took some time recently to review the report. Whilst some of these changes will be appreciated and positive, I feel that if these proposals are enacted by Government, this will inevitably result in a more complex system and potentially a higher IHT burden for many estates. It will also be interesting to see how the proposals will interact or interrupt any existing planning.

I detail below some of the OTS proposals and suggest you speak to your Financial Planner, so you can put the proposed changes into context and understand your personal position.

The main changes proposed are as follows:

• Currently, many gifts which are not exempt from IHT tend to be subject to a 7 year rule. In summary, the gift will not form part of your estate for IHT purposes after a period of 7 years. In     addition, after the third anniversary and subsequent anniversaries thereafter, the IHT payable on the gift may reduce on a sliding scale. This will happen for larger gifts in excess of £325,000.

The OTS report suggests reducing this period from 7 to 5 years, but simultaneously also proposes to remove the taper relief benefit. Therefore, the tax on the gift will be charged in full for the entire 5 year period as opposed to potentially reducing after 3 years. This presents a “cliff edge” scenario whereby on death, after 4 years and 364 days, tax would be payable on the full amount, but if the donor lives one more day, the gift would become entirely tax-free.

On the whole, I believe that this is a positive change as it will ease administration and encourage gifting. However, it’s important to consider the health of the Donor before advising on such a gift.

• When making gifts, there are a number of allowances which can be utilised in order to make the gift immediately exempt from IHT. The new OTS proposals include removing many of these allowances and just giving everyone one higher allowance per year. From a simplification perspective, I personally welcome this change and believe it would ultimately encourage better utilisation of the IHT exemptions.

However, one current exemption enables individuals to annually gift a limited amount of money. This is referred to as ‘the normal expenditure out of income exemption’ but the OTS is recommending its removal. A number of our clients who have significant excess income utilise this exemption and this is an important part of their IHT planning, so these arrangements will require review if the proposals are enacted.

• The OTS also suggest changes to Capital Gains Tax (CGT) and how it interacts with IHT. Currently, if you inherit an asset, no CGT is payable until you dispose of the asset when CGT is then payable on the increase in value from the date of inheritance to disposal, ie the base cost is uplifted to the value on death.

The OTS proposes changing the base cost to when the original owner acquired it rather than the inherited value, which is likely to bring a significant increase in capital gains tax bills. In my view, it is very important to keep a close eye on this proposal and if the legislation is passed, suitable action should be taken.

• The Residence Nil Rate Band (RNRB) was introduced recently and many of our clients will be familiar with this new exemption as it is often discussed during our regular meetings in order to maximise its potential benefit. However, the RNRB conditions have been branded as unfair as an estate would only qualify for it, providing the main property is left to children, grandchildren and step children / step grandchildren. The OTS have acknowledged this and suggested it requires review in the future.

• At the moment, holdings in many AIM shares are free from IHT liabilities, due to them qualifying for Business Property Relief (BPR). The BPR rules were introduced to prevent family farms and businesses being split up to pay IHT bills but the report raises a question about whether it is within the policy intent of BPR to extend the relief to such shares, in particular where they are no longer held by the family or individuals originally owning the business.

• Currently, term life insurance policies which are not written into trust form part of one’s estate when one dies, meaning they can be liable for IHT. Policies written into trust do not form part of the estate. The report said it would be ‘desirable’ for there to be a standard rule that term life insurance policies fall outside of a deceased person’s estate for IHT purposes, whether or not the policies are written into a trust. We welcome this proposed change.

• From a pensions perspective, no major changes have been proposed. However, the OTS has indicated that in the future, it may be appropriate for the Government to consider a wider review of the tax system and pensions.

The above summary only touches the surface on these potential changes and so it is important to discuss your own particular circumstances in regard to estate planning with your financial planner. We offer IHT guidance and advice as part of our service and part of our initial review, so please do not hesitate to contact us if you wish to discuss this further.


England bring Home the Cricket World Cup

By | Investment News, Latest News, Uncategorized

Sunday 14th July was history in the making when England won the Cricket World Cup against New Zealand, at the iconic Lord’s cricket ground, known as the Home of Cricket.

Leading the team was England Captain Eoin Morgan, who plays county cricket for Middlesex where NLP Financial Management (NLPFM) sponsor his 2019 One Day Middlesex CCC shirt. The atmosphere in the cricket ground was electric with a massive audience watching it on TV, online and radio with the win resulting in a fantastic platform from which the sport can build.

With the England team having previously endured a number of embarrassing defeats on the world stage, Morgan has led a transformation of England’s One Day team since the last World Cup in 2015, and has successfully developed a new way of playing without fear, backing the players he wanted and leading the team to thrive in a positive environment. This is the atmosphere we have hopefully also created with the team here at NLPFM without of course taking any undue risks in regard to our investment selection and we are proud to be associated with Eoin Morgan as a leader.

The England victory can only be good for the quintessentially perceived British sport, which could now see a surge in interest, investment and participation from within schools and clubs throughout the UK. For the England and Wales Cricket Board and cricket fans across the country, Morgan and his team could not have done anything more!

(Photo – NLPFM Consultant Elliot Gothold and Eoin Morgan)

What happens to my Self-Invested Personal Pension when I die? By Senior Consultant Chad Atwal

By | Financial Planning, Latest News

Frequently, I am asked about death benefits and Self Invested Personal Pensions (SIPPs). I detail a few pointers below and recommend you contact your adviser if you require further information on this area.

What happens to my SIPP if I die?
Death benefits can be paid to beneficiaries as a lump sum or used to generate an income through drawdown or by the purchase of an annuity.

Who are my beneficiaries?
Frequently, we note that SIPPs do not have a death benefit nomination form attached to them. We strongly recommend you complete a death benefit nomination form as this will advise your scheme administrator as to whom you would like benefits payable to in the event of your death.  The nomination is not usually legally binding but it tells your provider your wishes, which they must consider prior to allocating the death benefits.

Who can I nominate?
You can nominate whoever you like to receive your benefits on your death, which can also be split among several beneficiaries. These could be your spouse, children or grandchildren or you can nominate someone unrelated to you if you wish. You can also leave some, or all, of your SIPP to charity.

How are death benefits paid?
Beneficiaries of your pension will normally have the choice of taking the pension fund as a lump sum or leaving the fund invested and using it to provide an income. We suggest a beneficiary gets advice prior to deciding the best course of action to avoid any costly mistakes.

If they choose to leave the pension fund invested, they can take income as and when required. Any funds left invested will continue to benefit from being in a tax-advantaged pension wrapper.

What about tax?
This can be complex, but in summary, on death before age 75, the death benefits are normally paid tax free regardless of whether you have taken benefits from your pension or not.
Beyond age 75, any lump sum or income payments to beneficiaries will be liable for income tax at their own standard rates on any payments made.

Death benefit lump sums are usually free of Inheritance Tax (IHT) but can be subject to IHT in certain instances. HM Revenue & Customs reserve the right to subject a pension fund to an IHT charge if they feel it has been used for tax avoidance purposes.

What happens to the SIPP when the beneficiary dies?
If your beneficiary has not withdrawn the entire pension fund before their death, any remaining funds in the SIPP can be passed on to a further beneficiary. Your own beneficiary will be able to nominate their personal successors to whom they want the funds to go to following their death.

It is possible to have unlimited successors, so your pension fund could be passed on for generations, providing funds remain in the SIPP.  This can be a complex area and we strongly recommend you discuss these death benefits with your adviser to ensure you get the correct outcome for you.

The information in this article is correct as at 1 July 2019.

Congratulations to Eoin Morgan

By | Uncategorized

Earlier this week England 1 Day Cricket Captain Eoin Morgan smashed the record for the number of sixes in a one-day international innings against Afghanistan, previously held jointly by Chris Gayle, AB de Villiers and Rohit Sharma.

NLP Financial Management are proud to sponsor the 2019 One Day Middlesex CCC shirt for Eoin, whose achievement came amid a career-best 148 from 71 balls.  Eoin himself expressed delight in his innings, especially when recovering from a painful back spasm experienced in his last game.

“It’s weird, very strange” were the words expressed by the England Captain after setting the new six-hitting record plus shattering through to a century with a strike rate of more than 200.* He told his team to play with no fear, highlighting his confidence and determination and truly led by example. ** Congratulations Eoin!





We’ve achieved champion status!

By | Latest News

We’re delighted to have recently achieved “Champion” status on Intelliflo’s eAdviser Index. Intelliflo provide our back office administration and this index was set up by them in 2018 to recognise advisers that are embracing the wide range of technology that Intelliflo provides, to positively impact their businesses.

The index essentially highlights that when a high score is achieved, that company is demonstrating a commitment to adopting the available technologies whilst advising a higher number of clients, managing more assets and generally becoming more efficient in their dealings.

For us, it recognises the efforts the administration teams from both NLP Financial Management and Birchwood Investment Management (part of the NLPFM group) have put into the system to streamline and maximise the client portal, valuations and document generation system. Dedicated administration personnel keep that important human touch in the advice process and allow us to keep excelling within our industry.

Woodford Equity Income fund

By | Financial Planning, Investment News, Latest News

A number of our clients have contacted us for reassurance that they are not affected by the suspension of the high profile Fund Manager’s flagship fund, and we are pleased to be able to confirm that this fund is not included in any of our model portfolios.

The fund was suspended on 3 June following a raft of redemptions as investors lost patience with the fund’s under-performance and the managers found it difficult to sell enough of their holdings to repurchase units from clients.

Neil Woodford had built a reputation as a star manager when he ran a number of income funds for Invesco Perpetual in the early 2000s and earned further praise for how he guided his clients through the financial crisis in 2008, so that both retail and institutional investors followed him in large numbers when he left Invesco Perpetual to set up his own management company in 2014.

Despite his reputation for always being on the right side of markets, our biggest concern was the unlisted part of his portfolios. These are companies that are not listed on any major stock exchange and therefore can prove difficult to obtain accurate valuations on, as well as the possibility of it proving difficult to sell them when you wish to do so. His initial allocation to these companies was 5% but we became increasingly concerned when it grew to around 10% of the portfolio towards the end of 2015. Further concerns were raised when it became clear that the valuations of these holdings had not been reduced when the markets experienced a significant dip around that time.

Since early 2016 the Woodford fund has fallen in value by almost 15% whilst the UK Equity Income sector is up 28% over the same period. In terms of funds under management, Woodford had £10 billion of assets two years ago but had fallen to £3.7 billion today. This was clearly unsustainable and the inevitable has now happened.

Whilst we are pleased that our due diligence on the funds we hold in our portfolios means that we have avoided the direct problems with the Woodford funds, their announcement that they were suspending dealings raised concerns about liquidity across the market with the prices of some of the Woodford holdings being heavily marked down. This could impact the performance of other funds and we are closely monitoring any potential issues that could arise as a result.