If you’re a company director and you have life assurance in place to protect your family, you could be paying more tax than you need to. Relevant life policies are a way of providing death in service benefits on an individual basis no matter how small your business is.

What are the benefits?

Although the company pays the premiums, they are not normally assessable to income tax on the employee as a benefit in kind. This can be a significant saving, particularly for a higher rate taxpayer.

Unlike a registered group scheme, the benefit will not form part of the employee’s annual or lifetime pension allowance.

These payments may be treated as an allowable expense for the employer in calculating their tax liability, as long as the local inspector of taxes is satisfied they qualify under the ‘wholly and exclusively’ rules.

In most cases the benefits are paid free of inheritance tax, provided the benefits are payable through a discretionary trust.

Who are relevant life policies suitable for?

Small businesses that do not have enough eligible employees to warrant a group life scheme.

High-earning employees or directors who have substantial pension funds and do not want their benefits to form part of their lifetime allowance.

They are not suitable for the self-employed or equity partners, although their employed staff could be covered.

Are there any limits to the cover I have?

The legislation does have some limits to qualify for the tax concessions, and to ensure these are met we make sure that:

The cover must be paid in a single lump sum before the age of 75.

Only death benefits can be provided.

Benefits must be paid through a discretionary trust.

Beneficiaries are normally restricted to family members and dependants

Too see how much you could benefit from this call us on 0845 0179 578 to discuss your circumstances further.

The style, content, quality and presentation of personal financial plans varies immensely from financial adviser to financial adviser. So how do you dare to part with your money to enable your financial adviser to produce your initial report?

Well, quite often, financial adviser firms like mine will offer new clients a free initial meeting. This allows you to meet with your potential adviser to see if you could enjoy a long term advisory relationship with them. The meeting will also allow the adviser to understand what your financial goals and objectives are along with a summary of your current financial position.

During this initial meeting there is lot of information for you to take on board as you find out about the firm, it’s services, what the services cost, the adviser experience, qualifications and so on. You should also ask them what their personal financial plans look like. Is it a “one size fits all” or is it bespoke to your own circumstances. After all, this could be the most important piece of work you have ever paid to be done.

Here’s what ours look like for a typical family that you may have heard of before.

Homer & Marge Financial Plan

Our costs for preparing your initial report start from £500 depending upon the complexity of your current financial circumstances so please contact us if you would like an accurate estimate and would like to book your free initial consultation.

Do you want to save money?

We undertook a study recently to see the merit in clients paying a monthly fee for our advice rather than us earn commission when we sell a financial product such as a personal pension. We looked at different types of clients (age, sex, earnings, wealth) and found that just on cost it was mainly beneficial for clients to pay a monthly fee.

Take an average couple who are both 40. They have life cover of £250k costing £42.28 per month, save £200 per month into a pension which is projecting a fund of £140k at age 65 and they save £100 per month into an ISA.

If they were a fee paying client of ours and we set up identical products the life cover would cost £31.86 per month, the pension fund would be projecting a value of £150k at retirement and they would not suffer an initial cost of 5.25% on every ISA contribution they made. By the age of 65, purely on cost they would have saved £14,701 in charges against a fee of say £30 per month. A net saving of over £5000.00

This doesn’t even take into account the ad hoc phone support we provide, the annual review we carry out with our fee paying client to try to improve fund performance, maximising all cash saving returns, improving their mortgage rate, investing their baby’s Child Trust Fund voucher from the government and general financial guidance on meeting their lifestyle goals.

We aim to make you money, save you money and save you time and I think the above example demonstrates how we can save you money. Call us now to arrange a consultation to see how much we could save you.

High street banks have won their appeal at the Supreme Court over unauthorised overdraft charges.

The Supreme Court ruled in favour of the seven major banks and a building society, which had challenged High Court and Court of Appeal decisions that the charges were unfair and should be subject to regulation by the Office of Fair Trading.

More follows….

SSAS schemes are registered pension schemes that are not regulated by the financial services authority. The members are usually directors or key employees of the sponsoring employer. A SSAS, whilst subject to the same rules relating to contributions and benefits as an insured company arrangement, has considerably greater flexibility and control over the scheme’s investment policies and its underlying assets.
One of the benefits of this is that a SSAS scheme can loan back money to the company. This is attractive for the company and the pension fund as the pension fund can release cash on which it was probably getting very little interest into a secure loan, as according to HMRC rules, the loan has to be secured on an asset, at typically a couple of percentage points above base, which is probably much cheaper than any bank funding in today’s market.

a SSAS scheme can loan back money to the company.
Up to 50% of the value of the scheme can be lent to the sponsoring company and the scheme has to charge a minimum of 1% above base. The pension scheme would also need a first charge on an asset for the value of the loan plus interest, though this does not need to be a company asset. The length of the loan cannot be longer than five years and it cannot be interest free. Assets purchased have to be acceptable assets, but can be commercial property or intellectual property.
Also, loans from the pension fund can be used to buy both physical and intellectual property. With intellectual property, such as a trademark, there will be recurring royalty fees and these can then be paid into the pension fund tax free. for instance, one of our pharmaceutical client companies recently used 50% of the value of its SSAS fund to buy the company’s intellectual property and then the royalty payments were paid back tax free into the scheme. Over and above providing funding, SSAS funds have one further benefit – they can be converted into a scheme pension, which means at age 75, the company owner does not face the possibility of a potential 80% tax charge as can happen with some self invested pension schemes. A consequence many business owners would be more than happy to avoid.

The government has decided to abolish contracting out of the State Second Pension (S2P) through money purchase pension schemes. This is likely to happen from 6 April 2012, but it could be later.

Most money purchase pension annual statements contain a Statutory Money Purchase Illustration (SMPI). By law, from 1 September 2009, these will have to assume that protected rights contributions will stop from no later than 2012.

What this means for our customers
For contracted-out plan holders we’ll now assume no more rebates will be payable after 5 April 2012, which may result in lower values for their SMPI retirement fund values and pension in their annual statement compared to previous years’ statements.

This will be a more realistic projection of the future benefits from their policy, and although the values may reduce, it has to be remembered that their overall benefits at retirement could include S2P benefits from the government.

Whenever I begin to advise a client on their retirement planning it is important that I fully understand their current circumstances. This often involves dealing with various historic pension funds and benefits all (hopefully) packaged together in a tidy manner for me. However, there is always one omission and that is details of the State Pension.

The State Pension is the foundation block of your retirement plans. Whether it forms the majority or minority of potential retirement income it is still valuable. It can vary quite significantly based on your level of earnings and your employment status (employed, self employed, not employed etc). I’ve seen State Pensions for this year vary from £91 per week to £164 per week.

Also, you may have noticed a lot of press about State Pensions and extending the retirement age from when you can draw your pension. This bad news is offset by the return of the link between the State Pension yearly increases and earnings increases.

If you would like to find out the details of your own State Pension then you can request a forecast online here for free. It will tell you what you have built up so far, when you forecasted State Pension age is and how many more years of contribution you need to do in order to get the maximum basic pension is. It will also confirm if you have any entitlement to The Graduated Pension Scheme, SERPS or the more newer State Second Pension (S2P). It’s only 4 pages long and it is something you should read well before you plan to retire.

If you would like any advice on State pensions or your retirement planning then please get it touch.

It has been a tradition of pension schemes for many years that the earliest age you can get at your pension benefits is age 50. However, about 3 years ago the rules changed to increase that age to 55 but the change was not immediate. In fact, the rule change wasn’t to come into effect until the 6th April 2010. I am finding it hard to believe that this is only 7 months away now!!!

We are experiencing an increased amount of enquiries from clients and prospective clients who are able to access their pension funds now but won’t be able to do so after April 2010. They are looking at this for many reasons such as early retirement, loss of employment income, home refurbishments and starting up businesses. Are you looking to release the tax free cash from you pension fund? Are you affected by the age increase?

We can advise you on all the different ways you can receive benefits such as an annuity, open market option, phased retirement, income drawdown, 3rd way annuity, with profit annuity etc. Contact us now for more information and to book your free initial consultation.

At last! Safeguarded Rights are now only a distant memory in the world of pensions. This badly thought out and inappropriately named type of pension fund is now to be brought in line with the rest of Contracted Out pensions funds.

The Pensions Act 2008 (Abolition of Safeguarded Rights) (Consequential) Order 2009 (SI 2009/598) removes references in pensions secondary legislation to safeguarded rights – eleven SIs in total are modified. Safeguarded rights arise when a member’s rights in an occupational or personal pension scheme which is contracted-out of the state second pension are shared on divorce or dissolution of a civil partnership. PA 2008 s.100 and the related repeals in Schedule 11 Part 2 abolish safeguarded rights altogether with effect from 6 April 2009. From that date, shared rights that derive from contracted-out rights will be treated in the same way as other shared rights.

And the best news is that if you are a policy holder who owned a Safeguarded Rights fund or were about to receive such a pension fund through your divorce then you are now able to take 25% of the fund as a tax free cash lump sum. This is subject to the normal rules surrounding all pension such has a earliest retirement age of 50.

Call me now if you want to discuss your Safeguarded Rights in more detail.

Standard Life is to remediate all customers who lost money after the revaluation of its Pension Sterling fund last month (January), at an estimated cost of £100m.

The insurer announced this morning (11 February) that around 97,000 customers will benefit from the payout, which will restore the value of the fund – and put customers back in the position they were in – before it was revalued downwards.
Standard Life said the cost of the remediation is expected to result in an additional pre-tax charge of approximately £100m against profits in 2008.

The Pension Sterling fund was devalued by 4.8 per cent on 14 January, leaving investors out of pocket.

Standard Life has subsequently come under increasing fire to remediate investors, as many advisers and customers claimed they were not aware that the fund’s investments included mortgage-backed securities.

In a statement to the market, Standard Life conceded: “This decision is a reflection of our belief that many people were not fully aware of the nature of the fund, and that some customers could not have anticipated that the value of their units could fall by such an amount in one day.”

It said a review of its literature and feedback from customers and advisers had highlighted that many were not fully aware of the nature of the fund, or would have anticipated that units in the fund could fall by such an amount in one day.

The insurer added: “With hindsight, some of the literature we provided in respect of this fund fell short of our own high standards.

“Against this background, we feel strongly that the right thing to do is to put all customers back to the position they would have been in had we not reduced the value of the fund on 14 January.”

Customers who have switched to another Standard Life fund since 14 January will also have the value of their investment adjusted to reflect today’s announcement.

Meanwhile, those who have since retired or transferred out will receive a separate letter from Standard Life to explain how they will benefit.

John Gill, managing director of customer service, said: “Standard Life would like to take this opportunity to apologise to any customers who have been affected by the fall in value of this fund. In hindsight, some of the literature supporting the fund fell short of our own high standards, and it is important that we put this right.

“We have listened to our customers and advisers and believe that our response underlines our commitment to our long-term relationship with them.”

With the level of interest you earn falling on cash savings accounts with bank and building societies by about 75% you might be facing the prospect of not enough income to meet you expenditure. Of course, you could cut back on what you spend or even start using some of the capital but how long are you prepared to do this for?

In the world of investments, the more you want and the quicker you want it the more riskier the scheme tends to be. We are not talking about 100% return/100% loss on the spin of a roulette wheel though.

By careful analysis of your income requirements and the level of risk you would be comfortable with (non, minimal, minimal to low, low, low to medium, medium etc.) We can carefully advise you on both the most suitable style of investments scheme (ISA, Bond, OEIC, Unit Trust) and the most suitable underlying asset classes (Gilts, Fixed Interest, Corporate Bond, Equities etc.)

We have many years of experience in the area of investing for income and a number of satisfied clients. If you would like to discuss you requirements with us then please contact us for a free initial consultation.

Make the most of your ISA allowance

Whatever your savings needs, you’ll want to make sure you choose the most tax efficient option. After all, you need your money to work hard for you. Your valuable annual ISA allowance may have an important part to play in helping you achieve these objectives.

The important thing to remember is that you can’t carry forward your allowance so, if you don’t use it you’ll lose it.
If your not sure what an ISA or you need a refresher on the guidelines for investing then your should read the FSA Money Made Clear Saving and Investing publication.
If you would like to arrange a convenient time to talk through your options with me before the end of this tax year, please give me a call on 02476 251100.

There has been an awful amount of publicity surrounding pensions this week. Sir Fred Goodwin and The Royal Mail have been getting pension pelters. Goodwin’s was agreed, presumably when he decided whether to take the job or not, so it forms part of his contract and must be paid.

The same goes for the Royal Mail. One of the factors of interview candidates being offered a job must have been the pension entitlement. So that must stand also.

Not so long ago we have had strikes in both Council offices and the Fire Service. Ok, these have been about pay, or equipment, but the amount of public funds that has to go into their pension scheme means there just isn’t enough money left over to give these folk a pay rise which, at an absolute minimum, must equal inflation.

If the government is really serious about following the private sector and abolishing these long term, under funded state promises then it must begin with axing its own MP scheme. This, amongst all public sector pension schemes, is one of the most generous.

Go on Gordon. Put your pension where your mouth is!

Scottish Life have developed new software which they are providing free of charge to employers who take out a pension scheme for their staff. This is an anticipation of the government requirements on compulsory pension schemes for all employers so why not take the initiative now.

If you are thinking of putting in a new pension scheme for your staff or would like to change your existing providers to obtain the software then please contact us on 02476 251100

Want to know more? – Scottish Life Benefits Administration details are here.

We are all look for valuations on our investments and assets and pricing any residential property has been difficult of late as valuations have been falling. However, there do seem to be signs that the valuations have reached a point where they are now acceptable to buyers and investors with cash to hand.

Firstly, one of the most high-profile luxury developments in the UK is to be taken over in a deal worth less than a third of what Icelandic bank Kaupthing paid when it teamed up with property developers Nick and Christian Candy three years ago. The control of the Noho Square scheme in London’s West End is to be acquired by Stanhope, the property company run by David Camp and backed by entrepreneur Ian Laing.

Secondly, Rightmove yesterday said there were early signs of a recovery in the market with the return of near- record volumes of traffic among would-be house buyers monitoring the falling market.

So, is this now the time to buy? We don’t have a crystal ball to help you with this decision on timing but you should be confident that the property you buy now will have cost you about 25% more 2 years ago.

Call us to discuss your plans in more detail.