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					                                 F I N A N C I A L              S O L U T I O N S




    MoneyMatters
                                                                                          JANUARY/FEBRUARY 2011



Input into your
A quick guide
Pension
to the                                                                                                      2011
                                                                                                      Retirement
                                                                                                     Matters
pension changes                                                                         guide to growing

                                                                                    MONEY
                                                                             EQUITY RELEASE
VAT                                                                                                             Is it right for
savings to
be made                                                                                                     YOU?

Investment
Trusts a
 Plan for                                                                 Inheritance tax
  Explaining                                                                   Unemployment
                                                                                     Planning
Prosperous
  the data              New Year                                                                            Insurance
$   Lifestyle Protection                   $           Creating Wealth                                      $    Tax Rules   $
                                            Credencis Limited
                        18 Prince Street, Long Eaton, Nottingham NG10 4LH
          T: 08456 385 047 F: 01159 316409 E: info@credencis.co.uk www.credencis.co.uk
                      Credencis Limited is an appointed representative of Mint Financial Services Limited
                            which is authorised and regulated by the Financial Services Authority
    inside                                                                                                                                                               Input into your
                                                                                                                                                                         Pension
    Plan for a prosperous New Year…                         Plan for the future …                                    Ethical savings …
    Review your personal finances                           Saving for your children                                 Investment in the mainstream
                                 Page 2                                                                 Page 6                                   Page 10

    Input into your pension…                                Offshore bonds or pensions…..                            Are you ready for retirement? …
    Is it in line with the Tax Year?                        Which is right for you?                                  Plan and prepare now
                                              Page 3                                   Page 7                                                    Page 11
    8 point plan to beat inflation…
    The 2011 guide to growing your                          Maximum investment plans …                               The ISA increase…
    money                                                   The return of the pension                                Your allowance is set to rise
                                                            alternative               Page 8                                                                   Page 12   If you earn less than £130,000, you have          This could lead to problems for schemes that     £50,000. Unfortunately, the scheme’s next
                                  Page 4                                                                                                                                 until the new tax year which starts on 6 April    haven’t notified their members of their PIP,     PIP ends 31 March 2014, the date of the
                                                                                                                                                                         2011 to make a significant contribution into      including those who are retiring. Members of     member’s retirement. This is also in the
    Unemployment insurance...                               Is your cover legal? …                                   Reader Reply…
                                                                                                                                                                         your pension fund, before the annual              defined benefit schemes that didn’t decide on    2013-14 tax year, so must also be tested
    Protecting against a loss of income                     Insurances to cover the costs of a claim                 Personalised reply section                          allowance for tax-privileged pension savings      their PIP in 2006, for tax purposes, are now     against any remaining annual allowance for
                                    Page 5                                                   Page 9                                                           Page 12    plummets to £50,000. But beware, you will         assigned a default PIP year of 7 April 2010 to   that tax year.
                                                                                                                                                                         need to check your pension fund’s pension         6 April 2011. However, the tax year runs from       Therefore it is essential for employees to
              Need more information? Simply complete and return the information request on page 12                                                                       input period, if it is not in line with the tax   6 April 2010 to 5 April 2011. This one day       know what the PIP is for their pension
                                                                                                                                                                         year, you could be in for a nasty surprise.       may seem insignificant, but it could make a      scheme. Using the above example, the
                                                                                                                                                                            Each and every pension scheme has a            high earner eligible for a tax liability on      member could decide to postpone retirement



       Plan for a prosperous
                                                                                                                                                                         pension input period or PIP for short. This       payments made in 2010-11.                        until after 6 April 2014 and as a result, have
                                                                                                                                                                         time period is used to measure the benefit           The new regime will also affect retiring      single PIP ending on 31 December 2013. This
                                                                                                                                                                         accrued by a pension scheme member for tax        employees, where the benefits accruing over      being in the 2013-14 tax year and hence




       NEW YEAR
                                                                                                                                                                         purposes. These were introduced on 6 April        up to two years could be measured against        subject to an annual allowance of £50,000.
                                                                                                                                                                         2006, which was known as ‘A-Day’, as part of      only one annual allowance of £50,000.            The next PIP ends on the members advised
                                                                                                                                                                         the widespread pension simplification by the         Under the current system, a PIP also ends     date of retirement in the 2014-15 tax year
                                                                                                                                                                         previous Government. The idea was to allow        the day you take all of your benefits from a     and hence now subject to the annual
                                                                                                                                                                         pension schemes the flexibility to align their    scheme. It is currently possible to have two     allowance of £50,000 for the 2014-15 tax
                                                                                                                                                                         annual allowance periods within their scheme      PIPs ending in the same tax year, but there is   year.
                                                                                                                                                                         year and their sponsoring employer’s financial    only one annual allowance in each tax year.
       Keeping New Year’s resolutions is difficult,          returns. These levels are due to increase as           Review pension arrangements                          year.                                                Imagine a scheme’s PIP running from
       especially sorting out your finances. But             from April 2011 in line with inflation to              Do you know how much income you can                     The annual allowance is currently              1 January to 31 December. The employee is
       simple steps can save you hundreds of                 £10,680.                                               expect in retirement? Contact your                   £255,000 but this is set to fall to £50,000       retiring on 31 March 2014. The first PIP ends
       pounds. Here, we outline ways to plan to a                                                                   Profesional Independent Financial Adviser            next tax year. This will be the maximum           on 31 December 2013 in the 2013-14 tax
                                                             Reclaim forgotten cash
       prosperous New Year.                                                                                         to see if you are saving enough. You can             amount that you and your employer can             year, so the employee’s benefits to that date
                                                             If you had premium bonds as a child, or
       Check your tax code                                   received shares after a mutual or utility              also get a state pension forecast from the           contribute to a pension in any tax year           are subject to the annual allowance cap of
                                                                                                                    Pension Service by calling 0845 3000168.             without incurring a tax charge.
       Elderly people and students are                       was listed on the Stock Exchange, you
                                                                                                                                                                            Some pension schemes have aligned their
       particularly susceptible to paying too                should reclaim the money. Go to                        Clear credit card debt                               PIPs with the tax year but others may not
       much tax. Check your tax code now and                 www.mylostaccount.org.uk to search for                 If you slapped Christmas on the credit               have done so. If they are unaligned the
       you could receive a rebate. Your code                 dormant bank, building society and                     card, paying this off should be a priority.          possibility exists that an investor could find
       should reflect your personal allowance. Up            National Savings & Investments accounts.               If you are struggling with your debt, never          pension contributions made on one tax year
       to age 64 this is £6,475 (tax code L), but            The Unclaimed Assets Register has a                    skip a repayment or pay less than the                being assessed against their annual
       from 65 to 74 it increases to £9,490 (tax             database of unclaimed life policies,                   minimum as it could lead to penalty                  allowance in a different tax year. Should this
       code P) and at age 75 and above it is                 pensions, unit trust holdings and share                charges and higher interest rates. Any               happen, it is the annual allowance in the year
       £9,640 (tax code Y). If you think your code           dividends drawn from many companies                    missed payments will also remain on your             in which the accounting period ends that sets
       may be wrong, contact your local tax                                                                         file for six years. Talk to your card issuer if      the limit for your pension contribution.
                                                             Cut household bills
       office.                                                                                                      you have problems making repayments.                    For example; if a pension scheme’s
                                                             Use a comparison website to find a
                                                                                                                    You may be able to reschedule your                   accounting period ends on September 30
       Move savings into ISAs                                cheaper deal for your gas and electricity.
                                                                                                                    payments, or take a temporary payment                each year, contributions made between 30
       Savers had a dismal 2010, as interest                 The average yearly energy bill will be £1,239
                                                                                                                    holiday.                                             September 2010 and 30 September 2011 will
       rates fell to record lows. ISAs, which                in 2011, but this can be cut by up to £300
                                                                                                                                                                         take up part of the annual allowance for the
       should be the first port of call for any              by switching to a different tariff, according          Start saving for next Christmas                      2011-12 tax year, because that is the tax year
       taxpayer, allow you to invest up to                   to www.uSwitch.com. Moving to dual fuel,               If you are debt-free, consider putting               in which the accounting period ends. With
       £10,250 in both cash and stocks and                   paying by direct debit and signing up to               money aside for this year’s holiday, or              the annual allowance dropping to £50,000
       shares, without being taxed on the                    an online plan will all save cash.                     even for next Christmas.                             pension contributions being made by some
                                                                                                                                                                         investors now could be tested against next
      The articles featured in this publication are for your general information and use only and are not intended to address your particular requirements. They
      should not be relied upon in their entirety. Although endeavours have been made to provide accurate and timely information, there can be no guarantee              year’s lower allowance, potentially incurring
      that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon    a tax charge.
      such information without receiving appropriate professional advice after a thorough examination of their particular situation. Will writing, buy-to-let
2     mortgages, EFRBS and some forms of tax and estate planning are not regulated by the Financial Services Authority.                                                                                                                                                                                                      3
     2011                                                           guide to
                                                                    growing your
                                                                                                                                                     UNEMPLOYMENT
                                                                    MONEY                                                                            INSURANCE
     The threat of inflation
     Inflation or deflation, which is the biggest
                                                    2) Locking in
                                                    Investing in the stock market can be scary,
                                                                                                  5) Bonds
                                                                                                  How will bonds fare if inflation rises?        Protecting yourself against loss of income
     threat to the global economy? All the          but to grow your wealth in real terms you     Bonds have traditionally been seen as
     indications point to the importance of         have to do more than simply find the best     defensive, low-risk investments. However,
     people in Great Britain taking the threat      savings account.                              as inflation rises that no longer holds
     of inflation very seriously.                     If you are prepared to lock up your         true. Short-dated Government bonds (or
        It is impossible to ignore the impact       money for five years to get a relatively      gilts) look vulnerable, but there may be an
     that inflation is having on our lives.         modest interest rate then you are likely to   argument for holding other types of            The economic outlook is still uncertain       linked loan and again usually just for one     cases the policies will pay out if ill-health
     Figures suggest the average UK                 see successful investing.                     bonds, particularly ‘high yield’ corporate     and many are bracing themselves for           year, but the payout is usually made           prevents you from doing your own job;
     household needs to find an extra £1,133          Investing is risky but so is leaving your   bonds and emerging markets bonds.              more job cuts, especially if we head into a   directly to the credit provider.               with ASU you are only likely to make a
     a year to maintain the standard of living      money in cash where it will fall in value     6) Are index-linked bonds worth a              “double dip” recession.                           The cost is dependent on the monthly       valid health claim if you can’t do any
     two years ago.                                 because inflation is higher than interest     punt?                                             So what can employees do if they are       benefit you are insuring and the “excess       work at all, which means far fewer claims
     Here are 8 areas to consider.                  rates.                                        Index-linked bonds specifically offer          worried about losing their jobs?              period”. Premiums are lower if you opt         will be paid out.
     1) Cash squeeze                                3) Consider shares                            protection against inflation and so have       Consider insurance. There are a number of     for a 60 or 90 day deferral, which can be        Additionally, most ASU policies
     If you are a higher rate taxpayer the bad      Despite the bad news we read about,           become popular with investors.                 products available, all of which will pay     useful for those who know they will get a      automatically exclude claims relating to
     news is that it is now almost impossible       such as Greece and Ireland, now could be      However, they now appear to be
                                                                                                                                                 out a monthly sum if the policyholder is      reasonable redundancy pay out.                 back injuries or stress, two of the most
     to find a no-strings attached savings          a good time to invest. The experts suggest    expensive.
     account to beat inflation.                     that in particular buying shares in big,
                                                                                                                                                 made redundant.                                   When buying ASU cover there are a          common complaints why people have
                                                                                                  7) Commercial property                            However, there are concerns that           number of exclusions to consider.              prolonged periods off work.
        Higher rate taxpayers need a pre-tax,       stable, multinational companies is            The property bubble burst in the credit
     gross rate of approximately 5.33% to           attractive. Not only are some of these                                                       smaller insurers are beginning to refuse to       The most important one being that this
                                                                                                  crunch. Should it still be part of an
     preserve the value of their money. There       shares undervalued and poised for growth      investor’s portfolio? The world is trying to
                                                                                                                                                 offer cover to those in the public sector     cover will not be valid if your employer
     are so few accounts doing that at present      when the market lifts up, but they could      repay its debts, and it seems this area has    and as widespread job losses look likely,     has already announced a redundancy
     and those that do require at least 70 per      also return good dividends.                   little value at the moment due to the fact     premiums may well rise sharply.               programme. Those working in the public
     cent of your money into an investment          4) Emerging markets                           that the enterprises in commercial                Those considering unemployment             sector need to recognise that if the
     bond which will be investing in the stock      Many investors have some investments in       property rely on borrowing.                    insurance, have the choice between two        school, NHS trust, local authority or
     market. Rising inflation is a great argument   the emerging markets. The rise of the                                                        different products.                           private company, has already announced
                                                                                                  8) Commodities
     for investing in the stock market but there    BRICs countries, Brazil, Russia, India and                                                      The first is known as Accident, Sickness   a redundancy programme, then it is too
                                                                                                  Gold has soared to very high amounts per
     are better ways of doing it than through       China has been well documented. Their                                                        and Unemployment cover ( ASU). This is        late to buy cover. If you do, any
                                                                                                  ounce, and investors have turned to this
     certain available bonds, and remember, it      stock markets, are generally extremely        known safe haven against inflation.            an annual insurance, as it is renewed         subsequent claim will be rejected.
     makes sense to keep your cash savings          volatile, but have generated huge returns     Demand has prompted concerns of a              every year, much like your home or car            The second option is a policy called an
     and stock market investments separate.         for investors over the years. However,        speculative bubble in gold. However,           insurance. So you can cancel it, if and       Income Protection Policy. This insurance is
        Basic rate taxpayers need only a 4 per      these returns are not guaranteed for          with the world beset by currency wars it       when the economic situation improves.         designed to pay out if a policyholder is
     cent interest rate to beat inflation.          future years.                                 probably has further to go.                       If you are unable to work, either as a     unable to work through ill-health, but it is
     Unfortunately, the number of accounts
     offering that has fallen quite dramatically                                                                                                 result of ill-health or redundancy, these     possible to buy an unemployment add-on.
     over recent months, with the best deals                                                                                                     policies will pay out a fixed sum for one         The differences being that any claim for
     in three and five year bonds.                                                                                                               year.                                         ill health will be paid out until the person
                                                                                                                                                 A form of this insurance, known as            returns to work, as there is not a
                                                                                                                                                 Payment Protection Insurance (PPI), is        12 month cut off, although there is for
                                                                                                                                                 often sold alongside loans, credit cards      unemployment cover. Premiums are also
                                                                                                                                                 and mortgages. Basically it is the same,      guaranteed for as long as you hold the
                                                                                                                                                 the only difference being the payout only     policy, ASU insurers could increase
                                                                                                                                                 covers the interest payments due on the       premiums at renewal annually. In most




    The value of your investment and the income from it can go down as well as up and you may not get back a significant proportion of your
    investment. Past performance is not an indication of future performance. Please contact us for further information or if you are in any
4   doubt as to the suitability of an investment                                                                                                                                                                                                                                              5
    Plan for the
                                                                                                                                                      Offshore Bonds
    Future
    As university costs rise and                                                                                                                       Pensions?
                                                                                                                                                      Or
    Child Trust Funds disappear, we                                                                                                                   If you are a high earner and you want to                 offshore bond, a higher-rate taxpayer                     After basic-rate tax it would be worth

    consider the options available to                                                                                                                 put money into a pension, as from 2011
                                                                                                                                                      you will notice that you will start to lose
                                                                                                                                                                                                               would have £196,000 at the end of the
                                                                                                                                                                                                               term, an extra £41,000 as gains would
                                                                                                                                                                                                                                                                         £200,869, or £170,652 for a higher-rate
                                                                                                                                                                                                                                                                         taxpayer. You could withdraw an income

    concerned parents
                                                                                                                                                      pension tax relief on your contributions if              have rolled up gross. Also, bonds allow                   of £16,242, or £13,180, by taking
                                                                                                                                                      you earn over £130,000. The argument for                 withdrawals of up to 5 per cent a year for                advantage of the 5 per cent rule. This
                                                                                                                                                      an offshore bond has become a lot more                   up to 20 years with no immediate tax to                   income would last 20 years giving you
                                                                                                                                                      compelling for high earners as many are                  pay. In effect, you are “rolling up” the tax,             approximately £4,000 per year, which may
    The idea that students will have to pay up      contribution and automatic enrolment of its      marketing to attract saving on behalf of         reluctant to tie up money in pensions in                 which could mean big savings for those                    not be enough to manage on without
    to £9,000 per year in university tuition fees   predecessor.                                     children or grandchildren. Parents be            return for comparatively little tax relief,              who expect to move to a lower tax rate                    cashing in the bond and taking the tax
    is sending shockwaves down the spines of           A spokesman for the Treasury announced        warned, that while investment funds can be       therefore this could be why offshore bonds               later in life.                                            liability.
    many parents. However, these fees will start    the new account would be available by            held on behalf of children, they cannot be       are becoming a retirement saving plan                       However fund charges can be high,                         By comparison, a top-rate taxpayer who
    to be repaid once the student earns more        autumn 2011, and would be backdated to           owned directly until the child is 18 years       alternative.                                             usually between 0.3 per cent to 1 per cent                made an £80,000 pension investment
    than £21,000.                                   ensure that no child born too late to get a      old.                                                Offshore bonds are an insurance                       upfront, as well as around £400 or up to                  grossed up to £100,000 (if eligible for
       However, parents are going to have to        CTF missed out on the new tax-free savings       Tax                                              “wrapper” around a portfolio of                          0.25 per cent per year on top depending                   basic-rate tax relief only), would have a
    save much more if they want to be able to       programme.                                       Every child has their own personal tax           investments, which receive tax advantages                on how much you invest, and that is just                  £320,714 retirement pot. After taking
    help their children to avoid large debts at        Approximately 5 million children in Britain   allowance and you can ensure that your           by allowing you to defer the tax on the                  on the wrapper alone. With adviser                        25 per cent tax-free cash at £80,178, there
    university, but just as parents are realising   have had CTFs opened for them since the          child does not pay more tax than necessary       growth of the investments. Capital growth                commission on top, this generally means                   would be an annuity of £9,381 for a
    they need to save more for their children;      initiative was launched in 2002. The current     on savings interest by completing an R85
    the Government is abolishing the Child Trust    Government announced in May 2010 that it                                                          in an onshore bond is taxed at 20 per cent,              the bonds are usually best for investments                higher-rate taxpayer or £12,508 for a
                                                                                                     form.                                            whereas offshore bond capital grows tax                  greater than £100,000 held for more than                  basic-rate taxpayer.
    Fund.                                           was abolishing the funds; children received         There are special rules to consider if
       So what can parents do to build up a nest    vouchers at birth and on their seventh                                                            free. The wrapper protects your assets                   five years.                                                  If the investor were to die at the age of
                                                                                                     parents give savings to their children, where
    egg to help pay for their children’s            birthday for £250, with children from low                                                         from tax for as long as you hold it. Then                   If you are looking for a pension                       77 after taking an annuity each year for
                                                                                                     gifts from a parent produce more than £100
    education? We set out some of the options.      income families receiving £500.                                                                   when you cash in your assets, you pay tax                alternative, offshore bonds are not                       12 years, the tax savings would be
                                                                                                     a year in interest, the whole of that amount
                                                       Existing CTFs will continue until maturity                                                     on the accumulated gains. While basic-rate               necessarily the answer. If you invested                   identical when using an offshore bond or a
    Savings accounts                                                                                 is taxed as the parent’s income. This rule
    A very flexible way of putting money aside      on the child’s 18th birthday, and friends and    does not apply to financial gifts from           taxpayers have no more tax to pay when                   £80,000 in the offshore bond, it would                    pension. However, the plus point for the
    for your son or daughter is a conventional      family can continue to make contributions        anyone else, including grandparents.             they cash in an onshore investment bond,                 have a value of £231,086 in 20 years                      offshore bond is that you will have been
    savings account. Many accounts are now          into those funds up to a maximum of                                                               higher-rate taxpayers must pay a further                 assuming a 5.5 per cent return and                        able to make the 5 per cent withdrawal at
                                                                                                     Pensions
    intended specifically for youngsters and        £1,200 a year.                                                                                    20 per cent and top-rate taxpayers 30 per                charges of 1 per cent a year.                             any time.
                                                                                                     Pensions are a very tax-efficient way of
    encourage regular saving with favourable           The new Junior ISA is expected to have                                                         cent. With offshore bonds, there is no tax
                                                                                                     saving for children, though they cannot
    rates of interest.                              limits and will also have similar restrictions                                                    to pay until you encash the bond, when
                                                                                                     access the fund until they are 55, so it
       Parents could also consider Premium          to the CTFs, as the money will belong to the                                                      higher-rate taxpayers will pay the entire
                                                                                                     cannot be used to cover the cost of
    Bonds from the state-owned National             child and cannot be taken out until they                                                          40 per cent and top-rate payers liable for
                                                                                                     education.
    Savings & Investments. Premium Bonds do         become an adult. Similar to the CTF,                                                              50 per cent.
                                                                                                        You can save up to a maximum of £3,600
    not pay interest, though the chance of          parents will be able to choose either a cash                                                         If you invested £100,000 in an onshore
                                                                                                     a year into a pension for each child, and
    winning a tax-free prize each month is an       or shares account and all returns will be                                                         bond, you would have a lump sum of
                                                                                                     because basic-rate tax relief is added
    exciting proposition.                           tax-free.                                                                                         £155,000 after 10 years with a growth of
                                                                                                     automatically, it will cost only £2,880 to
    Junior ISAs                                     Investment funds                                 make a £3,600 contribution. This means           6 per cent a year, according to Barclays
    Children can have their own cash ISA at age     There are a number of investment funds           that a £100 contribution costs only £80.         Wealth. If you invested the same in an
    16 or over, but they have to be 18 or over      and products aimed at saving for children,
                                                                                                        If parents have spare cash, this is a good
    for a stocks and shares ISA. The                but there are no products aimed specifically
                                                                                                     way to build up a retirement fund for their
    Government though has announced an              at saving for education cost, so parents
                                                                                                     children as it will remain invested for a very
    alternative for the Child Trust Fund, a tax-    should do their research before signing up.
                                                                                                     long time.
    free savings plan called the Junior ISA.           Investment funds do not usually offer
                                                                                                        Investing in a pension for a child can be
       This ISA is expected to have a similar cap   anything extra or special. They are
                                                                                                     done in any one of three ways: a
    and restrictions to the Child Trust Fund        mainstream products that are marketed as
                                                                                                     stakeholder pension, personal pension or a
    (CTF), but will not have the Government         savings for children, but this is often just
                                                                                                     self-invested personal pension (SIPP).

      The value of your investment and the income from it can go down as well as up and you may not get back a significant proportion of your
     investment. Past performance is not an indication HOME performance. Please contact UNDERSTAND THE FEATURES AND RISKS
     THESE ARE LIFETIME MORTGAGES AND of future REVERSION PLANS. TO us for further information or if you are in any doubt                              The value of your investment and the income from it can go down as well as up and you may not get back a significant proportion of your investment. Past performance is
                                                                                                                                                                    not an indication of future performance. Please contact us for further information or if you are in any doubt as to the suitability of an investment
                                                        as A PERSONALISED ILLUSTRATION.
                                                ASK FOR to the suitability of an investment
6                                                                                                                                                                                                                                                                                                                                7
    Maximum                                                                                                                                                Is your cover
    Investment
    Plans
                                                                                                                                                                                       LEGAL?
                                                                                                                                                    With cutbacks in legal aid, families should     What legal fee insurance is                     to ownership or occupation of your
                                                                                                                                                    consider taking out legal fees insurance to     available?                                      homeand contract disputes for buying or
                                                                                                                                                    cover events like divorce, industrial injury    There are two types of legal fees               selling your home.
                                                                                                                                                    as well as employment, schools and              insurance, Before the Event (BTE), which is     ATE insurance
                                                                                                                                                    benefit disputes, as these will largely no      usually offered by household and motor          After the Event (ATE) legal expenses
                                                                                                                                                    longer be covered.                              insurers as an add-on to the main policy,       insurance has rapidly grown since the
                                                                                                                                                    Divorce withdrawn from legal aid                and After the Event (ATE), which is often       Government cut legal aid funding for
                                                                                                                                                    Divorce will no longer qualify for legal aid.   purchased through a solicitor when you          personal injury claims in 2000. This

    The return of the                                                                                                                               Under the new system, which will start to       first decide that you want to take a case to    insurance is generally sold by solicitors
                                                                                                                                                    take effect from January 2011, anyone           court.                                          and claims management companies
                                                                                                                                                    with assets worth more than £1,000 will            Legal fees insurance will not pay your       dealing with personal injury claims. It


    pension alternative
                                                                                                                                                    have to pay at least £100 towards their         insurance claim, but it will cover the legal    covers legal costs after you have suffered
                                                                                                                                                    legal costs.                                    costs involved in pursuing or defending a       a non-fault personal injury.
                                                                                                                                                       However, legal aid will still be available   claim, including the appointment of                The cost of ATE insurance can range
                                                                                                                                                    for divorce cases where there are               solicitors, barristers and expert witnesses.    from around £75 to £5,000 depending on
                                                                                                                                                    allegations of domestic violence, child         In most cases, the legal fees provider          the amount you are claiming. In personal
    Wealthy individuals are seeking an option     period, usually 10 years. The market for       they are being charged for, and when they                                                          manages the claim throughout.
    to pensions and moving to Maximum             MIPs is growing again among wealthy            have to pay it.                                    abduction, or forced marriage. These                                                            injury and medical negligence claims,
                                                                                                                                                    cutbacks are expected to encourage more         BTE insurance                                   some firms offer a ‘no-win no-fee’ or
    investment plans (MIPs) which has seen a      individuals who have already maximised           MIPs also offer high net worth savers
                                                                                                                                                    couples to arrange a pre-nuptial agreement,     Before the Event insurance is generally         conditional fee service as well as ATE legal
    resurgence of new competitive products        contributions to individual savings            the chance to reduce exposure to the
                                                                                                                                                    particularly as a ‘pre-nup’ was recently, for   covered under household insurance where         expenses insurance. But under the
    on the market.                                accounts and pensions.                         volatility of the markets by being able to
                                                                                                                                                    the first time, upheld in a British court.      legal expenses cover is included, it            proposed cutbacks in legal aid there will
       The products were popular in the 1980s        MIPs are not subject to the higher rate     invest monthly, a process called pound                                                             typically covers legal costs incurred in
                                                                                                                                                    Legal fees policies & costs                                                                     be reductions here also. Lawyers will no
    but went out of vogue when they became        of tax on returns, provided the policy has     cost averaging. Advisers also warn                                                                 disputes over faulty goods, employment
                                                                                                                                                    The average legal fees policy costs no                                                          longer be able to recover their success
    associated with high commissions and          “qualified” by being held for at least 7.5     investors to take care when selecting a                                                            claims, including unfair dismissal,
                                                                                                                                                    more than £15 to £25 to add onto a                                                              fees from ‘after the event’ insurance
    unclear charges.                              years, the underlying investments,             policy as each has significantly different                                                         redundancy, discrimination on grounds of
                                                                                                                                                    household or motor policy, but adding                                                           policies and the claimant will have to pay
       However, providers are starting to         managed by life companies, are deemed          terms and conditions.                                                                              sex, race or disability, civil claims related   this fee out of any damages awarded with
                                                                                                                                                    divorce or extending the cover to include
    launch new products with transparent          to have been taxed already at 20 per cent,       Choosing a MIP allows you to invest in                                                                                                           a cap of 25 per cent of the damages. It is
                                                                                                                                                    full medical negligence, industrial disease
    charges that are attracting high earners,     so higher-rate taxpayers have nothing          a broad range of investments and initial                                                                                                           hoped that this will keep these rapidly
                                                                                                                                                    and injury claims, could increase the
    because MIPs are not subject to higher        more to pay.                                   charges are closer to 20 per cent rather                                                                                                           rising fees under control and will reduce
                                                                                                                                                    premium significantly. However, the
    rate tax on returns if set up and held           The products are also a type of life        than the traditional 40 per cent charges.                                                                                                          the costs for defendants.
                                                                                                                                                    cutbacks in legal aid could be the stimulus
    correctly.                                    assurance policy, meaning the initial          Once taken out, a MIP must maintain its
                                                                                                                                                    for insurers to offer more comprehensive                                                        Problems and restrictions
       High earners are looking for alternative   investment is protected. If the policyholder   qualifying status to provide the maximum           cover.                                                                                          The problem with BTE policies are that a
    savings routes following the Government’s     dies, the minimum levels of life cover can     benefit. So, as well as holding the policy            Many household policies already offer a                                                      high proportion of claims are rejected and
    decision to reduce the amount people can      still be invested as planned.                  for 7.5 years, premiums must be paid at            legal expenses cover for property,                                                              claimants are often obliged to use the
    save into a pension each year with tax           Other savers though like the inheritance    least annually, the plan must pay out a            employment, and third party disputes as                                                         insurer’s lawyers to pursue their claim and
    relief to £50,000 from April 2011.            tax benefits of using a MIP. The product       capital sum either on maturity or death,           an extension of the main policy. But                                                            all claims will need to be approved by the
       As pensions become inflexible MIPs will    can be put inside a trust so that the saver    and the premiums in any one year must              divorce, child custody and medical                                                              insurer, before you even consult a lawyer
    rally, annual payments into MIPs for a        is no longer the beneficiary.                  not exceed twice the premiums in any               negligence, areas where there are likely to                                                     and legal fees insurers, like all insurers,
    period of 10 years or more mirrors the           It is thought that the arrival of new       other. If qualifying status is lost, tax will be   be the greatest number of potential                                                             have a vested interest in rejecting your
    savings into a pension, and while             MIPs with clearer pricing structures will      payable on the proceeds of the MIP at the          claims, are rarely covered.                                                                     claim or keeping costs to a minimum.
    investors still have to pay tax on these      boost interest from advisers and investors     investor’s own tax rate.
    payments, it is at a low tax rate.            alike. Transparent charging structures
       MIPs are essentially short-term            mean that clients will know exactly what
    endowment plans that mature after a set

     The value of your investment and the income from it can go down as well as up and you may not get back a significant
    proportion of your investment. Past performance is not an indication of future performance. Please contact us for further
                           information or if you are in any doubt as to the suitability of an investment
8                                                                                                                                                                                                                                                                                                  9
                                                                                                                                                 Are you ready for retirement?
     Ethical savings                                                                                                                             Plan and prepare
     Investment into the mainstream
     Ethical investing is moving rapidly into the   Most people are looking for the best          Interest rates on these may not be a
     mainstream, the growth of the market           overall return for their investment with      “best-buy”, but they are not that so far
     over the past 10 years has added more          minimum risk. Funds that do not include       off and anyone who wants to save
     than 100 products, from ISAs, to unit          Rolls-Royce, BP or BAE are difficult to       ethically should consider choosing
     trusts and pensions. They are now offering     recommend to someone who is risk averse       building societies, which, with their long     Changes to pension
                                                                                                                                                 legislation could change
     a responsible or sustainable element and       and people generally still tend to go for     historical links with the mutual movement,
     have opened up the sector to those with        income over ethics.                           are preferable to high-street banks.
     small and large amounts to invest.
        New figures from the Co-op show that
                                                      Equity bond performance is different for
                                                    ethical funds in the short and medium
                                                                                                  Another product area that has seen a
                                                                                                  marked increase in ethical schemes is
                                                                                                                                                 the way you plan for
     the amount of cash invested in ethical         term, but over the longer term, there is no   pensions. Many stakeholder pensions now        your retirement.
     financial products has had its biggest         performance cost, as income yields are        offer ethical funds. Those with a higher
     annual increase in 10 years, rising 34 per     broadly similar.                              than average income which are more
     cent last year from £14.3bn to £19.2bn.          If you are a cautious investor, then        comfortable with riskier investments, have     As a result of the recession, the                 COULD IT AFFECT YOU?                                  MAKE A PLAN
     This increase outstripped the mainstream       ethically screened corporate bond funds       the option to invest in a single company or    Governments spending review and                   The Governments change to the state pension           Retirees should start planning their life in a
     finance market, which grew 15 per cent,        may be for you. Screening includes an         sectors such as sustainable fuels or           advances in health care, the retirement           age is a start of a general trend toward              different way and ask themselves, what would
     over the same period. The report adds that     analysis of things like the effect an         technologies, but you need to know the         picture is changing fast.                         people working longer and retiring later, for         they do if they got to 66 and had another 25
     the average UK household now has               industry has on the environment, a            market inside out or be advised by those         For people approaching retirement or            some by choice and others because they                years of life ahead of them. How will you
     almost £750 invested in ethical funds and      company’s track record on social and          that do. There are some areas, such as a       thinking about when to retire, now is the         simply cannot afford to give up work.                 occupy your time, maybe you want to travel or
     savings accounts.                              environmental issues and the geographic       few interesting wind-farm co-operatives        time to indulge in some serious                      Many people have been misled into                  go on holiday in your retirement, but this will
        Many professional financial advisers        regions affected by the operation.            that will stand up to investigation in terms   retirement planning.                              thinking that just by saving more they will           require funding.
     deal with green and ethical products,            Some banks and building societies           of liquidity, protection and risk levels but                                                     have an adequate pension pot, but the                    With this in mind those approaching
     although many still had concerns about         offering ethical cash ISAs use the money      you need to be careful.
                                                                                                                                                 SO WHAT ARE THE CHANGES?
                                                                                                                                                                                                   savings will still not be enough for many             normal retirement age should begin a
                                                                                                                                                 The recent decision to change the state
     their performance relative to more             on deposit to fund socially and                 Experts expect it to continue to grow, as                                                      people. Employers are going to have to                dialogue with their employers. People will
     mainstream investments.                        environmentally beneficial projects at        banks look to use a new-found ethical          pension age faster than planned may not
                                                                                                                                                                                                   engage with gradual retirement.                       need guidance, financial education, lifestyle
                                                    home and across the world, such as            stance to win back the trust of customers      impact on everyone’s retirement plans.
                                                                                                                                                                                                      People will need to consider retirement in         planning and a pre-arranged agreement with
                                                    investment in renewable energy schemes        which was damaged during the credit               A change in the state pension age does not
                                                                                                                                                                                                   two phases. The first is your prime-time              their employer.
                                                    or sustainable housing.                       crunch. They also hope that if the             automatically mean a change for your
                                                                                                                                                                                                   retirement, before the age of 75, when you               Most importantly, do not underestimate the
                                                                                                  Government follows through with its            retirement plan, but there are other changes
                                                                                                                                                                                                   may still be able to work flexibly, while the         amount that you need to have within a
                                                                                                  promise of a green investment bank, then       that may affect the age at which you decide
                                                                                                                                                                                                   second is your senior years, when you may             decent pension pot. A typical 35 year old will
                                                                                                  a green ISA scheme to fund it may not be       to retire, and how that retirement happens.
                                                                                                                                                                                                   need extra care.                                      need to save approximately 32 per cent of
                                                                                                  far behind.                                       The Government has announced changes
                                                                                                                                                                                                   WHAT TO DO?                                           their wage in order to receive a retirement
                                                                                                                                                 that will affect public sector pensions, making
                                                                                                                                                                                                   The first step is to work out what you already        income two thirds of their current salary
                                                                                                                                                 them less attractive. It has also announced a
                                                                                                                                                                                                   have. You can get a state pension forecast            at 65.
                                                                                                                                                 change in the pensions saving credit that will
                                                                                                                                                 leave some pensioners worse off.                  from the Government, and you can also get a           UNDERSTAND THE FINANCES
                                                                                                                                                    The default retirement age of 65 is being      forecast for any occupational pensions you            Seek professional financial advice and use all
                                                                                                                                                 abolished from October 2011, extending            have.                                                 your options. You don’t have to spend all of
                                                                                                                                                 peoples working lives.                               Unless you have a final salary pension, you        your pension pot on an annuity; you can mix
                                                                                                                                                    The recession is also having an impact on      may need to buy an annuity with your                  it up and move it around.
                                                                                                                                                 people’s pension funds. Due to stock market       pension pot. You can find out roughly how                Those choosing the annuity route should
                                                                                                                                                 fluctuations they are generally worth less and    much your pension pot will buy you by using           take note of what inflation could do to their
                                                                                                                                                 the low-interest-rate environment combined        an online annuity calculator.                         income if they plan to buy a level annuity,
                                                                                                                                                 with relatively high inflation has made it more      Many people are disappointed at the                where the income stays the same. However,
                                                                                                                                                 difficult for pensioners to live on a fixed       present annuity figures and it is felt that annuity   inflation-linked annuities are generally more
                                                                                                                                                 income.                                           rates will not be recovering any time soon.           expensive.


                                                                                                                                                           To discuss how you can get the most out of your retirement planning, please contact us for further information
10                                                                                                                                                                                                                                                                                                         11
      The ISA increase
      Your allowance is set to rise
      The Government have officially announced the                             an average of £4,700 to cover the cost of bills                  uncertainty, it is considered important that
      news that ISA limits will rise by £480 from                              and other emergency costs.                                       people set aside a realistic sum of money to be
      £10,200 to £10,680 in line with inflation. This                             The research also uncovered that 20 per cent                  used in emergencies.
      new allowance for 2011/12 tax year is due to                             of all adults have no savings at all, with the 25                   With this background in mind and with the
      increase in line with September’s retail price                           to 34 year old age group being the least                         increasing limits to ISA investments, savers
      index of 4.6 per cent. This retail price indexation                      prepared for a financial emergency. 41 per cent                  should make full use of their tax free savings
      uplift will have the effect of adding £480 to the                        of people in this age group have less than £250                  allowances.
      current £10,200 individual ISA limit.                                    saved and 25 per cent have nothing at all.                          A couple will be able to save jointly £21,360
         Recent research from HSBC has suggested                                  Women are at a higher financial risk than                     per year in their ISAs and enjoy tax free returns.
      Britons are not saving enough and almost a third                         men, as 33 per cent of women have less than                      As taxes rise, savers and investors should ensure
      could and would not be able to survive for more                          £250 in savings, whilst just 26 per cent of men                  that they invest as much as they can in their ISA
      than a week on their savings.                                            have less than this amount in savings.                           each year. It is thought over 42 per cent of the
         Research in October 2010 from HSBC has                                   Taking the UK as a whole, people in the North                 UK population is still not taking up their ISA
      indicated that around 30 per cent of the UK                              West are the least likely to have a financial                    allowance. ISAs are an efficient all year round tax
      population have less than £249 as a financial                            cushion as 25 per cent had no financial safety                   perk and a way to avoid giving hard earned
      safety fund, which at today’s rates is equivalent                        net in place.                                                    money straight back to the tax man, they are
      of five days average take home pay. Experts                                 Such findings from the HSBC survey show a                     also a good vehicle to ensure a financial safety
      recommend that families should keep a financial                          worrying trend and lack of preparation amongst                   fund is in place for the future.
      fund of at least three months’ take home pay or                          UK residents. With the current climate of




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