Emptying the Nest

It can be a sad time when children ‘fly the nest’. However, it is also an exciting start to a new phase for the parents. Now is the time to plan your next steps and to enjoy the time that is to come.

We can help with:

  • Property downsizing
  • Purchase of property in Spain
  • Wealth management and financial planning, including pension advice and how to minimise inheritance tax
  • Gifts and loans to children for property purchases
  • Contact with grandchildren

Frequently Asked Questions

It depends on whether your employment contract has what is known as a mobility clause in it. This type of clause says that your employer can require you to move to work at another location. However, it can only usually be relied upon by your employer if it is reasonable.

When is Relocation Reasonable?

This is judged on a case-by-case basis, but, generally speaking being asked to work at a different location that is say, five miles away from your original workplace, is much more likely to be seen as reasonable than being required to work in another county or somewhere that is a considerably longer travelling distance away.

The need for an employee to relocate also might be seen as unreasonable if it would interfere with their caring responsibilities, for example being able to pick up a child from school, or if it would make it more difficult for an employee with disabilities to get to work because there is a lack of public transport in the new location, or because the additional travelling costs would cause an employee to be significantly worse off financially.

What If I Have to Move a Long Way Away?

Then your employer is much more likely to need you to agree to move to the new place of work and would not usually be able to force you to move.

They might offer to pay your costs of relocating, for example removal costs or towards buying a new home, but legally they do not have to unless it says they must in your employment contract, which is unusual.

What If There is No Mobility Clause?

If there is no mobility clause, then any attempt to move your place of work to anywhere that is more than a reasonable travelling distance away is likely to be seen as a significant change to your employment contract.

Your employer would have to agree this with you and usually it could not be imposed without your agreement.

What If I Refuse to Move?

If the request to move is seen as reasonable and you refuse to comply then you could be dismissed by your employer for failing to comply with a lawful instruction.

Alternatively, if the workplace is closing altogether and reopening in a new location which is more than a reasonable travelling distance away, then your employer could make you redundant.

However, if the new place of work is close by, but you just don’t want to move then you could lose your entitlement to a statutory redundancy payment if you refuse to move to the new location, because it could be seen as a refusal of suitable alternative employment.

The process of purchasing a property in Spain is radically different to England and therefore we always advise to instruct the services of a Spanish lawyer, in Spanish Abogado.

The Spanish lawyer can be based either in the UK or in Spain. The key point is that they are independent.

The advantage of engaging the services of a Spanish lawyer based in the UK is that they will be SRA regulated. This means that their firm will have the right level of insurance to protect you in case something goes wrong and that you may be able to claim through the SRA’s Compensation Fund.

We can assist you with the purchase or sale of a property in Spain.

We can offer advice in English or Spanish, whichever you prefer or are most comfortable with.

As we are based in England, we can meet easily meet with you face-to-face, if you wish to do so.

Many of our clients have also found that it is much easier to visit our offices than to travel to and from Spain to meet with their lawyer there to resolve any difficulties, to sign any additional paperwork etc.

When you’re deciding how much to save into your pension there are a few things to think about:

  • How much can you afford?
  • How much have you already saved into your pension(s)?
  • How much are you allowed to save into your pension?
  • How long have you got until you retire?
  • Are you likely to increase or decrease your pension contributions in the future?
  • How much do you expect your investments to grow between now and your retirement?
  • How much will your employer contribute to your pension, and do they offer contribution matching?
  • How much income will you need in retirement?

One of the key benefits of saving towards a pension is the tax relief. Pension contributions are a great way to claim back some of the tax you pay, and even non-taxpayers can get tax relief added to pension contributions.

The amount of tax relief you receive depends on your income tax band, if you’re a basic rate taxpayer you can normally get tax relief at source at the basic rate of tax (currently 20%) on regular and one-off payments into your pension.

So, a contribution by you of £80 means £100 will go in to the pension as the Government pays the other £20. Similarly, if you pay tax at £40%, that £100 pension contribution will only cost you £60.

Pension Contribution Limits

When you’re deciding how much to pay into your pension it’s important to bear in mind the pension contribution limits in relation to both the lifetime allowance (currently £1,073,100) and annual allowance limits (currently £40,000). Few people are at risk of exceeding these limits, but if you do then you could face a tax bill.

If you don’t have an income or you earn less than £3,600 per year, your annual pension contribution limit is £3,600, including tax relief.

For most savers, the current pension contribution limit is 100% of your income, with a cap of £40,000. If you earn £26,000 a year, you can save up to £26,000 (including tax relief) into your pension in one year. If you earn £50,000 a year, you can save up to £40,000 (including tax relief) into your pension.

For very high earners, a tapered annual allowance will apply which affects people who earn over £200,000 per year and could potentially reduce the allowed limit down to £4,000.

While the above contribution figures apply specifically to defined contribution (or money purchase) pensions, it is important to note that the level of benefit accrued within a defined benefit (or final salary) pension scheme is also subject to the annual allowance, but is calculated on the basis of how much the benefit level has increased each year (rather than being based on any contributions into the scheme).

The rules on pension contributions can be complex and you should seek independent financial advice to discuss your own individual circumstances.

It’s important to keep an eye on your pension saving and make sure you’re on track to save enough for your retirement. Contact a member of the Nockolds Wealth team to discuss your circumstances and pension savings in more detail.

Important Information

  • This article is for your general information only and is not intended to address your particular requirements. The content should not be relied upon in its entirety and shall not be deemed to be, or constitute, advice.
  • No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of the content.
  • Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is provided or that it will continue to be accurate in the future.
  • Levels and bases of, and reliefs from, taxation are subject to change and their value depends on the specific circumstances of the individual. All figures relate to the current tax year unless otherwise stated.
  • The value of your investments and the income derived from them can go down as well as up and you may get back less than you invested. Where stated, past performance is used as a guide and is no guarantee of future returns.

We usually recommend that you have a separate Will made according to the laws of each country in which you own a house, as this makes the process of administering your estate quicker and more straightforward.

Whilst many European countries will accept an English Will, it is our experience that this leads to more paperwork and expense when the estate is administered, and it is easier for your Executors if you have separate Wills in place.

This also ensures that local inheritance and tax laws are properly dealt with and that you are aware of what these are during your lifetime, so that you can plan your affairs accordingly. For example, in some European countries it is not possible to leave your assets to whoever you like, as it is in England.

When making a foreign Will it is important to advise the solicitor that you already have a Will in place that you do not wish to revoke, in order to ensure that your existing Will is not unintentionally cancelled.

We have a specialist Spanish team at Nockolds who would be happy to assist if you own property in Spain.

A buy to let property can be a great investment. You will generally receive a higher return on your investment than if the money were invested in savings, and you will also have the benefit of owning an asset that will typically increase in value over time.

The downsides are that there is no guarantee that you will be able to successfully rent out the property all of the time. There may be gaps between tenants. There is also a risk that tenants will not pay the rent in full or on time, and you may need to incur legal costs in evicting tenants for non-payment.

You may need to make mortgage repayments even if you are not receiving a rental income. Whilst it is sensible to have some protection against damage to the property in the form of a deposit from a tenant, such deposits are limited to the amount of five weeks rent (or up to six weeks rent where the rent is in excess of £50,000 per year) and so may not be sufficient to remedy extensive damage to your property.

It’s also important to take advice on tax consequences. The rental income will be subject to income tax. You will also be liable to capital gains tax on the increase in value of the property if and when you come to sell it.

The property will also form part of the value of your estate on your death. Stamp duty land tax (SDLT) is higher for those that are purchasing additional properties, and so if you already own a home, you will have to pay a higher amount of STLD to purchase a buy to let property.

It would be sensible to take advice on whether it is financially beneficial to you to own a buy to let property through a limited company (owned by you), rather than in your own name.

The government has been decreasing the income tax relief for higher and additional income tax paying landlords when taking on finance (i.e. a buy to let mortgage). The main finance cost for a buy to let mortgage is the interest paid on it, but that may also include interest on loans to buy furnishings or fees incurred when taking out the buy to let mortgage.

From 6 April 2020, residential landlords who own the property in their own name (and not via a limited company) have not been able to deduct their finance costs from their rental income when determining their income tax liability. Finances costs include mortgage interest, interest on loans to buy furnishings and fees incurred when taking out or repaying mortgages or loans.

Instead, there will just be a basic rate of tax reduction on the finance costs from the income liability.

Some landlords consider that it is more tax-efficient to own their properties in a limited company because they pay corporation tax and not income tax, and therefore the restrictions on finance costs reductions do not apply. The main rate of corporation tax will decrease from 19% (2018/2019 tax year) to 17% (2020/2021 tax year).

It is important to bear in mind though, that where a limited company receives the rental income, the income will remain in company until it is withdrawn as dividends, at which point further tax will be due.

So, would it be beneficial to transfer properties that you already own into a limited company?

As the properties would have to be sold by you to the limited company at market value, you would also need to pay some or all of the following into account:

  • Stamp duty land tax (paid at the higher rates of SDLT even if you only own one property)
  • Capital gains tax (paid on the difference between what you paid for the property and the value at the date of the transfer into the limited company)
  • Early repayment charges to the mortgage lender if you are within the redemption penalty period
  • Finance costs incurred by the company when taking out the mortgage

Whether your future purchases should be made via a limited company will depend on your circumstances. Tax advice should be taken in advance of a purchase to determine the best way to own the property.

The Purchase Process

We always recommend instructing an independent lawyer as soon as you have identified the property that you are interested in purchasing. Your lawyer can then complete due diligence searches before you make any payments towards the property.

If you instruct Nockolds, we will carry out extensive searches on the property and we will let you have a report with our findings so that you can make an informed decision as to whether or not you want to continue with the purchase.

If you want to proceed, we will then prepare a power of attorney and ask you to sign it before a Notary Public in your area. This way, we will be able to sign the completion documentation on your behalf without the need for you to travel to Spain.

We will also prepare a deposit contract setting out the terms of the purchase and monitor the transfer of the deposit payment to the other party. You only ought to make a deposit payment at this stage of the transaction, not before we have completed the due diligence searches on the property

Once we have agreed the completion date with the sellers, we will obtain your NIE certificate and open a Spanish bank account for you. The NIE is the Spanish tax identification number for foreigners. We will then attend the completion meeting before the Spanish Notary Public and deal with the payments of taxes and the registration of the property in your name.

Issues That May Occur

If you are interested in acquiring a resale property, it would be very important to confirm that the sellers own the property and that the estate agent has the necessary authority to market it for sale.

The next step will be to find out if there are charges registered against the property and to establish if the property was built with planning permission. This is very important especially when you are purchasing property in rural areas.

If you are purchasing a property which forms part of a complex, you will become a member of the community of property owners and you will be bound to make payments towards the upkeep of the communal areas. These mandatory contributions are known as community fees. It is of course very useful to find out the monthly or quarterly amount of community fees before proceeding with the purchase.

It is also important to determine the financial position of the community of property owners, as if there are many property owners failing to pay their community fees, this may result either in the poor maintenance of the complex and the subsequent depreciation of your property, or in the significant increase of the community fees in the near future. This may put off any potential buyer if you decide to sell your property.

People are now more likely to have a number of different jobs during their career and will often be enrolled into a new pension at each new workplace. This means you may end up with several pension plans with different providers, and it can be confusing trying to keep track of them all.

There are two main types of pension scheme available:

  • Defined Contribution (or money purchase) – you and/or your employer make contributions (in which you may also benefit from tax relief) to build up a personal pension pot that you can then use to provide an income in retirement. The value of your pension pot and the retirement income it will provide is not guaranteed and depends upon the total amount of contributions made, the investment growth achieved and the level of charges applied.
  • Defined Benefit (or final salary) – is a special type of employer sponsored pension scheme that provides members with a guaranteed retirement income for life that usually increases each year to protect against inflation. The level of retirement income received will be based upon a member’s final (or averaged) salary and their length of service.

The Financial Conduct Authority (FCA) and The Pensions Regulator believe that it will be in most people’s interest to keep any benefits held within a defined benefit pension scheme*.

As such, the sole purpose of this article is to highlight the main factors when considering the potential consolidation of defined contribution pensions only. The considerations for a potential transfer of a defined benefit pension is beyond the scope of this article and would require specialist pension transfer advice (that is not available from Nockolds Wealth).

One of the options you have for your defined contribution pensions is to combine all of them into one single pot.

Benefits of Consolidation

Less hassle: By combining all your pensions into a single plan you can reduce the hassle which comes with managing and keeping track of different pots to a single plan which is easier to manage.

Reducing paperwork: A new plan could allow you to view your pension online. You can check your balance, make top ups and withdrawals online with minimum paperwork required.

Greater control: With a single pension plan you can ensure that the funds are invested how you want them to be in line with your attitude to risk, as well as finding it easier to track performance and being aware of the fees and charges you are paying.

Improved retirement planning: It can also be easier to see what your retirement will look like, and giving you an idea of how big a shortfall there is between your current pension savings and the size of the pot needed to provide you with a comfortable retirement.

Flexibility: A lot of older pension plans do not give you as much choice over how you access your money. By switching to a new single plan you could have greater flexibility over access to your money when you need it.

These are some of the benefits of consolidating your pensions, but it is also important to make sure that you are aware of all the details of your existing pensions as you could potentially be giving up some valuable benefits.

Things to Check Before You Consolidate

Safe Guarded Benefits: Some pension plans have valuable guarantees attached, such as guaranteed annuity rates or guaranteed growth rates which may be lost if you decide to transfer out from the scheme. So, it is always important to check whether you are entitled to any of these, and if you still want to go ahead with the transfer despite this.

Protected Tax Free Cash: Some older pension plans may have an enhanced tax free cash entitlement above the usual 25% which may be lost on transfer.

Exit fees and charges: Some plans especially older ones may put in place an exit fee or penalty if you want to move your money to a new plan. The fee will usually be a percentage of your pension savings, although if your pension is in a ‘with-profits’ fund then your exit fee may come in the form of a Market Value Reduction (MVR). You should carefully consider whether any perceived benefits of moving the funds to a new pension outweighs any exit fee, charges or MVR that may apply.

In addition, where a new pension has higher charges than any existing pension(s) it is also important to consider whether the new plan offers sufficient additional benefits to warrant the additional cost.

As you can see, there is a lot to think about before consolidating your defined contribution pensions and you should seek independent financial advice. Speak to a member of Nockolds Wealth to find out more.

Important Information

  • This article is for your general information only, and is not intended to address your particular requirements. The content should not be relied upon in its entirety and shall not be deemed to be, or constitute, advice.
  • No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of the content.
  • Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is provided or that it will continue to be accurate in the future.
  • Levels and bases of, and reliefs from, taxation are subject to change and their value depends on the specific circumstances of the individual. All figures relate to the current tax year unless otherwise stated.
  • The value of your investments and the income derived from them can go down as well as up and you may get back less than you invested. Where stated, past performance is used as a guide and is no guarantee of future returns
  • There is no guarantee that a new/consolidated pension plan will perform better than your existing pension plan(s).
  • During a transfer of funds between pension providers, your pension fund will not be invested while the transfer is taking place and will therefore not benefit from any potential investment growth during this period.
* (Source: FCA website, last updated 05/06/2020
| https://www.fca.org.uk/consumers/pension-transfer-defined-benefit)

Many adult children now rely on the bank of mum and dad to be able to afford to buy their first home.

It is important that parents give careful consideration to their options for being able to assist their child to purchase a property before they make the money available.

If you intend to gift money to your child and they intend to purchase a home with another person, make sure that the money is protected, whether by a declaration of trust between your child and their partner, or between the three of you.

The main disadvantage of a declaration of trust between just your child and their partner is that, if they marry and later divorce (without the protection of a prenup) the declaration will not be conclusive and will be one of the factors to be taken into consideration when the financial split is decided.

Divorce will not affect a declaration of trust between the three of you.

If you intend to gift money to your child, you should take advice as to potential inheritance tax implications, as if you die within seven years of making the gift, it could still be considered as part of your estate for inheritance tax purposes.

Alternatively, you could loan the money to your child. This would mean that it belongs to you. It would be sensible to protect yourself with a loan agreement. The disadvantage of this would be that the mortgage lender would take any loan repayments (if any are to be made) into account in the affordability calculation, which may limit the number of mortgages available to your child.

The most suitable option will depend on your and your child’s circumstances. We can advise you on the pros and cons of each option to help you to make a decision.

You will be free to marry once Decree Absolute is made in your first divorce. While Decree Absolute can be made six weeks and one day from the date of Decree Nisi, it is usually sensible to wait until a financial order has been approved by the court before Decree Absolute is applied for.

Before you remarry, you may wish to:

  • Review your Will
    Any gift to your former spouse in your Will or appointment of your spouse as your executor will be void once you are divorced. If you do not have a Will and you remarry, your new spouse will inherit some or all of your estate under the intestacy rules.

    Make sure that your Will reflects your wishes as to what you would want to happen to your assets in the event of your death. It may be, for example, that you wish to consider making gifts to your children in your Will.
  • Think about your living arrangements
    It may be that you both own a property and will live in one property and rent out the other. Consider how the household outgoings of the property that you live in will be met. If there is a rental income from another property, think about if and how that will be shared. If you plan to buy a property together, ensure that your contribution is protected.
  • Consider entering into a marital agreement, commonly known as a ‘prenup’
    We know that many betrothed couples feel that prenup are an unromantic concept, but they can help both spouses understand where they stand, and offer protection and certainty in the event of a future divorce.

    Even if you had a relatively ‘easy’ and uncomplicated first divorce, you may find that a second divorce is more stressful, complicated, lengthy and expensive without the protection of a prenup.

    Prenups are not just for the rich and famous, and usually do not cost as much as people think.
  • If you have children with your ex, agree with them (if you can) about how to tell the children about the new marriage, and how any questions that the children have will be answered
    If your children are young, they may be concerned about, for example, what they will call your new spouse, or whether the marriage will affect the time that they spend with their other parent.
  • Any liability on your ex-spouse to pay spousal maintenance (not child maintenance) to you will automatically terminate on your remarriage and cannot be started again if the second marriage ends. Consider how this might affect your household outgoings with your spouse-to-be.
  • Take advice on any tax-related issues that will be affected by marriage. This is most sensibly done at the same time as considering your Will.
  • Keep your Decree Absolute in a safe place. The registrar will need to see it before you remarry.
  • Take out wedding and honeymoon insurance. The cover will offer you protection if the wedding and/or honeymoon cannot go ahead or go ahead as you planned.
  • Have any contracts (such as with the venue, caterers) reviewed by a lawyer to ensure that you are fully aware of what you are signing up to and that it is fair.

Leave It To Us...

For more information and to find out how we can help you, please contact us on 0345 646 0406 or fill in our online enquiry form and a member of our Team will be in touch.

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