Marginal Gain – April 2023

The tax year end has happened, and the new changes are very much in effect. In all my years in the industry this was the busiest tax year end we have encountered and as Standard Life are still having issues with their wrap upgrade, it was a challenging one!

This month’s issue looks at passing intergenerational wealth and the concerns that this raises, pension planning for the grandkids, the impact of inflation on your retirement savings and getting started in the new tax year, planning in advance is far better than a last-minute rush!

Wendy Devlin

Head of Advisory Services


Transferring wealth in the way you want

With the coming years set to see record flows of assets pass down the generations, the thorny issue of wealth transfer has inevitably become an increasingly important financial topic. Seeking professional advice is a crucial step that can ease any inheritance planning anxieties and facilitate the transfer of assets in the way that you want.

‘Great wealth transfer’

The next three decades are set to witness the largest ever intergenerational transfer of wealth as baby boomers pass on assets to their heirs. Analysts have dubbed it the ‘great wealth transfer,’ with trillions set to cascade down the generations.

Intergenerational mismatch

A new survey1, however, highlights baby boomer concerns about how their money may ultimately be spent. According to the research, a third of baby boomers are reluctant to pass wealth to someone whose attitude to money differs from their own; additionally, Gen Z were found to be much more likely to adopt a short-term financial outlook than their forebears. Researchers fear this disparity in attitudes could therefore impact older generations’ wealth transfer decisions.

Bridging the divide

While such differences could create intergenerational conflict, we can help alleviate any issues by building cross-generational connections and ensuring any asset transfer is conducted in a way that meets your specific needs. Developing relationships with your beneficiaries to ensure younger generations will receive financial decision-making support can create invaluable peace of mind for both you and your heirs.

Inheritance options

A range of options are available for people looking to transfer wealth, with lifetime gifting amongst the popular methods of passing on money. Complexities with Inheritance Tax and rules in establishing trusts, though, mean sound advice is critical in order to adopt the most efficient approach.

Here to support you

All the evidence suggests developing strong relationships is key to the success of intergenerational financial planning. So get in touch and, with our support, you and your family can work towards determining and achieving your inheritance planning objectives.

1abrdn, 2023


The best (retirement) gift for your child

With the cost of children’s birthday presents and parties often totalling hundreds – could there be a better way to provide for your child or grandchild?

Investing in a pension for your child can provide numerous long-term benefits and go some way in helping them secure a financially stable future. Setting up a pension for your child can also help teach them about the importance of saving and investing for the future.

Who can set up a child’s pension?

A parent or legal guardian can set up the pension; this can be done as soon as the child is born.

Who can contribute?

If you’re a grandparent keen to help out, the good news is that anyone can contribute into the pension, as well as godparents, relatives or friends. As a parent, you manage the pension saving plan until the child turns 18.

What happens when they turn 18?

Whilst they gain control at 18, they won’t be able to access the money until they reach the normal minimum pension age.

How much can we contribute?

Under current rules you can pay up to £2,880 into a children’s pension each year. This will then receive basic rate tax relief, so the government will boost this to £3,600. The majority of people setting up a children’s pension won’t pay this much in, instead choosing to make smaller contributions, which will still build up over time and benefit from tax relief.

Why choose a children’s pension?

It may seem odd thinking about a pension for your child when they are so young, but not only will it help your child later on in life when they think about retirement, but also help with the amount they might contribute into their pension during their lifetime, potentially freeing up more money to fund other life events.

What about a Junior ISA (JISA)?

Another worthwhile tax-efficient children’s saving option is a JISA. One key difference between children’s pensions and JISAs is that with the latter, your child can access the money when they turn 18. With any pension, the money can only be used to save for retirement.

The early bird

Investing in a pension plan for your child can provide them with the financial security they need to achieve their goals in the future. By starting early, they can benefit from compound interest and reinvested dividends, tax benefits, and the potential to grow their savings over time.


Rising prices adding to retirement costs

It can be difficult to understand what funds you’ll need to finance the retirement you dream about and how this compares to your projected pensions income. It’s even harder to keep track when the cost of living is spiralling.

Setting standards

The Pensions and Lifetime Savings Association (PLSA) developed its Retirement Living Standards1 to help us to picture what kind of lifestyle we could have in retirement at different levels and what a range of common goods and services would cost for each level.

The cost of a Minimum lifestyle for a single person has increased from £10,900 in 2021 to £12,800 in 2022, a rise of 18%. For a couple, an income of £16,700 required in 2021 rose to £19,900 (19% increase). Costs factored into this lifestyle include – £96 for a couple’s weekly food shop, eating out about once a month, a week’s annual holiday in the UK and some affordable leisure activities about twice a week. But there is no budget to run a car.

Want more than the minimum?

At the Comfortable Retirement Living Standard, retirees can expect more luxuries like regular beauty treatments, three weeks, holiday in Europe each year and theatre trips. The weekly food shop for a couple in this lifestyle amounts to £238 per week. At this level, the cost of living increased 11% to £37,300 for one person and 10% to £54,500 for a two-person household.

How much do I need to save?

For a comfortable retirement PLSA estimate that a couple who are both in receipt of the full new State Pension would need to accumulate a retirement pot of £328,000 each, based on an annuity rate of £6,200 per £100,000.

Your lifestyle, your choice

If you’re concerned about your retirement planning we can help you prepare for the lifestyle you want to enjoy. Retirement planning involves visualising your key goals for your retirement years and setting up a plan to help you achieve those goals through financial planning.

1PLSA, 2023


Starting early in the new tax year

A new tax year has begun and with it comes the chance to start your tax planning early, but why rush when there’s almost a year to go? Here are a few reasons:

  • You can take advantage of various tax allowances available for the year, such as your Individual Savings Account (ISA) and pension annual allowances
  • You’re likely to benefit from having your money invested for longer. Some interesting research1 has found that an investor could potentially lose up to £25,000 over 25 years by investing the maximum into their ISA at the end of the tax year rather than at the start
  • If you can’t invest a lump sum, you can set up a regular payment into your ISA or pension, to spread the cost over 12 months
  • Avoiding the last-minute rush allows you to get everything done
  • You can establish a system for keeping track of all your income, expenses and other financial transactions throughout the year, helping you to budget
  • There is time to research your options and get financial advice to make informed decisions.

Why not get the new tax year off to the best start – get in touch.

1Vanguard, 2023


Author: Richmond House