Clever ways to boost pension pots, business succession and the many possibilities offered by the Enterprise Investment Scheme have all cropped up significantly more in our conversations with affluent individuals in recent times.
Pension tricks (and traps) are a real focus
Admittedly, the state pension isn’t typically something we discuss with our users, since they are High Net Worth Individuals. However, a number have become aware of a canny move that many other people across the UK are making to ensure that they get the full allowance even if they have gaps in their National Insurance contributions.
The government has made a rare extension to its NI top up window (from April 6 to June 31) which will allow savers to buy up to ten years of additional state pension coverage. At the uppermost extreme, experts are saying that savers could spend a little over £13,000 to boost their income by close to £100,000. That is a figure that will have even HNWIs paying close attention, although of course it won’t be applicable (or optimal) for all. Get in touch if you would like to find advice fast and free to help you decide if this option is one you should jump on before the offer expires.
The government has made a rare extension to its NI top up window (from April 6 to June 31) which will allow savers to buy up to ten years of additional state pension coverage. At the uppermost extreme, experts are saying that savers could spend a little over £13,000 to boost their income by close to £100,000
This special window has actually been really good in terms of making our users think more deeply about what other tips (and possibly traps) they aren’t aware of on the pension front. For many people there are likely to be more than a few on both sides.
The fact is, for most people their pension savings are going to be among their most valuable pots of wealth (and undoubtedly one of the most important). As this government extension proves, it is vital to take every single step you can to maximise the health of your wealth in retirement. Having a professional on hand to advise you on deadlines, allowances and any special measures you might take will ensure that you don’t miss a trick when it comes to building your pension pot.
Succession dominates the conversation
As we relayed in last month’s Client Trends, research from private bank Brown Shipley has shown that a full 1 in 5 six-figure earners in the UK derive their wealth from running a business today. This is no surprise to us: entrepreneurs have always made up a significant proportion of those coming to us to find a leading wealth manager.
It may be that hit streaming show Succession is coming to its long-hyped conclusion, but something has certainly got entrepreneurs thinking more about the options for their businesses and families. How to pass business interests on to the next generation fairly yet in line with the talents of children or, conversely, when the best time to sell really is have been featuring noticeably more in our conversations with users in recent weeks.
There are a number of institutions on our wealth manager panel which specialise in serving entrepreneurs – and you might be surprised at just how many ways they can assist
There are a number of institutions on our wealth manager panel which specialise in serving entrepreneurs – and you might be surprised at just how many ways they can assist. Aside from the financial planning, wealth structuring and expertise in exits you might expect are a world of networking opportunities on offer (that may well lead to partnerships, funding or even buyers if that is your aim). Most importantly of all, wealth managers can help you make the important decisions that will secure your financial future optimally, and that of your family.
It may be too much to hope for a truly happy ending for Succession’s Roy family and their company, Waystar Royco. For everyone else, proper wealth management advice can certainly avert any business succession drama!
1 Opinium Research surveyed a representative sample of 4,000 UK adults between 6 November 2022 and 10 January 2023. 692 of those surveyed have estimated financial assets in excess of £150,000 and/or a main home valued at £1m or more; of those, 390 identified themselves as ‘entrepreneurs’ and/or ‘business owners’
Top Tip
Many High Net Worth Individuals will not give the state pension much thought, but this month’s piece emphasises that it should be on your radar as an income stream which can play a valuable role (and which you are entitled to!) I must confess that the extended top-up window was something new to me and I would bet that there are lots of people such as busy entrepreneurs paying themselves in dividends who may not have known that they could even top up their NI in this way.
Part of the pleasure of having a professional adviser is knowing that you are never going to miss out on any bonus tips and tricks to boost your wealth. These may be worth a relatively modest amount, but they are sometimes really very significant indeed. Take our short wealth manager matching questionnaire and you too can have a wealth manager fighting your corner in no time at all.
Lee Goggin
Co-Founder
EIS investors are seeking KICs
We are in incredibly exciting times when it comes to technological advances, and also very serious ones when it comes to the need to shield as much of our wealth as possible from tax. The UK’s tax burden is set to hit 37.7% of GDP in 2027-28 – the highest level seen since WWII.
There are always numerous tax mitigation strategies our users are seeking to explore with professional advisers, often as a result of their own research and reading of the financial pages. The Enterprise Investment Scheme (EIS) has come to the fore in our recent discussions with them, and in particular how to find opportunities in Knowledge Intensive Companies (KICs).
It is fairly well known that that EIS investors can claim up to 30% income tax relief on their investments up to a maximum of £1m per tax year. What perhaps isn’t as well known is that the investment limit is raised to £2m for Knowledge-Intensive Companies – ones which are carrying out research, development or innovation at the time that they are issuing shares and which get as a result special dispensations for raising investment (and for their investors) which are even more generous than those for standard EIS-qualifying ventures.
There are significant fears about what a Labour government might do to further tax the wealthy if they were to win the next General Election, but the good news is that the party seems to be committed to continuing the EIS as part of strengthening the UK’s economic prospects
There are significant fears about what a Labour government might do to further tax the wealthy if they were to win the next General Election, but the good news is that the party seems to be committed to continuing the EIS as part of strengthening the UK’s economic prospects. The EIS can therefore probably be relied on as a long-term tax mitigation strategy for some of your wealth, if these investments suit your profile and needs.
Deciding if that is the case really does call for a conversation with a professional adviser, however, as does completing all the tax paper work that will result from any such investment. The rewards might be really significant though, so let us know if EIS opportunities are something you would like to explore with a wealth manager.
You have to address all the pillars of proper wealth management
The conversations we’ve been having with users of our matching service are always hugely varied and in the round they represent all three pillars of good wealth management being addressed – those being protection, growth and tax mitigation. However, what is often the case on the individual level is that one of these strands is being neglected somewhat, or indeed not tackled at all.
The relationships with wealth managers that we help to seed are your path to a plan for making sure your wealth is protected from risks, grows at the rate you need and that you never pay more tax than you absolutely must. Getting the ball rolling is just one step away: complete our short wealth manager matching questionnaire or speak to our expert and unbiased team and well-established and respected firms can come to you for an introductory chat with no obligation at all.
Important information
The investment strategy and financial planning explanations of this piece are for informational purposes only, may represent only one view, and are not intended in any way as financial or investment advice. Any comment on specific securities should not be interpreted as investment research or advice, solicitation or recommendations to buy or sell a particular security.
We always advise consultation with a professional before making any investment and financial planning decisions.
Always remember that investing involves risk and the value of investments may fall as well as rise. Past performance should not be seen as a guarantee of future returns.
