smart money 24

JANUARY / FEBRUARY 2009

GETTING YOUR FINANCES IN SHAPE

CorPorAtE mAttErScost-effective solutions for today’s challenging business environment

ProtECtINg your lIfEStylEcovering the costs that result from a serious illness

SAvINgS ComPENSAtIoN SCHEmEhow safe is your money?

don’t leave your heirs facing an unexpected tax bill

PRE-BUDGETrEPort

AlSo INSIdE tHIS ISSuE

have you considered the potential effects of a recession?

EStAtEPLANNING

were you a winner or a loser?

smartmoney

In today’s business environment, with budgets under constant pressure, it is even more vital to deliver more cost-effective solutions. Employee benefits should be regularly reviewed to take advantage of new developments and improved terms offered by providers keen to compete for business.

Many employees today expect to have access to death-in-service cover or income protection as part of their financial package. Some also look to employers who give them the option of being part of a flexible benefit scheme that enables them to select their own benefits from a menu, using an agreed allowance that provides a more tailored employee choice.

A business that wants to retain or recruit directors or senior executives may find it much easier to achieve this if they provide them with a suitably tax-effective remuneration strategy. This may also go a long way towards promoting loyalty and protecting them from the potential threat of the competition.

It’s also important to protect your business against the unexpected death or serious illness of your key employees, shareholders or partners. Many businesses recognise the need to insure their company property, equipment

and fixed assets. However, they continually overlook their most important assets, the people who drive the business, and the impact their death or illness could have on the financial security of the business.

Receiving the appropriate professional advice can help to ensure that premiums paid are competitive and set up in a tax-efficient manner. Services offered to corporate clients include:

n Corporate investments n Individual pension plans n Key person insurancen Partnership insurancen Employee benefit plansn Business succession planningn Group retirement planning

CorPorAtE mAttErS

CORPORATE PLANNING

INSIDE ThIS

ISSuE

Content of the articles featured in this publication is for your general information and use only and is not intended to address your particular requirements. They should not be relied upon in their entirety and shall not be deemed to be, or constitute advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee 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 such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles.

Welcome to the first issue of our financial magazine for the New Year, featuring articles designed to help you make more of your

money and prepare for any economic situation. From declining financial markets to a troubled

and crisis-ridden housing sector, we are being continually bombarded by a plethora of news stories and media coverage about the state of the UK’s financial health. In times of economic turbulence or market downturn, it is prudent, if you haven’t done so already, to start considering and planning for the potential effects a recession could have on your investments and pension. Turn to page 5 to read the full article.

The Chancellor’s message to the country as he delivered his second Pre-Budget Report last November was to ’spend, spend, spend’, at least for the rest of this year, to benefit from the reduced 15 per cent VAT rate. We shall all start paying for the tax reductions by 2011, assuming the government is re-elected. On page 9 we look at the main points set out by the Chancellor that are aimed at seeing us through these turbulent times, and on page 11 we consider how the business sector fared.

On page 4 we look at how an economic slowdown could have considerable implications for most people’s taxes. Whatever your position, now is an excellent opportunity to take a look at your tax. In some instances, people may be oblivious to the fact that they are paying more tax than they really need to and they subsequently never claim this sum back.

At the time of going to press, the global financial crisis and events are changing very quickly, and some further changes are likely to have occurred by the time you read this issue. A full content listing appears on page 3.

Implementing a successful employee benefits package should not only enable your business to meet its legal obligations in respect of making pension schemes available, it could also help to increase your successes when looking to recruit the best people.

Cost-effeCtive solutions for today’s Challenging business environment

Whatever the size of your business, if you require objective and expert advice on corporate financial planning and employee benefits please contact us for further information.

n Arranging a financial wealth check

n Building an investment portfolio

n Generating a bigger retirement income

n Off-shore investments

n Tax-efficient investments

n Family protection in the event of premature death

n Protection against the loss of regular income

n Providing a capital sum if I’m diagnosed with serious illness

n Provision for long-term health care

n School fees/further education funding

n Protecting my estate from inheritance tax

n Capital gains tax planning

n Corporation tax/income tax planning

n Director and employee benefit schemes

n Other (please specify)

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For more information please tick the appropriate box or boxes below, include your personal details and return this information directly to us.

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want to make more of your money?

issueinside this

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Corporate matters cost-effective solutions for today’s challenging business environment

savers disadvantaged by lower interest ratesin general, savings rates are now lower compared with last year

surprise interest rate reduCtionslowest levels for over 50 years

take a look at your taxare you paying more than you really need to?

getting your finanCes in shapehave you considered the potential effects of a recession?

estate planningdon’t leave your heirs facing an unexpected tax bill

45 per Cent tax rate for high earnersthe wealthy could face substantial tax rises

isa returns of the yearsheltering your returns from tax

pre-budget reportwere you a winner or a loser?

proteCting your lifestylecovering the costs that result from a serious illness

open market optionsspeeding up the time it takes payments to be made to pensioners

pre-budget report for businessa wide-ranging package

savings Compensation sChemehow safe is your money?

I NTEREST RATES

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In general, savings rates are now lower compared with the higher rates that were available last year, when many of the banks were offering more attractive rates because they had become increasingly reliant on deposits from consumers to fund their mortgage lending. The only comfort to savers is that many banks still need depositors’ money and therefore may not pass on any future rate cut reductions.

During much of last year, returns on savings accounts were at seven-year highs as lenders became increasingly reliant on consumer deposits to fund their mortgage book. But with lower interest rates, many of the savings rates have become short-lived.

Levels and bases of and reliefs from taxation are subject to change and their value depends on the

individual circumstances of the investor. The value of your investment can go down as well as up and

you may not get back the full amount invested.

It’s an unfortunate fact that any interest rate cuts, although welcome news for borrowers and the business community, are the curse of savers, many of whom have been disadvantaged by higher rates of inflation.

SAvERS DISADvANTAGED BYloWEr INtErESt rAtES

SURPRISE INTEREST rAtE rEduCtIoNS

in general, savings rates are now lower Compared with last year

LOWEST LEvELS FOR OvER 50 YEARS

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Interest rates were cut to their lowest level in over 50 years on Thursday 6 November 2008 when the Bank of England cut its official rate by 1.5 percentage points to 3 per cent, a cut three

times larger than any seen since the Bank’s Monetary

Policy Committee was established in 1997. This was followed by another 1 per cent reduction on Thursday 4 December 2008, bringing the rate down to 2 per cent, a

level not seen since 1951, when Winston Churchill was in office.

The Monetary Policy Committee explained its decision to cut rates far more than expected by saying there was evidence of a ’severe contraction’ in the economy during the coming months, and such a dramatic extinction of inflationary pressure that ’at prevailing market interest rates, [there is] a substantial risk of undershooting the inflation target.’ Traders and most economists took that to mean further rate cuts were likely to come.

During much of 2008, returns on

savings accounts were at seven-year highs as lenders became increasingly reliant on consumer deposits to fund their mortgage book.

NEEd morE INformAtIoN?PLEASE CONTACT US WITh YOUR ENQUIRY

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payments on account. This is a timing difference rather than an actual tax saving, which can give hard-pressed professionals a bit of breathing space.

In an economic downturn, falling asset prices can also benefit those planning for the future. If you wish to pass on assets, whether property or shares, to members of your family for inheritance tax planning purposes, there are opportunities presented by lower property and share values.

You could opt to give the gifts outright. If you survive for seven years, they become tax-free.

Alternatively, you could place them in a trust, which may still involve a 20 per cent charge. However, this can be circumvented by opting instead for a family limited partnership, which, although not as flexible as a trust, can still be worth considering.

Levels and bases of and reliefs from taxation are subject to change and

their value depends on the individual circumstances of the investor. The

value of your investment can go down as well as up and you may not get

back the full amount invested.

to apply for dividend tax to be kept out of PAYE, as HMRC cannot compel you to pay tax on dividends via your coding notice.

Pensioners benefit from higher personal allowances in the current 2008/09 tax year: £9,030 at age 65 and £9,180 at age 75. But if applicable to your situation, you lose 50p in every pound of income above £21,800. However, this clawback stops once your income falls below this threshold. If a dividend slice means you fall below the £21,800 threshold,

you will at least no longer suffer from the income clawback. But you should make sure you inform HMRC fully of dividend cuts, or you could be overtaxed.

There may be opportunities for small business owners to claw back overpaid tax. If small companies make a trading loss, it is possible to carry that loss back to the previous year and obtain a tax rebate, which could offer valuable cash flow advantages. Partnerships may be able to extend the current accounting year to, say, 15 or 18 months to reduce

In some instances, people may be oblivious to the fact that they are paying more tax than they really need to and they subsequently never claim this sum back. Also, many will earn less and accrue lower investment income. Some self-employed workers could see profits all but disappear, while others will forego dividends from family businesses.

If you are employed and taxed under Pay As You Earn (PAYE), your personal allowance for the current 2008/09 tax year is £6,035, which is divided by 12 and then deducted from your monthly salary. However, if you do not work the whole year, you will have unused personal allowance which will be refunded to you. On that basis, you may also have paid too much higher rate tax.

Even larger sums could be at stake if you are self-employed or pay tax at the higher rate on substantial investments. If you pay tax in advance of finalising your returns and accounts by estimating what your income will be, you may have paid too much, given falling share dividends and the general economic slowdown.

If applicable to your situation you may be required to pay tax in two amounts, each amount being half of the previous year’s tax bill. In some

cases, this could now seem too high, given that the credit crunch began during the middle of last year.

If your earnings dropped sharply in the second half of last year, or if you did not receive the dividends expected, it’s important to take action now to make sure you calculate your assessment correctly and claim any money back that is due.

In January, not only do your 2007/08 tax affairs have to be finalised, but you begin making payments on account in respect of the 2008/09 tax period. Due to the economic downturn, it may be prudent not simply to pay the usual required half of the previous year’s tax bill. Before you make a payment, take a realistic look at your earnings and dividends and what they are likely to be by the end of the financial year. If they are lower, you can apply to make a lower payment than usual, but you need to request this by filling in a form SA303.

You should also keep a close eye on the dividends you receive, especially once they fall below £10,000, as HM Revenue & Customs (HMRC) may sweep them up into PAYE. Not only are payments made earlier this way, but shareholders may be overcharged. It is possible

TAX PLANNING

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TAKE A LOOK At your tAXare you paying more than you really need to?An economic slowdown could have considerable implications for most people’s taxes. Whatever your position, now is an excellent opportunity to take a look at your tax.

In January, not only do your 2007/08 tax affairs have to

be finalised, but you begin making payments on account in respect of the 2008/09 tax period.

Firstly, don’t make any knee-jerk decisions, especially if you are investing for the longer term. Our service is designed to assess your current situation and provide professional advice to help you make informed decisions. Selling any investments when the FTSE 100 index and other indices are at such a low point may not be the most appropriate course of action for most investors, and if you can wait for equity markets to recover before selling any investments, you have the potential to gain from the upside of any future recovery.

Currently, some investors with a longer-term view and a higher risk-for-reward attitude may even find that some opportunities still exist by holding both UK and US equities. Investors who acquire UK, US and even European equities, all of which have fallen heavily, could benefit once markets eventually recover. If you have exposure to emerging market equities, they still remain high risk and are likely to require a longer time frame for any potential recovery.

You may be concerned about the effects on your retirement planning, as the value of your pension fund may have been affected by falls in equity and corporate bond prices. For many people this will almost certainly be the case if they have a personal pension or are members of a defined contribution ‘money purchase’ occupational scheme.

Time is often said to be a healer, and if you have the luxury of targeting a retirement date in excess of five years, continuing your contributions should be an important consideration as markets are expected to recover in the longer term. If you have less time before you stop working, though, you might want to consider phasing your retirement by using only part of your fund to buy an annuity to produce income, and keeping the rest invested in an unsecured pension or an alternatively secured pension. Phased retirement is a complex area of pensions and independent advice should be sought if this route is being considered.

Working while your pension fund value has the potential to recover could be an alternative course of action you may wish to consider. During November last year, data from the Office of National Statistics showed that more people are choosing to do this, pushing the average retirement age for men up to a

record high of 64.6 years, and the average retirement age for women up to 61.9 years.

If you have a defined benefit occupational scheme, your pension benefits will not be affected by a recession or stock market falls as the income you receive will be determined by your final salary. However, if you work for an employer whose solvency may be adversely affected by a recession, you should check how much of your pension will be protected if the company folds, and this is also true if you are already receiving your pension.

Currently, 90 per cent of your employer’s pension up to a maximum of £27,000 per year is covered by the government’s Pension Protection Fund (PPF). If you are expecting to retire on more than this figure and have any concerns, please talk to us so that we can assess the options available to you.


individual circumstances of the investor. The value of your investment and income from them can fall

as well as rise and you may not get back the full amount invested.

ECONOMY

05

You may be concerned about

the effects on your retirement planning, as the value of your pension fund may have been affected by falls in equity and corporate bond prices.

if you Would liKe to revieW your current financial planning position please contact us for further information

GETTING YOUR fINANCES IN SHAPE have you Considered the potential effeCts of a reCession? From declining financial markets to a troubled and crisis-ridden housing sector, we are being continually bombarded by a plethora of news stories and media coverage about the state of the UK’s financial health. In times of economic turbulence or market downturn, it is prudent, if you haven’t done so already, to start considering and planning for the potential effects on your investments and pension.

WEALTH PROTECTION

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ESTATE PlANNINg

don’t leave your heirs facing an unexpected tax bill

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WEALTH PROTECTION

When you add up the value of your property, savings and investments and other belongings, you may be surprised by how much your estate is actually worth and you could therefore be looking at a sizable tax bill.

There are a number of ways in which, with some careful planning, you could mitigate or potentially remove an IHT liability against your estate, thereby ensuring that your heirs are not left with an avoidable tax bill.

Unfortunately, though, some families do not start thinking about IHT planning until it is too late. The first thing to do is to work out if the tax will be an issue. Start by adding up the value of your savings, investments, properties and other personal possessions. You also need to include funds held in Individual Savings Accounts. Although the proceeds are tax-free during your lifetime, they are subject to death duties.

When an estate passes between a husband and wife, or from one civil partner to another, IHT is not payable. In addition, married couples or civil partners can transfer the unused element of their IHT-free allowance to their spouse when they die. By doubling up the allowance this financial year, a couple would escape IHT on £624,000.

During your lifetime, giving away assets is a simple and legitimate way to reduce the value of your estate, as long as you do it in time. You can gift up to £3,000 a year and it is immediately exempt from IHT, or £6,000 if you did not make a gift of this kind in the previous tax year.

A married couple giving for the first time could, therefore, hand over £12,000 to their children in one year. After that, the maximum for a couple is £6,000. You could also escape IHT by giving £250 to any number of people every year, but you cannot combine it with the above exemption.

Parents can give £5,000 to each of their children as a wedding or civil partnership gift. Grandparents can give £2,500 and anyone else £1,000. Gifts of any size to political parties or

charities are also exempt. If a gift is regular, comes out of income and does not affect your standard of living, any amount of money can be given away and ignored for IHT.

It is possible to make further tax-free gifts known as potentially exempt transfers (PETs), but you have to survive for seven years after making the gift. If you die within seven years and the gifts are valued at more than the nil-rate band threshold, it may be possible to apply taper relief. The tax reduces on a sliding scale if the gift was made between three and seven years earlier.

You can give away most assets, but these have to be an outright gift from which you can no longer benefit. This excludes giving away your family home. If you hand it to your children and continue to live there, you have to pay a market rent, which can wipe out the tax benefits. It is important to make a note of such gifts to pass on to the executor of your will.

Loan trusts are designed for people who cannot give away assets because they need to live off the income, but want future investment growth to be IHT-free. This type of arrangement is very specialist and you should always receive the appropriate professional advice before embarking down this tax-planning path.

In most cases, IHT must be paid within six months from the end of the month in which the death occurs, otherwise interest is charged on the amount owing. Tax on some assets, including certain land and buildings, can be deferred and paid in instalments over ten years.

There is a range of policies and strategies you can use to plan for IHT, but this is a complex area of financial planning, so it’s important to receive good professional advice. Finally, don’t forget to make or update your will.


individual circumstances of the investor.

An increasing number of households could be at risk of paying inheritance tax (IHT). The 40 per cent tax charge is payable on the value of an estate over the nil-rate band threshold, £312,000 for an individual and £624,000 for a married couple, based on the current 2008/09 financial year.


There are a number of ways in

which, with some careful planning, you could mitigate or potentially remove an IHT liability against your estate, thereby ensuring that your heirs are not left with an avoidable tax bill.

08

WEALTH CREATIONPRE-BUDGET REPORT

The Chancellor confirmed in his Pre-Budget Report last November his intention to introduce a new 45 per cent tax rate from April 2011 for high earners earning more than £150,000, which is estimated to affect the top 1 per cent of incomes.

Such individuals will face a higher rate of 37.5 per cent on dividends, which is an effective rate of 30.5 per cent. These higher rates will also apply to most trustees. There is also a proposed increase in National Insurance rates of 0.5 per cent for employees, employers and the self-employed.

In addition, there would be a change to the personal allowances of high earners to end the anomaly of these being worth twice as much to higher rate taxpayers as those who pay basic rate tax. The personal allowance, which is £6,035 in this financial year, is the amount of earnings on which no tax is payable and all taxpayers receive the same allowance.

From April 2010, people earning between £100,000 and £140,000 will have their personal allowances halved so they receive the same benefit as those earning less. For taxpayers earning more than £140,000 the allowance will be withdrawn entirely.

From this April, the personal allowance for those under 65 will be increased by £145. This is in addition to the £600 increase from May last year, and increases the total to £6,475. Taxpayers aged between 65 and 74 will see their personal allowance increase in line with inflation to £9,490, while those aged 75 and over will get an annual allowance of £9,640.

Plans were also announced to make permanent last year’s increase in the income tax personal allowance of £120 a year for basic rate taxpayers.

ISA rEturNS of tHE yEAr

IF YOU USE YOUR ALLOWANCE EVERY YEAR, ISAS OFFER YOU THE CHANCE TO BUILD YOUR OWN PERSONAL TAx HAVEN. HOWEVER, MISS THE DEADLINE FOR A TAx YEAR AND YOU LOSE THAT PART OF YOUR ISA ALLOWANCE FOREVER. FOR MORE INFORMATION, PLEASE CONTACT US.

As we enter a New Year, the tax clock is ticking and the countdown to the end of the financial year on 5 April approaches with increased vigour. If appropriate to your situation, one way in which you could hold a wide range of investments and shelter your returns from tax is to take advantage of an Individual Savings Account (ISA).

Within an ISA gains are tax free and there is no tax to pay on the income. (Since April 2004, the 10 per cent tax credit on UK dividends cannot be reclaimed, regardless of whether the shares are held directly or within a collective investment scheme.)

You don’t have to mention ISAs on your tax return. Inside the ISA wrapper you can also switch your investments whenever you like, but this could possibly lead to a switching charge. Currently, you can invest up

to £7,200 in this financial year, which runs from 6 April to 5 April the following year. Any UK resident over 18 can invest (over 16 for Cash ISAs).

From 6 April 2008, the ISA rules changed. Mini and Maxi ISAs were replaced with Cash ISAs and Stocks and Shares ISAs, and the annual allowance rose to £7,200. This means you can invest up to £7,200 in a Stocks and Shares ISA, or up to £3,600 in a Cash ISA with the balance (within the overall limit) in a Stocks and Shares ISA.

Levels and bases of and reliefs from taxation are subject to change and their value depends on the individual

circumstances of the investor. The value of your investment can go down as well as up and you may not

get back the full amount invested.

sheltering your returns from tax

45 PEr CENt tAX rAtE for HIgH EArNErSthe Wealthy could face substantial tax rises


PRE-BUDGET REPORT

The Chancellor’s message as he delivered his second Pre-Budget Report was to ’spend, spend, spend’, at least for the rest of this year, to benefit from the reduced 15 per cent VAT rate.

We shall all start paying for the tax reductions by 2011, assuming the government is re-elected. National Insurance contributions will rise by 0.5 per cent for both employers and employees, although the lower rate threshold will be increased to match the new personal allowance.

Higher rate taxpayers will see personal allowances cut (for those earning over £100,000) and eliminated (for those earning over £140,000). In addition, there will be a new 45 per cent rate for those earning over £150,000.

pre-budget report highlights fisCal paCkage The government will inject £20bn into the economy in an attempt to stave off a deep recession.

growth Growth forecast predictions have been downgraded for this financial year to between -0.75 per cent and -1.25 per cent from 2.5 per cent. The Chancellor predicted growth of between 1.5 per cent and 2 per cent in 2010.

publiC finanCes publiC spending Real terms capital spending will increase by 1.2 per cent a year. About £3bn of capital spending will be brought forward from 2010/11 to this financial year. The government will inject £535m into energy efficiency, rail transport and environmental protection.

effiCienCy CutsThe government confirmed that an extra £5bn could be saved in the public sector on top of the original £30bn of efficiency savings it had planned for between 2007 and 2010/11.

borrowingThe Chancellor said borrowing would reach £78bn this financial

year, up from the previous forecast of £43bn. Borrowing will rise to £118bn in 2009/10, or 8 per cent of GDP. From 2010 it will fall to £105bn, then to £87bn, £70bn and £54bn. By 2015/16 the government will borrow only to invest.

net debtThis will rise to 41.2 per cent this financial year, then to 48.2 per cent in 2009/10, 48 per cent in 2010/11 and 53 per cent in 2011/12, peaking at 57 per cent of GDP in 2013/14. The package confirmed that the government would suspend its rule that limits borrowing to 40 per cent of GDP.

family and investment debt adviCe The government will provide £15m for the provision of debt advice.

tax havens A review of the regulatory arrangements surrounding the Isle of Man and the Channel Islands has been commissioned and will report this spring.

pensions and Child benefit state pension Pensioners will see their payment increase from £90.70 to £95.25 a week. Pensioners on modest incomes will get an increase in pension credit from £124 to £130 and for couples from £189 to £198 from this January.

disability Pensioners and children with disabilities will gain an extra £60 to go towards energy bills from January this year. This will be £120 for couples.

Child benefit This April’s planned increase in child benefit to £20 a week for the eldest or only child and £13.20 per week for other children will be brought forward to this January.

energyenergy priCes The government may introduce statutory powers to cut energy bills.

insulation Up to £100m will be spent to help people to insulate their homes.

environmentvehiCle exCise duty New tax bands will be phased in. Vehicle excise duty rates for all cars will increase by up to £5 this year. Differential increases in duty will be introduced from 2010. More polluting cars will see duty increased up to a maximum of £30, while less polluting cars will see no increase or a cut of up to £30.

Climate Change levy The renewables obligation, which requires energy generators to use greener methods of production, will be extended for an additional ten years to 2037.

air passenger duty A four-band tax duty is to be introduced. Long-haul passengers will pay more.

personal taxes inCome tax Income tax will be charged at 45 per cent on taxable non-savings and savings incomes over £150,000 with effect from April 2011.

allowanCesPersonal allowances will be scrapped for those earning in excess of £140,000 a year from April 2010.

ten penCe band The increase in the personal allowance to offset the scrapping of the 10p tax band is to be made permanent and increased to £145 a year from £120.

national insuranCe From April 2011, National Insurance contributions will rise by 0.5 per cent for employers and employees, but those earning less than £20,000 will be exempted.

pension funds The standard lifetime allowance, £1.75m in 2009/10, will rise to £1.8m in 2010/11 and then remain at this level

for the next five tax years (i.e. up to and including the tax year 2015/16).

value added tax vat The tax on sales was cut from 17.5 per cent to 15 per cent on 1 December 2008 until the end of this year, after which it returns to the original rate. That reduction will be offset by increased duties on alcohol, tobacco and petrol.

propertyhousing support paCkage The government will offer an overall housing support package worth £1.8bn.

affordable housing An extra £775m will be brought forward to invest in new housing and modernisation schemes.

mortgage resCue sCheme The government said that the scheme would be extended to those with a second mortgage.

mortgage interest sCheme The limit on the mortgage interest scheme is to be raised from £100,000 to £200,000.

repossessionsMain lenders agreed to wait three months before starting a repossession order against struggling homeowners.

Jobs and unemployment adult training Up to £1.3bn in funding will be provided for training. Tesco, Centrica and Royal Mail were named as being among businesses that would work with Jobcentre Plus to help with training.

unemployment The government will extend its rapid response service for those who have been made redundant.

banksCredit guarantee The government said that banks would have access to £100bn under credit guarantee.

09

PrE-BudgEt rEPortWErE you A WINNEr or A loSEr?

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find out how we can help plan your strategy for 2009.

IN A CHALLENGING FINANCIAL MARKET...

( Please contact us for more information

WEALTH PROTECTION

ProtECtINgyour lIfEStylECritical illness insurance can help you and your family cover the costs that may result from a serious illness, including medical expenses, moving house and protecting your business. You receive a tax-free lump sum if you are diagnosed as having one of the specific life-threatening conditions defined in the policy and it is up to you how you use the money.

Policies often offer combined life and critical illness cover. These pay out if you are diagnosed with a specified critical illness, or you die, whichever happens first.

No single policy will cover all critical conditions, which is why, we believe, it is important to receive professional advice. Industry guidelines say that, to call itself critical illness insurance, a policy must offer cover for: cancer, but only advanced cases; heart attack if sufficiently severe; and stroke if it results in permanent symptoms. However, there are differences between the definitions provided even on these.

In practice, most policies cover more critical conditions than just these three. A basic plan will typically also cover coronary bypass surgery, kidney failure, major organ transplants and multiple sclerosis.

A more comprehensive policy will cover many more serious conditions, including loss of sight, permanent loss of hearing and a total and permanent disability that stops you from working. Some policies also provide cover against the loss of a limb.

if you Would liKe to find out more about protecting yourself in the event that you are diagnosed With a critical illness, We can help advise you on What type of policy is most suitable for your needs and circumstances. please contact us for further information.

Covering the Costs that result from a serious illness

Critical illness

insurance can help you and your family cover the costs that may result from a serious illness, including medical expenses, moving house and protecting your business.

Fifteen providers, representing over 90 per cent of the annuities industry, have taken part in the initiative, which involved the creation of an electronic information exchange, the financial services e-commerce standards body. The objective of the service is to reduce the time taken to set up an annuity when changing providers and will become the industry benchmark.

The ABI said, ’The initiative marked a step change in the industry’s work to improve customer service around the Open Market Option. The ABI and the annuity providers involved are determined to make the annuity set-up process work better, and this service will reduce the time taken to transfer between providers.

’The ABI has already published new template wording for ”wake-up” letters sent to people who are approaching retirement. This will help make

the options customers have at retirement clear and easy to understand.’


individual circumstances of the investor. The value of your investment can go down as well as up and you

may not get back the full amount invested.

The Association of British Insurers (ABI) announced on 23 October 2008 details of its work with the UK’s leading annuity providers to speed up the time it takes for Open Market Option payments to be made to pensioners.

PRE-BUDGET REPORTRETIREMENT

OPEN MARKET oPtIoNS

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Small businesses received a wide-ranging package of extra finance, including a scheme to spread tax payments and a new three-year loss carry-back rule for losses up to £50,000. In addition, the increase in small companies’ rate to 22 per cent is deferred for a year, to 2010.

BuSINESS PrE-BudgEt rEPort HIgHlIgHtS Corporation tax The government will defer the increase in corporation tax for small businesses. Corporation tax for small firms was set to rise to 22 per cent from April 2009 from 21 per cent as part of a staged increase set out in the March 2007 Budget. Small and medium-sized enterprises (SMEs) The Chancellor announced he would deliver £1bn of tax cuts through the Small Business Finance Scheme and £2bn of loan guarantees. Lending to SMEs Banks will receive an extra £4bn to help SMEs. The Chancellor said banks should follow the Royal Bank of Scotland’s example of not increasing charges to SMEs. Business tax repayments SMEs will be allowed to spread business tax payments over a period to help to ease cashflow and credit constraints. Export guarantees Small businesses will gain £1bn in export guarantees from this January through the Export Credit Guarantee Department. Tax repayments There will be an extension of a scheme to help businesses that were previously profitable but are now making losses. Losses of up to £50,000 can be offset against profits made in the past three years rather than just one year. Foreign dividends The Chancellor introduced an exemption for companies’ foreign dividends from tax in 2009, in an effort to allay concerns over proposed changes to taxation of foreign earnings that have led some companies to shift their tax domicile out of Britain. Rates Empty commercial properties will be exempt from business rates from 2009/10 if the rateable value is less than £15,000.

PrE-BudgEt rEPort for BuSINESSa Wide-ranging pacKage


speeding up the time it takes payments to be made to pensioners

Savers are covered for that sum in each organisation they bank with, unless any of them share a banking licence. If, for example, you have money with Barclays and HSBC, which don’t share a licence, you will have up to £50,000 protected in each bank.However, if you have money with HSBC and First Direct, which do share a licence, only the first £50,000 of your total will be protected. The protection is for each account holder, so in a joint account up to £100,000 will be covered.

The first £50,000 will be 100 per cent secure and you will be able to reclaim it in the same way as someone who holds less than the new limit. You may be able to recover some of your other money, but only after the bank has been liquidated.

If a bank or building society falls into difficulty, the FSCS will swing into action. It will get a list of customers from the administrators and, if you are on it, you will be sent a form to apply for compensation. You must fill this in and send it back to get your claim processed.

UK savers with Ireland’s six biggest banks, including those with Post Office savings accounts, do not have to worry about the protection limits that apply to banks and building societies in this country. They will have 100 per cent of

their deposits protected under the limited term guarantee announced by the Irish government.

If your mortgage and savings are with the same bank, your deposits are offset against your outstanding borrowing and you only get back anything that is left after this has been done. So if you hold £30,000 in a savings account and have an outstanding mortgage of £200,000 when your bank fails, instead of getting any money back you would see your mortgage debt reduced to £170,000.

When it comes to insurance, the FSCS will cover life insurance policies such as pensions, annuities and endowments, as well as motor, home and employers’ liability insurance. For these claims you will again have to fill in an application form from the FSCS (not from your insurer) in order for it to consider your claim.

If you are making a claim against an insurance company that has gone bust, the FSCS could compensate you for the premiums you have already paid (if the insurer is unable to do so) and will try and help you transfer policies or pay you compensation.

Compensation is unlimited under the scheme, but you will not get all your money back unless it is a claim for a compulsory insurance. The scheme covers 100 per cent of

the first £2,000 you have lost, plus 90 per cent of the remainder of the claim.

If you are making a claim against an investment company that has gone under, you will have to supply the FSCS with specific details about your investment, such as its type, how much you invested and when. If your business with the company was only ever before August 1988, then the FSCS will not be able to help you.

The FSCS will usually ask you to send any documents relating to your investments which the company may have sent you. The more information you provide, the smoother the claiming process may be.

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WEALTH PROTECTION

If you have a savings or current account with a UK-based institution, up to £50,000 of your cash is protected through the Financial Services Compensation Scheme (FSCS) from 7 October 2008. If the institution collapses, you will be entitled to claim back 100 per cent of your money up to that limit.

hOW SAFE IS YOUR MONEY?

The Forest Stewardship Council (FSC) is an international network promoting responsible management of the world’s forest. The paper this publication is printed on supports the development of responsible forest management worldwide. The wood comes from FSC certified, well managed forests, company controlled sources and/or recycled material.

SAvINGS COMPENSATION

SCHEmEUK savers with Ireland’s six

biggest banks, including those with Post Office savings accounts, do not have to worry about the protection limits that apply to banks and building societies in this country.