ADVISER’S DUTY OF CARE WHEN GIVING FINANCIAL ADVICE
In the case of O’Hare and another v Coutts & Co [2016] EWHC 2224 (QB) the Court decided that the adviser did not breach his duty when advising his client to make certain investment.
Thankfully it is not often that financial advisers are taken to court by their clients claiming that the adviser had been negligent in giving investment advice. The last one we reported on was the case of Rubinstein v HSBC Bank in 2012, although there has been a more recent case, Worthing v Lloyds Bank, 2015 EWHC 2836 QB, in which a couple who lost £43,000 on an investment recommended by Lloyds’ private banking service in 2007 sued the bank but failed to recover their loss.
There has recently been another case concerning the duty of care when giving financial advice and this is rather interesting as it illustrates the Court’s attitude when considering risk-related decision making.
The key facts of the case were as follows:
Les and Janet O’Hare had had investment accounts with Coutts for seven years prior to 2007. The growth of securities markets in the early 2000s led their advisors at Coutts to suggest they place significant amounts of money in risky ‘growth equities’ – including £8 million into various funds operated under the Novus name, a high-risk ‘wealth generation’ investment that Coutts was promoting at the time.
The O’Hares’ total estimated wealth (including their two residences) was about £38 million. Of their total assets, about £9 million was invested in Coutts’ wealth generation products.
Then came the 2008 financial crisis and we all know what happened to the values of equities. The O’Hares made some more investments in 2009 and 2010 on the bank’s recommendation and also lost money on those.
The O’Hares sued, claiming Coutts’ advice underplayed the high risks attached to the investments, which they said were unsuitable for their risk appetite. They further alleged that Coutts’ advice had exposed them to the loss of an unjustifiably high proportion of their wealth. Their total claim was for just under £3.3 million, plus interest. The causes of action relied on were breach of contract, negligence, breach of statutory duty and negligent misrepresentation.
The court carefully considered the relevant test for whether a financial adviser had acted in accordance with an implied term of reasonable care and skill in making recommendations which were “suitable”.
Historically, the courts have tended to use the Bolam test (from the case of Bolam v Friern Hospital Management Committee, 1957). This is a medical negligence case but applies to all professional liability cases. The test states that a professional will not be found liable if he provides advice in line with a practice accepted by some members of his profession as being proper; even if a different view was taken by others within that profession.
But the expert evidence in the O’Hare case suggested that there was little consensus within financial services as to how a professional should manage the risk appetite of clients.
In the circumstances, the judge favoured the approach taken in the case of Montgomery v Lanarkshire Health Board [2015] UKSC 11, another medical negligence case. This case found that the onus is on the medical patient, as an adult with sound mind, to make their own decision about the risks involved. This is only when the medical professional has taken reasonable care to ensure that the patient was aware of the material risks involved in any recommended treatment, and of any reasonable alternative or variant treatments.
In O’Hare, and therefore in a financial context, the judge considered that this approach was more appropriate. The O’Hares, as informed investors, were entitled to decide the risks that they were prepared to take and accept responsibility if those risks did not pay off.
The judge also added weight to this approach by reference to the FCA’s Conduct of Business Sourcebook (COBS rules). He found that the COBS rules do not rule out the use of persuasion. However, they do stress the need for full information to be given, and conflicts of interest to be properly managed.
The actual words of the judge are worth noting, as follows;
“As I read the authorities and the COBS regulatory scheme, there is nothing intrinsically wrong with a private banker using persuasive techniques to induce a client to take risks the client would not take but for the banker’s powers of persuasion, provided the client can afford to take the risks and shows himself willing to take them, and provided the risks are not – avoiding the temptation to use hindsight – so high as to be foolhardy. The authorities include mention of the adviser sometimes having to save the client from himself, but also of the principle that investors take responsibility for their investment decisions including mistaken ones. The duty of care must reflect a balance between those two propositions, which pull in opposite directions.”
O’Hare v Coutts provides helpful guidance about the extent of financial advisers’ duties to their clients and adds to the theme running through recent cases, that make clear that informed investors must be prepared to accept responsibility for their own investment decisions, even where the adviser has used sales techniques to push a particular product or to encourage the investor to take more risk than they otherwise would.
CHANGES TO TAX TREATMENT OF NON-DOMICILES
New rules on taxing non-UK domiciled individuals are to come into effect from 6 April 2017. This Bulletin covers the proposals included in the Finance Bill 2017.
Draft legislation on most of the changes has been included in the Finance Bill 2017 which was published on 5 December 2017. There have been some changes since the previous proposals, in particular the “cleansing” of mixed funds into clean capital, income and gains which was originally being offered for just one year from 6 April 2017 has now been extended to two years. This Bulletin supersedes the December bulletin.
Although the precise final rules might still change as the Bill progresses through Parliament, no major further changes are expected.
Given the timescales involved, non-UK domiciled persons who are likely to be affected by these new rules should review their arrangements now – particularly those who hold UK property through offshore companies or trusts. As ever, the right strategy for a client will depend on the client’s individual circumstances.
The new rules broadly affect persons in one of three categories: –
- those non-UK domiciliaries who have been tax resident in the UK for 15 tax years;
- those people who had a UK domicile of origin, acquired a non-UK domicile of choice and are now UK tax resident or may become UK tax resident in the future;
- those non-UK domiciled individuals who own UK residential property through an offshore structure (trust, company or both).
There are also changes on the taxation of existing offshore trusts and two tax concessions relating to the revaluation of assets for CGT purposes and the reorganisation of mixed overseas funds.
We now look at all these aspects in more detail.
NON-UK DOMICILIARIES WHO ARE LONG TERM UK RESIDENTS – THE NEW DEEMED DOMICILE RULES
From 6 April 2017 individuals who have been tax resident in the UK for 15 of the last 20 tax years will be deemed to be domiciled in the UK for income tax, capital gains tax (‘CGT’) and inheritance tax (IHT) purposes.
Currently there is no deemed domicile rule for income tax and CGT purposes but there is a rule that treats a person who has been tax resident in the UK for 17 out of the last 20 tax years as deemed domiciled for IHT purposes.
The most significant impact of the changes is that once a UK resident becomes deemed UK domiciled under the new rules, they will be subject to UK income tax and CGT on their worldwide income and gains on an arising basis. In other words, the remittance basis will cease to be available even if they remain non-domiciled under general law and even if they were otherwise prepared to pay the remittance basis charge.
Scope of New Rules
Under the new rules, if a person who becomes deemed domiciled under the 15-year test is then non-resident in the UK for six consecutive years, they will lose their deemed domicile status. This means that the clock re-starts so that they can once again access the remittance basis of taxation for foreign income and gains if they return to the UK after that point.
For IHT purposes this 6 years’ rule would be detrimental as compared to the current position. This is because currently a person is able to lose UK domicile for IHT purposes once they have acquired a non-UK domicile for 3 years. In light of this, the proposed rules include a concession in that deemed domicile status is lost for IHT purposes after only a three-year period of consecutive non-residence. This should mean that if an individual die after this time, but before they have spent six consecutive years outside the UK, then their foreign assets will be outside their estate for IHT purposes. However, this will not make any difference to the IHT levied on indirectly held UK residential property (under the new rules described in 3 below) nor on UK assets generally.
Rebasing
The proposed new rules contain some limited rebasing provisions. For individuals who become UK deemed domiciled on 6 April 2017, they will be able to rebase directly held foreign assets to their market value on 5 April 2017. This means that any gain which accrued before April 2017 will not be charged to CGT in the UK. Any further increase in the value of an asset between April 2017 and the date of disposal will be chargeable to CGT in the normal way.
However, rebasing will be limited to assets held directly by the individual (not via trusts or companies) which have been located outside the UK for the period between 16 March 2016 and 5 April 2017. There is no restriction on when those assets were originally acquired. Also, the rebasing rules will be restricted to those people who had paid the remittance basis charge in any year before April 2017. For some who have never so elected, it may be worth electing for the remittance basis charge in 2016/17 just to get this treatment. Those individuals who become deemed domiciled after 6 April 2017 will not be able to rebase their foreign assets.
The rebasing provisions will be applied automatically for individually owned assets but can be dis-applied in respect of specific disposals for example, rebasing would not be appropriate for assets showing a loss as at 5 April 2017. Also, the provisions will only apply to assets on which gains would be chargeable to CGT, so no rebasing will be available for offshore income gains that arise on non-reporting offshore funds.
Mixed Funds – Transitional provisions
As a further transitional measure, there will be a temporary window, which will last for two tax years from April 2017, during which individuals will be able to rearrange their mixed funds overseas into separate accounts. These can be placed into separate accounts holding separate clean capital, foreign income and foreign gains. This will give investors certainty on how amounts remitted to the UK will be taxed in future and enable people to choose the most tax efficient method of remitting those funds.
This is quite a generous relief although it also has limitations. It will only apply to mixed funds which consist of amounts deposited in bank and similar accounts, though where an asset was purchased from mixed funds, if it is sold overseas during the transitional window, then the proceeds can be separated in the same way. However, this form of “cleansing” will not be available where an individual is unable to determine the component parts of their mixed fund, for instance where there are no or insufficient records.
For those who can place their capital into a bank account, it may then be appropriate to put this into an investment vehicle that doesn’t produce future income or taxable capital gains. An offshore single premium investment bond may be appropriate in this respect. The investor can access the investment in the future without triggering a tax charge by using the 5% tax deferred allowance facility.
Offshore Trusts
There are also some changes proposed to the taxation of existing offshore trusts which will sit alongside the new deemed domicile rules. The proposal is that protections will be introduced with respect to offshore trusts that were set up before the rules change. These protections will ensure that the settlor of an offshore trust should not, when they become UK deemed domiciled, automatically become subject to CGT on all gains as they arise and to income tax on all foreign income as it arises.
Those people who are currently non-UK domiciled who have already established an offshore trust will have found that the offshore trust was preferentially taxed from a CGT and income tax standpoint. To ensure that such treatment continues after the settlor has become deemed UK domiciled, the trust will need to be a “Protected Settlement”. A Protected Settlement is one that was established before a settlor became UK deemed domiciled which has not had further property added directly or indirectly by the Settlor after he/she has become UK deemed domiciled.
Capital Gains Tax
Whilst it has protected status, capital gains of the offshore trust will only be taxable on the deemed domiciled UK resident settlor by reference to benefits received by that settlor or his/her non-resident “close family members” (spouse, cohabitee, children and adult grandchildren).
Moreover, such payments will no longer wash-out previous capital gains of the trust. This has been important in the past where there are beneficiaries under a trust who are non-UK resident and UK resident so that gains could have been washed out on payments to non-UK resident beneficiaries who wouldn’t pay any tax on them. It has now been announced that distributions to non-UK resident beneficiaries will not be matched against the pool of trust gains and all deemed domiciled individuals will be taxed on an arising basis on capital payments received from a non-UK trust. There are exceptions to this rule for temporary non-residents (in which case the payment will be matched in the year of return to the UK); and in the final year of the settlement, when the existing rules will continue to apply (i.e. gains will be matched proportionally to the payments received).
Capital payments made to close family members of a UK resident settlor will be taxable on the settlor, not the beneficiary, if the beneficiary in receipt of the capital payment is either
(i) non-UK resident, or
(ii) claims the remittance basis of taxation and does not remit the capital payment in the same tax year.
This applies to all offshore trusts with a living settlor whether non-domiciled, deemed domiciled or UK domiciled (and so where the UK resident settlor is a non-domiciliary, the remittance basis can be claimed).
Where this results in a charge to tax on the settlor, then he/she will be entitled to reclaim the tax paid from either the beneficiary in receipt of the capital payment, or the trustee of the trust from which the capital payment was made.
Note that where a capital payment made to a non-UK resident beneficiary (who is not a ‘close family member’ of either a UK resident settlor or a settlor who is non-UK resident), is forwarded on to another recipient within three years of the payment first being made, the capital payment will be treated and taxed as though it had been made to the final recipient, under a new anti-avoidance rule.
The draft legislation is not clear what happens if both settlor and beneficiary are on the remittance basis but before any remittance is made, the beneficiary ceases to be a “relevant person” by reference to the settlor (and so is no longer capable of making a taxable remittance on behalf of the settlor of capital gains deemed to belong to the settlor for UK tax purposes).
Income Tax
Provided the trust remains a Protected Settlement (see above), from 6 April 2017 it is proposed that foreign income will only be treated as arising to the settlor if, and to the extent that he/she or a close family member receives any benefit from the trust in circumstances where it is not taxable in the hands of the beneficiary under the existing rules (i.e. where the close family member is non-UK resident or using the remittance basis).
Further, a settlor who is non-UK-domiciled under general law will be taxable in respect of foreign source trust income according to his/her tax status (so if he/she is a remittance basis user the benefit will only be taxed if remitted to the UK). A UK resident, deemed domiciled settlor will, however, pay tax on the benefit regardless of where it is received.
INDIVIDUALS WITH A UK DOMICILE OF ORIGIN
The second category of person who will be affected by the new rules is individuals who were born in the UK with a UK domicile of origin but who have subsequently acquired a domicile of choice elsewhere. These individuals will be deemed domiciled in the UK for tax purposes in any tax year that they are UK resident after 5 April 2017.
This is the most draconian of all the measures and trusts created by such individuals at a time that they were neither UK-domiciled nor deemed domiciled will not be protected from IHT for any year in which the settlor is UK resident. Nor will such trusts benefit from any of the concessions mentioned in 1. above. This means that if an individual with a UK domicile of origin establishes an excluded property trust having acquired a domicile of choice outside the UK and then returns to the UK and becomes UK resident, the trust will no longer be excluded property for IHT purposes while he remains resident in the UK for tax purposes. Of course, the position will change if he later becomes non-UK resident.
The one minor concession is that for IHT purposes only, these ‘formerly UK domiciled residents’ will not be treated as being domiciled in the UK until they have been resident for at least one of the two prior tax years. This is to help people who regularly come and go from the UK.
IHT ON UK RESIDENTIAL PROPERTY
From 6 April 2017, all UK residential properties owned in an offshore corporate structure will fall within the UK IHT net. This can apply where a non-dom individual directly owns shares in an offshore company that in turn owns a UK residential property; or where such a person has created a trust which owns shares in an offshore company that in turn owns a UK residential property. In such cases, on the individual’s death, IHT will be charged on the shares to the extent that any underlying assets of the company consist of UK residential property. Ten year IHT charges can also arise on an excluded property trust to the extent that the value of shares held by the trust in an offshore company can be attributed to UK residential property. Any debt used to finance such property will not be excluded property and so will itself be subject to IHT in the lender’s hands.
The changes to the tax treatment of UK residential property owned indirectly through an offshore structure will be a huge change for individuals who are not domiciled in the UK. At present, no IHT liability arises on residential property owned through offshore companies because the assets in the individual’s estate or in the trust are non-UK shares in that company. In turn because non-UK assets owned by non-domiciled individuals are “excluded property”, they are not chargeable to IHT.
These structures will not work in the future. Moreover, people who have existing arrangements will need to consider unwinding them. Many may find that effecting life assurance in trust will be the best way of dealing with potential inheritance tax liabilities on a UK residential property in the future.
There will be no changes to the general IHT position for non-domiciliaries and therefore other UK assets including investments and commercial property owned via a non-resident company will effectively remain outside the IHT net. However, UK residential property (including let residential property) will no longer be excluded property and so will be potentially subject to IHT, irrespective of how it is owned. Moreover, where a UK residential property is sold by an overseas vehicle, the proceeds of such sale will continue to be regarded in the same way as UK residential property for 2 years following the disposal. For the purposes of what is residential property, the definition for a “UK dwelling” will follow the non-Resident CGT definition rather than which applies for the Annual Tax on Enveloped Dwellings (ATED).
A targeted anti-avoidance rule is to be introduced to deter deliberate tax avoidance in relation to IHT on UK residential property.
Trust Company Structures
In the past many non-UK domiciliaries have used a trust to hold the shares in an offshore company that owns the UK residential property. This excluded property trust arrangement could have been useful if the individual was likely to regain UK domiciled status in the future which would have meant a direct holding of shares by the individual would have become chargeable to IHT. By holding the shares in a trust, the future domicile status of the settlor would not affect the IHT position.
With effect from 6 April 2017, where an offshore trust owns shares in an offshore company that in turn holds UK residential property, the trust property will no longer be excluded property – and so will be within the IHT trust charging regime – to the extent that, the value of the shares is derived, directly or indirectly, from residential property in the UK. This will normally mean that trustees will pay IHT on the value of the property at 10 year anniversaries and if the property is removed from the trust after 6 April, there may be an IHT exit charge.
A further potential difficulty for property held through trusts is that, when the new rules come into effect, the IHT the Gift with Reservation of Benefit rules may apply for the first time, with the result that the whole value of the property may also be within the individual’s estate for IHT purposes. This is because in a typical situation the settlor of the trust is also a beneficiary of the trust and/or continues to live in the property that the trust indirectly owns. It is already the case that where the trust owns UK property directly, that property is within the IHT charging regime.
Lifetime Gifts
These changes also have implications for non-doms planning to make lifetime gifts or changes to their offshore structure. From 6 April 2017, gifts made by a non-domiciled individual of shares in an offshore company owning UK residential property may trigger an IHT charge, either immediately or if they fail to survive seven years. For instance, where a donor dies within 7 years of a gift of shares made on or after 6 April 2017 in an offshore company which owns UK residential property, he/she will be treated as making a PET or chargeable lifetime transfer for IHT purposes. The redistribution of the share capital of an overseas company which owns UK residential property may also trigger an IHT charge.
Scope of the New Rules
The changes will be effective for all chargeable events which take place after 5 April 2017, regardless of how long the property has been owned by the company and whether or not the individual is UK resident. There are no transitional provisions or concessions for existing arrangements. Individuals with existing offshore structures – particularly those where the company currently pays ATED (the Annual Tax on Enveloped Dwellings) – may conclude that once the IHT protection is lost, it is no longer cost effective for the property to remain within the company. However, taking the property out of the corporate structure (or “de-enveloping” as it is known) can involve triggering tax charges which may in some cases prove prohibitive. It was hoped that the government might introduce some form of relief to enable individuals to dismantle current structures but at present there appear to be no plans to do this.
When the new charge does apply, IHT will be charged on the value of the residential property at the time of the chargeable event (e.g. death, lifetime gift or at the trust’s 10-year anniversary) taking into account any debts relating exclusively to the property (e.g. amounts outstanding on a mortgage which was taken out to purchase the property).
Of course, in cases, where UK property is owned through an overseas company, HMRC might have difficulties in identifying whether a chargeable event has taken place and hence whether a liability to IHT has arisen. To deal with this it is intended that provisions will be put in place substantially extending the responsibility for both reporting to HMRC and for paying any tax. However, it seems that the Government will not impose the IHT liability on the legal owners of the property (e.g. the directors of a property holding company).
Business Investment Relief
Business Investment Relief (BIR) was introduced in April 2012 to encourage individuals who are taxed on the remittance basis to invest their foreign income and gains in businesses in the UK. To date, over £1.5 billion has been invested in UK businesses under the scheme.
Generally, a UK resident non-domiciled individual who is taxed on the remittance basis will be subject to UK tax on the overseas income or gains which they bring to the UK, regardless of the purpose for which such funds are used. In some circumstances, this can be a significant disincentive for non-domiciles who wish to invest in a business in the UK. In introducing BIR, the Government sought to address this issue and provided a means to encourage these individuals to invest their money in the UK and support the UK’s economy.
The Government will change the rules for the BIR scheme from April 2017 to make it easier for non-domiciled individuals who are taxed on the remittance basis to bring offshore money into the UK for the purpose of investing in UK businesses. The Government will continue to consider further improvements to the rules for the scheme to attract more capital investment in British businesses by non-domiciled individuals.
ACTION TO TAKE
Given the time scales involved, individuals will now need to urgently review the relative merits of retaining or dismantling existing arrangements for holding UK property and also consider the availability of other methods of covering or reducing any new IHT liability. This may involve arranging life assurance in trust.
For those who are deemed UK domiciled on 6 April 2017 or at some point thereafter, they will need to assess the likely effects on their finances and begin to put in place any necessary measures to mitigate the impact of the new rules. Those who will be deemed domiciled from 6 April 2017, may also wish to consider deferring liquidity events or sales of offshore assets to take advantage of rebasing. The right strategy will depend on the individual’s particular circumstances.
NI CREDIT FOR GRANDPARENTS/FAMILY CHILD CARERS
A Royal London FOI request has discovered very few family members that help with family childcare are taking advantage of the NI credit available.
A recent Freedom of Information request to HM Revenue & Customs by Royal London has revealed that the scheme designed to help grandparents/family members who make sacrifices to help their families get back to work after the birth of a child has been taken up as expected.
Under current rules, if a mother or father goes back to work after the birth of a child she can sign a form that allows a grandparent (or other family member) to receive Class 3 National Insurance credits for looking after the child. A grandparent who gives up work to look after the grandchild would otherwise be losing out on valuable state pension rights. If a working age grandparent misses out on one year of state pension rights because they are spending time with a grandchild instead of doing paid work, this would cost them 1/35th of the full rate of the state pension or £231 per year. Over a 20-year retirement this would be a loss of over £4,500.
The FOI figures reveal that a scheme designed to help grandparents across the country is benefiting an average of just two grandparents per Parliamentary constituency. This is a tiny fraction of those who could benefit, at no cost to them or their children.
The FOI reply from HMRC shows that this system, known officially as the ‘Specified Adult Childcare Credit’, is so little known just 1 ,298 grandparents (and other family members) benefited in the year to September 2016. This is actually a smaller number than two years earlier when 1,725 were benefiting. But calculations by Royal London suggest that there could easily be over 100,000 grandparents of working age who could benefit if the scheme was more widely known.
These National Insurance (NI) credits were introduced from April 2011. Entitlement to receive NI credits if you are a grandparent, or other family member, who cares for a child under 12, usually whilst their parent (or main carer) is working. These credits are only available from April 2011 and you must make an application to receive the NI credits (see below).
Who is eligible?
You cannot apply for Specified Adult Childcare credits if you:
- already have a qualifying year of National Insurance – usually because you work or receive other NI credits
- are receiving Child Benefit for the child – you already get Parent’s credits automatically
- are the partner of, and live with, the Child Benefit recipient and you want to transfer the Parent’s credits from your spouse or partner to yourself – you apply to do this on form CF411A
You can apply for Specified Adult Childcare credits if:
- you are a grandparent, or other family member caring for a child under 12
- you were over 16, and under state pension age when you cared for the child
- you are ordinarily resident in the United Kingdom, meaning England, Scotland, Wales and Northern Ireland, but not the Channel Islands or the Isle of Man
- the child’s parent (or main carer) is entitled to Child Benefit and has a qualifying year for National Insurance without needing the parent’s class 3 NI credits which they receive automatically from Child Benefit
- the child’s parent (or main carer) agrees to your application by countersigning the form to confirm that:
- you cared for their child for the period stated
- you can have the Class 3 NI credit for the period stated
What counts as a family member?
- mother or father
- grandparent, great-grandparent or great-great-grandparent
- brother or sister
- aunt or uncle
- husband or wife or former husband or wife of anyone in 1 to 6
- civil partner or former civil partner of anyone in 1 to 6
- partner or former partner of anyone in 1 to 8
- son or daughter of anyone in 5 to 9
- in respect of the son or daughter of anyone in 6, that person’s:
- husband or wife or former husband or wife
- civil partner or former civil partner, or
- partner or former partner
For 5 (in relation to the child) and for 6 (in relation to the parent) include:
- a half-brother or half-sister
- step-brother or step-sister
- an adopted brother or an adopted sister
For 9, a partner is the other member of a couple consisting of:
- a man and woman who are not married to each other but are living together as husband and wife, or
- two people of the same sex who are not civil partners of each other but are living together as if they were civil partners
How to apply
To apply for Specified Adult Childcare credits you will need to complete an application form. The application requires the:
- personal details of the applicant – the family member caring for the child
- child’s details and the periods of care
- personal details of the child’s parent (or main carer) – the Child Benefit recipient
- applicant and the parent must both sign their declarations on the application
When to apply
Applications for a particular tax year cannot be accepted until the following October at the earliest. For example, for the tax year 2016/2017 applications must not be made until October 2017 because a check needs to be made that the parent already has a qualifying year for National Insurance purposes, and that can take until the October.
NEW EXTENDED GAD TABLES PUBLISHED
HMRC have extended the GAD tables used to calculate the maximum income from Capped Drawdown to include Gilt Yields as low as 0%
HMRC have now extended the GAD tables to be able to cope with Gilt yields as low as 0%, previously the tables only went as low as 2%.
The maximum income withdrawal for a member taking a capped drawdown pension is determined from factors included in tables produced for HMRC by the Government Actuary’s Department (GAD). The factors to be used are dependent on the individual’s age. The factor to be used each month is dependent on the rounded down gross yield on 15 year gilts. This figure is based on the gross redemption yield on UK gilts (15 years) from the FTSE UK Gilts Indices (formerly FT Actuaries Fixed Interest Indices) for the 15th of the month preceding the month in which the income withdrawals commence (or reach their review date).
Where the income withdrawals are in respect of a dependant aged under 23 a different table has been produced by GAD. In this case, the maximum income withdrawal is based on factors using the rounded down gross yield on 5 year gilts.
CASH COMPENSATION LIMIT INCREASE CONFIRMED FROM 30 JANUARY 2017
The Financial Services Compensation Scheme increase the cash compensation limit from £75,000 to £85,000 from 30th January 2017.
FSCS currently protects up to £75,000 or £150,000 for joint accounts. This will increase to £85,000 and £170,000 respectively from 30th January 2017.
Mark Neale, chief executive, says boosting the limit will protect more people. “The £85,000 limit protects about 98% of the UK public. More people will have more protection for more of their money.”
FSCS has come to the aid of more than 4.5 million people since 2001. It has paid out more than £26 billion in that time.
FSCS is the UK’s statutory compensation scheme for customers of authorised financial services firms. FSCS is funded by the financial services industry and protects investment business, deposits, home finance – mortgage – advice, and general insurance and insurance broking. FSCS can pay for financial loss if a firm cannot pay claims against it.
Importantly, advisers should ensure that clients are fully aware of their position in regard to what would or would not be covered. Note that in the situation where a bank shares a banking license with other banks, savings which are split between the various banks which share the same license will only usually be covered if the total amount does not exceed the current limit.
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