Cash ISAs are simply savings accounts where you are not taxed on the interest you earn. Stocks and shares ISAs should be used for long-term investments are a way of putting money into a wide range of investments without having to pay tax on the profits you make – any profits made from share price increases aren’t eligible for capital gains tax and all the tax on bonds to be reclaimed. It must be noted that with Stocks and shares ISAs the tax credit on dividend income received by the underlying fund is not recoverable. Stocks and shares ISAs involve a degree of investment risk and there is therefore a risk of capital loss.

Each tax year – from April to April – you are given an allowance that can be placed into an ISA tax-free. The 2011/12 ISA limit is £10,680, up to £5,340 of which can be in the form of cash.

You have three options when investing in an ISA:

1. Mix and max your allowance, placing an amount of cash under £5,340 into a cash ISA and investing the rest of the £10,680 allowance in a stocks and shares ISA.
2. Use all the allowance for shares, investing £10,680 worth of shares in a stocks and shares ISA.
3. Use the maximum cash allowance, placing £5,340 into a cash ISA and leaving £5,340 available to fill with shares (if you choose to).

To take advantage of your full ISA allowance before 6 April 2012, speak to one of our savings and investment specialists. Generation Financial Services will look at your individual financial circumstances and offer advice and recommendations on the most suitable option for your tax-free saving.

We are continuously striving to further improve client servicing and communication and are in the process of implementing new servicing software. This will shortly be followed by the introduction of client servicing agreements. If you are an existing Generation Financial Services client, the new service agreements will be discussed at your next meeting with your Generation consultant.

We highly value the views and comments of all our clients and would appreciate your feedback on the service you receive. Please send us an email at enquiry@generationfs.co.uk to leave your feedback.

In other news, Generation Financial Services has launched a refreshed look and new website to reflect our growth and company development – we hope you like it! The new site demonstrates our wider and more sophisticated range of services, advice and products.

According to Sir Mervyn King, the Governor of the Bank of England, the UK is on a ‘zigzag’ path back to growth. Strong economic data for consumption figures surprisingly contrasted cautiousness in the outlook going forward, but the Monetary Policy Committee acknowledged that the economy remains fragile.

US

Following its early and aggressive response to the financial crisis, the US has averted disaster and is going from strength to strength. However, consumer borrowing is a key risk to watch and, following a 0.3% fall in the transport sector in the last month, there are concerns of a potential slowdown in the industry.

Eurozone

The Eurozone is showing signs of stabilisation but the Greek tragedy continues and the bailout remains top of the news this month. Despite succeeding in securing €130 billion in additional aid, a report from the International Monetary Fund (IMF) raised doubts over whether Greece can meet its targets.

Emerging markets

Emerging market funds saw eight weeks of consecutive inflows (to 22 February 2012), with investors adding $20.7 billion to emerging market equity funds so far this year and central banks looking to diversify away from European holdings. However, the region remains at risk of economic fallout from a worsening of the Eurozone crisis. Long-term demographics continue to look attractive, although growth is softening in the short term.

Markets

Equity markets reached seven-month highs, with the S&P in the US soaring to levels not seen since June 2008. With significant risks remaining in the Eurozone, we await either a correction or the resolution of key issues to gain enough confidence to add more risk to the table.

Demand for central London office space has given support to the property market and the sector looks to continue to benefit from foreign investment, although judged on a building-by-building basis.

There is no limit on the amount you can save in a pension scheme, but there is a limit on the amount that can receive tax relief each year. The annual allowance is the maximum amount of pension savings you can have per year that will benefit from tax relief. This includes pension savings that you make plus any contributions from an employer.

At the beginning of the current tax year in April 2011, the Government lowered the annual allowance to £50,000 per annum. However, it is still possible to save more than £50,000 this tax year by carrying forward any unused annual allowance from the previous three years, which will alleviate any allowance charges.

The use of carry forward is a complex subject. To take advantage of unused allowance, contact us to speak with one of Generation Financial Services’ pension experts.

Removal of 50 percent tax relief on pension contributions from 2013

Chancellor, George Osborne, recently announced that the 50 percent tax relief on pension contributions will be left intact in this budget, but from April 2013 earners of more than £150,000 will see their maximum possible tax relief fall.

Following the 2012 budget announcements, higher rate taxpayers need to take advantage of the 50 percent tax relief on pension contributions while it is still available.

Speak to a Generation Financial Services pension specialist today to discuss your pension savings options.

Change in the pension age allowance

Millions of pensioners have been hit by a change in legislation to the pension age allowance, announced in the 2012 budget, which could leave them hundreds of pounds a year worse off. The policy changes will affect many pensioners, including our clients, who use their savings and investments to provide them with additional income to meet their day-to-day needs.

Under rules introduced in 1925, pensioners have had a higher personal tax allowance than younger people. From April 2012, the personal allowance for people aged 65 to 74 is £10,500 and, for those 75 and over, it is £10,650. Normally, these limits rise each year but, in this year’s budget, Chancellor George Osborne announced he is freezing them and will eventually bring them in line with the lower personal allowance for younger people.

Annual increases in income sources, such as the basic state pension, will gradually push more pensioners’ income over the tax threshold, and will cost pensioners £3.3 billion over four years.

According to a Treasury analysis of the policy, the poorest 40 per cent of pensioners will not be affected. Nor will the 10 per cent with the highest retirement incomes, roughly £25,000 and more. This leaves 40 percent of pensioners – more than 4.4 million – with mid-range incomes, mostly received from modest private pensions or returns on savings and investments, that will be affected by the change. In the financial year starting next April, 4.41 million pensioners will be worse off in real terms, with an average loss of £83 per person.

People who turn 65 or 75 next year will be the worst hit by the Chancellor’s decision to charge older people more tax. Those who turn 65 will be the biggest losers as they move into the age-related allowance system, suffering an average loss of £285 for the year.

Freezing the allowance will mean that 230,000 pensioners will be pushed into the income tax system for the first time next year because their income will rise above the threshold, a process known as fiscal drag.

However, the effects of the announced pension changes can be minimised. By ensuring the right investment structures are used – structures that do not affect the age allowance if income is taken – you can reduce the effect of the Government’s policy.

For more information on the changes to pension legislation and advice on pension investment options, contact us to speak to a Generation Financial Services pension specialist.

The lifetime allowance is the maximum amount of pension and/or lump sum that an individual can receive from their pension scheme that benefits from tax relief. There is no limit on the amount of benefits that a pension scheme can pay you but, if your pension benefits are more than the £1.5 million lifetime allowance, you will pay a tax charge called the lifetime allowance charge on the amount over your lifetime allowance.

If you currently receive a pension that has been paid since before 6 April 2006 you will need to take this into account when working out if your pension savings are more than the lifetime allowance. The lifetime allowance could have an impact on your pension benefit until you reach the age of 75, and you need to consider how much your pension fund will grow between now and then.

If you expect your pension savings to be more than £1.5 million when you come to take your pension benefits, you can apply for fixed protection to protect you against the lifetime allowance charge.

For advice on fixed protection, contact us to speak to one of our pension specialists.

Bond has already reported fantastic feedback from clients, who are benefiting from substantially reduced costs, improved product delivery and enhanced benefit communication.

Bond commented that one of the many reasons it chose to partner with Generation Financial Services was due to Generation’s no obligation initial review and audit of a client’s benefits, in particular looking at auto-enrolment compliance.

Generation Financial Services has also been appointed as Bond’s employee benefits provider and has just completed the rollout of a new benefits proposition for the company, reducing pension charges by half.

Click here for more information and advice on auto-enrolment pensions or contact us here.