After our look back at 2012, this week we look ahead to the coming year. What's in store for the financial world and, more importantly, for your finances in 2013?
Obviously, one has an effect on the other. Changes in regulations to the financial industry have an impact on our personal finances, as do any increases or decreases in taxes. In both the Budget (way back in March 2012) and the Autumn Statement (November 2012) policies were announced that will come into effect in 2013. Virtually all of us will be affected in some way.
Probably the most significant (in terms of the immediate and most noticeable effect they will have), are the changes to income tax levels that were announced. From April 2013, at the start of the new tax year, the top 50p rate of tax will drop to 45p. At the other end of the tax scale, the personal allowance will increase to £9,205 – so the first £9,205 you earn will not be subject to any tax. It's estimated that this will make 24 million people £220 better off a year.
On the downside (there's usually a downside when it comes to tax…) the higher rate 40% tax threshold will be lowered from £42,475 to £41,450. That move will take 300,000 people into the higher rate tax band, and take a little more disposable income away.
Away from taxes, pensions have been experiencing a few changes recently. They seem to be one of our politicians' favourite things to tinker with, and not always for the better.
During 2013, the auto-enrolment pension scheme will continue to be rolled out to businesses, meaning more and more of us who either work for or are an employer will be automatically enrolled in a scheme, or will have to make a scheme available to employees. The roll-out started in October 2012 and will continue in stages until 2014. The ruling means that by default, employees must be enrolled in a pension scheme; it's then up to them to opt out if they choose to.
Less favourable to pension savers was the announcement in the Autumn Statement that allowances, both annual and lifetime, would be cut. The annual allowance will be cut to £40,000 (from £50,000) and the lifetime allowance will be cut to £1.25 million (from £1.5 million). Although these reductions don't come into effect until 2014, it's as well to bear these changes in mind for financial planning in 2013.
There is better news regarding ISA allowances: as of April 2013, the ISA allowance increases to £11,520. We'll have more information about how you can make best use of your allowance, as well as all your other tax allowances, at the start of next year. The new tax year starts on April 6, so be prepared and plan ahead so you can make the most of your tax planning.
The other main event in the 2013 financial world is the coming into force of the Retail Distribution Review. It's a review led by the Financial Services Authority (which will change its name to the Financial Conduct Authority, or FCA in 2013) with the aim of raising standards in the financial industry and making charges for advice, and the nature of it, much more transparent. As of the January 1, advisers must have a minimum level of qualification and meet certain professional standards. If we may blow our own trumpet a little, we've been meeting these standards for some time now and are really proud of all our advisers who have gained their qualifications, and are going on to gain further qualifications.
Whether you have any specific questions about RDR or would simply like to find out more, you can go to the FSA's website http://www.fsa.gov.uk/rdr or give your financial adviser a call. For a free, no obligation discussion about your financial planning, call Andrew Stallard on 0800 0112825, e-mail firstname.lastname@example.org or take a look at our website www.wwfp.net. Follow us on Twitter: @WorldwideFP Become a fan of Worldwide Financial Planning on Facebook.