Revenue relents on discounts

Personal Finance

SOME good news from the Inland Revenue. I don't mean its recent admission that perhaps 1.5 million people have the wrong tax code and therefore could be paying too little tax - more likely, of course, it's too much. Although I do recommend checking your tax code, which the article on the facing page should help with, improving your financial lot starts with the basics - not with the investment equivalent of betting on the 3.30 at Newmarket.

No, the good news is that the Revenue will no longer try to tax many discounts offered by financial advisers on personal pension and life insurance policies. The discounts that will now be tax free are those where the adviser rebates some or all of his commission to you, whether in the form of cash, by reducing the premium you pay or as an enhancement to the money you put in.

But it's only some good news. In fact, the Revenue hasn't had much luck collecting this tax. Previously, consumers were meant to declare the value of these rebates for tax. But more than likely, people weren't aware they had this obligation.

The second reason is that the Revenue's U-turn does not apply to discounts offered by advisers on unit trusts and PEPs. A number of advisers - London- based Chelsea Financial Services and Guildford-based Premier Investment are two - now specialise in this discount broking, which can be worth up to 3 per cent of the amount of money you invest. The Revenue says it is still considering the position on these discounts.

The third caveat is that the Revenue will still tax the adviser as though they have taken the full commission. Who cares, you may say. But if the adviser is taxed, he's going to be less inclined to discount. And less inclined to charge fees while rebating all commissions, because that way he faces tax on both "incomes". Fee-based independent financial advice is a good thing - the adviser is under less pressure to sell you something than a commission-based adviser, who only earns if he sells.

IT'S the season for Budget submissions, where interested parties do their special pleading. That of the unit trust companies' association, Autif, stands out for wanting government action to encourage pension plans that involve unit trusts to a greater degree. It says: "The use of the unit trust would . . . minimise one of the great problems the Government faces, in that pensions in general have lost the confidence of much of the population either via the impact of the Maxwell affair or via the problems with personal pensions. The unit trust is a financial services product with a record of the utmost integrity . . . together with the current transparency of charging . . . this should leave both the Government and the consumer entirely confident about the nature of their investment."

Knock out the hype and they have a point. Traditional pension providers have shot themselves in the foot in recent times. A survey out this week by NatWest says the equivalent of more than 1.5 million people say that what they have heard about poor pensions advice has stopped them buying a pension plan or paying more into an existing plan.

PEPs have only become as popular as they have thanks to unit trust companies. And quite a number - but by no means all - now offer pretty good value to the small saver.

Autif's proposal is to take the existing PEP concept and apply it to something which could be called an independent pension account. Compared with existing pension plans, Autif believes it would be simple and cheap and might resemble products available in the US. The word "account" would be more comprehensible to the general public, it says.

I would go one step further. Dump "pension" - it puts many younger people off buying. I'm not sure whether an "IRA" (independent retirement account) would appeal.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Kenny Ireland, pictured in 2010.
peopleActor, from House of Cards and Benidorm, was 68
A scene from the video shows students mock rioting
newsSchool leaver's YouTube video features staging of a playground gun massacre
View from the Llanberis Track to the mountain lake Llyn
Du’r Arddu
environmentA large chunk of Mount Snowdon, in north Wales, is up for sale
A family sit and enjoy a quiet train journey
voicesForcing us to overhear dull phone conversations is an offensive act, says Simon Kelner
Arts and Entertainment
The cast of The Big Bang Theory in a still from the show
tvBig Bang Theory filming delayed by contract dispute over actors' pay
England celebrate a wicket for Moeen Ali
sportMoeen Ali stars with five wickets as Cook's men level India series
Morrissey pictured in 2013
Life and Style
The director of Wall-E Andrew Stanton with Angus MacLane's Lego model
gadgetsDesign made in Pixar animator’s spare time could get retail release
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
Robyn Lawley
i100  ... he was into holy war way before it was on trend
Arts and Entertainment
High-flyer: Chris Pratt in 'Guardians of the Galaxy'
filmThe film is surprisingly witty, but could do with taking itself more seriously, says Geoffrey Macnab
Life and Style
food + drinkVegetarians enjoy food as much as anyone else, writes Susan Elkin
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    1st Line Support Technician / Application Support

    £20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...

    Team Secretary - (Client Development/Sales Team) - Wimbledon

    £28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...

    Accountant / Assistant Management Accountant

    Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...

    Senior Investment Accounting Change Manager

    £600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

    Day In a Page

    Save the tiger: Tiger, tiger burning less brightly as numbers plummet

    Tiger, tiger burning less brightly

    When William Blake wrote his famous poem there were probably more than 100,000 tigers in the wild. These days they probably number around 3,200
    A tale of two presidents: George W Bush downs his paintbrush to pen father’s life story

    A tale of two presidents

    George W Bush downs his paintbrush to pen father’s life story
    Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

    The day America’s love of backyard tigers led to a horrific bloodbath

    With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
    Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

    How Samuel Beckett became a French Resistance spy

    As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
    We will remember them: relatives still honour those who fought in the Great War

    We will remember them

    Relatives still honour those who fought in the Great War
    Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

    Kodak's last-ditch bid to keep celluloid alive

    Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
    Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

    Acting in video games gets a makeover

    David Crookes meets two of the genre's most popular voices
    Could our smartphones soon be diagnosing diseases via Health Kit and Google Fit?

    Could smartphones soon be diagnosing diseases?

    Health Kit and Google Fit have been described as "the beginning of a health revolution"
    Ryanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?

    Can we learn to love Ryanair again?

    Four recent travellers give their verdicts on the carrier's improved customer service
    Billionaire founder of Spanx launches range of jeans that offers

    Spanx launches range of jeans

    The jeans come in two styles, multiple cuts and three washes and will go on sale in the UK in October
    10 best over-ear headphones

    Aural pleasure: 10 best over-ear headphones

    Listen to your favourite tracks with this selection, offering everything from lambskin earmuffs to stainless steel
    Commonwealth Games 2014: David Millar ready to serve up gold for his beloved Scotland in the end

    Commonwealth Games

    David Millar ready to serve up gold for his beloved Scotland in the end
    UCI Mountain Bike World Cup 2014: Downhill all the way to the top for the Atherton siblings

    UCI Mountain Bike World Cup

    Downhill all the way to the top for the Atherton siblings
    Save the tiger: The animals bred for bones on China’s tiger farms

    The animals bred for bones on China’s tiger farms

    The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
    A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

    A former custard factory, a Midlands bog and a Leeds cemetery

    Introducing the top 50 hidden spots in Britain