Prabhu recommends reassessing cash holdings. ‘Cash has a role in helping individuals and families have access to funds for emergencies or earmarked purchases. However, interest rates are already lower than they were a few months ago and are likely to decrease further, as global monetary easing is expected to continue into next year. Therefore, it’s crucial to reassess cash holdings. We continue to view the overall macroeconomic landscape as a supportive backdrop for risk assets however, we emphasise the importance of diversification within investment portfolios across geographies, sectors and asset classes. To navigate the increasingly dynamic and evolving landscape, investors should continue to focus on constructing robust and resilient portfolios. This includes diversification, income and real assets to help hedge against unexpected shocks while remaining aligned to long-term investment goals.’
Look into alternative tax structures for future-proofing finances
‘Consider how Capital Gains tax increases will impact on future growth and returns, and whether other tax structures like ISAs could be a more efficient way to reach their future goals. There haven’t been any changes to ISA allowances so these can still form part of tax-efficient financial planning,’ says Anna King, Financial Planner at NatWest Premier.
Nauman Gondal, Founder of Apollo Private Wealth recommends considering a Lump Sum Allowance (LSA). ‘Despite pre-Budget speculation, the Lump Sum Allowance (LSA) remains consistent, at one quarter of the previous LTA, or £268,275. Withdrawing the LSA and using it during one’s lifetime, to fund spending, or make gifts to family members, could offer an efficient way to reduce the value a pension subject to Inheritance Tax.’
Gondal also advises to think about having a life cover written into your trust. ‘Life insurance offers a tax-exempt payout to a chosen beneficiary upon your death’
‘Over and above gifting sufficient assets to reduce your gross estate value to within £2 million, if you have excess income during your retirement, it might make sense to consider a life cover plan written in trust, to meet the eventual IHT liability, which could be as high as £400,000 on an estate valued at £2 million. It is important that the life cover plan is written into trust, and that the premiums are paid using excess income, rather than from assets – otherwise, the premiums paid could be treated as a chargeable lifetime transfer (CLT). Note that probate is required to release estate assets, and IHT needs to be paid before probate is granted. Therefore, an estate’s assets cannot be directly used to meet IHT liability, and an alternative solution such as life cover in trust provides the funds required,’ says Gondal.
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