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PFS What's new bulletin - June I

UPDATE from 31 May 2024 to 13 June 2024



Text message to will writer deemed enough to prove deathbed gift validity by EWHC

(AF1, JO2, RO3)


The England and Wales High Court (EWHC) have recently accepted a claim from Masudur Rahman (the claimant), after his friend Al-Hasib Al Mahmood gifted him all his UK assets a week before his death in 2020.


After inheriting the estate of his wife, who passed away two weeks prior to him, Al-Hasib Al Mahmood passed away on 23 October 2020, leaving an estate valued for probate at £1.4 million.


In 2015, Al Mahmood created a will leaving his UK estate to his wife’s brother Dewan Raisul Hassan (the defendant), and her three nieces, who live in the US. The defendant, also named as the executor of the will submitted the will for probate, which was granted. After this, the claimant brought forward a claim against the estate. Rahman contended that, on 15 October and 22 October 2020 the deceased had gifted him all his UK assets, through a donationes mortis causa (gifts in contemplation of death) – a Roman law doctrine. These assets included chattels, bank accounts, registered land and also included assets formerly belonging to his late wife, either as they were inherited two weeks prior, or because they were jointly owned, and she was first to die.


The only living witnesses to the gifts were the claimant and his wife, causing the family of the deceased to be sceptical over the claim. Although the family could not prove the claim was false, the burden of proof lay with claimant. As the position of the defendants as beneficiaries under the 2015 will was not challenged, they did not have anything to prove.


The claimant put forward a witness, Jonathan Amponsah, a will writer who the deceased had contacted knowing he was very ill and was unlikely to live long. Amponsah visited the deceased in his home on 15 October 2020 as was instructed to draw up a new will, under which the claimant was to be sole executor and beneficiary. It was arranged that Amponsah would return on 22 October 2020. However, in the meantime, Al Mahmood became agitated that he had not received the new will and time for finding new witnesses was limited. The court heard that Amponsah was unaware of the temporary law during the Covid-19 pandemic, allowing the witnessing of wills via videoconference.


On 22 October 2020, a text message was received by Amponsah from the deceased’s phone, stating: ‘Jonathan, I am al-Mahmood. I agreed that Masudur Rahman will be the absolute own[er] of all my assets and the executor of my new and last will. This is my final word. I revoked all my previous will done by me and my wife. It's a difficult time for me. Please help Masud.’ Later that day he died.

During the trial, questions were raised over whether the deceased was the author of the text message received by Amponsah. After finding that they were, the court concluded that the deceased was attempting to make a gift in contemplation of his impending death. There was no legal bar to the subject matter being subject to a donatio mortis causes, and the deceased had capacity to make the gift.


The judge explained the legal concept to the court: ‘A donatio mortis causa is a gift made by a living person in contemplation of impending death, subject to the condition that the donor dies.’ Referring to the deceased, he added: ‘He was ill, believed he was dying, and had given instructions to a professional will-writer for a new will. Unfortunately, this was during the Covid pandemic, and he became agitated because he had not received the new will. Understandably, he wanted to ensure that his donative intentions were effective. So he resorted to a gift to take effect on death. The whole point about the doctrine of donatio mortis causa is to provide a legal solution to a human need, when other legal institutions do not.’


Accordingly, the court concluded that Rahman’s claim was valid, except in relation to the furniture and other contents of the house/flats. (Rahman v Hassan, 2024 EWHC 1290 Ch).


Tax-free childcare - latest statistics

(AF1, RO3)


Tax-free childcare provides help with childcare costs for working parents. For every £8 a parent pays into their tax-free childcare account, the Government will add an extra £2, up to a maximum of £2,000 per child per year. For disabled children the maximum is £4,000 per year.


Tax-free childcare replaced the childcare voucher and directly contracted childcare schemes, which closed to new entrants in October 2018.


For more information about tax-free childcare, please see HMRC’s guidance.


The key points from HMRC’s latest release covering the period to 31 March 2024 are:


  • approximately 523,000 families used tax-free childcare for 636,000 children in January 2024 (the peak in the quarter to 31 March 2024), compared to 492,000 families using tax-free childcare for 592,000 children in October 2023 (last quarter’s peak);


  • both the number of families and children using tax-free childcare and the top-up value, increased in January 2024, before decreasing slightly in February 2024, and falling again in March 2024;


  • more families used a tax-free childcare account in January 2024, compared to February 2024. This is thought to be due to the final day of December 2023 landing on a weekend, causing an uplift in January’s figures, rather than a change in the underlying trend of a gradual increase in number of users of tax-free childcare. In addition, February is a shorter month and contains a school half term. March 2024 also ended on a weekend, meaning payments made on the final day of March 2024 will appear in April rather than March data;
  • this does not change the underlying trend of a gradual increase in number of users of tax-free childcare. HMRC’s receipts statistics show a rise in tax-free childcare expenditure for the quarter ended 31 March 2024, compared to the previous quarter;

  • the Government said that it spent £165.9 million on top-up for families in the quarter to 31 March 2024, £11.2 million more than in the last quarter.


Annual data for the financial year 2023/24 has been made available for the first time. Approximately 740,000 families used tax-free childcare for 966,000 children in financial year 2023/24, which compares to 650,000 families using tax-free childcare for 836,000 children in financial year 2022/23. The Government said that it spent £625 million on top-up for families in financial year 2023/24, approximately £92 million more than in financial year 2022/23. And looking at long term trends, the number of families using a tax-free childcare account has generally increased since launch with the exception of COVID-19 lockdowns.


Many accounts that were previously tax-free childcare only have become joint tax-free childcare and 30 hours accounts. In December 2023, 55% of open accounts were joint. This increased to 70% by March 2024. This can be attributed to anticipation of the Department for Education (DFE) childcare expansion roll out in April 2024, please see Upcoming changes to childcare support. There has also been an increase in open accounts for two-year-olds, from 174,000 in December 2023 to 234,000 in March 2024 due to anticipation of the DFE childcare expansion roll out.


Tax-free childcare was launched in April 2017 with a phased roll out by age of the youngest child in a family, completed in February 2018. Children must be aged 11 or under, or 16 and under if they have a disability, to be eligible for tax-free childcare. Families with a disabled child up to the age of 16 were able to sign up for tax-free childcare in April 2017.


Families with a tax-free childcare account receive 20% top up on childcare costs up to a total of £2,000 per year per child (£4,000 for a disabled child).


Tax-free childcare is run by HMRC with their delivery partners National Savings & Investments (NS&I). Parents pay into and make payments to childcare providers out of the same account. Parents are able to withdraw money for other purposes, but lose the Government top-up on anything removed. An individual family may register for a tax-free childcare account for multiple children. Separated or divorced parents cannot register an account separately for the same child.


In order to qualify for tax-free childcare, families must have all adults earning the equivalent of at least the national minimum or living wage for 16 hours per week, and don’t have income over £100,000 a year. They must not be claiming tax credits or universal credit in any form or other disqualifying benefits such as Job Seeker’s Allowance.


Since September 2017, families in England have also been able to use the Government’s offer of 30 hours free weekly childcare for children aged three or four. Families can access this offer provided all parents are earning at least the equivalent of the national minimum or living wage for 16 hours a week, and don’t have a taxable income over £100,000 annually. Unlike tax-free childcare, families are eligible for 30 free hours if they receive tax credits or universal credit or childcare vouchers. Applications for the two offers are linked and accessed through the same online portal on GOV.UK.

When a family applies for 30 hours free childcare and also meets the additional eligibility criteria for tax-free childcare, a tax-free childcare account is automatically opened, and vice versa. This leads to a discrepancy between ‘open’ and ‘used’ tax-free childcare accounts which can be seen in the tables accompanying this publication.


From April 2024, this offer was expanded to also include 15 hours free weekly childcare entitlement for children aged two years of eligible working parents. This will be followed up by 15 hours free weekly childcare entitlement for children aged nine months of eligible working parents in September 2024, which will increase to 30 hours in September 2025.


Tax-free childcare is available to families where one or more parents are self-employed. This is different to the employer supported childcare schemes, which are only available from some employers.


With childcare vouchers, a basic rate taxpayer can salary sacrifice up to £55 per week, with a maximum benefit of £933 per year per parent, whilst a higher rate payer can get up to £28 a week in vouchers. Whether a family is better off under tax-free childcare or childcare vouchers (if available) will depend on their circumstances. Following the closure of childcare vouchers, parents who change employer and new parents are no longer be able to receive childcare vouchers but may be eligible for tax-free childcare. The Government believes this should lead to an increase in take up of tax-free childcare in the longer term, as these families look for childcare support.


Whether a family can access tax-free childcare may also depend on their preferred childcare provider. Childcare providers need to be signed up to tax-free childcare before a family can make payments to them.


You can see the full statistics here.



















Help to Buys ISAs - quarterly statistics released


HMRC’s latest quarterly statistics on Help to Buys ISAs have been released. These cover the period from 1 December 2015 to 31 December 2023.


The statistics show that, since the launch of the Help to Buy ISA, 592,105 property completions have been supported by the scheme and 770,768 bonuses have been paid through the scheme (totalling £973 million) with an average bonus value of £1,262.


The table below shows the number of property completions from 1 December 2015 to 31 December 2023 supported by the scheme broken down by property value: 



The statistics also show:


  • The mean value of a property purchased through the scheme is £177,877 compared to an average first-time buyer house price of £237,655 and a national average house price of £284,691;
  • 65% of first-time buyers who have been supported by the scheme were between the ages of 25 to 34;
  • The median age of a first-time buyer in the scheme is 28 compared to a national first-time buyer median age of 30;
  • 73% of bonuses paid were in England and this supported approximately 72% of total property completions through the scheme.
  • At a regional level, property completions are distributed fairly evenly across England. London and the South East accounted for 14% of total bonuses paid and made up 14% of total property completions.
  • The highest number of property completions with the support of the scheme is in the North West, Yorkshire and the Humber and Scotland, with the lowest numbers in the North East of England, Wales and Northern Ireland.

The Help to Buy ISA scheme was launched on 1 December 2015. The scheme closed to new accounts on 30 November 2019, so it is no longer possible to open a new account. However, it is possible to continue saving until 30 November 2029 when accounts will close to additional contributions. The Government bonus must be claimed by 1 December 2030.



The ECB starts the move downwards

(AF4, FA7, LP2, RO2)


The European Central Bank interest rate, which has been cut by 0.25%


On Wednesday 5 June the Bank of Canada (BoC) became the first G7 central bank to cut interest rates in the current cycle, although other smaller country central banks, notably the Swiss National Bank and Swedish Riksbank, have already lowered rates.


The day after the BoC’s move, the European Central Bank (ECB) followed suit, announcing cuts in its three main interest rates of 0.25%. This was the first cut from the ECB since September 2019 and had been widely anticipated after comments from its President, Christine Lagarde, and fellow ECB rate-setters. If anything, it would have been more of a surprise if the ECB had sat on its hands.


The ECB wielded the interest rate axe even though the latest (provisional) May inflation rate was up 0.2% from the April figure at 2.6%. The rise was slightly a statistical quirk – between April 2023 and May 2023 prices were virtually flat, whereas twelve months later there was a 0.22% increase. The ECB is now forecasting 2.5% inflation this year, 2.2% in 2025 and 1.9% in 2026. Eurozone economic growth is expected to pick up to 0.9% in 2024, 1.4% in 2025 and 1.6% in 2026.


poll of 82 economists carried out by Reuters found the majority expecting two more cuts this year, in September and December. However, the economists are more optimistic than the money markets, where pricing implies only one more 0.25% reduction in 2024. For its part, the ECB played the central banker’s straight bat, saying ‘The Governing Council will continue to follow a data-dependent and meeting-by-meeting approach to determining the appropriate level and duration of [interest rate] restriction.’


The ECB’s action does not mean that the Bank of England will be announcing a rate cut on 20 June, after the next meeting of the Monetary Policy Committee. Although the Bank, like the US Federal Reserve, says it is above politics, neither will want to change rates shortly before the polls open.




The ECB’s 0.25% cut reinforces the sense that the rate cycle is turning, but the descent currently looks set to be slower and end well above the 2021 starting point.   
































No more lifetime allowance?

(AF8, FA2, JO5, RO4)


As report in Financial Times on Monday 10th June said that the Labour Party had dropped plans to reinstate the pension lifetime allowance (LTA).  The manifesto published on the 13 June made no mention of it.  While at the time of writing we can’t say for sure that Labour do not plan to reintroduce the LTA, as well as the silence in the manifesto, there are good reasons to believe it may be true:


  • The original LTA reinstatement pledge was made in response to the March 2023 Budget. At the time Rachel Reeves described Hunt’s moves as ‘…the wrong priority, at the wrong time, for the wrong people’. Since then, nothing of any significance about LTA reinstatement has emerged from Reeves or other Treasury shadows.


  • Earlier this year there were press reports that Labour was considering carve outs for the NHS and, subsequently, the civil service. These were followed by suggestions that nobody would escape LTA Mk II. Carve outs always looked difficult, e.g. in terms of employment definition and handling job changes. However, the issue of NHS staff has not gone away, as the BMA underlined in a May press release commenting on Labour’s pledge to reduce waiting times.


  • The complexity of the task of removing the LTA became apparent and with it the corollary of the legislative challenge of reversing the process. Sunak’s surprise election call meant the Finance (No 2) Act rapidly became law with outstanding legislation to correct errors in its predecessor left it limbo. These glitches are already stalling some transfers. Any move to revive the LTA would face the issue of dealing with the existing incorrect drafting.


  • The timing of the election also presented an obstacle for LTA reinstatement. As Steve Webb recently pointed out, it would be virtually impossible for Reeves to bring in a fresh LTA before April 2026, given her first Budget will not be until at least mid-September. A 21-month gap between election day and a new A-Day could well see a pre-emptive wave of large pension top ups and NHS retirements.


  • In the recent IFS’s LTA and other pension proposals, the estimated £800m medium term revenue gain from unwinding Hunt’s 2023 LTA announcement was never included in Labour’s list of new tax revenue, so its disappearance does not create another black hole.


Maintaining the current LTA-free structure does not mean that pensions escape other potential tax-raising measures. These could include:


  • The IFS favourite of bringing into the inheritance tax (IHT) net unused funds at death. 
  • Reducing the maximum tax free cash.
  • Moving to a flat rate of income tax relief.
  • Scrapping employer’s National Insurance (NIC) relief on pension contributions.
  • Applying NICs, probably at an initially reduced rate, to pension income.

TPR: Former sports centre director fined for withholding information in pensions probe

(AF8, FA2, JO5, RO4)


The Pensions Regulator (TPR) has issued a Press Release detailing the outcome of a recent court case held Lewes Crown Court. This was in respect of a Sussex businessman has been ordered to pay a total of £15,000 (£7,500 was costs and £7,500 related to a fine) for withholding information legally required in an investigation by TPR.


At a previous hearing at Lewes Crown Court on Friday 26 April 2024, Bartholomew pleaded guilty under section 77(5) of the Pensions Act 2004 to intentionally and without reasonable excuse suppressing documents he was required to produce under section 72 of the Pensions Act 2004.


TPR formally requested the information on 10 June 2020 as part of an investigation into allegations of fraudulent evasion relating to employee pension contributions. The court heard that Bartholomew intentionally failed to provide the information required by TPR by the deadline of 8 July 2020, suppressing the material sought without reasonable excuse.


Following his guilty plea to the charge under s.77(5) Pensions Act 2004, TPR is no longer prosecuting Mr Bartholomew for fraudulent evasion of his duty to pay money deducted from the salaries of his employees as pension contributions into a workplace pension scheme within a prescribed period under section 49 of the Pensions Act 1995.



PASA warns pension administrators could inadvertently be included in scope of HMRC’s tax proposals

(AF8, FA2, JO5, RO4)


The Pensions Administration Standards Association (PASA) has responded to HMRC’s consultation Raising standards in the tax advice market — strengthening the regulatory framework and improving registration, warning that pension administrators could inadvertently be included in the scope of its proposals. The consultation asks for views on two proposals: mandating registration for tax practitioners who wish to interact with HMRC on behalf of their clients, and strengthening the regulatory framework for either all tax practitioners or those interacting with HMRC. PASA said that pension administrators do not provide tax advice but interact with HMRC in carrying out non-advisory administrative functions, and urged HMRC to consider how its proposals interact with other Government departments and bodies such as TPR.


In its response, PASA stated that: “The precise wording of any exemption will be critical to the industry to avoid a compliance issue. The scope is too wide as pensions administrators will be caught within the scope when they are not giving tax advice but merely carrying out a non-advisory administrative function. There are many reasons for interaction with HMRC and some are merely administrative in nature rather than giving true tax advice. The requirements should be refined further to ensure such activities are not included within the proposals.”

PLSA identifies five key areas of pension reform for first 100 days of next Government

(AF8, FA2, JO5, RO4)


The Pensions and Lifetime Savings Association (PLSA) has published a report identifying five key areas for pension reform for the next Government to enact in its first 100 days. These areas are:


  • supporting adequate pension saving;
  • helping savers navigate choices at retirement;
  • supporting well-run DB schemes;
  • bridging the pensions and growth gap; and
  • supporting the Local Government Pension Scheme.


Nigel Peaple, Director of Policy & Advocacy at the PLSA, said in their Press Release that: “Today more people are saving into workplace pensions, and they have more freedom over how to use their savings. But the future remains uncertain as people are not saving enough for retirement. The next Government must do everything it can to help everyone reach a good income in retirement. We have identified five key areas of the UK pensions system where we would like a new Government to take action on quickly, within the first 100 days of government, to better secure the financial futures of millions of savers.”

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