22 March 2006

Brewin Dolphin, the UK 's largest independent portfolio manager, was very sorry that the hopes of an end to compulsory annuity purchase for pensioners over 75 were dashed, and that the Finance Bill 2006 will ensure that appropriate inheritance tax charges will be applied to the substitute ASPs (Alternative Secured Pension). The other very low point to note in the Budget was that from 22nd March, gifts to all Trusts (both Accumulation & Maintenance and Interest in Possession Trusts, including additions to existing Trusts) will be treated as chargeable transfers for IHT purposes and no longer PETs. Furthermore the 6% tax charge every ten years on all trusts (details still to be confirmed) we believe is iniquitous.

At first glance the following other points are the most significant to private investors:

• ISA allowances frozen, despite national savings ratio halved in the last 10 years
• VCT investments - relief cut to 30% and must now be held for 5 yrs – up from 3
• IHT – minimal threshold increase of 18% by 2010
• REITs – warm welcome for legislation to introduce REITs to the UK

Charlotte Black, Marketing Director at Brewin Dolphin said,

“We are dismayed by the Chancellor's retrospective attack on Trusts – a perfectly legitimate and sensible way to protect family assets from IHT and preserve them from being given away absolutely to children at a young age. We will be doing all we can to lobby against these iniquitous changes during the debate on the Finance Bill.

"We were also disappointed that it will take until 2010 for the threshold over which IHT is payable, to increase by only 18% to £325,000, when house prices have increased by 160% since 1997 – meaning just to keep pace the IHT free threshold should already be over £500,000. The other particular frustration was that the Income Tax relief for private investment in VCTs was reduced from 40% to 30%.”

Bruce Angus – Director of Financial Services at Brewin Dolphin said,

“Pension simplification' is due to be implemented on 'A' day and a huge amount of detail still remains to be clarified, particularly for the Alternatively Secured Pension (ASP) for pensioners over age 75 and on the position of IHT and pension funds. Now we can't expect the confirmation until the Finance Bill 2006 – long after implementation on 6 th April 2006.”

The following Brewin Dolphin experts are available to comment in their specialist areas on various aspects of savings and investments from today's Budget.

Impact on private investors Charlotte Black, 020 7246 1060
SIPPs and Pensions Bruce Angus, 01224 578732
Inheritance Tax Stephen Williams, 0121 236 7000
Structured Products Stephen Glazzard, 0121 236 7000
Lenny Norstrand Venture Capital Trusts, 020 7246 1176
REITs Tim Green, 020 7246 1059