ISSUE 3 - 2017

www.successiongroup.co.uk

OUR CHILDREN’S FUTURE... IN OUR HANDS?In this issue of Succession News, we look at our children’s future from a savings, inheritance, property and pensions point of view.

FUNDING YOUR CHILD’S EDUCATION

SAVING FOR CHILDREN

CHILDREN AND THEIR RETIREMENT PLANNING

COMMERCIAL PROPERTY

Succession NEW

SQUARTERLY NEWS BULLETIN

Editorial Team

Design & Print: citrusmedia

Succession News Magazine is designed and published by Succession Group Limited. No part of this publication may be reproduced without the permission of the publishers.

This magazine has been written for information purposes only and does not constitute advice or a personal recommendation. It does not take into account the particular investment objectives, financial situations or needs of individuals. The information and opinions expressed in the articles are those of the relevant authors and based on information which they believe to be reliable. They do not represent that they are accurate or complete and they should not be relied on as such. Any information is given in good faith but is subject to change without notice.

This publication contains links to websites owned and operated by third parties. Succession Group cannot and has not reviewed all pages of the sites linked to this publication and therefore cannot be liable for their content. No liability whatsoever is accepted by Succession Group Ltd.

FP:2017-297

IN THIS ISSUE...

Succession NEWS 3

LET THE WEALTH

YOU CREATE TODAY

PROVIDE FOR YOUR

FAMILY’S

TOMORROW

Investingfor futuregenerations

At Triple Point we know that when investing for the next generation, you need a solution that not only preserves the value of your funds through Business Relief, but ensures the continued growth of your capital.

Your capital is at risk. There is no guarantee that target returns will be achieved andinvestors may get back less than they invested. Tax rules and reliefs are subject to change.

Triple Point is the trading name for the Triple Point Group which includes the following companies and associatedentities: Triple Point Investment Management LLP registered in England & Wales no. OC321250, authorised andregulated by the Financial Conduct Authority no. 456597, Triple Point Administration LLP registered in England& Wales no. OC391352 and authorised and regulated by the Financial Conduct Authority no. 618187, and TPNominees Limited registered in England & Wales no. 07839571, all of 18 St. Swithin’s Lane, London, EC4N 8AD.

At Triple Point we know that when investing for the next generation, you need a solution that not only preserves the value of your funds through Business Relief, but ensures the continued growth of your capital.

Contact your Succession Wealth Planner to find out more.

Triple Point Estate Planning Service

The Triple Point Estate Planning Service is a clear and straightforward investment solution that aims to achieve 100% relief from inheritance tax after two years without surrendering control or access to your capital.

www.triplepoint.co.uk

Keeping it in the family Succession Group 5

Saving for children Vanguard 6

Essentials in financially educating the kids Seven IM 9

Commercial property: building foundations for the future Janus Henderson Investors 9

Funding your children’s education Succession Group 10

Banking on Mum and Dad Succession Group 12

‘Mum, Dad, I’m getting married’ Succession Group 14

Keeping your family safe Succession Group 16

Children and their retirement planning...surely some mistake! LGT Vestra 19

Why it’s a good idea to start saving for your child’s retirement now Succession Group 20

All the paperwork you need Succession Group 22

Tis better to give Succession Group 24

help to calculate the impact of the residence nil-rate band on your estate Octopus Investments 26

Are pension contributions good for IHT planning? Prudential 27

Succession NEWS 5

KEEPING IT IN THE FAMILY As families are increasingly blended, Succession News explores how you can preserve wealth for your direct descendants?The blended family is now the norm rather than the

exception in fact they now account for 10% of families in

the UK * (1.). Families often come with step-children, ex-

wives, second husbands and while wicked step mothers are

usually the stuff of fairy tales, there may be circumstances

where you would rather share your wealth only with your

blood relatives.

There is a trust that will help you plan your legacy with

greater precision. So-called ‘bloodline’ trusts - also known

as discretionary trusts, family protection trusts or wealth

protection trusts - can protect a family’s wealth and

assets, ensuring that they are not at risk from the divorce or

bankruptcy of family members. In a bloodline trust, the money

can only be accessed by your children, grandchildren or

other direct descendants. It specifically excludes those who

have married into a family.

This can be useful where, for example, your child marries

someone who has children from a previous marriage, or

where you fear a child is on the brink of divorce and you

do not want to see half of your assets go to a soon-to-be-ex

spouse. Your child may have married someone financially

irresponsible and you fear it may end up in the hands of

their creditors. There may also be issues if your own spouse

remarries - you may not want your assets in the hands of a

new partner or their children.

In certain circumstances, this type of trust can also help

protect the estate from the impact of care home fees. If

assets are put into trust, and providing the settlor does

not retain control over those assets, they may not be

taken into account by local authorities when assessing

care fund needs. This is, however, a complex area.

Our specialist Later Life Planning Team would be able to

provide more information.

In other circumstances a ‘discretionary trust’ may be the

right option. In this type of trust, the trustees have discretion

on how to use the trust income, and sometimes the capital.

They decide what gets paid out and to whom. They may

also impose conditions on the beneficiaries. They may be

set up to put assets aside beneficiaries who aren’t currently

capable or responsible of managing their own money. The

settlor sets the guiding principles for the trust, but the trustees

have legal ownership of the assets and the person who

establishes the trust cannot retain control.

The right structure for the trust will depend on how you want

to distribute your wealth. If you have just one beneficiary, an

‘immediate post death interest trust’ may be appropriate.

This may be used in a situation where someone has remarried,

and want their new spouse to have a lifetime interest in their

property or assets, but wants the estate ultimately to revert

to their own children, rather than their spouse’s children,

after they die. This needs to be established in a person’s will,

so requires some forward planning.

Case study

Annabel had run a successful business for many years,

which she eventually sold for £6m. She and her husband

both have children from previous marriages. She had two

adult daughters from her first marriage and he had four boys

from his first marriage. Her husband brought some property

to the marriage, but the majority of their wealth has come

from her business.

Annabel wanted to preserve the wealth from the sale of her

business for her daughters. She wanted to ensure that it did

not go to her husband’s children should she pre-decease

him or to any of her daughters’ spouses or boyfriends. She

also wanted to make sure that her husband could maintain

his lifestyle while he was alive. She established a discretionary

trust. She stated that she wanted her daughters to be able

to withdraw money from the trust at aged 35. Up to that

point, the trustees could make payments for education or

maintenance needs at their discretion. She could also ask

that the trustees made provision for her spouse.

For more information, talk to your Succession Wealth Planner.1. https://www.gov.uk/junior-individual-savings-accounts/overview2. https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/ pensions-and-tax/tax-relief-and-contributions

ETHICAL INVESTINGWe’ve been managing sustainable investments since 2002.Let us help you help your client.

www.ksep.co.ukFor your reference the value of your investments may fall as well as rise and is not guaranteed.

King & Shaxson Capital Limited (FRN: 169760) is authorised and regulated by the Financial Conduct Authority.

Please contact your Succession Wealth planner

K&S_ethical_ad_A5_landscape.indd 1 14/07/2017 15:09

SAVING FOR CHILDRENIf our generation has learnt anything, it is not to assume that the future will be the same as the present. It was hardly 20 years ago that university was free and that the majority of people looked to either their employer or the state for basic pension provision.

Increasingly, individuals are coming to terms with the need

to invest for their own retirement. And university, from being

free is now likely to cost around £60,000, including tuition

fees and living allowance.

Besides university, young people face serious challenges in

financing a home. The average first-time buyer puts down a

deposit of 17% . On the average UK house, costing £290,000,

that means a down-payment just shy of £50,000 .

Of course, everyone’s situation is different. But many of

us face the double challenge of investing for our own

retirement while thinking of ways to help our children at

appropriate times. There are no miracle solutions. We

can, though, make the best of the advantages of time

and regularity.

The one big thing that children have is time. Investing even

small amounts each month, compounded over several

years, might not solve all your problems, but it can make a

significant difference.

Let’s look at an example. Let’s say, at the end of March

2007, you invested £1000 in the Vanguard LifeStrategy 60%

Equity Fund, a simple, low-cost, diversified portfolio of shares

and bonds, which are a type of loan. Let’s say you then

added in £100 a month for the next ten years. At the end,

despite the set-back of the financial crisis, you would have

£21,700 for a total investment of £13,000, including fees.

If you had invested in the LifeStrategy 60% Equity Fund

through a Junior Individual Savings Account (JISA), that extra

return would be tax free. (Of course, it must be remembered

that past performance is not a reliable indicator of

future result).

It doesn’t solve your life problems. It doesn’t even get the

washing-up done. But it is not a bad starter for the challenges

likely to face our children as they grow up.

Ben NightingaleHead of UK strategic accounts1. http://www.which.co.uk/money/mortgages-and-property/guides/mortgage-de posit-explained/how-much-deposit-do-i-need-for-a-mortgage/2. http://www.theguardian.com/business/2016/feb/16/average-uk-house-price- reaches-288000

ESSENTIALS IN FINANCIALLY EDUCATING THE KIDSMost of us believe that our children’s education can be left primarily in the hands of teachers. But there’s one area where we cannot pass on responsibility – financial education. Schools don’t have the resources given it’s not part of the curriculum and their only access to information would be through service providers. Many of us would be uncomfortable giving large brands the ability to ‘sell’ to our offspring so early in life.

So it’s down to us parents. I’ve tried to do the best thing by

my children, aged 9 and 12. They’ve had pocket money

since they could complete chores. They originally received

it fortnightly to help them budget, moving to a monthly basis

when they reach(ed) 10.

When each reaches 13 - an age when they can grasp the

appropriate concepts - I plan to introduce a Junior ISA and

help them select the underlying funds. That allows some five

years of investment experience before they can access

any money. They’ll also hopefully appreciate that money

foregone today is simply transferring happiness to another

time frame!

There are many examples of millionaires who started young.

You may disagree with Jacob Rees-Mogg’s politics, but no

one would baulk at his money. While he came from wealth,

much of his money is actually self-made having set up a firm

with two friends in Hong Kong. He started young: there’s a

picture of him aged 12 reading the Financial Times.

Not everyone needs or wants to become that familiar

with finance. But I would like my kids to understand what

National Insurance Contributions are when they turn 16

and that they’ll pay into a pension when they start work.

Through timely education, I hope to do a half decent ‘job’

as a parent (for once!). Now, if they could also keep me in a

lifestyle to which I’d easily become accustomed… an area

I’m sure that a Succession wealth planner can help…

Seven Investment Management LLP is authorised and regulated by the Financial Conduct Authority. Member of the London Stock Exchange. Registered office: 55 Bishopsgate, London EC2N 3AS. Registered in England and Wales No. OC378740.

Succession NEWS 9

COMMERCIAL PROPERTY: BUILDING FOUNDATIONS FOR THE FUTUREMost people think of residential property when considering investing in bricks and mortar based assets. An allocation to commercial property, however, may provide an alternative means of receiving regular income for lifestyle planning and future family needs, along with diversification and capital growth potential.

Income, growth potential, and diversificationCommercial property funds, particularly those owning a greater proportion of higher-quality property assets, should appeal to investors on three fronts: they offer a possible good source of income in the form of rents, with the potential for rental growth in locations and sectors that are exhibiting economic strength; they provide the potential for capital gain over the long term should the properties rise in value; and they bring diversification to a portfolio with property historically performing differently to other asset classes.

The value of an investment and the income from it can fall as well as rise and you may not get back the amount

originally invested. Past performance is not a guide to future performance.

Due to the specialist nature of property investment, sometimes, there may be constraints on the redemption or switching of units/shares in the fund(s). The funds invest in a specialist sector that may be less liquid and produce more volatile performance than an investment in other sectors. The value of capital/income will fluctuate as property values and rental income rise and fall. The valuation of property is generally a matter of valuer’s opinion rather than fact. The amount raised when a property is sold may be less than

the valuation.

Nothing in this document is intended/should be construed as advice.

Issued in the UK by Janus Henderson Investors. Janus Henderson Investors is the name under which Henderson Investment Funds Limited (reg. no. 2678531) is incorporated and registered in England and Wales with registered office 201 Bishopsgate, London EC2M 3A and authorised and regulated by the Financial Conduct Authority to provide investment products and services.

© 2017, Janus Henderson Investors. The name Janus Henderson Investors includes HGI Group Limited, Henderson Global Investors (Brand Management) Sarl and Janus International Holding LLC.

THE OLDER YOU GET,

THE MORE FLEXIBILITY YOU WANT

Investingfor futuregenerations

At Triple Point we know that when investing for the next generation, you need a solution that not only preserves the value of your funds through Business Relief, but ensures the continued growth of your capital.

Your capital is at risk. There is no guarantee that target returns will be achieved andinvestors may get back less than they invested. Tax rules and reliefs are subject to change and withdrawals are subject to liquidity.

Triple Point is the trading name for the Triple Point Group which includes the following companies and associated entities: Triple Point Investment Management LLP registered in England & Wales no. OC321250, authorised and regulated by the Financial Conduct Authority no. 456597, Triple Point Administration LLP registered in England & Wales no. OC391352 and authorised and regulated by the Financial Conduct Authority no. 618187, and TP Nominees Limited registered in England & Wales no. 07839571, all of 18 St. Swithin’s Lane, London, EC4N 8AD.

At Triple Point we know that when planning for retirement and inheritance tax, you require a Business Relief solution that is as flexible as it is robust; providing you with access to your money and allowing you and your loved ones to benefit from your years of hard work.

Contact your Succession Wealth Planner to find out more.

This is a financial promotion issued by Triple Point Investment Management LLP

Triple Point Estate Planning Service

The Triple Point Estate Planning Service is a clear and straightforward investment solution that aims to achieve 100% relief from inheritance tax after two years without surrendering control or access to your capital.

www.triplepoint.co.uk

Succession NEWS 11

FUNDING YOUR CHILDREN’S EDUCATION

University is increasingly expensive. Succession News considers how to help your children pay for it.University tuition fees remained a hot topic in the General

Election campaign, but for the time being at least, the

student - or their parents - must bear the burden. Fees will

increase to £9,250 in the 2017/18 tax year and continue to

rise in line with inflation thereafter. There had been talk of

making higher fees dependent on improved teaching, but

there are no plans to implement this before 2020/21.

At the same time, the cost of student debt continues to rise.

Student loans are subject to a sharp increase in interest rates

in the Autumn – moving from 4.6% to 6.1%, putting them well

ahead of the interest rate on normal personal loans. Many

parents will feel uncomfortable about their children starting

out in life saddled with significant debt and will, therefore,

want to help out both for tuition fees and living expenses.

Living expenses very much depend on the university, but

the University of Bristol estimates that they will add another

£9,000 to £13,000 each year to a student’s bill (1.). The

University of Oxford suggests a range of £11,000 to £17,000

(2.), while Edinburgh University has a lower band of £8,000,

rising to £16,000 (3.). Either way, to emerge debt-free from

university, parents would probably need to support their

children to the tune of £60,000 or so.

There is no easy solution to raising the money that you’re

likely to need. Starting early is key to let the power of

compounding do its work. If you start when your child is

5, you’ll need to save around £225 a month to raise a pot

of £50,000 (assuming a growth rate on your investment of

5%). If you start at 15, you’ll need to save around £1,250 a

month to hit your target. While judging a child’s academic

potential may be tricky at 5, if they turn out not to be the

scholarly type, it would be a boost to your pension pot if you

find yourself with £50,000 that is now not committed.

If you start saving for university fees early, it also allows you

to invest in riskier assets, which may have greater growth

potential over the long term. This is particularly important

when cash rates are low, and may not beat inflation. (For

example, the top-paying easy-access savings accounts

currently pay 1.1% (source: Savings Champion). With inflation

running at 2.6% (4.), investors may find it erodes the real-

world value of their pot over time. For those with a longer

time horizon, your Succession Wealth Planner can discuss

the investment strategy that best suits your circumstances.

Junior Isas can be an effective way to save for living

expenses at university. You can put in £4,128 per year (17/18

tax year) and the income drawn out will be tax-free. The

only problem is that parents have no control over how it

is spent and experience suggests that handing an 18-year

their first taste of freedom with a £50,000 lump sum may not

deliver the right outcome. Some parents may be more

comfortable using their own Isa allowance, rather than

relying on their children.

For older parents, it may also be possible to use a pension.

You can access a pension from age 55 and can take 25%

tax-free up front, which may help pay for fees. However,

this is a delicate piece of tax planning, and there are

implications to taking your pension early. Your Succession

Wealth Planner will be able to help you if this is a route you

would like to consider.

For more information, talk to your Succession Wealth Planner.1. http://www.bristol.ac.uk/fees-funding/advice/living-expenses/2. https://www.ox.ac.uk/students/fees-funding/living-costs?wssl=13. http://www.ed.ac.uk/studying/international/finance/cost-of-living4. https://www.ons.gov.uk/economy/inflationandpriceindices

Succession NEWS 13

BANKING ONMUM AND DAD

Succession News explores how you can help your children to buy their first property.As house prices rise and incomes stagnate, parents may

be increasingly concerned that their children will never be

able to get onto the property ladder. The ‘Bank of Mum and

Dad’ is now the 10th biggest UK mortgage lender (1.). As

parents give their children a helping hand, they are now

involved in a quarter of all UK property transactions.

A priority for many parents will be ensuring that their children

have a deposit. The average first-time deposit has more

than doubled since 2007 to stand at over £32,000 (2.).

While some parents will choose simply to save up for their

children over a period of years, other parents have used

the capital in their homes to fund deposits for their children.

Lenders have made this easier, by relaxing age limits on

mortgages. It is now possible to have mortgages ending at

age 70 and beyond.

For others, equity release or lifetime mortgages may be an

option. These allow you to take part of the capital in your

home and keep living there. The loan is repaid on death,

along with interest. While costs need to be calculated

carefully, these products can also help mitigate inheritance

tax by reducing the overall value of your estate. Used

properly, they can give children capital when they need

it, while also reducing the tax they pay on your estate. As

such, they are worth considering, though specialist advice

is needed and your Succession Wealth Planner can put you

in touch with our specialist team.

Parents may also be able to help their children with a

guarantor mortgage. These mortgages are offered by most

of the major lenders and pass some or all of the liability for

a mortgage taken out by the child onto the parents. This

helps people whose salary may not be high enough to

meet lenders’ criteria for the amount they want to borrow.

However, it does mean that the parents are on the hook if

children do not make their repayments and you may need

to forge some agreement with your children about what to

do if they lose their job or can’t make repayments.

Where possible, children should take advantage of the

various schemes to incentivise home ownership. Help-to-

buy and Lifetime ISAs are Government-sponsored schemes

designed to help first-time buyers save for their deposit. For

Help-to-buy, the Government will add 25% to any savings,

up to a maximum of £3,000 on savings of £12,000 (3.). The

money can only be held in cash, and the top rates are

currently 2.25% (4.).

Lifetime ISAs were introduced at the start of this tax year.

If you’re under 40, you can put in up to £4,000 per year as

cash savings or stocks and shares. The Government tops up

your contribution by 25%, and the proceeds can be used for

a first home or retirement at 60 or over (5.). People can use

the money for other purposes, but the Government will claw

back its contribution, and any gains, so it is worth ensuring

that it is used for the intended purpose. For both types of ISA,

there are limits on the property price - £250,000 for the help-

to-buy (£450,000 for London) and £450,000 (all properties)

for the lifetime ISA.

Children should not neglect conventional savings options as

well. Everyone has an annual ISA allowance of up to £20,000

(this includes the Lifetime and Help-to-buy ISA allowances if

they are being used). In practice, if your children are looking

to buy in the relatively short-term (within three years), they

will need to hold the money in very low-risk investments. If

they have a longer-term horizon, they can probably afford

to take a little investment risk to try and achieve stronger

capital growth and some protection against inflation.

If your child is seeking a foot on the housing ladder, talk to

your Succession Wealth Planner about the most appropriate

way to help them, without compromising your own long-

term financial planning.

For more information, talk to your Succession Wealth Planner.1. http://www.bbc.co.uk/news/business-397780292. http://www.bbc.co.uk/news/business-386054793. https://www.gov.uk/affordable-home-ownership-schemes/help-to-buy-isa4. https://www.savingschampion.co.uk/best-buys/personal/help-buy-isa/5. https://www.gov.uk/lifetime-isa

Succession NEWS 15

‘MUM, DAD, I’M GETTING MARRIED.’

Succession News Magazine looks at how to mitigate the costs of the BIG day.When your daughter announces that she is getting married,

early excitement may turn to horror once a realistic appraisal of

the cost of cake, venue, dresses and special touches has been

done. The average wedding costs more than £30,000 (source:

Bridemagazine.co.uk) - and your daughter may have even

grander plans.

While you can do your best to rein in costs, managing a bride’s

expectations is never easy. It is still traditional for the bride’s family

to pay for the majority of a wedding with the groom paying for his

suit, the ring(s) and the honeymoon.

While it may seem far-fetched to start saving when your little girl

is more interested in Peppa Pig than Mr Right, starting early is your

greatest weapon. The sooner you start saving, the less it will cost

you. If your daughter chooses not to get married, you can always

add the cash to your pension pot.

If you start saving early, it does not pay to be too cautious

in your investment approach. And with a 10-15 year time

horizon, it may be counterproductive to keep everything

in cash.

Not every story has a happy ending, and while it may not be

pleasant to think about it, it would be naïve not to prepare for the

eventuality of divorce. If you believe the marriage may have a

short life span, make sure family assets are protected. Prenuptial

agreements are unromantic, but they have their place,

particularly where there are stepfamilies or children involved.

While prenuptial agreements are not strictly enforceable in the

UK, they are now used as a key reference for court decisions.

Equally, it may be worth talking to your Succession Wealth Planner

about a bloodline trust. This can help protect family assets,

ensuring that wealth is only passed to direct descendants.

You can also use a wedding to do a little inheritance tax

planning. ‘Gifts in consideration of marriage’ attract favourable

IHT treatment. The first £5,000 of a gift by a parent of either part

of the marriage is exempt, so a couple can receive up to £10,000

from their parents. The first £2,500 of a gift by any other relative,

such as grandparents, is also exempt. Everyone else can make

gifts of up to £1,000.

Finally, while it is easy to get carried away with the idea of ‘one

big day’, budgetary discipline should not be abandoned. And

it could be an opportune time for you to introduce the Happy

Couple to the discipline of financial planning with your Succession

Wealth Planner.

For more information, talk to your Succession Wealth Planner.

Succession NEWS 17

KEEPING YOUR FAMILY SAFE Succession News helps you plan for the unexpected and you could save your family a lot of problems.Life doesn’t always go to plan. It may seem morbid to plan

for the worst, but illness, injury or redundancy can have a

serious impact on your family’s financial future and around

a third of households (Source: ING Bank) have nothing set

aside for emergencies. There are a number of important

measures you should put in place to safeguard your family.

Life insurance should always be a top priority. It is a relatively

inexpensive way of ensuring that your family is protected

if you die. You make payments over a period of time and

it pays out a lump sum on death. You can make higher

payments more to receive a larger lump sum at the end

and the cost will also depend on your age and health.

The amount needed varies greatly from person to person

- the size of the mortgage, how many dependents still live

at home. It will also depend on existing assets and the

insurance cover you have elsewhere: For example, you

should consider how much you may receive from your

company - many have a ‘death in service’ benefit, which

can amount to 3-4 times your salary. Self-employed, or

those running their own business, will not have automatic

provision, so they will need a larger lump sum.

However, death is not the only consideration. Far more

common is a serious illness that leaves you unable to work,

or redundancy. Having a few months’ living expenses held

in cash is your first line of defense. Financial planners usually

recommend holding at least three months to allow you

some breathing space if you lose your job for any reason.

You may also want to consider income protection insurance,

which would kick in after a period of illness or injury. The

cost will vary according to your age, state of health and

the amount of income you are looking to replace. If you

want to pay a little less, you can defer the point at which

the policy kicks in: You may decide that you can cope for six

months or so, but would need protection thereafter.

Policies vary in the conditions and situations they cover

and the amount of income they provide, so you need to

examine your needs carefully. You may find that pre-existing

conditions are not covered. Again, you should also look at

the extent to which your employer provides protection if you

are on long term sick leave. The Government will provide

some benefits, but these are unlikely to be high enough to

sustain you in the longer-term.

In general, some cover is better than none. Even if you

can’t afford to take out life insurance or income protection

insurance to replicate the income you contribute to the

family coffers in full, it is worth taking out a smaller amount.

Long-term illness, redundancy or any other material

change in your circumstances may necessitate changes

to Your Succession Plan. You may want to make smaller

contributions for a while, or you may need to start drawing

an income from your investments. You may want to retrain.

Your Succession Wealth Planner will help you through

the likely implications and tell you how it impacts your

long-term goals.

Planning for the unexpected is difficult; it is far easier to

believe that nothing bad will happen. However, knowing

that you have a plan can be reassuring at times when you

have many other things to worry about.

For more information, talk to your Succession Wealth Planner.

We don’t just take a passive role in the companies we invest in.

We make ourselves heard on behalf of our investors.

The value of investments and any income from them may fall as well as rise, and you may get back less than you invest. Details of the specific and general risks associated with the funds mentioned are contained within the Key Investor Information Documents. Legal & General (Unit Trust Managers) Limited. Registered in England and Wales No.1009418. Registered office: One Coleman Street, London, EC2R 5AA. Authorised and regulated by the Financial Conduct Authority. *As at 31 December 2016.

Legal & General Index Funds

We’re one of the UK’s largest index managers with

£319.8bn in index funds*. We leverage our scale

and indexing expertise to offer clients the most

cost-effective index funds we can. But we also

engage with companies to represent investors’

interests, effect change and improve company

performance. Because we believe that good

corporate governance protects the long-term

prospects of our investors. But also, because

it’s the right thing to do for the next generation.

For more information please contact your Succession Wealth Planner

LGIM0091_Loudhailer_SN_297x210.indd 1 11/07/2017 16:01

Succession NEWS 19

CHILDREN AND THEIR RETIREMENT PLANNING......SURELY SOME MISTAKE!

First some basicsThe amount that can normally be contributed to a pension for a child, on the basis (very likely) that they have no relevant earnings in any one tax year, is £3,600 gross or £2,880 net. In other words, there is automatically a 20% uplift by virtue of the tax relief granted on the contribution. Additionally, the contributions are invested and grow in a tax-free environment.

A universal lawWe know that compounding of returns over the long-term can produce very powerful outcomes for investors. Consider the idea of making your child a millionaire by the time they reach retirement - that is not beyond the realms of possibility. Ask your Succession Financial Adviser for advice on how compounding of returns can play such a crucial part in the creation of a meaningful pension pot.

Do not underestimate the importance of saving on behalf your children and grandchildren for their retirement. It allows you to build a fund for your loved ones in a highly tax efficient environment and provide a solid foundation for their retirement. For further details please contact your Succession Wealth Planner.

Important InformationThe information presented herein is for illustrative purposes only and does not provide sufficient information on which to make an informed investment decision. This document is not intended and should not be construed as an offer, solicitation or recommendation to buy or sell any specific investments or participate in any investment (or other) strategy. It is recommended that potential investors should seek advice concerning the suitability of any investment from their Financial Adviser. Po-tential investors should be aware that past performance is not an indication of future performance and the value of investments and the income derived from them may fluctuate and they may not receive back the amount they originally invested. LGT Vestra LLP is authorised and regulated by the Financial Conduct Authority.

WHY IT’S A GOOD IDEATO START SAVING FOR YOUR CHILD’S RETIREMENT NOW

Succession NEWS 21

Succession News Magazine explores the trend for children’s pension planning - start early and save regularly to given your children a pensions head start.When you welcome a new baby into the family, picking a

pension for them is unlikely to be your first priority. However,

there are real advantages in starting a pension for your

children at the earliest possible moment.

The ‘savings crisis’ continues to pose a problem for

individuals and Governments alike. As pensions have

become increasingly unaffordable both for the state and

for companies, the responsibility for later-life provision has

been pushed back on individuals. This is likely to become

more acute in future generations as governments have to

contend with higher and higher debt burdens.

With this in mind, parents may want to give their children

a head start. Junior ISAs are often the first port of call for

parents saving for their children. However, it is only possible

to save up to £4,128 per year (1. 17/18 tax year) and the

child becomes entitled to the pot at age 18. That is great

if you have a responsible, strong-minded 18-year. But

some 18 year olds are not, and parents may prefer to

exercise more control. Either way, it is worth considering

additional options.

On the face of it, starting a savings plan for your child

where they can’t withdraw the cash until they are 55 may

seem cruel, but there are several attractions to a pension:

Children’s pensions attract the same tax relief as a normal

pension, so even though your child doesn’t pay tax, the

taxman will add 20% to all contributions to a maximum of

£3,600 each year. If you invest £2,880, the government will

add £720 (2.).

The effect of compounding over all those years is significant.

Starting at birth and assuming a growth rate of 5%, £300

a month would give a pot of £1,047,850. Of course, you

may want to pass on responsibility for contributions to your

children after age 18, but either way, you have given them

a head start. To put this in context, the same £300 a month

started at 30 would only give a pot of £178,650.

This lengthy time frame also allows you to take more

investment risk. You may have as long as 40-50 years to

invest, meaning you can consider a higher level of

investment risk.

Importantly, you need to make sure that any investment

keeps pace with inflation. Assuming a long-term inflation

rate of 2% (the Bank of England’s current target), investors

can expect the real value of their capital to halve every

35 years.

Another advantage of a pension, or indeed any other type

of saving, is a behavioural one. It gets children in the habit

of saving, which is a great lesson for life. These habits can

help ensure their financial security for life.

Of course, there are also disadvantages: Children’s pensions

will not help with school or university fees (though it may be

possible to use your own pension for this if you have children

later in life). The money is tied up for a long time and it is not

possible to get access to it. As such it is best to combine it

with another form of savings, such as a Junior ISA, or your

own ISA. Either way, in saving money into a pension for your

child, you may give them the luxury of never having to worry

about their retirement. They might even thank you for it.

For more information, talk to your Succession Wealth Planner.1. https://www.gov.uk/junior-individual-savings-accounts/overview2. https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/ pensions-and-tax/tax-relief-and-contributions

Succession NEWS 22

ARE PENSION CONTRIBUTIONS GOOD FOR IHT PLANNING?

Cascading your wealth through the generations via a pension can be a great way to look after family members. Would you like to invest in your children or grand children’s future as you know they will not be in the golden era of pensioners?

Our case study below discusses how a grandfather could

use a pension to look after his grandchild’s future. This does

not constitute financial advice.

A pension for Olivia

Michael, 62 is a retired surgeon. He is widowed with one

son, Matthew who is 32. Michael is a member of the NHS

pension scheme and he is receiving pension income of

£50,000 per year. Matthew’s first child, Olivia, is 1.

Michael has decided that he would like to save money for

Olivia. He doesn’t want tied into putting large amounts into

a trust or Olivia to be able to access it until she is older. His

adviser explained that pension contributions might be a

good idea.

Michael sets up a pension plan for Olivia, paying £2,880

per year which is then grossed up with tax relief to £3,600.

Although Olivia doesn’t have any earnings, she is still

entitled to this tax relief from the government. £3,600 is the

maximum allowed for tax relief if there are not any relevant

earnings, such as salary. The value of an investment may go

down as well as up and Olivia may get back less than has

been paid in.

An annual contribution of £2,880 is set up for every January

around Olivia’s birthday. If Michael pays this until just after

Olivia is 18, with 5% net growth on the fund, the fund value

will be £101,277*. Even if no more contributions are made

and still assuming 5% growth, then just after Olivia’s 60th

birthday, the fund will be worth £786,067. A nice pension

fund for Olivia and if the worst were to happen and Olivia

died then Olivia’s beneficiaries would receive the pension

death benefit.

Michael could carry on paying pension contributions

after Olivia is 18 or he could think about paying the £2,880

towards university fees or helping Olivia with a deposit for a

first house.

Michael’s contributions to Olivia’s pension fund mean

that his bank balance is reducing which is good news if

inheritance tax might be a problem on his death.

Instead of sitting in a bank account which would form part

of Michael’s estate on death, his wealth is passing to Olivia

to help her future. As Michael is giving away less than £3,000,

which is within the annual IHT exemption, he immediately

saves on the IHT. Olivia can add money herself in years

to come or it can just grow in a tax efficient environment.

Please note tax rules may change, and depend on your

individual circumstances.

Clare MoffatSenior Technical Manager at Prudential

To find out more about how Prudential can help

with your investment planning contact your Succession

Wealth planner.

* This calculation takes into account inflation.The Prudential Assurance Company Limited (PACL) is registered in England and Wales. This name is also used by other companies within the Prudential Group. Registered office at Laurence Pountney Hill, London EC4R 0HH. Registered number 15454. Autho-rised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get back the amount originally invested. Unlike the income from a single fixed income security, the level of income (yield) from a fund is not fixed and may go up and down. Sub-investment grade bonds have characteristics which may result in a higher probability of default than investment grade bonds and therefore a higher risk. For funds that use derivatives, their use may be beneficial, however, they also involve specific risks. Derivatives may alter the economic exposure of a fund over time, causing it to deviate from the performance of the broader market. For more information concerning the risks of investing, please refer to the Prospectus and Key Investor Information Document (KIID). Financial promotion issued by Royal London Asset Management June 2017. Information correct at that date unless otherwise stated. Royal London Asset Management Limited, registered in England and Wales number 2244297; Royal London Unit Trust Managers Limited, registered in England and Wales number 2372439. RLUM Limited, registered in England and Wales number 2369965. All of these companies are authorised and regulated by the Financial Conduct Authority. All of these companies are subsidiaries of The Royal London Mutual Insurance Society Limited, registered in England and Wales number 99064. Registered Office: 55 Gracechurch Street, London, EC3V 0RL. The marketing brand also includes Royal London Asset Management Bond Funds Plc, an umbrella company with segregated liability between sub-funds, authorised and regulated by the Central Bank of Ireland, registered in Ireland number 364259, and subject to limited regulation by the Financial Conduct Authority. Details about the extent of our regulation by the Financial Conduct Authority are available from us on request.

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