The Government announced in July that it was conducting another review of the State pension age.
This will look again at the UK state pension age, which is currently 66 and is set to rise to 67 between 2026 and 2028.
This move could have profound implications for people planning for their retirement and on pension savings.
Here we look at what could change – and what you can do about it.
The Government is required to conduct a review into the state pension age every six years.
The last review concluded in 2023 and the new one announced in July is due to finish in 2029.
The review will consider whether the current state pension age is still appropriate, based on factors such as life expectancy.
The 2023 pensions review agreed to increase the state pension age from 66 to 67 between 2026 and 2028.
Review author Baroness Neville-Rolfe recommended that the age should rise to 68 between 2041 and 2043. This was three years ahead of the previously planned date of 2044 to 2046.
However, the Government of the time decided not to implement this recommendation but to look again at the evidence in two years’ time – hence the review announced in July of this year.
The new state pension review will look at key factors such as linking state pension age to life expectancy, its fairness between generations, as well as its role in ensuring the state pension’s long-term sustainability.
This could result in a recommendation to raise the state pension age higher and faster than currently planned.
The Government has stated that it will stick by a pledge to give ten years’ notice of a change in the pension age, meaning that when this latest review reports in 2029, the earliest it can recommend an increase in the state pension age would be 2039.
Stating the obvious, by speeding up the planned increase in the state pension age by as much as five years, the Government will postpone the date that people currently aged 53 and under will be able to access their state pensions.
With the full state pension currently worth more than £12,000 – and likely to be worth more than that by 2039 – this could mean anything from people having to access more of their private pension earlier (if they have saved enough) to having to work a year longer than they had anticipated.
Either way, any increase in the state pension age is likely to throw something of a spanner in the works of those finalising their retirement plans in the next 10 to 15 years.
If you are currently aged 54 or older and were banking on the state pension age not changing before the dates previously announced, this shouldn’t alter your plans.
However, those aged 53 or younger could find themselves having to make some difficult decisions.
Although rises are introduced incrementally over a two-year period to ensure that those right on the cusp of state pension age under the previous regime do not miss out, you could still be out of pocket. This is particularly so if you’re in your late 40s and the state pension age is raised between 2039 and 2041.
This is where getting expert financial advice can really pay dividends.
Speaking with a financial adviser can give you a clearer understanding of how your pension is performing. It will also show what actions you may need to take, especially in light of potential changes to the state pension age.
More importantly, a financial adviser can help you build a personalised retirement plan that aligns with your goals and circumstances. This guidance is delivered in a clear, straightforward way, helping you feel confident and in control of your financial future.
A well-structured financial plan offers more than just numbers, it provides clarity and direction. With the support of a financial adviser, you can expect:
With expert advice and a clear plan, you’ll be better equipped to make informed decisions and feel confident about retirement.
The pensions review could result in a delay in when you receive your state pension. Careful long-term planning with the help of a financial adviser can help you mitigate the effects and enjoy your retirement.
For further details on any of the issues raised in this article, please get in touch.
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Disclaimer: This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax treatment depends on individual circumstances and may change. Always seek professional advice before making financial decisions.
Recruiting and retaining the right employees is fundamental to the success of every business.
But besides paying them well, how can you ensure that you bring on board and keep hold of talented staff?
I’ve been advising business owners for over 30 years and one thing which I’ve found time and again to be effective when it comes to recruitment and retention is employee benefits packages.
Don’t just take my word for it – recent research shows that 70% of employees are more likely to stay with a company that offers well-structured benefit packages while 65% of candidates say they consider employee benefits as a crucial factor in their job choice.
In this article, I’m going to run through some key employee benefits, how to put attractive incentive packages in place and what factors you need to consider as a business owner when you’re looking to reward employees.
Employee benefits come under a range of different headings and can cover everything from health insurance to Cycle To Work schemes.
They are incentives in addition to standard remuneration and statutory holidays. Just as every business is different, so is every employee within a business, so when considering what benefits to offer to your employees, it’s a good idea to try to provide a range of incentives covering different areas of life.
Let’s break down some of the main employee benefit categories with some examples of incentives you could offer.
Aside from a competitive salary, to help with your employees’ finances you might want to consider:
Also known as Private Medical Insurance, this is one of the most popular employee benefits in the UK. It can help your staff get quicker access to GPs or other health services such as physiotherapy and, depending on levels of cover, potentially a choice of specialists or hospitals. This benefit also has the added advantage to you as an employer of potentially cutting down the length of time staff need to be off work.
Also known as Death In Service benefit, this provides a financial safety net for employees’ families in case the worst should happen to them. Typical levels of cover are three to four times an insured employee’s annual salary.
Having advised business owners on a number of occasions over the years with employee life insurance claims, I know how valuable this kind of policy can be in providing a financial safety net for employees’ families in times of great distress.
In a similar way to company life insurance, disability insurance cover will provide income if any of your employees are unable to work due to illness or injury.
A number of companies offer employees discounted or free expert guidance and support for their financial wellbeing as part of a package of benefits.
In the UK, employers have to enrol eligible workers into a pension scheme and then pay into the scheme on their behalf. There are minimum contribution levels from employers and employees, but you can choose to provide more generous contributions as part of an employee benefits package. This subject is dealt with in more detail on our workplace pensions blog.
A healthy, happy workforce is invariably a more productive one. Health and well-being benefits you could consider for your employees include:
Benefits such as discounted or free gym memberships, health screenings or educational seminars can help promote health lifestyles across your workforce.
This can include things like access to confidential counselling services or advice lines, employee assistance programmes and resources to help your employees to manage stress.
Dental insurance plans insurance plans typically cover routine check-ups, fillings, and other necessary treatments while eyecare insurance helps cover the costs of eye tests and glasses.
Keeping your employees focused at work while enjoying their leisure time can be crucial. Benefits that can assist with this include:
In addition to statutory holidays for full-time workers, you could offer your employees extra holidays and/or the right to ‘buy’ additional leave as well as things like having their birthday off or an allotment of ‘personal’ days to recharge their batteries.
If your business is suitable for it, offering staff things like flexible start/finish times, compressed work weeks and remote working options can be attractive to new hires and existing employees alike.
Providing additional time off for new parents outside of statutory limits can help promote a family-friendly workplace, as can allowing staff time off for caring for family members such as elderly relatives.
Investing in your employees can bring dividends to your business as well as to your staff. Examples of career development benefits include:
Offering opportunities for employees to enhance their skills and knowledge – whether by in-house training or paid places on external courses – can upskill your workforce and improve staff retention rates.
Part or full payment for staff to embark on educational courses or degrees can enhance their personal development and your business.
Paying for sessions with professional vocational coaches has the potential to develop employees’ skills and competencies in the workplace, giving you a more efficient and more productive workforce.
From little touches which make your business a nicer place to be to ways of saving staff money on everyday purchases, there are lots of perks you can put in place including:
From money off goods and services you provide to discounts from leading retailers, many workplace benefits packages offer savings just for being a member of staff.
Whether it’s free fruit on Fridays or access to a subsidised canteen, providing staff with food and drink benefits invariably prove popular.
Something usually offered to senior staff, company cars can be a benefit which people find hard to give up, although it is important to fully investigate and understand the various tax implications involved in company car schemes.
Many public transport providers offer corporate membership for help with staff commuting to their place of work, giving employees access to discounted travel costs.
Under this government initiative, employees can save money on the purchase of a bicycle and cycling equipment through salary sacrifice. Essentially, employees can lease a bike and accessories from their employer, paying for it through monthly deductions from their pre-tax salary, resulting in tax and National Insurance savings.
As you can see from the wide range of different employee benefits available, costs associated with such schemes vary to a similar degree.
When considering which schemes to put in place, it is important to bear in mind not just how much it will cost your business, but also how it will affect your tax situation and the tax and National Insurance situation of your employees.
In many cases, this is not an easy thing to work out. Thjs is just one of the reasons why consulting a financial adviser is an important first step in your employee benefits scheme journey.
Working with your business accountants, a financial adviser can provide detailed advice on new employee benefits and ongoing support.
A financial adviser can also provide forecasts to help you plan for the future and change employee benefits as and when needed as part of your overall corporate financial planning.
Over the years, I have helped many clients to put in place and maintain successful employee benefits programmes which have reaped dividends for their business and their staff alike.
For more details, please get in touch.
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Disclaimer: This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax treatment depends on individual circumstances and may change. Always seek professional advice before making financial decisions.
There’s been a lot of talk lately about non-domicile status and tax changes introduced by the Labour government.
The general feeling is clear: people are tired of the UK’s growing tax burden. High income tax rates, inheritance tax now applying to businesses and farms, rising employer National Insurance costs – the list keeps growing.
One option for wealthy individuals keen to keep hold of their assets is to move to a lower tax country such as the United Arab Emirates (UAE).
However, I know that most of my clients would never actually think of moving to Dubai for tax – for them, the lifestyle change just doesn’t justify the tax savings.
What’s more, there are ways to stay in the UK and shelter your wealth – read on to find out more.
Since Labour came into power in July 2024, there have been growing reports of a wealth exodus from the UK. Initially, the focus was on non-dom reforms, first introduced by Conservative Chancellor Jeremy Hunt in 2024, as providing the spark that made the ultra-wealthy consider leaving.
Now, there’s concern that more of the “mass affluent” may follow, especially with reforms that bring more assets into the scope of inheritance tax (IHT).
One report has claimed that as many as 16,500 millionaires will leave the UK during the course of 2025.
Many of these wealthy people are said to be heading to the UAE because of its low taxes, residency programmes and high-end lifestyle.
But is living somewhere like Dubai all it’s cracked up to be?
Moving to Dubai for tax might seem like a solution, but recent developments suggest it may not be a long-term fix.
For example, neighbouring Oman has become the first Gulf Arab state to introduce income tax, raising concerns that Dubai could follow within the next five years.
Under a royal decree, residents in Oman will pay 5% income tax on earnings above OMR 42,000 (around £80,000). While the tax won’t take effect until 2028 and is modest compared to the UK’s top rate of 45%, it signals a shift in the region.
Most of my clients -those with £1 million to £5 million + in assets – enjoy the UK lifestyle, with plenty of travel built in. So instead of moving to Dubai for tax reasons, we focus on smart, strategic tax planning, retirement planning and estate planning.
Here are some examples of what can be done.
If you’re a high earner now, offshore bonds can help you defer tax on investment gains. Offshore bonds are issued outside UK jurisdiction and are ideal if you expect to be a lower earner in the future or plan to retire in a country with lower tax rates.
For example, if you are a 45% taxpayer, you can defer all gains from tax until you are ready to crystalise them. Later in life, you may become a basic rate taxpayer, meaning you could pay only 20% tax on the profits.
If you are not a basic rate taxpayer and wish to reduce your tax liability, you can assign the Offshore Bond to your children for their benefit (if they are over 18) or your partner to potentially save tax on the gains.
Despite the name, offshore bonds are not complex or shady. They’re a legitimate and often essential part of a well-structured tax plan. Like pensions, they allow you to invest in a wide range of assets while deferring tax until withdrawal.
Pensions remain one of the most powerful tools for tax relief. Contributing £60,000 to your pension every year can attract up to 45% tax relief. Yes, there’s tax when you draw from it, but it’s usually far less.
Here’s a simple example:
If you’re a 45% taxpayer, every £100,000 in your pension only costs you £55,000 net. Later, if you’re a 20% taxpayer in retirement, you could draw £100,000 and receive £85,000 net. That’s a return of £85,000 from a £55,000 net cost.
Note: 25% of any amount drawn down from a pension is tax-free, and the remaining 75% is taxed—netting down to 60% after tax = 85%. Therefore in the above example, you can turn £55,000 net into £85,000.
Venture Capital Trusts allow you to invest in small, high-growth businesses. These investments carry risk, but you receive 30% income tax relief on your investment, and all dividends and gains are tax-free. Names such as Secret Escapes, Five Guys UK, Zoopla, Graze, Tails, Depop were all backed by the UK VCT market.
Individual Savings Accounts (ISAs) are basic but remain very effective when compounded over a long period of time. All gains, dividends and interest from ISAs – whether cash or investment ISAs – are tax free.
A Loan Trust lets you retain access to your capital while removing the growth from your estate. For example, if you lend £500,000 to a trust you set up (of which you can still be trustee) and it grows to £1.5 million over 20 years, only the original £500,000 remains in your estate. The rest belongs to the trust, often for your children/grandchildren. However, it’s important to note that you as the settlor can’t access the growth at any stage!
This strategy is ideal for clients who want flexibility and access to their original capital. If you don’t use the capital during your lifetime, you can write off the loan. If you survive seven years, the £500,000 is outside of your estate. Alternatively, you can spend it on making memories!
These give trustees full control over how and when assets are distributed. They’re perfect for clients who want to gift assets without handing over full control and access to their children/grandchildren.
It’s important to note that if you set up a Discretionary Gift Trust you can’t benefit from the monies. However, a variation of the gift trust – the Discounted Gift Trust (DGT) – allows you to draw a fixed income for life while gifting the capital.
Previously known as Business Property Relief, Business Relief allows qualifying business assets to be passed on free from inheritance tax (IHT), or at a reduced rate, provided certain conditions are met.
There are many Business Relief funds available that qualify for IHT relief after two years of holding the shares. This could potentially save your estate up to 40% in IHT. Nevertheless, there are various risks and conditions that need to be met here. As a result, you should take expert financial advice before going down this route.
A Whole of Life insurance policy is a form of financial protection which can be used to cover a future IHT bill directly.
When written in trust, the payout doesn’t form part of your estate and can be used to pay the tax quickly. It’s especially useful for estates tied up in property or business assets. The proceeds are also free from income tax.
Taking out a Whole of Life Insurance policy also means that there is no investment risk attached. Your family don’t have to worry about whether adverse market conditions will leave them short on the Inheritance Tax bill.
While the tax burden is on the rise, you can mitigate the effects without moving to Dubai for tax.
Taking expert financial advice and planning ahead could help you to keep more of your wealth while enjoying UK life.
For further details on any of the issues raised in this article, please get in touch.
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Disclaimer: It is important to note that the value of investments can go down as well as up and you may not get back the full amount you invested. Past performance is also not a reliable indicator of future performance. This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax treatment depends on individual circumstances and may change. Always seek professional advice before making financial decisions.
Inheritance tax will be levied on unused pension funds after death from April 2027.
This change has major implications for people looking to leave money to their loved ones.
Here we take a look at how to cope with the new regime and maximise what you can leave your family.
With limited exceptions, inheritance tax (IHT) of 40% is charged on anything you leave after your death over £325,000. This amount is known as the ‘nil-rate band’.
If you leave your main home to your children or grandchildren, you may also get a residence nil-rate band of £175,000. This adds up to a maximum £500,000 before tax kicks in. Therefore a couple who are married or in a civil partnership can potentially pass on up to £1m without their inheritors paying tax.
While this may not sound too bad at first, when you look a little closer then alarm bells may well start to ring.
For example, as of March 2025, the average UK house price was £271,000, a 6.4% increase on the same month in 2024. In 15 years at that annual growth rate, your house would be worth over £531,000.
But with annual house price growth over the last 10 years estimated at 12.1% (by estate agency Zoopla), then after 15 years your home could actually be worth more than £762,000.
With the nil-rate band frozen until 5th April 2030 and higher house prices in certain parts of the country, people even on fairly modest means are now falling into the IHT trap.
At the moment, defined contribution pensions – those where you build up a pot of money to give you an income when you retire – don’t form part of your estate when you die. Consequently, your family doesn’t currently have to pay inheritance tax on any unused defined contribution pensions after your death.
However, from April 2027, any unused defined contribution pensions will be treated as part of your estate for IHT purposes.
Including pension funds in IHT calculations could mean that your estate surpasses the IHT threshold. The rise in house prices and the freeze on tax thresholds makes this even more likely.
Anything above the threshold will be liable for tax at a current rate of 40%. This could have significant financial consequences for your beneficiaries, especially with many people currently using their defined contribution pensions to help pass on assets to the next generation.
As well as potentially paying more in tax, bringing pensions under the IHT umbrella will also cause delays. With HMRC assessing pension funds as part of the overall estate, beneficiaries may face months of waiting for the probate process to be completed. This process could take even longer for more complex estates.
Pension scheme administrators will have to determine the value of any unused pension funds at the time of death and include these in the calculation for IHT. Again, this could lead to significant delays.
With this major change less than two years away, you should take stock of your current situation and evaluate the total value of your assets.
Add up the current worth of your pensions, properties and investments to see where you stand. You should also check you have all appropriate documentation in place. Once you have a comprehensive picture of your financial position, you can start to look at ways of tax-efficient planning.
Careful planning and expert help from a financial adviser can help you to preserve as much as possible of your estate. It can also avoid leaving your family facing major financial headaches.
Here are some options to consider for cutting down on potential inheritance tax liabilities:
As a retiree after being careful with incomes and outgoings for many years, this can be easier said than done. However, it is one sure way of reducing your taxable estate.
You can give away up to £3,000 in any tax year without it counting towards IHT. You can also carry forward unused allowance from the previous year. As a result, you could gift up to £6,000 if you haven’t used it previously.
You can gift additional amounts for weddings and civil partnerships. This can be up to £5,000 to a child, up to £2,500 to a grandchild or great-grandchild and up to £1,000 for anyone else.
Also, you can gift up to £250 per person per tax year, if that person hasn’t received part of your £3,000 annual exemption.
Gifts above these amounts are called Potentially Exempt Transfers (PETs). If you live for seven years after giving the gift, it won’t be taxed. If you don’t, then IHT is charged on a sliding scale as follows:
| Years between gift and death | IHT on gifts over allowance |
| 0-3 years | 40% |
| 3-4 years | 32% |
| 4-5 years | 24% |
| 5-6 years | 16% |
| 6-7 years | 8% |
| 7+ years | 0% |
A Trust is a legal structure that lets you set aside assets for your loved ones while keeping some control over how and when they receive them.
Some trusts are taxed at lower rates or even avoid IHT entirely, depending on how they’re set up. For example:
However, Trusts are complex. A financial adviser or an estate planning expert can ensure they are set up correctly and carry out your wishes.
Many people assume that life insurance policies are only there to help families in the event of an untimely death.
However, you can take out a life insurance policy to cover the anticipated cost of an inheritance tax bill. These policies can be taken out at later stages in life.
If the policy is written in trust, then the payout doesn’t count as part of your estate and won’t be taxed. You should get professional advice since such policies do not come cheap and need careful handling to be effective.
You could consider using some funds to make an investment that qualifies for Business or Agricultural Relief.
From April 2026, any assets worth up to £1m and which you have held for at least two years will get 100% relief from inheritance tax. Assets above that level will qualify for 50% relief from IHT, effectively taxing them at 20% rather than the standard 40%.
Qualifying quoted but unlisted shares (such as those on the Alternative Investment Market) will attract 50% relief from inheritance tax.
This is a complicated area so take expert investment advice and taxation advice before progressing with any plan.
If your defined benefit pension fund is left to your spouse or civil partner, they will not have to pay any inheritance tax.
Nonetheless, when they die, that pension could still attract IHT. The same principle applies when it comes to property.
A financial adviser or estate planning expert can help you put in place joint plans to help maximise benefits.
For example, a joint lives second death policy in trust for the beneficiaries of your estate may help to cover the IHT bill.
Inheritance Tax on pensions will make it harder for people to pass on assets without attracting increased tax bills. This especially the case when you consider rising house prices and frozen tax allowances.
Careful planning with financial and estate planning advisers can create useful solutions to ensure you maximise what you leave behind.
To find out more, why not get in touch with one of our experts by clicking the link below.
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Disclaimer: This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax treatment depends on individual circumstances and may change. Always seek professional advice before making financial decisions.
Employee pensions used to be thought of as the preserve of major companies or huge conglomerates.
But since the introduction of auto-enrolment in 2012 – obliging businesses to offer staff access to a contributory workplace pension – employee pensions are literally everyone’s business.
I’ve advised employers of all kinds on employee pension schemes over the years to help recruit, retain and motivate their staff. Here are some of the key points to bear in mind as an employer – and how you can make employee pensions work for your business.
If you are an employer, you will need to offer some form of employee pension scheme.
If you deduct tax and National Insurance from an employee’s wages then you are usually regarded as an employer, even if you only have one or two members of staff.
You must enrol and make an employer’s contribution for all staff who:
If staff become eligible because of a change in their age or earnings, you must put them into your workplace pension scheme and write to them within 6 weeks of the day they meet the criteria.
You must pay a minimum of 3% of your employee’s qualifying earnings into your staff’s pension scheme.
Under most pension schemes, this is usually an employee’s total earnings between £6,240 and £50,270 a year before tax. Total earnings include:
If you wish to, you can choose to contribute more than 3% of an employee’s earnings, although there will be tax implications for doing so.
Employees must contribute at least 5% of their qualifying earnings to a workplace pension scheme. They may also receive tax relief on their pension contributions, which can further increase the amount going into their pension pot.
Employees usually have one month from the date they are enrolled on a workplace pension scheme to opt out. If they opt out after this time, any contributions they have made will usually remain in the pension pot until retirement.
Employers can offer two main types of workplace pension schemes: Defined Contribution (DC) and Defined Benefit (DB) schemes.
In a Defined Contribution scheme, the pension pot is built through contributions from the employer and employee. The final amount in the pot depends on investment performance.
Defined Benefit schemes, also known as final salary schemes, guarantee a specific income in retirement. This income is usually based on salary and length of service.
Most modern workplace pension schemes are Defined Contribution schemes since they generally offer more straightforward and predictable costs than Defined Benefit schemes.
There are a range of different pension options which you can pick from to offer as your workplace pension scheme, including specialist schemes for small employers.
These schemes will vary in terms of fees, expenses and investment approach. It can be challenging choosing which scheme is right for you, your business and your employees.
Factors you need to take into account include:
An independent financial adviser can search the whole of the market to find the best possible solution and help you comply with relevant regulations.
I’ve helped many businesses to navigate their way through the workplace pensions maze to find the best fit for their company, their employees and themselves.
Fairstone can also advise on other pension options including a Small Self-Administered Scheme (SSAS) or a group Self-Invested Personal Pension (SIPP) scheme. We can also advise on other aspects of workplace pensions such as salary sacrifice pension schemes.
Employee pensions are an unavoidable fact of life for UK businesses. But with the right approach and the right advice, they can be beneficial for you, your employees and your company.
Expert corporate financial planning advice can help you choose the scheme and ensure you fulfil your associated obligations.
If you’re an employer considering setting up a pension scheme or changing your scheme provider, get in touch with an adviser. They can talk you through the options and find out what’s best for you and your business.
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Disclaimer: This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax treatment depends on individual circumstances and may change. Always seek professional advice before making financial decisions.
Retiring abroad is a dream for many people and one which becomes all the more alluring if you return from a fortnight in the sun to the questionable delights of the UK weather.
But how do you make that dream a reality?
Here we take a look at some of the important practical and financial steps you need to consider before retiring abroad – and how taking expert advice can help you make the move.
If you’re already thinking about retiring abroad, the chances are you may have decided on your destination.
This choice may be based on previous knowledge of the country and the location – maybe it’s the place where you holiday every year – but you’ll need to consider other factors if you’re making your move permanent.
Think about questions such as:
Legal requirements and residency rules also need to be carefully assessed – do you have the right to live permanently in that country? Will you need to change your citizenship status or fulfil other obligations?
For example, following Brexit, current rules mean that UK residents living in EU countries need to apply for a new residence status to secure their rights. Each EU country also has its own specific immigration laws and visa requirements so you will need to consult the embassy or consulate of their host country for details on how to apply for a residence permit.
Another key consideration is whether you plan to retain a property in the UK or sell up completely.
Some retirees choose to keep a property they can return to if things don’t work out as planned or to rent out as a way of securing additional income to fund their new life in the sun.
You may also want to retain your UK property with the aim of passing it on to your descendants so they can live there or can realise the value of selling it after your death.
All of these choices have different financial, tax and pensions ramifications so whichever route you choose, it is prudent to seek expert advice at an early stage from an independent adviser to discover where you and your family stand.
If you’ve decided on your destination and worked out what you want to do with your current home, figuring out the finances needed for retiring abroad is a crucial step. You’ll need to consider things like currency exchange rates and cost of living changes when you’re working out your money.
If you are retiring abroad and have no intention of working again then you will probably be relying on your pension to pay the bulk of your living expenses.
You will need to choose whether to transfer your UK pension abroad or just leave it in the UK. If you decide to leave your pension savings invested in the UK, your pension provider can either pay pension income into your UK bank account or pay it into a bank account in your new country.
Neither choice is straightforward. If you move abroad, you might not be able to keep your UK bank account. If you opt for an account in your new country, not all pension providers will send money to a non-UK bank account and those that do might charge you for it. With this in mind, it is important to talk through your options with your pension provider and bank.
If you’re considering moving your UK pension abroad, a Qualifying Recognised Overseas Pension Scheme (QROPS) might be an option. QROPS allow you to transfer your pension to certain overseas schemes, potentially offering more flexibility and tax advantages. However, transfers can be complex and may incur charges, so it’s important to get professional advice before deciding what to do.
As well as any personal pensions you have, you will also generally be entitled to a State pension if you are a UK resident who has been paying National Insurance contributions for 10 years or more.
However, you will not receive your State pension until you are 66 (increasing to 67 between 2026 and 2028 with future increases to 68 planned). This could have a major impact on when you decide to move abroad.
In addition to when you receive your State pension, another important factor to consider is how much that pension will be.
While UK residents automatically receive annual increases in their State pension, those who live abroad may not do so.
Your State pension if you retire abroad will only currently increase each year if you live in countries in the European Economic Area, Gibraltar, Switzerland and 15 other countries which have reciprocal agreements with the UK. Live anywhere else – including in places such as Australia and Canada – and your pension will currently be frozen at the rate you first move abroad.
The All-Party Parliamentary Group on frozen British pensions estimates that approximately 450,000 British pensioners living abroad are currently on frozen pensions, meaning their real terms income is declining every year.
With considerations like this, it is easy to see why taking expert advice on retirement planning is crucial before deciding on your big move.
Keeping fit and healthy can be a challenge, particularly in your later years, so it is prudent to consider what healthcare arrangements are available in your new country.
Healthcare systems vary from country to country and might not include services you’d expect to get free on the NHS. You may have to pay a patient contribution towards any treatment, or you may need to take out health insurance.
With all this in mind, you should take time to research healthcare access, healthcare entitlements and likely healthcare costs in your prospective new country and factor those into your financial calculations.
It’s not something you want to think about when planning an exciting new life abroad, but what would happen if you or your partner suffered a serious illness or died overseas? How would your income be affected, would you have to return home for good and how would such an occurrence impact on your family?
This is why talking to an adviser about financial protection is really important before embarking on that big move overseas. Your adviser will be able to explain the different protection policies available and how they work when it comes to policy holders who live abroad.
Sadly, tax issues don’t go away when you move overseas!
Being an expat can bring some tax advantages but it does mean taking extra care and still paying the UK tax you owe.
The amount you have to pay will depend on many different factors, including:
Living abroad can also affect how much capital gains tax you may need to pay on certain assets and this can differ by country or region. You may need to obtain specialist tax advice when considering your options.
Moving overseas also involves dealing with legal issues. Aside from visa and citizenship matters mentioned earlier, living abroad can affect how your estate is treated when it comes to inheritance.
As can be seen, retiring abroad involves a lot more preparation than packing for a fortnight’s holiday.
There are important financial, legal, tax, pensions and practical matters which require careful thought and considered actions.
However, by taking expert advice at an early stage, you can put a plan in place that will enable you to sail off into the sunset with confidence.
If you’re thinking of retiring abroad, get in touch with an adviser today. They can talk you through all the different factors you need to take on board before you take the plunge.
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Disclaimer: This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax treatment depends on individual circumstances and may change. Always seek professional advice before making financial decisions.
Estimates say the average number for UK workers is six but could be up to 12 for younger workers.
Either way, the idea of a job for life – and a pension to match – is for most people a thing of the past.
Thanks to auto-enrolment rules, all employers must now provide a workplace pension scheme. Combine this with regular job changes and potentially periods of self-employment and you have the prospect of dealing with multiple pension pots as you plan for retirement.
This could cause financial and logistical headaches, as well as a mound of paperwork. As a result, many people consider consolidating pensions into a single pot.
But is this always the right thing to do?
With inheritance tax (IHT) set to be introduced on pensions very soon, how does this process fit into your overall estate planning and preserving wealth for future generations?
And if you do decide to consolidate your pensions, how do you go about it?
Pension consolidation is a common issue which I come across when advising clients about their pensions and retirement planning so I’m going to take a practical look at consolidating pensions, the factors you need to consider and some of the things you need to watch out for.
A key consideration with consolidating pensions is the kind of pensions you possess. Broadly speaking, these can be divided into defined benefit pensions and defined contribution pensions.
Commonly known as ‘final salary’ pension schemes, these are less prevalent than they used to be, although some older pension savers and those working in specific sectors such as public services do have them.
With defined benefit pensions, how much you get when you retire is based on your salary and how long you’ve worked for your employer.
Generally, defined benefit schemes are not suitable for consolidation since you could lose value and benefits if you ‘transfer out’. In fact, it is mandatory to take financial advice if your defined benefit scheme is valued at £30,000 or more and you are considering transferring out.
Also known as ‘money purchase’ schemes, defined contribution pensions are the most common form of workplace and private pensions.
Defined contribution pensions are where you build up a pot of money based on the contributions you (and your employer, in the case of a workplace pension) have built up over time and which is invested by the pension firm operating the fund.
If you move jobs, you can either leave the pension where it is (even though you are no longer paying into it) or you can consolidate the pension by transferring it to a new pension scheme, whether that is a private pension or a workplace pension at a new employer.
Consolidating pensions can simplify administration and lower overall fees but you should still bear in mind several factors before deciding whether to stay or go, including:
It could be the case that if you have several different pensions, some may be better consolidating while others are best left alone.
This is one of the reasons why getting expert advice from an independent financial adviser is really important, particularly if you have complex pension arrangements or high value pensions.
At Fairstone, we can help you navigate your way through all these different considerations to come up with comprehensive recommendations about the best way forward.
If consolidating pensions is something you have decided to do, how should you go about it?
Get details on providers, policy numbers and current valuations of each pension pot. If you’re missing paperwork or can’t remember which provider was with which employer, then contact previous employers to get that information. If you think you have a pension but are unsure about the provider or the employer, try the free Government Pension Tracing Service who may be able to help.
Make sure you take a good look through the small print of each one of your pensions. As mentioned earlier, there could be perks you might miss out on or penalties you have to pay if you choose to consolidate a particular pension.
You might choose to transfer your pensions into your current workplace pension, an existing private pension or set up a brand new pension. Whichever route you choose, you should check out the rules on transfers to the destination pension to make sure you can carry out your plan.
If you’re sure you want to consolidate pensions then you should inform the provider of your destination pension of your plans. You will need to check that the scheme you want to transfer allows you to do so and that the destination pension will accept the transfer. If all that is fine, then the consolidation process can start.
A financial adviser can help with all four steps of the consolidation process outlined above, giving you expert insight into all aspects of the transfer and assisting with the various forms and paperwork required.
At Fairstone, we have helped many clients with advice on consolidating their pensions and assistance throughout the process.
As well as the nuts and bolts of combining pensions, a financial adviser can also help with the wider aspects of pensions and retirement planning to ensure your funds are working hard for you and that you are saving enough towards providing the retirement you want.
For example, with pension wealth attracting inheritance tax (IHT) from April 2027, getting expert advice on how best to preserve your pension could be crucial when it comes to estate planning and preserving wealth for future generations.
Your adviser can also help you plan for unexpected future events with advice on financial protection options.
And in a sector where scams are unfortunately a fact of life, consulting an independent financial adviser is a great way to sense-check pension offers which seem too good to be true.
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Consolidating your pensions can help cut down on costs, streamline your life admin and boost your retirement pot, but it’s a process which requires careful consideration.
Getting expert advice at an early stage can really pay dividends and help you on your way to a better retirement.
THIS ARTICLE IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, TAX, OR LEGAL ADVICE.
TAX TREATMENT DEPENDS ON INDIVIDUAL CIRCUMSTANCES AND MAY CHANGE. ALWAYS SEEK PROFESSIONAL ADVICE BEFORE MAKING FINANCIAL DECISIONS.
When it comes to planning for retirement, the earlier you start, the better. But the reality is that many of us, especially those in our 20s and early 30s, don’t always prioritise saving for the future. Instead, we’re focused on the present – career progression and enjoying life. However, those who are committed every step of the way will reap the greatest rewards down the line.
Starting with small steps in retirement planning now can make your financial journey smoother as you approach retirement. As the retirement savings journey often spans several decades, it can be helpful to separate your plan into stages.
This will help you achieve the right blend of enjoying the present and funding your future.
The general recommendation is to save at least 15% of your income towards retirement. However, the amount you should contribute depends on your personal circumstances and retirement goals. Starting with smaller contributions is okay, but aim to increase your contributions as your income grows.
Let’s explore the different stages of life and how retirement planning fits in.
At this age, retirement may feel a long way off, but that’s exactly why it’s the perfect time to start. In your 20s and early 30s, you are likely to have fewer financial responsibilities than in later years, and this can work to your advantage. While retirement saving might not seem urgent, building a solid foundation early on will make a huge difference in later life.
The best time to start saving for a pension is when you’re young, as this gives your money more time to grow. Delaying contributions by even a few years can significantly reduce your final pension pot.
It’s estimated that postponing pension savings until middle age could mean missing out on up to £100,000 in investment returns and tax relief.
Fortunately, as soon as you begin working, you’ll typically be enrolled in your employer’s pension scheme automatically. By law, if you contribute 5% of your salary, your employer must add at least 3%.
Making the most of this scheme is essential for building a comfortable retirement fund. The earlier you start, the greater the benefits of compound growth over time.
Self-employed individuals don’t have access to workplace pensions, making personal retirement savings essential. Options like Self-Invested Personal Pensions (SIPPs), stakeholder pensions, and ISAs can provide tax-efficient ways to save.
Since income can fluctuate, setting up flexible contributions and using high-earning periods to boost pension savings can help ensure financial security. It’s also vital to check National Insurance contributions to qualify for the full State Pension, as self-employed workers must actively manage their contributions.
When deciding how to invest your pension, a long-term approach is key. Choosing assets with strong growth potential—such as stocks and shares—can help maximise returns. While investments can fluctuate in value, a longer investment horizon allows you to ride out market ups and downs.
A Self-Invested Personal Pension (SIPP) gives you more control over how your pension pot is invested. Unlike traditional pension plans, which have a limited range of investment options, a SIPP lets you choose from a wider variety of assets, including stocks, bonds, and property. If you’re confident in your investment knowledge or want more flexibility, a SIPP could be a good choice.
When you’re young, you have time on your side, which allows you to take more investment risks and benefit from the growth potential of the markets. Even though markets go up and down, you have decades before retirement, so short-term volatility tends to smooth out in the long run.
It’s essential to focus on your future during this phase, even if it feels distant.
Many young people receive financial gifts from parents or grandparents, often intended for long-term savings or investments. While these gifts can provide a valuable boost to retirement savings, they should be managed carefully.
Instead of spending them immediately, consider investing them in a pension, stocks & shares ISA, or other tax-efficient savings vehicles to maximise growth over time. Additionally, family gifts may have inheritance tax (IHT) implications if the giver passes away within seven years, so seeking financial advice on how best to structure these contributions can be beneficial.
Financial responsibilities tend to pile up by your mid-30s, with mortgage payments and childcare costs becoming major expenses.
On the plus side, career progression often leads to higher earnings, making it a great time to focus on retirement savings.
By now, your income has likely increased. Perhaps you’re further along in your career, maybe starting or have a family, and you may have more financial flexibility. With this increased earning power, it’s the ideal time to review your retirement plans and consider ramping up your contributions.
If you earn more than £50,270 a year, you can benefit from 40% tax relief on pension contributions. This means that for every £100 you invest in your pension, the actual cost to you is just £60. When combined with employer contributions, this presents a powerful opportunity to grow your savings.
By the time you reach your mid-40s, it’s crucial to assess whether your pension savings align with your retirement goals. You may have a clearer idea of the income you’ll need and the age at which you’d like to stop working, allowing you to fine-tune your savings strategy accordingly.
If you haven’t already, it’s time to speak with a financial adviser. Retirement is becoming more real, and a professional can help you understand exactly how much you need to save and at what age you would like to retire. A financial adviser can also help ensure that your retirement savings are aligned with your personal goals and provide insight into the best investment strategies.
Now is the time to make some important adjustments:
Consolidate your plans: If you have multiple pension pots, consider consolidating them into one plan. This will help simplify your retirement strategy and potentially reduce fees.
Maximise contributions: Aim to contribute more than the minimum required. If you’re able, topping up your pension with extra contributions will make a significant difference when you retire.
Update your beneficiaries: Ensure that the beneficiaries listed on your pension plans are up to date. This is particularly important if your life circumstances have changed, such as marriage or the birth of children.
Consider bonus or salary sacrifice: Some employers allow you to sacrifice a portion of your salary or bonus for pension contributions, giving you more flexibility and tax advantages.
Use your ISA allowance: Don’t forget about Individual Savings Accounts (ISAs). Using your ISA allowance each year provides additional tax advantages and flexibility.
By the time you turn 50, your focus on retirement savings should be sharper than ever—this is the stage to make significant progress toward your goals.
If your pension pot isn’t where you’d like it to be, don’t panic—you still have time to make a meaningful impact.
At this stage, many financial commitments begin to ease. You may be approaching the final years of your mortgage, and other expenses could start to decline. Meanwhile, earnings often peak in your 50s, creating the perfect opportunity to accelerate your retirement savings—especially if you need to catch up.
If you have spare cash in the bank that you don’t need immediate access to, consider boosting your pension through lump-sum contributions. The maximum you can contribute in a year while receiving tax relief is 100% of your earnings or £60,000, whichever is lower—this is known as your annual allowance.
Additionally, you may be able to contribute even more using the “carry forward” rule, which lets you use unused allowance from the previous three tax years.
As you approach 65, your retirement plans should be taking shape, with a clear understanding of the final steps needed to achieve your target income. Having a well-defined plan will make decision-making much smoother when the time comes to transition into retirement.
At this stage, you should be looking at the big picture and considering all the ways you can maximise your pension and savings before retirement. This could include consulting with a financial adviser to review your retirement strategy in detail.
Here are some key steps to take as you near retirement:
Conduct a pre-retirement review: Work with your financial adviser to conduct a full review of your pension plan, including how your benefits can be taken and how your finances will look post-retirement.
Consider SIPPs: A Self-Invested Personal Pension (SIPP) may be an option to give you more control over your pension investments. A SIPP lets you choose how your pension is invested, which could potentially help you boost your retirement income.
Understand your pension options: The rules around pensions are changing, and now that you’re getting closer to retirement, it’s important to understand how you can take your pension benefits. For example, you can start accessing your pension savings at age 55, but you should understand the different ways to draw your pension—whether that’s through lump sum payments, income drawdown, or purchasing an annuity.
State Pension forecast: Make sure you know how much you can expect from the state pension and whether you’re on track to receive it at the right time.
You might be wondering, “Can I withdraw my pension before 55?” The answer is generally no, unless you meet certain conditions such as ill health or specific pension schemes. While some people may consider early pension release, this is a complex issue and should be explored with a financial adviser to understand the long-term impact on your retirement funds.
Changes in employment, such as moving to part-time work or switching jobs, can impact your pension contributions and long-term retirement strategy. When changing jobs, it’s important to track and consolidate pension pots, ensuring your savings continue growing efficiently. If transitioning to part-time work, consider adjusting your savings strategy to maintain financial stability. Career breaks can also affect your National Insurance record, so checking contributions and making voluntary payments can help protect your State Pension entitlement.
Death Benefits: Understanding how your pension can pass to your beneficiaries is important for inheritance planning. You can use death benefit options to save on inheritance tax.
ISA Allowance: Continuing to use your ISA allowance is essential for flexibility in how you draw funds during retirement.
Investment Strategy: Review your investments carefully. You might want to shift toward lower-risk options as you get closer to retirement to preserve the value of your pension fund.
At this stage, your focus should shift from growing your wealth to ensuring it provides a steady income for the rest of your life.
Your primary goal is to make your retirement savings last, balancing security with flexibility. When it comes to drawing an income from your pension, you generally have two main options:
Choosing between these options requires careful consideration, as each has its advantages and drawbacks. With income drawdown, you have the freedom to access your money when needed, but there’s a risk of running out of funds. An annuity, on the other hand, provides financial security but is irreversible and leaves no remaining capital for inheritance.
However, you don’t have to pick just one. Many retirees opt for a mix of guaranteed and flexible income, striking a balance between security and control.
Once you reach State Pension age (currently 66, rising to 67 from 2028), you may also qualify for the full new State Pension, provided you have sufficient National Insurance contributions. At £203.85 per week, this can provide a valuable boost to your retirement income.
Retirement planning is a lifelong journey, and it’s important to stay focused on the long term. By starting early, increasing contributions over time, and consulting with professionals, you can ensure that your retirement years are comfortable and financially secure.
Whether you’re just starting out in your career or approaching retirement, making smart decisions about saving and investing now can set you up for success in the years to come. Start today, and let your future self, thank you for it!
It’s never too early to start! The earlier you begin saving for retirement, the better. Even if you’re in your 20s or 30s and feel retirement is far off, starting early allows you to benefit from compounding and gives you the flexibility to take more investment risks. The earlier you set up a pension and start contributing, the more time your money has to grow.
In most cases, you cannot access your pension before age 55 unless you meet specific conditions, such as ill health. Early pension release is generally not an option unless you are in one of these circumstances. It’s crucial to plan your pension withdrawals with care, as early access could reduce your pension pot when you need it most.
In your 20s and 30s, it’s essential to start contributing regularly to your pension plan, even if you can’t afford to make large contributions. Setting up a direct debit or salary deduction is a good way to ensure regular savings. If your employer offers a pension scheme, contribute enough to take full advantage of any matching contributions they offer, as this is effectively free money.
The general recommendation is to save at least 15% of your income towards retirement. However, the amount you should contribute depends on your personal circumstances and retirement goals. Starting with smaller contributions is okay, but aim to increase your contributions as your income grows.
A Self-Invested Personal Pension (SIPP) gives you more control over how your pension pot is invested. Unlike traditional pension plans, which have a limited range of investment options, a SIPP lets you choose from a wider variety of assets, including stocks, bonds, and property. If you’re confident in your investment knowledge or want more flexibility, a SIPP could be a good choice.
In most cases, you can access your pension savings from the age of 55. This could include taking a lump sum, income drawdown, or purchasing an annuity. However, taking funds early means you could reduce your retirement income in the long term, so it’s important to plan carefully with a financial adviser.
It’s essential to ensure your pension plan has up-to-date beneficiaries listed. This will make sure your pension pot is passed on to the people you want in the event of your death. Many pension schemes also allow you to specify how death benefits are paid, which could be used for inheritance tax planning.
If you change jobs, your pension from your previous employer doesn’t go away. You can leave it where it is, transfer it to your new employer’s pension scheme, or move it to a personal pension plan. It’s important to keep track of any pension pots you have from previous jobs to ensure they are well-managed and continue to grow.
Yes, you are entitled to a state pension when you reach the state pension age, which is currently 66 but will rise over time. The amount you receive depends on your National Insurance contributions throughout your working life. You can request a state pension forecast from the government to see how much you’re likely to receive.
There are several ways to boost your retirement savings, including:
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THIS ARTICLE DOES NOT CONSTITUTE TAX, LEGAL OR FINANCIAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.
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.
Dreaming of retiring early? Achieving early retirement requires strategic planning, disciplined saving, and smart decision-making. By focusing on financial independence and proactive management of healthcare expenses, pensions, and workplace benefits, you can significantly boost your chances of retiring early. Whether you aim to retire in your early 60s or even earlier, smart planning is always key.
In the early years of retirement, the focus often shifts to fulfilling long-held dreams and enjoying life to the fullest. Spending during this phase may be higher due to increased activity but tends to decline as activity levels decrease over time. However, expenses may rise again later in life, often due to growing care needs.
Many individuals overestimate their health or underestimate how long they will live. With increasing life expectancy, it is not uncommon for retirement to span over 20 years or more. However, as with most life scenarios, this is influenced by various factors, including personal health, lifestyle, and financial planning.
Retirement planning requires ensuring that lifetime expenses do not exceed income and accumulated assets, such as savings and investments. This balancing act can be challenging and requires careful evaluation of pensions, income streams, and anticipated changes in spending over time.
Investment returns and inflation also play a critical role in retirement planning. Inflation, in particular, can erode the purchasing power of fixed incomes or cash savings. As recent years have demonstrated, the cost of living can rise sharply, emphasising the need for financial strategies that adapt to economic fluctuations.
Goal setting is another crucial aspect of retiring early. Define clear financial and lifestyle goals and create a roadmap to achieve them. Whether it’s building a larger pension pot, reducing healthcare expenses, or maximising workplace benefits, every step brings you closer to financial independence.
Your pension pot is one of the most critical resources for retiring early. Start by reviewing your workplace pension schemes and personal savings to understand how much pension income they will provide. Explore how different scenarios—like speaking to your employer about salary sacrifice, increasing contributions or delaying withdrawals can impact your overall retirement savings and income.
Flexible pots and lump sum options offer ways to access your savings early, allowing you to fund your early retirement while maintaining financial stability. However, it’s essential to withdraw strategically to ensure your funds last. Retiring early also means you may need to bridge the gap until you reach the state pension age, so plan your withdrawals carefully.
Workplace benefits can be a game-changer when planning to retire early. If your employer offers a defined benefits scheme or a generous workplace pension, these can provide a reliable income stream. Survivor’s pensions and other benefits can also support your family’s financial security.
Redundancy pay can act as a financial springboard for early retirement. If you’ve received a redundancy payout, consider using it to boost your retirement savings or pay off outstanding debts. Combining redundancy pay with an early retirement deal can help you transition smoothly into your next phase of life, especially if you aim to retire in your early 60s.
For many aspiring early retirees, transitioning to a part-time role or adopting a phased retirement approach can provide both income and flexibility. A reduced work schedule allows you to test the waters of retirement while still contributing to your pension pot.
Work-from-home opportunities are another excellent option, offering the chance to earn income without the physical demands of commuting. This flexibility is particularly beneficial if mobility or mental health concerns arise. Mini retirements, where you take short breaks from work before fully retiring, can also help you build confidence in your financial plan while enjoying the benefits of downtime.
The exact amount depends on your lifestyle and expected expenses. A common rule of thumb is to save 25 times your annual expenses.
Yes, many pension schemes offer flexible pots or lump sum options that allow early withdrawals. However, early withdrawals may reduce your overall pension income, so plan carefully.
Invest in comprehensive health insurance. Consider setting aside a portion of your savings specifically for healthcare expenses.
Yes, part-time roles, freelance work, and phased retirement options can provide additional income while allowing flexibility. Work-from-home opportunities are particularly convenient.
Evaluate the financial implications, including redundancy pay and the impact on your pension pot. Ensure the deal aligns with your long-term retirement goals.
Stick to a budget, monitor your investments, and periodically review your financial plan.
Retiring early is a challenging but achievable goal. Working with an Independent Financial Adviser could help improve your chances of retiring early. By proactively managing healthcare costs, maximising your pension income, and leveraging workplace benefits, you can create a solid foundation for early retirement. Whether you opt for phased retirement, a part-time role, or a mini retirement, staying flexible and informed will increase your chances of success. With careful planning and determination, you can retire early and enjoy the freedom and fulfilment you deserve.
We have over 1250 local advisers & staff specialising in investment advice all the way through to retirement planning. Provide some basic details through our quick and easy to use online tool, and we’ll provide you with the perfect match.
Alternatively, sign up to our newsletter to stay up to date with our latest news and expert insights.
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THIS ARTICLE DOES NOT CONSTITUTE TAX, LEGAL OR FINANCIAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.
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.
Christmas is the season of giving, and for many, it’s an opportunity to make a meaningful impact on the lives of loved ones. Beyond the charm of wrapped presents, monetary gifts can offer long-term benefits, helping younger generations save for education, buy a home, or invest in their future. However, ensuring that your generosity aligns with UK financial rules and tax regulations is essential for maximising the impact of your gifts.
Understanding the rules surrounding gifting is not just a matter of legal compliance—it’s the key to making your financial presents as effective and worry-free as possible. This guide will walk you through the essentials of gifting money in the UK, helping you make informed and confident choices this festive season.
With proper planning, your holiday generosity can bring both immediate joy and lasting financial security to your family. Here’s what you need to know to make your monetary gifts count without unintended tax implications.
You can technically gift as much money as you wish to your children or grandchildren. However, the amount you gift, and the timing of your generosity can have an impact on the Inheritance Tax position of your estate further down the line.
The annual tax-free gifting allowance enables you to give up to £3,000 per year without it being subject to Inheritance Tax (IHT). If you didn’t use last year’s allowance, you can combine it to gift up to £6,000 this tax year.
It is also worth keeping the seven year rule in mind when gifting – especially if you are gifting significant sums or assets. If you live for more than seven years after making a gift, no IHT will be due on the respective gift but care is needed, as in certain circumstances, gifts going back up to 14 years can be caught. Advice on the order of gifting is really important.
HMRC allows for several exemptions that make gifting money tax-efficient:
In the UK, there isn’t a specific “gift tax” in the way some countries define it. However, monetary gifts are considered under the umbrella of IHT. As we previously mentioned, if you pass away within seven years of giving a gift, it may be liable to IHT depending on the total value of your estate and the timing of the gift.
Some gifts are fully exempt from tax:
Potentially Exempt Transfers are gifts that may become exempt from tax, depending on how long you live after giving them. Taper relief reduces the tax rate on gifts made three to seven years before your death. It’s really important to note that Taper relief only applies if the total value of gifts made in the 7 years before you die is over the £325,000 tax-free threshold.
| Years Between Gift and Death | Tax Rate |
| Under 3 | 40% |
| 3-4 | 32% |
| 4-5 | 24% |
| 5-6 | 16% |
| 6-7 | 8% |
| 7+ | 0% |
To minimise the inheritance tax burden on your family:
Can I give £3,000 to each child I have?
No, the £3,000 annual exemption applies to you, not your recipients. You can divide it among children or double it to £6,000 if your spouse also gifts.
What’s the best way for grandparents to gift money?
Contributing to living expenses, Junior ISAs, or setting up a trust are common approaches. Tailor the method to your grandchildren’s needs and your financial goals.
Do I need to declare cash gifts to HMRC?
No declaration is required for gifts within the £3,000 allowance or covered by exemptions. For larger gifts, recipients may face IHT if you pass within seven years.
Will HMRC find out about gifts after someone dies?
Yes, executors must report gifts made within seven years to ensure accurate IHT calculations.
Are all gifts subject to the Seven-Year Rule?
No. Tax-free gifts such as those within the £3,000 exemption or to a spouse/charity are not subject to this rule.
Can my child be a beneficiary of my Life Insurance?
Yes, but children under 18 will need a guardian to manage the payout. Consider writing the policy in trust to prevent it from counting towards your estate.
This Christmas, consider how gifting money can create lasting impacts for your loved ones. By understanding the rules and planning strategically, you can spread joy and ensure your family benefits from your generosity in the most tax-efficient way. If in doubt, consult a financial adviser to make your festive giving as impactful as possible.
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How Inheritance Tax works: thresholds, rules, and allowances: Rules on giving gifts – GOV.UK
THIS ARTICLE DOES NOT CONSTITUTE TAX, LEGAL OR FINANCIAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.
THE TAX TREATMENT IS DEPENDENT ON INDIVIDUAL CIRCUMSTANCES AND MAY BE SUBJECT TO CHANGE IN FUTURE.
THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE TAX AND TRUST ADVICE
