Client Guide - Pension Tax Relief , April 2011

Email me if you are a client and would like a copy

Business Protection. What are the chances...?

Go to www.iangreen.com or Contact us
for a pdf of the guide

Please find following a few statistics sourced from recent research*

It is a numbers game after all, but what are the chances it will affect me or you...?

"My top sales consultant suffered a stroke. I lost our biggest client"
25% of businesses questioned had key employee protection
The unexpected critical illness or death of a key person can have a damaging and permanent impact on a business. Key person protection can provide funds to help minimise the impact and allow a business to recover should the worst happen

"My business partner died unexpectedly. I didn't have the funds to buy his interest"
50% of businesses questioned believed the death of a key employee would have a severe impact on their business
Remaining partners could lose control of the business in the event of the death or critical illness of a partner. A partnership protection plan can provide continuing partners the funds and the right to allow the interest to be purchased

"It'll never happen to me..."
60% of businesses questioned did not have, or did not know if they had, a financial safety net when considering protection of key employees, loans or control of their business.
In a business with 4 key male employees there is a 68% chance** that 1 will suffer a critical illness before they retire. The absence of an important employee can damage a business in a number of ways. In a moment it could lose key skills, experience and contacts.

"One of our shareholders died suddenly and his wife sold his shares to our biggest competitor"
73% of businesses questioned had no shareholder or partner protection
Remaining shareholders could lose control of their business in the event of the death or critical illness of a shareholder. A shareholder protection plan can provide continuing shareholders both the funds and the framework to purchase shares from the shareholder or their estate.

"I suffered a heart attack. As a sole trader, if that wasn't enough for me and my family to deal with, I was then unable to repay my business loan"
79% of businesses questioned had no corporate loan protection.
Whether a sole trader or a director the implications of being unable to repay business debt can have a damaging and permanent impact. Loan protection can provide a sum of money to ensure the repayment of business loans in the event of the death or critical illness of the person covered.

*Scottish Provident small business risk research January 2011 : interview of 208 small business decision makers
** Munich Re, 2007

Since 1999 Business Protection has formed an important part of corpoarte financial planning for Green Financial clients.



Too often the risks to businesses from the loss of key personel or shareholders are overlooked.


If you'd like me to provide a risk assessment of your business, where we 'look for the loss' I'd be delighted to help.


If we find no loss, then you don't need insurance. If we do find a situation where the unexpected absence of an individual, usually through death or illness, would cause loss for the business, the shareholders or their families then you may wish to consider insurance.



contact us at http://www.iangreen.com/ if you'd like a pdf of the guide (below)

Junior ISAs - due Nov 2011

A new tax-free savings account for children, known as the JUNIOR ISA, will be available from 1 November, the government has confirmed.

The Individual Savings Account (Isa) will have an annual contribution limit of up to £3,000 in cash and shares.

The government said last autumn that it was considering the investment scheme, and has now published draft regulations for consultation.

Junior Isas will replace Child Trust Funds, which have been phased out.

However, I believe the government have missed an opportunity to simplify things here, as children who are eligible for an old child trust fund will not be eligible for a Junior ISA. This means children who have a CTF (and the parents may not even have chosen it, as if they didn't submit the voucher in time, the government just select a provider) will be limited to £1,200 a year instead of the £3,000 limit of a junior ISA. And even without the difference in limits, this is just another piece of admin needed before opening an account.
See my previous blog post for details of which children are eligible for CTFs
http://greenfinancial.blogspot.com/2011/02/time-flies-saving-for-children.html
but generally speaking, it is children who were born in 2011 or later or before 1 September 2002.



Savings or Investment

As mentioned above, investments in Child Trust Funds (CTFs) have a £1,200 annual limit, but the new Junior Isas will have a £3,000 limit. This will be available whether through regular monthly savings, a lump sum, or a combination of both.

But, unlike CTFs, there will be no government contributions into each child's savings pot.

Junior Isas will be offered by many of the providers that currently offer Isas to adults.

"Junior Isas are a great example of a simple, clear and jargon-free financial product that allows families to save and invest for their child's future," said Mark Hoban, financial secretary to the Treasury.

Fidelity International has calculated that if a parent invested the full allowance of £3,000 each year they could accumulate savings of £107,923 by the time their child reached 18, based on growth of 5% a year.

So you can see why it seems unfair that if your child was born in the time that CTFs were in existence, the total pot possible to accumulate will be much reduced.


Timeframe

Money invested in Junior Isas will be "locked in" until the child is 18, and the Isa will then, by default, become an adult one.

The Treasury has estimated that six million children will be eligible for Junior Isas at launch, with 800,000 more eligible each year after that.

Consultation on the government's regulations will continue until May, with the launch date of the product due in November 2011

Shopping Around for Lifetime Annuities

- The "Open Market Option"

Annuity rates vary from one life company to another, so you should make sure you shop around to get the best deal for you.

There are a few things to think about first.

• If you're getting a pension from a personal pension arrangement, your pension provider should send you information between four and six months before you are due to retire, setting out what they will offer you based on the value of your fund. They will also tell you that you can shop around for a higher annuity. About six weeks before you retire your pension provider should give you an estimate of the value of your fund. You can use this to compare products from other providers. This is known as your open market option.

• Don’t assume the same company with which you built up your fund will automatically offer you the best rate. You may do better to shop around and check whether another company could offer you more. The annuity rate you get can affect your income by hundreds of pounds a year for the rest of your life.

• If you're getting a pension from an occupational defined contribution pension scheme, the trustees may buy your annuity for you, but you can also shop around on the open market and find the insurance company with the best annuity rate for you, or your scheme trustees can do this for you if you ask. It can be difficult or impossible to change your lifetime annuity provider after you've bought your lifetime annuity, so take some time to choose the one that’s right for you.

Check what your existing provider offers
Before shopping around, make sure you understand what your existing provider is offering you. Check:

• whether your provider offers a guaranteed annuity rate. This is not the same as a guarantee period. A guaranteed annuity rate means that the provider has to offer a minimum annuity rate for your pension fund. Now that annuity rates are a lot lower than in the past, a guaranteed annuity rate can be very valuable and could give a higher retirement income than can currently be bought on the open market;

• whether your provider will charge your fund if you buy your annuity from another company. Your existing provider will usually give you a quote for a specific type of annuity. Make sure you get a quote for the type of annuity you want, not just the one the provider offers you. How long have you got? Annuity quotes are usually valid for between 7 and 28 days. If you change your mind – you may have the right to withdraw or cancel. If so, the provider will tell you and also tell you how quickly you must act.

Shopping around for your annuity
1. Get an estimate of the value of your pension fund, taking account of any charges, from your provider.

2. Decide whether you want to take a tax-free lump sum, and if so, how much (usually up to a quarter of your fund). If you decide to take a tax-free lump sum, deduct it from the pension fund value your pension provider gives you. Remember, if you have less than £18,000 in total you may be able to take the whole amunt as a tax free sum under the 'triviality' rules.

3. Decide whether you want: - a single or joint-life annuity. If joint life, whether the pension paid to your partner is paid in full or reduced (say by a third) – or - a level or escalating annuity

4. Think about whether you want your annuity to continue to be paid for a specific number of years (5 or 10), should you die shortly after you buy it.

5. Does your fund need to be a certain size to qualify for the better rates offered by another company? Some firms may not be interested in providing an annuity for small sums.

6. Are you a smoker? If you are, you may get a better rate from some annuity providers.

7. Do you have a medical condition that could reduce your life expectancy? If you do, you may get a better rate from some annuity providers. Some providers of impaired life annuities will also accept pension funds of less than £5,000.

You should now have the facts you need to get quotes from a range of providers. Or we can do it for you – our fee is £147 (+VAT).

We can also help you arrange the annuity too, we have a separate fee for that depending on the amount and type of annuity you require.

Contact us for full details.