SPRING BUDGET

NEWSLETTER 2010
Alistair Darling gives his
Special points of
third Budget speech.
ISAs interest:
From next month, the
annual ISA limit will
rise from 7,200 to Budget
10,200 and ISA lim- Announcements
its will increase annu-
ally in line with infla-
tion.
Equity Release
Schemes
Alcohol
Stamp duty Duty on cider will in-
The stamp duty limit
for first-time buyers
crease by 10% above Crossword
inflation from midnight
will be doubled from on Sunday.
midnight 24th March
2010 to 250,000 for Duty on beer, wine and Contact details
next two years, to be spirits will increase as
funded through an planned from midnight
increase in Stamp
Duty to 5% for houses
on Sunday. Nest Update
worth over 1m from
April 2011.

Business
Business rates will be cut for one
year from October, meaning a tax
reduction for over 500,000 small
businesses in England. Small busi-
nesses will be helped to expand by
doubling the annual investment
allowance to 100,000.

Lifetime
March saw Alistair Darling deliver his final Budget
before the general election. However much of what the Chan-
cellor announced could be unpicked, reversed, amended, or
Financial
Services
delayed should the Conservatives gain power at the Election -
either with a majority, or as a minority Government. The
Election is expected to take place in six weeks, and the To-
ries have said they would have "an emergency Budget" within
seven weeks of that - so it is worth bearing in mind that the
Ltd
measures below could be valid for barely three months. Issue CP3
 THE 2010 BUDGET BULLETIN

New changes announced (that we didn't know about) include:

" A doubling of the "lifetime limit" for entrepreneurs' relief from 1m to 2m.
" Lots more (fairly intricate) anti-avoidance provisions.
" A freezing of the IHT nil rate band at 325,000 for four years.
" A doubling of the Annual Investment Allowance delivering a 100% corporation tax
" deduction for qualifying purchases of plant and machinery.
We didn't get any change to the CGT flat rate of 18%.

The following is what we already knew about:

" The continued removal of higher rate tax relief for pension contributions for those
" with relevant income of 130,000 or more through the imposition of a special
" allowance charge.
" The introduction, from 2010/11, of a 50% income tax rate (and 42.5% rate on
" dividends) for those with taxable income of 150,000 or more.
" The gradual reduction, from 2010/11, of the basic personal allowance for those with
" an income over 100,000.
" The increase of the trust tax rate to 50% and 42.5% for dividends - regardless of trust
" income levels.
" The increase of the annual ISA allowance to 10,200 from 2010/11 for all qualifying
" individuals.
" The retention of the small companies' corporation tax at 21% for another year.

There have been no significant changes in this Budget Statement yesterday other than changes to
stamp duty. First time buyers won't pay stamp duty on properties under 250,000, and a new rate
of 5 per cent of Stamp Duty is set for 1 million properties. Inheritance Tax is frozen at previous
levels, i.e. 40% tax on estate value in excess of 325,000. For married couples, unused relief on the
first death is carried over to the surviving spouse in proportion to the amount used at the first
death and based on the allowance at time of the first death.

All personal and age-related Income Tax allowances are to be frozen in 2010-11. See up-to-date ta-
bles enclosed.
From April 2010 a new rate of Income Tax of 50 per cent will apply to income over 150,000.

The UK currently faces a very real and pressing savings gap, and the Government yesterday missed
the opportunity to do something about it. While we welcome the increased ISA limit and commitment
to index-linking, we do not believe that this in itself will encourage new saving from those who most
need to save. The government must do much more to foster a real savings culture amongst all British
people . We were therefore disappointed that higher-rate tax relief restrictions on pension contri-
butions will remain, having a negative impact on pensions saving in the UK, and sending the wrong mes-
sage to those who are saving for retirement.

Today's budget only tells half the story for the future of the economy. The real question of how to
address the current Government deficit will only be tackled after the election, when there will be a
spending review (should Labour win) or an emergency budget (should the Tories win.)

We will be bringing you information about other matters which we think may be
relevant to you but if you have a specific query or just want a full report (69 pages)
please call.
An Information Series part 1. EQUITY RELEASE SCHEMES

Over the next four Newsletters I will be including information regarding Equity Release schemes. I
will explain the different schemes available, how you can qualify, and important advice, finally a ques-
tion and answer sheet will help answer any niggling queries you have on this important subject. Please
forward any questions you wish answered to me, Celia Plowden, Should you require assistance in the
meantime, please telephone 01424 772444

Equity Release With a lifetime mortgage you: as a cash lump sum to use as you
take out a loan that is secured wish. However, if you want an
The equity (value) you have in on your home (that is, the lender income, you have various options:
your home is its open market knows they can get their money You can invest the lump sum in
value less any mortgage or other back by selling your home); an annuity or some other invest-
debt held against it. continue to own your home, al- ment to provide a regular income
Equity release is a way of get- though you will have to pay back (with some schemes the provider
ting cash from the value of your the mortgage on it; does this for you).
home without having to move out repay the mortgage from the Your scheme may provide a
of it. proceeds of the sale of your regular income that is not linked
There are two main types of eq- home when you die, or if you to an annuity or investment.
uity release scheme lifetime move out of it (perhaps to a care Other schemes provide an in-
mortgages and home reversions. home). come (or lump sum) only when
you need it, on a drawdown basis.
With an equity release scheme, With a home reversion you: Some schemes combine these
you: sell all or part of your home to features. For example, you can
have to be over a certain age a reversion company or an indi- take a lump sum at the start,
(typically over 50) and own your vidual; and then draw down income
own home; no longer own your home, but later.
can get a cash lump sum, a continue to live there as a ten-
regular income, or both, to use ant of the reversion company or
as you wish; individual. The home is sold when
continue to live in your home; you die, or if you move out of it
and (perhaps to a care home).
continue to be responsible for
maintaining your home. How do you get your money?
You will normally get your money

Types of equity release schemes:

Lifetime mortgages

These are the main types currently available:

Roll-up mortgage
The loan you get can be a regular income or a cash lump sum.
Fixed or variable interest is added to the loan monthly or yearly. But you do not pay the interest until your home
is sold. This could be when you die or need to go into a care home. Interest is charged on the loan and also on all
the interest that has already been added. Because of this, the amount you owe can grow quickly, especially if you
take a lump sum at the start see the table over
ROLL-UP MORTGAGE TABLES

Number of years since Amount you owe if you take a lump sum of 45,000 at the start
you took out the loan and if the mortgage interest rate is:

5% a year 7% a year 9% a year

5 57,433 63,115 69,239

10 73,301 88,522 106,532

15 93,552 124,157 163,912

20 119,399 174,136 252,199

25 152,387 244,235 388,039

The other type of roll-up mortgage is a drawdown mortgage. This means that instead of taking the loan as a
single lump sum at the start, you take smaller amounts over time. These amounts can be taken at
regular intervals or as and when you need them.

Because you are taking smaller amounts over time, the total amount you owe will grow more slowly than if
you take a lump sum at the start. A roll-up mortgage may give you a higher income than a home income plan as you
are not paying back interest on the loan until it is repaid.

Interest-only mortgage
The loan you get is a cash lump sum. You pay interest on the loan each month at a fixed or variable rate.
If the interest rate is variable and your pension or other source of income is fixed, you may find it more diffi-
cult to meet your repayments when interest rates rise. The amount you originally borrowed is repaid when your
home is sold.

Fixed repayment mortgage

The loan you get is a cash lump sum. Instead of being charged interest on the loan, you agree that when your
home is sold you will pay the lender a higher sum than you borrowed. This higher sum is agreed at the outset.
How much higher it is will depend on your age and life expectancy. The lender takes this higher sum in
repayment for the mortgage when your home is sold. However, when you die, the lender may charge interest on
this higher sum from the date you die until the mortgage is actually repaid.

Home income plan

The loan you get is a cash lump sum. The lump sum is used to buy an annuity that gives you a regular income, usu-
ally fixed for life. From this income you pay the interest on your loan, usually at a fixed rate, and the rest is for
you to use as you wish. The amount you originally borrowed is repaid when your home is sold. The extra income
you will get is fairly low if you take the annuity soon after retirement, so this type of scheme is usually only suit-
able if you are older. The older you are when you buy an annuity, the higher the income youll get, as there are
fewer years over which the income will need to be paid.

Shared appreciation mortgage (SAM)

Some lifetime mortgages include a shared appreciation element. This means you agree with the lender that
they can have a share in any increase in the value of your home when it is sold in return for them charging you
less or no interest on the loan.

In the next newsletter information series part 2 I will cover the following subjects concerning Equity Release
Schemes:

Home Reversions Explained

How do I qualify?

(Please prepare any questions you may have for our information series part 4 and forward to our Battle office.)
Test your financial knowledge in this theme based crossword, answers in the next newsletter .

Across Down

1. Use of money for future profit (10) 2. Enterprise Investment Scheme (Abbrv) (3)
3. Venture Capital Trusts (Abbrv) (3) 4. Profit from selling assets (13)
5. Stash of money? (7) 6. Owned items (6)
10. Retirement pay (7) 7. Legacy (11)
11. Time following end of working life (10) 8. Group of investments (9)
13. Official information (6) 9. Look after somebody or something (4)
15. Part of company's stock (6) 10. Legal authority to act for another person
16. Birds home (4) (17)
18. Work done for somebody else (8) 12. Permanent (7)
19. Payment for professional services (4) 14. Document promising to pay (5)
20. Investment Savings Account (Abbrev) (3) 17. Money owed (11)
23. Affluence (6) 21. Length of time somebody remains alive (8)
26. Financial plan (6) 22. Safekeeping (8)
28. Shareholders share of profit (8) 24. Excise (3)
29. Connected with money (9) 25. Reserve of money (4)
30. Place where a person lives (4) 27. Schemes for achieving objectives (5)
31. Shares entitling holder to profits (6)

Answers in next newsletter.

Lifetime Lifetime Financial Services Ltd commitment to you

Financial We establish lifetime relationships with our clients by being accessible and paying attention to
their needs and expectations.
Services Where you have worries or anxieties, are swamped with information - without knowing what is
Ltd relevant or suitable, we deal with your concerns:

To put you in control

Unit 3 Watch Oak Business With a clear understanding of where you are now - plus
Centre Giving you confidence for the future

Chain Lane We pay particular attention to the elderly who may need extra time and a sympathetic ear, and
Battle welcome the association with other professionals or family attorneys. We are totally inde-
East Sussex pendent.

TN33 0GB This is why many of our clients have been with us for over 20 years, also introducing us to
family and friends. Graham Gardner, Managing Director

Phone: 01424 772444

Improving Clients Wealth and Financial Confidence

NEST Update

You may recall in issue 2 we discussed The National Employment Sav-

ings Trust, a scheme that is aimed at low income workers without ade-
quate retirement provision. It is being rolled out by the Personal Ac-
counts Delivery Authority, and should be in place by 2012 . The scheme will be run by employers.

The Government has recently confirmed that The National Employment Savings Trust (NEST) will
charge 2% on all contributions.

They say NEST will meet the Pension Commissions ambition for a low cost scheme with an anticipated
0.3% annual management charge over the longer term.

However, to meet the costs of establishing the scheme, the initial level of charges will also include a
small additional charge on contributions of about 2%. The Government said it was comparable to low
charges currently being paid by members of large occupational schemes

As information is available from the Government regarding NEST we will update you accordingly

Let me have your views and comments regarding this important subject. Will you be affected, will it
be of benefit etc.

Email your questions to celia@lifetimeinvestment.com or send a letter to our Battle office