lumin news Issue 10 / Winter 2024

Wealth management I Pensions I Mortgages I Inheritance & tax planning
Be better off with expert financial planning Issue 10 I Winter 2024
!
Page 6
Business Owners
Toolkit: Tips for
small businesses
INSIGHTS
AT A GLANCE
Tax planning 2
Tax-year-end tips
Pensions3
Pay more into your pension
with carry forward
Pensions4
Watch out for the erosion
of your tax-free cash
Pensions4
The potential benefits of
uniting old pensions
Investments7
How do family investment
companies work?
Investments7
Choosing the right funds
Investments8
The limitations of cash as a
means to growing wealth
Mortgages9
Borrowing against notional
investment income
Mortgages9
Funding school fees by
remortgaging
Ask our Expert 10
Questions from our readers
Key tax-saving actions to take
before 6 April 2024
As the end of the tax year draws nearer there are some easy wins on the table.
Doing the basics right can lead to substantial tax savings and significantly boost
financial outcomes over the long term. Here are some top tips.
JAMES CORCORAN
Senior Chartered Financial Planner
james.corcoran@luminwealth.co.uk
Phone 01727 893 333
Use or lose your ISA allowance
UK adults can pay a generous £20,000 annually
into ISAs. Money held in ISAs is sheltered
from both income and capital gains tax.
The allowance must be used before 6 April.
Optimise your pension
Most people can now pay up to £60,000 into
a pension. This provides high earners with a
valuable opportunity to boost their retirement
pot and save on income tax.
Consider past pension allowances
You may be able to pay more than £180,000
into your pension (and receive tax relief), if
you have unused annual allowances from
prior tax years – see page 3. This can be particularly
beneficial for business owners with
large cash profits.
Realise tax-free capital gains
‘Harvesting’ investment gains by applying
your tax-free allowance annually can help to
cut your tax bill. The allowance can’t be
applied retrospectively, so must be used before
6 April.
For further reading turn to page 2.
Retirement planning
Business owners
Pension consolidation
Reducing taxes
during retirement
Tax efficiencies for
small businesses
Guest columnist:
Baroness Altmann
Lumin Wealth is a leading
firm of Chartered Financial
Planners with offices in
St Albans and London. We
provide expert financial advice
and discretionary fund
management services.
A retired couple can typically
save thousands on tax every
year. Optimising available
allowances and exemptions,
and strategic use of ISA and
pension assets is the key to
achieving these tax savings.
With a disciplined approach,
a couple could be able to
shield up to £44,000 from
income tax in the 2024/25
tax year. Page 5
The daily pressures of running
a family business mean
that some business owners
don’t take full advantage of
available tax breaks and planning
opportunities. With the
right financial planning solutions,
smaller businesses can
substantially reduce their tax
burden and implement a succession
plan that provides for
their family. Page 6
The former UK Minister of
State for Pensions outlines the
potential benefits of combining
older workplace pensions
Uniting old pensions can improve
investment opportunities,
lead to lower annual fees,
and ease the administrative
burden. But due care must be
taken before transferring a
pension, as this may not be
right for everyone. Page 11
lumin news is a periodic publication Circulation: 20,000 copies Publisher: Lumin Wealth Ltd, 5 Sandridge Park, St Albans, AL3 6PH, company no. 03381115. Lumin Wealth Ltd
is authorised and regulated by the Financial Conduct Authority (reg. number 775068) Editorial: Markus Graf, William Monroe Enquiries and address changes: Phone
01727 893 333 or info@luminwealth.co.uk Copyright: No part of this publication may be reproduced or transmitted in any form without the prior permission of the editor.

Page 2 lumin news 10 / winter 2024
Key tips for cutting your tax bill before
the end of the tax year
Counter the cost of living squeeze by making full use of available annual allowances
and exemptions. Substantial savings can be made by optimising pensions and ISAs,
and by disciplined use of your capital gains tax exemption.
PETER FLOWERS
Senior Financial Consultant
peter.flowers@luminwealth.co.uk
Phone 01727 893 333
With inflation still high and a
number of tax thresholds frozen,
it’s particularly important
to make full use of annual allowances
and exemptions that
enable you to lower your tax
burden and build up wealth.
This article highlights some
key tips that you could consider
applying before the tax
year ends.
Optimise your pension
annual allowance
Contributing to a pension
plan annually can significantly
reduce your taxable
income. UK savers can now
pay up to £60,000 into their
pension annually and benefit
from tax relief on these contributions,
in light of the
50% increase to the annual
allowance as of 6 April 2023.
Optimising this allowance
can provide a valuable boost
to your retirement pot, while
lowering your tax liability.
Tip: If you have unused
annual allowances from the
three previous tax years you
may be able to contribute a
larger sum via the ‘carry forward’
rule. For more on carrying
forward see page 3.
Investment ISAs offer
tax-free gains
Like pensions, ISAs are one
of the two main pillars of
tax-efficient wealth building.
Each UK adult benefits
from an ISA allowance of
£20,000, with any interest
or gains shielded from tax.
The ISA annual allowance
can’t be carried over into a
new tax year – can you and/
or family members pay more
into ISAs before 6 April?
Tip: You should always
look to make full use of your
annual allowance if you have
an investment ISA before
paying into a general investment
account (GIA). GIAs
provide flexible access and
there is no limit on contributions,
but they don’t benefit
from the same tax shelters.
Harvesting
investment gains
The annual capital gains tax
(CGT) exemption is £6,000.
This will be halved to £3,000
from April 2024, which will
place even more emphasis on
optimising ISAs and pensions,
where any investment
gains are exempt from tax.
However, a couple can still
make substantial savings by
‘harvesting’ investment gains
in each tax year and applying
their annual CGT exemption,
rather than letting gains
build up and facing a large
tax charge down the line.
Tip: A professional investment
management team
can implement annual capital
gains harvesting, to ensure
Don’t miss out on optimising these annual allowances before 6 April
Tax wrapper/benefit
Standard pension allowance 1
Carry forward
ISA (stocks and shares)
Tax-free capital gains
Annual allowance
£60,000 (or 100% of earnings if lower) a year for earners
(contributions for non-earners are limited to £3,600)
Unused annual allowances from 3 previous tax years;
carry forward from 2020/21 must be used in the 2023/24
tax year
£20,000 per adult; £9,000 for under-16s; allowances
operate on a use it or lose it basis
£6,000 capital gains tax annual exemption; operates on a
use it or lose it basis. £3,000 from 2024/25 tax year
1 Savers are subject to a tapered (reduced) annual allowance if adjusted earnings are above £260,000
GOOD TO KNOW
Remember to
report losses
If you have incurred losses
when selling individual
shares or funds you can
carry those losses forward
to offset gains made in the
future. For tax-exempt
products such as ISAs and
pensions this isn’t an issue,
but it is for shares or funds
held directly and /or in a
general investment account
(GIA).
Your GIA provider will
produce a report that will
detail all gains and losses
made in each tax year. By
reporting these to HMRC
in your annual tax return,
you can potentially reduce
your overall tax liability,
both in that individual tax
year, and then (based on
current legislation) in
future tax years as well.
this ‘use it or lose it’ allowance
is being appropriately
applied before the end of
each tax year.
Doing the basics right
in each tax year can
substantially improve longterm
financial outcomes and
your overall retirement prospects.
Find out more about
planning for retirement by
calling a Lumin expert on
03300 564 446.
FACTSHEET
Tips for the end of
the tax year
Request this free factsheet
via enclosed response card,
info@luminwealth.co.uk
or call 03300 564 446

lumin news 10 / winter 2024 Page 3
Last chance to use any remaining
pension allowances from 2020/21
MY TIP
Using up unused annual allowances from previous tax years can provide a healthy
boost to your pension. But any remaining annual allowance from 2020/21 must be
used before 6 April, or it will be permanently lost.
SARA MOORE
Senior Financial Consultant
sara.moore@luminwealth.co.uk
Phone 01727 893 333
The standard pension allowance,
the maximum amount
that can be contributed into
a pension and benefit from
tax relief each year, increased
to £60,000 in April 2023
(some higher earners may
face a tapered annual allowance).
Certain individuals
can make a larger contribution
by ‘carrying forward’
unused annual allowances
from prior tax years. This
may be particularly lucrative
for small business owners.
How does carry
forward work?
Carry forward allows eligible
pension savers to pay more
than the standard annual allowance
(£60,000) into their
pension in a given tax year.
This can be achieved by carrying
forward unused annual
allowances from the three
previous tax years. To be eligible
you must first use up
your annual allowance in the
current tax year, before using
carry forward from prior
years, starting with the earliest
of the three available years.
Any carry forward from
2020/21 must be used before
the 6 April, or it will be lost.
Carry forward is only available
if you have been a member
of a registered pension
scheme in a given tax year. It
isn’t available if you’ve started
accessing your defined contribution
pension benefits.
Case study
The example table below illustrates
how carry forward
works in practice. In this scenario,
the individual could
achieve income tax savings of
Make substantial tax savings with carry forward
Example: Taxpayer in England; £10,000 annual pension contribution by employer.
Earnings
Pension contributions
made 1 Annual allowance
remaining
2020/21 £130,000 £15,000 £25,000
2021/22 £140,000 £40,000 None
2022/23 £150,000 £20,000 £20,000
2023/24 £150,000 £30,000 £30,000 2
1 Employee and employer contributions
2 The pension annual allowance rose from
£40,000 to £60,000 as of 6 April 2023
Total: £75,000
Potential income
tax saving of up
to £35,000
up to £35,000 on a pension
contribution of £75,000.
Benefits for
business owners
Carry forward can be particularly
helpful for small
business owners, who can
extract company profits via
workplace pension contributions
and boost their retirement
pot, achieving substantial
tax savings in the process.
In contrast to personal
pension contributions, tax
relief-qualifying contributions
via a company pension
scheme are not limited to
relevant UK earnings. Company
pension contributions
are only limited to your annual
allowance, plus any
available carry forward.
Do you want to know
how much you could
pay into your pension, and
how this fits within your
overall financial plan? Call
03300 564 446.
Use it in
2023/24 tax
year or lose it
MARTIN COTTER
Managing Director of
Lumin VZ Group
We’re delighted that the
specialist mortgage adviser
Davidson Deem has recently
joined the Lumin VZ family
of businesses. The timing is
particularly important given
the explosive rise in interest
rates seen over the past year,
which has placed greater
financial emphasis on sourcing
a new mortgage deal.
Davidson Deem has been
providing mortgage services
since 1989 and has particular
expertise when it comes
to advising high-net-worth
individuals, including solicitors
and accountants. They
operate as an independent
whole-of-market mortgage
adviser and deliver a highly
professional service, which
has resulted in a loyal client
following. Their 300 +, 5-star
Google ratings are a testament
to the consistent excellence
of their services.
My tip: If your existing deal
is coming to an end it’s advisable
to consider your options
in advance. New rates can be
locked in up to six months
early. Sign up to our Lumin
Mortgage Renewal Register,
and we will be in touch to
help you find the best available
rate ahead of the expiration
of your current mortgage
deal.

Page 4 lumin news 10 / winter 2024
How to avoid the sting in the tail of the
new pension tax-free cash rules
Savers with large pension pots could see the real value of their 25% cash lump sum
undercut if they leave it intact.
The lifetime allowance of
£1,073,100 – the cap on the
maximum amount you could
save into pensions without
extra tax charges – has been
scrapped (as of April 2023).
While this is good news for
savers with large pensions,
there is a sting in the tail.
The standard lump sum
entitlement – which allows
savers to take 25% of their
pot as tax-free cash – has been
frozen at £268,275, with no
plans currently in place to
revise this. This has created a
dilemma for savers with a
large pension; should they
leave their 25% entitlement
intact – and see its value undercut
over time – or put it
to work elsewhere?
Watch out for the erosion of your tax-free cash entitlement
Assumptions: Net investment return of 5% per annum; 2% annual inflation.
Year Fund value Max tax-free cash Tax-free cash
percentage
Frozen threshold
If your pension were to grow
over time, but the tax-free
lump sum stayed fixed at
£268,275, the percentage of
available tax-free cash would
shrink significantly in comparison
to the total value of
your pension. This is without
factoring in inflation, which
will eat into the purchasing
Value of cash lump
sum after inflation
2024 £500,000 £125,000 25% £125,000
2034 £814,447 £203,612 25% £167,033
2044 £1,326,649 £268,275 20% £180,541
2054 £2,160,971 £268,275 12% £148,107
power of your frozen tax-free
cash amount over the long
term – see example table.
Possible solutions
One option is to take the taxfree
lump sum and reallocate
it into different tax wrappers
(although bear in mind the
inheritance tax implications).
UK adults have a £20,000
annual ISA allowance, while
£9,000 can be put into a junior
ISA. Offshore bonds and
onshore bonds could also be
a tax-efficient investment option
for some savers, although
it is important to weigh up
the associated risks alongside
the possible benefits.
Want to find out more
about how to maximise
the value of your pension
pot? Call a Lumin consultant
on 03300 564 446.
Pursue your personal investment strategy by bringing
pensions together in one ‘mothership’
After a job move, it can be
easy to forget about pension
arrangements with a former
employer. But it’s important
to make sure the money is
invested in the right asset mix
and to monitor costs and performance.
Having a ‘mothership’
pension – outside of
a workplace pension with a
current employer – can make
that process much easier.
Setting your own
investment strategy
Workplace pensions typically
have a limited choice of investments.
You are in an investment
vehicle of the pension
scheme’s choosing, which is
designed for the ‘average’ employee.
A preferrable option is
to pursue an investment strategy
based on your own goals,
time horizon, and attitude to
risk. Consolidating multiple
plans into one self-invested
personal pension allows you to
tailor the asset mix/selection.
Are your pensions on
auto pilot?
Investors in ‘target date’ or
‘lifestyle’ funds should be
mindful of a changing asset
mix. Such funds automatically
reallocate from stocks
towards ‘safer’ assets in the
years leading up to a predetermined
retirement date.
However, that might not reflect
your intended use of
those assets or circumstances
at the time.
Less admin, lower fees
Combining old workplace
plans makes your pensions
easier to manage and can lead
to reduced costs, as some
plans may have higher management
charges. Some old
plans may not offer flexi-access
drawdown, which allows
retirees to dip into their pension
funds flexibly.
Combining multiple
pots into one single
flexible plan can give you
greater options when planning
for both the short and
long term. But it’s important
to watch out for potential
charges or any loss of benefits
that would result from exiting
a plan. Find out more by
calling 03300 564 446.

lumin news 10 / winter 2024 Page 5
How to generate retirement income with a
minimal tax burden
With the right planning, and careful use of allowances, a couple can significantly
lighten their tax load in retirement.
JOE FISHER
Financial Planning Manager
joe.fisher@luminwealth.co.uk
Phone 02039 887 788
Most retirees are able to substantially
reduce their income
tax burden once they
stop working. With careful
management and disciplined
use of allowances, a couple
could be able to shield up to
£44,000 from tax in the
2024/25 tax year (see chart).
A changing taxation
picture in retirement
During retirement the taxation
picture undergoes a
major shift for most people.
Your income will drop significantly,
so your tax bill will
also fall. You can utilise several
helpful allowances to
stay within the basic rate tax
band for income tax (20%),
minimising your tax bill still
further. In some cases, with
careful planning, a retired
couple could negate income
tax entirely. It’s important to
keep track of all forms of income.
Pension withdrawals,
rental income, State Pension
payments and dividend income
are all taxable.
Making the most of
tax allowances
Pension withdrawals are subject
to income tax at your
A couple can have up to £44,000 income
per year tax-free
Max. tax-free income
£45,000
£40,000
£35,000
£30,000
£25,000
£20,000
£15,000
£10,000
£5,000
£0
One person
Personal allowance
CGT allowance
Starting rate for
savings income
marginal rate. But if a couple
each apply their personal allowances
of £12,570, over
£25,000 can be taken taxfree
each year. The capital
gains tax annual allowance
can be used to ‘harvest’ investment
gains – or other
taxable gains – in each tax
year. This allowance is currently
£6,000, but will be
£3,000 per person for the
2024/25 tax year.
Individuals with less than
£17,570 of non-savings income
may be able to benefit
from up to £5,000 of tax-free
savings income. This allowance
is known as the starting
rate for savings. Every £1 of
non-savings income above
your personal allowance of
£12,570 reduces your starting
rate for savings by £1.
Basic rate taxpayers who
have income above £17,570
can benefit from £1,000 taxfree
savings interest per person
each year, via the personal
savings allowance.
A couple
Personal savings allowance
Dividend allowance
Cutting your dividends
tax bill
Investors who are earning
income from dividends (on
investments held outside of
tax wrappers) can also take
steps to reduce their tax bill.
The dividend allowance of
£1,000 will be cut to £500
from 6 April, but a couple
can still enjoy tax-free dividend
income of £1,000 annually.
Staying within the
basic rate tax band also sees
you pay tax on dividend income
(above the dividend
allowance) at a rate of just
8.75%, rather than 33.75%
and 39.35% for higher and
additional rate taxpayers.
ISAs and pensions
ISAs and pensions form the
bedrock of retirement income,
but how and when
should you draw on them?
Many retirees make tax-free
withdrawals from flexible
ISAs first and save pensions
for later in retirement (leaving
them invested and with
the opportunity for future
growth), as pensions are typically
exempt from forming
part of the estate for inheritance
tax purposes.
Using ISA assets first enables
you to continue Dividend making allowance
pension contributions Personal of up savings allow
to £60,000 in each Starting tax year. rate for savin
This may be helpful if you
CGT allowance
are continuing to work parttime,
as once you start Personal draw-allowancing
from pensions you are
limited to a maximum contribution
of £10,000 in each
tax year. You can take up to
25% of your total pension
pot as a tax-free cash lump
sum when you start accessing
pension benefits.
Strategically spreading
pension withdrawals (beyond
the 25% tax-free lump
sum) over a number of tax
years can help ensure overall
income stays within the basic
rate tax band, rather than
making a large one-off withdrawal
in a given tax year,
which would likely tip you
into a higher tax bracket.
A retired couple who
are making full use of
their annual allowances and
exemptions can save thousands
on tax each year. Learn
more by calling one of the
Lumin financial consultants
on 03300 564 446.
FACTSHEET
Tax-saving tips
for pensions
Request this free factsheet
via enclosed response card,
info@luminwealth.co.uk
or call 03300 564 446

Page 6 lumin news 10 / winter 2024
Financial planning for small business owners:
Tips for cutting your tax bill
How can family-run businesses navigate the tax maze and implement financial
efficiencies, while also incorporating a robust succession plan?
WILL HARRIES
Financial Consultant
will.harries@luminwealth.co.uk
Phone 01727 893 333
With so much time spent on
running the business in the
day-to-day, family businesses
often don’t take a step back
and consider the various tax
efficiencies of effective financial
planning (which larger
companies consistently benefit
from). This article outlines
some of the tax-saving
measures and steps that small
business owners could consider
implementing.
Pay structure and
tax efficiency
Many directors of limited
companies pay themselves a
small director’s salary, allowing
them to build up qualifying
years for their State
Pension, but keep their National
Insurance Contributions
low. They would typically
draw the rest of the
Checklist for tax efficiency
Pay structure
Pensions
Estate planning
money in the form of dividends,
which are paid out of
a company’s profits after corporation
tax has been deducted.
However dividend
tax rates are currently high,
with higher and additional
rate taxpayers paying tax at
33.75% and 39.35% respectively.
This approach also
means your pension contributions
are limited, as they
can’t exceed your annual salary
for the tax year.
Tip: If a company is generating
substantial profits
then employer pension contributions
can be a very taxefficient
way of paying yourself,
as well as family members
who work with you.
Making regular
contributions into
pensions
Pension contributions made
via the company (as opposed
to personal contributions)
can result in significant tax
savings. Employer pension
contributions are considered
to be an allowable business
expense, so they can usually
be offset against corporation
tax, subject to meeting the
‘wholly and exclusively’ tests.
Employers also don’t have to
pay National Insurance on
pension contributions.
UK adults can now pay
up to £60,000 into a pension
annually, but a larger sum
could be contributed if you
have unused annual allowances
from the previous three
tax years. Paying into workplace
pensions also provides
a valuable financial buffer if
the business were to struggle
or fail, as workplace pensions
do not form part of a company’s
assets.
Tip: If your business is
generating substantial cash
profits, and if adult children
are also involved in running
the business, they could also
benefit from significant tax
savings by making pension
contributions via the company,
while building up their
own retirement pot(s).
Succession planning
If younger family members
have the appetite – and the
skills – to run the business
then there are various ways
to pass on a small business
tax-efficiently. Gifting the
• Consider the most tax-efficient way of extracting money
(salary plus dividends, or pension contributions)
• If paying into workplace pensions, ensure all family
employees are optimising their contributions
• Consider whether you can carry forward unused annual
allowances
• Plan early and consider the most tax-efficient way of
passing on the business
GOOD TO KNOW
Cost-effective life
insurance
Many business owners opt
to take out life insurance,
to guard against an
unexpected passing.
Funding these policies via
the company (rather than
personally) can be very
tax-efficient. This is because
premiums are deductible
against corporation tax, as
they are considered to be
an ‘allowable business
expense’. Company owners
can often make substantial
savings as a result.
business – or your shares in
it – to children is one option,
as after the seven-year window
these assets are then
outside of your estate for inheritance
tax purposes.
Tip: If your company
qualifies for Business Relief
then you may be able to pass
it on to descendants without
a tax charge. Early planning
is advised.
Financial planning can
help small business
owners reduce their tax burden,
boost retirement outcomes
and ensure the right
legacy for loved ones. Call us
on 03300 564 446 to discuss
your options.
FACTSHEET
Tips on small
business protection
Request a free factsheet via
enclosed response card,
info@luminwealth.co.uk
or call the Lumin team on
03300 564 446

lumin news 10 / winter 2024 Page 7
Family investment companies: A tax-efficient
way of building and protecting wealth
For families with substantial wealth a family investment company may prove to be a
valuable alternative to approaches such as a discretionary trust.
A family investment company,
or FIC, can offer a flexible
and tax-efficient solution
through which to grow and
pass on wealth.
A FIC is structured as a
private limited company and
created (often via a founder
‘loan’) to hold a wide range
of investments for a family,
with the possibility of establishing
different share classes
to vary control and income
opportunities. A gift of shares
to children is outside the donor’s
estate after seven years.
In contrast, when gifting into
a discretionary trust a 20%
tax charge is due immediately
if the gift exceeds £325,000.
This rule, alongside additional
tax charges that apply
to discretionary trusts every
10 years, means that certain
high-net-worth families use
FICs as an alternative option
to consolidate and protect
family wealth, while maintaining
control and providing
an income (if required).
Potential tax benefits
Repayment of the original
‘loan’ is tax-free and can be
used to provide an income.
Dividends declared on underlying
equities held in
a FIC are typically exempt
from corporation tax. If held
by an individual, or in trust,
dividends (above the tax-free
allowance) are subject to tax
at 33.75% for higher rate taxpayers,
or 39.35% for additional
rate taxpayers. If a FIC
is properly structured inheritance
tax can be negated entirely,
providing that the donor
survives for seven years
after they gift shares to their
children. The cost of running
the FIC is also tax deductible.
Possible drawbacks
Profits from the sale of investments
held in a FIC are
subject to corporation tax at
a rate of 25% (not the lower
‘small profits rate’). This is
higher than the current capital
gains tax rate on shares,
which is 20% (although gains
on investment properties are
taxed at 28%). The biggest
watchpoint revolves around
extracting funds from the
company. A distribution to a
shareholder is subject to income
tax. That tax liability
can be managed by making
more regular or smaller distributions
to individuals who
have limited other income
(eg. children).
FICs can be complicated
and will not be
the right solution for everyone.
You should seek advice
from a qualified professional
to establish the best approach
for your own circumstances.
Please call 03300 564 446
to discuss your options.
Achieve your investment goals (earlier) by selecting
the right funds
It’s vital to invest in strong-performing
funds that provide
value for money. But there are
over 100,000 collective investment
vehicles worldwide
and about 4,000 funds for sale
in the UK. As a private investor,
researching and selecting
these funds can be difficult.
A typical fund selection process
Investment funds
Initial screening
Quantitative scoring
Qualitative analysis
Portfolio use/monitoring
Unbiased selection
The cornerstone of an unbiased
approach is to choose
from all available funds and
not restrict yourself to certain
providers or product types.
Best-in-class products can
either be active funds or passive
vehicles. Active funds
may struggle to outperform
passive alternatives – which
have lower fees – in some
markets, but can have better
chances in other sectors.
Choosing the right
investment funds
A fund selection process usually
starts with initial screening
(eg. minimum fund size),
before analysing historical
performance over different
time periods and market
conditions (eg. when equity
markets have gone up or
down). A qualitative assessment
is the most critical step
to establish the likelihood of
strong performance being
repeated going forward. Due
diligence thoroughly investigates
a fund’s strategy, processes,
and team. Ongoing
monitoring after the selection
of a fund typically incorporates
measures such as
monthly and quarterly performance
analysis, and scrutiny
of any changes to the
investment process, strategy,
or fund management team.
Professional expertise
can provide value for
money and help avoid some
of the potentially costly traps
that private investors can fall
into. Find out more by calling
03300 564 446.

Page 8 lumin news 10 / winter 2024
Is cash really king? Watch out for the
short-term cash trap
Savers are finding comfort in higher rates, but interest earned on cash is rarely sufficient
to expand wealth. Investments offer greater return potential in the long run.
FIONA READ
Senior Financial Consultant
fiona.read@luminwealth.co.uk
Phone 01727 893 333
Uncomfortable losses for
bond investors in 2022 and
sustained volatility in the
equity market could make
cash a tempting proposition,
especially with headline interest
rates exceeding 5%.
Many savers have piled large
sums into savings accounts.
This can make sense in the
short term, but it hasn’t been
successful in growing wealth
over the long run.
Are interest rates
peaking?
While cash may offer immediate
comfort, high rates are
likely to be temporary as they
typically follow the direction
of the base rate set by the
Bank of England. This poses
a reinvestment challenge for
cash further down the line.
The Bank of England is expected
to lower its rate from
2024. Bond funds offer potential
for substantial gains
in a falling rate environment.
Investors need to weigh up
the risks of investing in fixed
income funds and /or direct
bond investments. Bonds
issued by the UK government
(gilts) are exempt from
capital gains tax.
Beware of the invisible
inflation tax
At face value cash may appear
to offer the best capital protection,
but the impact of
inflation is often overlooked.
The purchasing power of
your wealth comes from real
returns, which is when you
deduct inflation from the
nominal return or interest.
Interest rates may have soared
in 2022 and 2023, but cash
has historically yielded negative
or minimal real returns,
even over long periods – see
table below.
UK real returns by asset class (% p.a.) since 1899
History favours
investing over cash
While UK equities underperformed
cash in 2022, the
table shows they have outperformed
both cash and UK
government bonds (gilts) in
real terms over long periods.
Holding more than an emergency
cash reserve (which
can be used to cover a job loss
or other urgent financial issue)
could be short-sighted.
Savings accounts are unlikely
to match the returns
generated via an investment
account over the long term.
The longer your investment
horizon, the greater your
chance of succeeding with
equities and other investments.
Patience and discipline
are key when investing,
as there will be leaner years,
alongside fruitful years where
you harvest strong returns.
The benefits of staying
invested
Predicting successful exit and
re-entry points into the market
is an immensely challenging
task, even for the most
sophisticated private investors.
Bloomberg data shows
that if an investor missed the
10 best days for global equities
over the two-decade period
from 2002 – 2022, they
would have seen their annualised
returns cut by over 3%
per year.
Long-term investors are
best-served by sticking to a
defined strategy, in line with
the principle of ‘time in the
UK 2022 10 years 20 years 50 years 123* years
Equities -11.5 2.6 3.8 4.5 4.8
Gilts -34.0 -3.3 0.0 2.4 0.9
Cash -10.9 -3.3 -1.8 0.7 0.5
Source: Barclays Equity Gilt Study 2023; *denotes entire sample
OFFER
Are your investments
working
hard enough?
A second opinion from a
professional can make sure
that your investment plan
is in the best possible
shape. A portfolio check
systematically investigates
key aspects, such as:
• Does your long-term
investment strategy and
goals match with your
circumstances?
• Has your asset mix drifted
with market movements?
• Are your investment
risks reduced through
diversification?
• Are you holding too
much cash?
• Which funds have performed
well, and which
have lagged behind?
• Do you have excessive
exposure to single company
shares?
• Are excessive fees undercutting
overall returns?
A second opinion from
Lumin is complimentary and
without any obligation to
work together afterwards.
Call 03300 564 446, or
scan the QR code
to request a
portfolio check.
market’, rather than ‘timing
the market’.
Cash is designed to fulfil
shorter-term needs.
Any money set aside for the
long term can expect a superior
return over time if it’s invested
in more suitable longterm
assets. Call 03300 564
446 to learn more.

lumin news 10 / winter 2024 Page 9
You don’t have to sell investments
to fund a property purchase
Certain lenders lend against notional investment income/values, allowing you to keep
investments intact, while helping children or grandchildren onto the property ladder.
Affordability can often be an
issue for investors who are
seeking to fund a house purchase.
But certain lenders will
lend against the value of existing
investments, or the value
of future investment income
that could be generated. In this
scenario the property is the
security, rather than the investment
portfolio. This notional
investment ‘income’ can
help borrowers to bridge the
income gap and get a loan.
Advantages
This can be an ideal solution
for helping children and /or
grandchildren onto the property
ladder. It allows you to
keep investments where they
are, and benefit from potential
returns, rather than selling
off a portion of your assets
to help fund a house
purchase. Some lenders will
lend well past retirement age,
providing additional flexibility
for those at later life stages.
How does it work?
Each lender’s terms will vary.
Some may use a notional
amount – for example 5% of
the investment value – as income,
irrespective of whether
your investments are returning
that amount annually, or
being drawn. In the example
(right) an 80% value is applied
to investments worth
£1,000,000, with the notional
annual income value
ranging from £25,000 to
£80,000 depending on the
lender and borrower’s age.
Potential limitations
Each lender will have different
requirements, but typical
caveats to consider include
term lengths, which can be
limited to a set maximum
term. Lenders may also require
a substantial minimum
investment value. In certain
cases this could be upwards
of £250,000. Certain higher-risk
funds or products may
be discounted.
Mortgage
affordability with
investment income
Illustrative example
£1,000,000
£800,000
£600,000
£400,000
£200,000
£0
Investment portfolio
Notional income value 1
1 £25,000 – £80,000; notional
income value depends on the
lender and the borrower’s age.
If you would like to
find out more about
borrowing with investments
please get in touch with our
in-house mortgage experts
on 03300 564 446.
orange
blau
Funding the cost of school fees by remortgaging
Over the past few years we
have seen an increasing number
of borrowers look to raise
funds against their homes in
order to pay school fees. This
trend comes as the cost of
private education has continued
to rise.
Funding the cost of
private education
Typically this is done by remortgaging
and borrowing a
larger sum (although occasionally
taking out a second
mortgage may be an appropriate
solution). Often the
amount raised can cover expected
costs right up until
the last child in the family
leaves higher education. This
can provide a valuable revenue
stream to cover fees and
help with affordability.
Lender problems when
remortgaging
A specialist mortgage broker
can provide access to lenders
who will ignore the school fee
commitment, in the knowledge
that the capital raised is
specifically for covering this
expense. In many cases lenders
count the school fees cost
as an additional financial
commitment, on top of the
cost of the increased mortgage.
This could mean that
borrowers fail to meet a lender’s
affordability criteria in
some cases.
Offset mortgages
Some schools may offer a
discount on the total cost if
you pay the whole sum up
front. If parents prefer to
hold back the funds and pay
school fees on a termly basis,
remortgaging via an offset
mortgage may be an appropriate
solution. With an offset
mortgage funds can be
drawn as and when they are
required. This provides flexibility
and can be cost-effective,
as interest is effectively
only charged as and when the
funds are spent.
While offset mortgages
provide valuable flexibility,
interest rates can often be
higher than for traditional
mortgages. A specialist broker
can help you find the best
deal for your circumstances.
Our independent inhouse
mortgage experts
have access to exclusive
lender deals and provide a
‘whole-of-market’ brokering
service that covers all types of
property finance, including
offset mortgages. Call 03300
564 446 to find out more.
Important: It’s necessary to
think carefully before securing
other debts against your
home. Your home may be
repossessed if you don’t keep
up with repayments on your
mortgage.

Page 10 lumin news 10 / winter 2024
Ask our Expert
Your financial planning questions answered
Financial Planning Manager Jason Coppard answers readers’ questions on
making the most of general investment accounts, inheritance tax refunds
on investment portfolios, and investing during retirement.
JASON COPPARD
Financial Planning Manager
jason.coppard@luminwealth.co.uk
How can I optimise my general investment
account (GIA)?
General investment accounts, or GIAs,
do not benefit from the same tax advantages
as ISAs, so capital gains tax
and income tax may be incurred. However,
working closely with a financial
adviser can help to minimise any potential
tax bill. For example, funds can
be sold down annually from GIAs and
transferred across to other tax-efficient
products, such as ISAs and pensions.
Which funds to sell – and the timing
around this – is very important.
If you are going to invest in GIAs it
is important to optimise the tax-free
capital gains allowance in each tax year.
This is £6,000 for the 2023/24 tax year,
and is set to fall to £3,000 in April 2024.
This allowance operates on a ‘use it or
lose it’ basis, which means it can’t be
applied retrospectively.
It very much depends on what you are
hoping to achieve. Many people in their
60s can underestimate their investment
timeline, and you may have decades of
investing left ahead of you. Your appetite
for risk is one of the key factors that
will determine what balance of assets
you hold – eg. shares vs. bonds.
You may also have specific goals
that mean you wish to take on more
investment risk, with the aim of generating
higher returns. This could include
a desire to leave a larger legacy for loved
ones, to maintain a certain standard of
living in retirement, or to attempt to
achieve inflation-beating returns.
Tip: Utilising the annual exempt
amount in each tax year – a process
known as capital gains harvesting – can
lead to significant tax savings, in contrast
to deferring capital gains and being
hit with a hefty tax bill when you
sell the funds in the future. The annual
allowance may be less generous currently
in light of recent tax changes, but
using it in a disciplined fashioned can
still substantially reduce tax liabilities
on GIAs.
FACTSHEET
Top tips on capital
gains tax
Request a factsheet via the response
card, info@luminwealth.co.uk or call
the Lumin team on 03300 564 446
I’m 60 and retired – what balance of growth
and income assets would you recommend?
Others may wish to adopt a more
conservative strategy in line with their
appetite for risk and retirement goals.
Investing comes with inevitable ups
and downs, and a long-term time horizon
– typically at least five years, but
ideally 10-plus – is required. Time in
the market, as opposed to timing the
market, is an important principle.
Tip: It’s important to monitor your
investment goals and strategy and stick
to a long-term plan. Many retirees opt
to delegate investment decisions to an
experienced investment management
team, so they can spend more time on
enjoying their retirement.
Can I claim an inheritance
tax refund on an
investment portfolio?
Inheritance tax (IHT) overpayments
typically happen because families have
a six-month window in which to pay
any tax that is due on an estate. However,
the sale of investment portfolios
(or inherited properties) at later dates
after this six-month window means
their price valuations can often fall,
compared to the valuations they were
given at the time of death (additional
IHT is not due if shares or property rise
in value). If you wish to make a claim
on investment assets you have up to a
year to make a claim (for homes a fouryear
period applies).
When the actual value of inherited
assets is settled, many families are completely
unaware that they may be eligible
to claim rebates on overpaid IHT.
Changes in stock markets mean that an
increasing number of people may be
able to make a claim. This may also be
the case for inheritance tax paid on a
family home, if house prices were to fall.
Tip: To make a claim for overpaid
IHT on shares /investments it’s necessary
to fill out an IHT35 form, or an
IHT38 form for properties. Forms are
typically filled in by the executor of the
will, or an ‘administrator’ in the event
that no will has been made.
FACTSHEET
Top tips on IHT/
estate planning
Request a free factsheet via
the enclosed response card,
info@luminwealth.co.uk or call
the Lumin team on 03300 564 446

lumin news 10 / winter 2024 Page 11
OPINIONS
Guest column:
Baroness
Ros Altmann
Former Pensions Minister and consumer champion
Ros Altmann outlines the potential benefits of combining
multiple workplace pension plans.
What are the possible benefits of
bringing defined contribution pensions
together?
Combining several smaller defined
contribution pensions into one larger
fund can lead to lower annual fees, so
you can keep more of the investment
returns. Even small reductions in the
amount you pay a company or adviser
annually can make a significant difference
over time.
Joining different pension funds together
means you can select the company
you feel offers the best value. For
example, the best range of investment
options to match your goals, the ability
to easily see how your pension is performing,
reasonable costs of holding /
managing your fund, and high-quality
information, guidance or advice. This
way, you can put your money somewhere
that suits your needs and build a
better pension fund for the long term.
Why is caution warranted before
transferring a pension?
Although there are many advantages
to combining your past workplace
pensions, there are several reasons why
this might not be right for everyone.
Some past pensions have valuable guarantees
– such as minimum returns, guaranteed
annuity rates, or a lower minimum
age of withdrawal. These benefits
should not be given up lightly. Certain
providers may also charge exit fees.
Older pensions are more likely to have
some of these features. You should really
get advice before moving your fund.
Is it worth retaining smaller pots?
It is definitely worth considering
keeping small pension pots (worth less
than £10,000) that you have. You are
able to cash in up to three small pots,
without losing the full £60,000 annual
pension contribution allowance. If you
only have one non-small fund, and you
have taken out more than your 25%
tax-free cash entitlement, you can’t contribute
more than £10,000 per year into
a pension.
What should you be mindful of if
you’re invested in a ‘default’ workplace
pension fund?
‘Default’ workplace pension funds
are designed for an ‘average’ person, so
may not cater to your individual requirements.
Your own needs depend on
factors such as how long you intend to
keep working, when (and if) you plan
to start with drawing money, your health
and age, and any other pensions you
may have (eg. defined benefit pensions
and the State Pension). Default funds
often assume a pre-determined retirement
age and will usually reallocate
towards ‘safer’ assets, such as bonds, in
your fifties, which reduce expected
long-term returns. If you intend to carry
on working, and want to keep your
money invested for longer, you run the
risk that your pension will deliver
sub-optimal investment returns.
What investment opportunities can
combining multiple pots provide?
Uniting multiple pension pots allows
you to invest in a range of assets,
which can help to smooth out investment
returns over time. This diversification
could deliver higher returns too,
as you can reap potential rewards from
allocating towards less mainstream markets.
A larger fund simplifies the monitoring
/administration process, particularly
if the funds are managed according
to one master in vestment plan that suits
your needs.
ROS ALTMANN
Baroness Altmann is an awardwinning
expert on all aspects
of pensions and later life policy.
She is a consumer cham pion,
and was awarded a CBE in 2014
for services to pensioners and
pension provision. She served as
UK Minister of State for Pensions
from 2015 to 2016.

Page 12 | winter 2024
Pensions, investing, and tax:
Lumin experts in the media
Our financial consultants regularly appear in publications including The Telegraph,
MoneyWeek and Investors’ Chronicle. Here we round up some recent coverage.
‘Deferring your State
Pension can give you
higher payments – but
there’s a catch’
The Telegraph, 08.06.2023
Financial Planning Manager
Jason Coppard says that deferring
the State Pension is
“unlikely to be the appropriate
starting position for the
majority, as retiring from
work will have caused a significant
reduction in regular
income, and many have major
concerns about living past
the age of 81” (the ‘breakeven
point’ whereby there is a financial
benefit to deferring).
There are some circumstances
where it may be appropriate.
For example, if your income
tax status is expected to
change from the time of deferral
to the commencement
of State Pension payments.
‘Should you invest
for income or growth
in retirement?’
Investors’ Chronicle,
10.11.2023
Your investment strategy in
retirement will depend on
several factors including your
age, attitude to risk, and your
financial and lifestyle goals.
James Corcoran, who is a
Senior Chartered Financial
Planner, points out that typically
“growth assets are the
key element of any retirement
plan, as it is primarily
growth assets that will provide
that driving force to
stave off the erosive effects of
inflation”. As James notes,
this is more important now
than ever, with the rate of
inflation still well above the
Bank of England’s long-term
2% target.
‘How to lower your
capital gains tax bill’
MoneyWeek, 03.11.2023
Transferring assets between
spouses is a widely used solution
to limit a capital gains
tax liability. Jason Coppard
explains that an additional
benefit can be achieved when
a transfer involves charitable
giving. “Transferring the asset
to the individual in the higher
tax band before gifting, via
Gift Aid, can be worth 20%
or 25% in additional rate tax
relief. This is because tax
bands are extended by the
gross charitable donation,
increasing the segment of income
taxed at the lower rates.
This is even more valuable if
income is between £100,000
and £125,140, as it will restore
some, or all, of their taxfree
personal allowance.”
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ABOUT LUMIN WEALTH
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St Albans Office
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St Albans, AL3 6PH
Phone 01727 893 333
info@luminwealth.co.uk
www.luminwealth.co.uk
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Our content constitutes a ‘financial promotion’ for the purposes of section 21 Financial Services and Markets Act 2000 (United Kingdom) (‘FSMA’). This publication is for general information only. It does not constitute
advice or (by itself), a basis for any financial decision. You should only make such decisions based on your individual circumstances and, we recommend, with advice from suitably qualified advisers working for a regulated
firm. Whilst we try to be accurate, Lumin Wealth does not accept responsibility for any inaccuracies in this publication or for any loss that may result from reliance on it, but this disclaimer does not affect our
responsibilities or your rights under the FSMA or other applicable UK law and regulation. Any financial projections in this document are provided for illustrative purposes only and should not be regarded as predictions.
Past performance is not a guide to future returns. The value of investments may fall as well as rise and you may get back less than you invested. Tax treatment depends on your individual circumstances and rules may
change. The Financial Conduct Authority does not regulate tax and estate planning.