Have You Reviewed Your Family Protection Insurance?

Recent events have brought home the fact that life is full of surprises and not all of them good, reminding us that having the right level of protection in place is essential. And even with protection in place, it’s really worth reviewing it regularly as your circumstances change over the years.

A recent survey1 revealed that just 27% of consumers are confident of the levels of protection they have in place. The results also show that people tend to overlook potential health issues, instead thinking that an early death is more likely than a serious health condition.

Participants indicated that they think it’s twice as likely they will die during their working life than have an accident or illness that could stop them from working. The resulting financial pressures can cause huge strain. More than 50% of 18 to 35-year-olds believe that if their health prevented them from working, their savings and investments would last them less than three months.

Trigger points

Trigger points, such as getting married, having children, moving home and taking on greater financial liability, are great prompters to reviewing the suitability of the cover you may already have in place.

Discussing your protection requirements with your financial adviser will ensure you have the correct level of cover in place for you and your family.

Talk to an expert

As a BPA member, you can claim a complimentary initial financial consultation*. 

Request a meeting in person or a telephone call with your local adviser. 

Book an appointment here.

*The initial consultation is designed to discover whether or not you would benefit from financial advice and there is no obligation on either side to proceed. Following the initial consultation, if you wish to appoint Lighthouse Financial Advice as your financial adviser they will explain and agree any charges with you before undertaking any work on your behalf.

1Royal London, 2019

How Can I Reduce My Inheritance Tax Bill?

The Government’s 40pc levy on estates of the deceased may seem inevitable or even inescapable, but there are ways to cut or even avoid it, writes Rosemary Bigmore

The sentiment that “in this world nothing can be said to be certain, except death and taxes” is most often attributed to Benjamin Franklin. If so, then inheritance tax (IHT), the levy paid by those who inherit your estate upon your death, merits a place on the list of certainties. But it is possible to reduce or even avoid IHT with some astute planning. Here’s how…

1 Leave your money to a spouse

IHT is levied at 40pc but the first £325,000 of everyone’s estate is tax-free. Property and assets can pass between spouses and civil partners without incurring a liability (except when passing from a UK domicile to their non-domicile spouse), so you can structure your will to leave money to each other to help reduce the tax. You can also pass any unused portion of your allowance to a civil partner or spouse to reduce the bill later.

2 Pass your home to direct descendants

The residence nil-rate band (RNRB) is available if you leave a property you live in to a child or grandchild. The additional sum is £150,000 per person until April 2020, then £175,000, increasing with inflation. You can pass this unused allowance between couples. If you downsize or go into care, you can claim this part of the exemption only if you leave assets worth the same as the former residence to a direct descendant. The RNRB tapers down to zero on estates worth more than £2m, so those with very valuable estates end up paying a greater proportion of IHT.

3 Keep it in the family

Your pension is outside your estate for IHT purposes, so passing it to relatives is tax-efficient.

4 Make IHT-free gifts

Prevent your family paying IHT on your estate by giving it away while you are alive. Anything you give away more than seven years before death is exempt from IHT. You can also give away £3,000 each year IHT-free and small gifts.

5 Use a trust structure

Some trust structures let you leave money without it being subject to IHT. However, the rules around this vary widely for different structures, so talk to a professional first.

6 Talk to an expert

IHT is complex and can make a big difference to the legacy you leave. An expert financial adviser can help you to make a workable plan, and you may also need to amend your will.

Request a meeting in person or a telephone call with your local adviser. 

Book an appointment here.

 

The Bank of Mum and Dad

The need to provide financial support to the younger generation is a recurring theme in today’s society. How can parents or grandparents help younger family members and are there any potential pitfalls when doing so?

The House of Lords Committee on Intergenerational Fairness and Provision recently highlighted how the younger generation are increasingly being helped onto the property ladder by older family members. Quoting data from a survey conducted by Douglas McWilliams, their report said that 27% of all UK house purchases were made with contributions giving family a helping hand from the older generation, with gifted lump sums averaging £5,000 to £6,0001.

The tax implications

However, if you are thinking of helping a younger family member financially then you do need to consider any tax implications, particularly in relation to Inheritance Tax (IHT).

Recent research2 has revealed that just 45% of people looking to gift money are aware of the rules and exemptions surrounding Inheritance Tax (IHT). Only a quarter (25%) of respondents admitted to possessing a ‘working knowledge’ of the rules surrounding gifting.

Everyone has an ‘annual exemption’ for IHT purposes which allows them to give away up to £3,000 each tax year. If you don’t use it, you can carry over any unused allowance to the following tax year meaning you could potentially gift up to £6,000 without it counting towards your estate’s IHT liability; and this amount rises to £12,000 for a couple.

You can also make more substantial gifts, known as ‘Potentially Exempt Transfers’. In this instance, you need to live for seven years after making the gift for it to be totally tax-free.

The rules relating to gifts can appear confusing and if you’re unsure of the tax implications then it is always best to seek advice.

Talk to an expert

Request a meeting in person or a telephone call with your local adviser. 

Book an appointment here.

*The initial consultation is designed to discover whether or not you would benefit from financial advice and there is no obligation on either side to proceed. Following the initial consultation, if you wish to appoint Lighthouse Financial Advice as your financial adviser they will explain and agree any charges with you before undertaking any work on your behalf.

1Intergenerational Committee, 2019

2IFS and the National Centre for Social Research (NCSR), May 2019

What could I do with my pension tax-free cash?

You have a range of choices when you get to 55 about what to do with the money in your defined contribution scheme. Once you reach 55, if you have saved into a defined contribution pension, you can take out a quarter of your money tax-free as soon as you like. During more ‘normal’ times we’ve outlined some of the decisions you could make about what to do with this cash, and their pros and cons.

Withdraw it all?

If you have always dreamt of extending your home or travelling, taking the tax-free cash is one way that could make these hopes a reality. You could also use the money to pay off debts – such as your mortgage – to help create a worry-free retirement.

There could be many reasons to use your lump sum, but be wary of how long your pension savings will have to last you in your old age, especially if you do not have other pensions or savings.

Leaving the money in your pension could be more tax-efficient if you do not need it, and also means that it would be outside your estate for inheritance tax purposes in the event of your death. In short, unless you need the money and are planning to spend it immediately, leaving it in the pension could be a good course of action.

Take only part of it?

If you only need to take some of your tax-free cash, you could split your pension fund into two, and take only the tax-free cash on part of it. That part of your pension fund would move into the withdrawal stage, and you would pay tax on anything else you withdrew from it. But the other part of your pension could generate further tax-free cash via investment growth.

Take 25% of each of your withdrawals tax-free?

If you do not have a requirement for your tax-free cash immediately, you can spread out your tax-free benefit – meaning that 25% of each withdrawal would be tax-free. This could potentially be beneficial from a tax perspective, because it can help you to remain below the tax thresholds each year, paying less or no income tax.

Before making your decision

Current market volatility has made some of these decisions more complex. So if you’re thinking about what your options are, then speaking to a qualified financial adviser will help you to make the best decision for you, taking into account the tax rules and your circumstances as well as your retirement plans.

Talk to an expert

Request a meeting in person or a telephone call with your local adviser. 

Book an appointment here.

*The initial consultation is designed to discover whether or not you would benefit from financial advice and there is no obligation on either side to proceed. Following the initial consultation, if you wish to appoint Lighthouse Financial Advice as your financial adviser they will explain and agree any charges with you before undertaking any work on your behalf.

What is the Cost of a Comfortable Retirement?

According to recent research1, anyone wishing to retire at age 65 with a pension income (including a full State Pension) equivalent to the average UK annual salary of about £28,000, would need to accumulate a pension pot of nearly £450,000 to fund their retirement until they reached 100 years old. Whilst that may seem unlikely for many of us, the Office for National Statistics calculates an increasing number of us will attain this age in the coming decades.

Start saving early

In addition to stating the amount required to fund a comfortable retirement, the analysis also highlights how investing regularly across a working life provides the best hope of reaching that target. Indeed, it shows that if you begin saving when you are 25, you would need to invest around £235 a month to accumulate a suitably sized retirement fund.

If you delay starting by 10 years, this figure rises to £428; while delaying until you are 45 would push the number to £859 a month. These projections are based on a defined contribution scheme entering a drawdown pension arrangement on retirement. Another option would be to buy an annuity that provides an income for life.

But better late than never. Although in an ideal world it is certainly best to start saving for retirement at the earliest opportunity, other financial commitments can inevitably make this difficult. And it’s important to remember it’s never too late to save for retirement. If you are fortunate enough to have your employer make contributions to your pension plan, along with favourable tax treatment and potential for investment growth, any pension contributions you make in later life can still have a big impact on your standard of living in retirement.

Tax advantages

All monies invested into a pension fund grow free of Capital Gains Tax and your contributions are enhanced by Income Tax relief at source. For example, if you invest £80, the government adds on tax relief (currently 20%) to enhance your contribution to £100. Higher rate taxpayers can claim additional relief through their PAYE coding. You may also need to consider the Lifetime Allowance, currently £1,073,100 and the Annual Allowance, which, for most people is £40,000. 

Prioritise pension saving

While saving for retirement can seem to be a daunting task, the sooner you engage with the topic the better the chances of you being able to afford the retirement you deserve. Although it may still seem to be a long way off, you can guarantee retirement will creep up much faster than you expect. And careful planning now will undoubtedly make a substantial difference to the amount of money ultimately available for you to enjoy in retirement.

Talk to an expert

Request a meeting in person or a telephone call with your local adviser. 

Book an appointment here.

*The initial consultation is designed to discover whether or not you would benefit from financial advice and there is no obligation on either side to proceed. Following the initial consultation, if you wish to appoint Lighthouse Financial Advice as your financial adviser they will explain and agree any charges with you before undertaking any work on your behalf.

The value of pensions and investments and the income they produce can fall as well as rise. You may get back less than you invested.

Tax treatment varies according to individual circumstances and is subject to change.

1 AJ Bell, June 2019.

Why does fraud increase with age?

The ageing process, both physical and cognitive, is an unavoidable feature of life. Some will attempt to slow the ravages of time, either through medical science or by actively seeking mental stimulation.

But despite the best efforts of many, our minds, like an ageing computer, will slow with time and detrimentally impact upon our ability to make logical decisions or to pick the right choices.

A common feature of the ageing process is that the rate by which we can process large amounts of new information to make an informed decision becomes impaired. Therefore, it is highly likely that as we age we will also find making financial decisions based on complex information more difficult.

A world of opportunity… and complexity

This becomes particularly relevant when we consider that more recently the UK has undergone radical changes to the pensions industry. Whilst this has created more flexibility and opportunity it has also created numerous options for people to contend with.

Given that the retirement age is currently 67 and cognitive decline accelerates at 70, the ability of some to process complex pension information may be significantly impeded. This process can be made even more challenging if the person feels like they are under pressure.

Talk to an expert

Request a meeting in person or a telephone call with your local adviser. 

Book an appointment here.

*The initial consultation is designed to discover whether or not you would benefit from financial advice and there is no obligation on either side to proceed. Following the initial consultation, if you wish to appoint Lighthouse Financial Advice as your financial adviser they will explain and agree any charges with you before undertaking any work on your behalf.

Stay safe from scams

The market uncertainty resulting from coronavirus has seen a rise of fraudsters. These criminals are often articulate and knowledgeable, using sophisticated techniques to impersonate companies and research their targets, making their scams look like genuine investments. Typically, experienced investors and those over 65 with savings in excess of £10,000 are targets for investment fraud, but it can happen to anyone.

Your security is our priority, so we have reacted quickly to help you and the financial advisers we work with to spot these fraudsters. Follow this simple checklist to protect your finances:

  1. Stop – Take a moment to pause and reflect before parting with your money.
  2. Challenge – Question any suspicious motives using our tips in the table below.
  3. Protect – Stay vigilant and report all suspicions to help keep yourself and others safe.

Here are some tips to help you stay safe from scams:

What are the warning signs?

  • Unexpected contact, or repeated calls
  • Requesting your PIN or password
  • Requesting personal details or financial information
  • Tempting returns that sound too good to be true
  • Offering reassurance about the risks involved
  • Exclusive offers
  • Unnecessary time pressure, for example you’re told it’s a time-limited offer, or you are offered a bonus or discount if you invest before a set date
  • Receiving a ‘clone’ email that seems to be from a real firm

How do I protect myself?

  • If you get cold-called, the safest thing to do is to hang up. If you get unexpectedly contacted by email, it’s always best to simply ignore it
  • A genuine bank or organisation will never ask for these types of personal details. Never give them if prompted
  • Never give them if it’s not for a service you want
  • If an investment sounds too good to be true then it probably is. Trust your instinct and do not proceed
  • If you are told not to worry about the risks and that the investment is safe, don’t simply accept that it’s true
  • If you are told the offer is only available to you, or you are asked not to tell anyone else about the opportunity, this is a sign it’s not genuine. Do not engage in any further communication
  • Don’t be pressured into acting quickly – a genuine bank or financial services firm won’t mind giving you time to think
  • If unsure, always use the contact details on the FCA Register, not the details the firm gives you

Remember: always get financial advice before investing.

Talk to an expert

Request a meeting in person or a telephone call with your local adviser. 

Book an appointment here.

*The initial consultation is designed to discover whether or not you would benefit from financial advice and there is no obligation on either side to proceed. Following the initial consultation, if you wish to appoint Lighthouse Financial Advice as your financial adviser they will explain and agree any charges with you before undertaking any work on your behalf.

Stay vigilant and scam aware

Several institutions, including the Bank of England, the National Crime Agency and the Financial Conduct Authority (FCA) have warned consumers to be particularly vigilant about scams in the current climate of uncertainty. These warnings follow an increase in incidences in the last few months, with scammers often targeting the most vulnerable people, such as those under financial pressure, perhaps having lost jobs or been furloughed. 

Millions affected

Recent research1 found 5.2m people in the UK had fallen victim to, or knew someone who had been duped by, a financial scam, since the beginning of the pandemic.

The most common financial scam involved banking, accounting for 60% of victims. A further 35% had been targeted by an insurance scam and one in five consumers reported having been targeted by a pension scam, often through fraudsters offering free pension reviews. 

Scams can have a significant financial impact – according to the research, victims lost on average, £566 per scam.  Having been a victim is also likely to result in people suffering more than just a financial impact – more than half of respondents (55%) agreed that it had impacted their mental health.

Government guidance

The government has provided guidance detailing how consumers can protect themselves from fraud. This guidance includes checking the company’s credentials via a reliable source such as the FCA’s Financial Services Register, being wary of deals that sound too good to be true, not giving out personal details, not clicking on links from unknown senders and seeking professional financial advice before making any decisions. The official advice can be found here www.gov.uk/government/news/be-vigilant-against-coronavirus-scams

How to be a scam-smart investor

The FCA also has an online scam checker where you can check a pension or investment opportunity – this can be found here www.fca.org.uk/scamsmart   

Helping you to stay safe 

In times of uncertainty, when we may be under more financial pressure, we can be more stressed and anxious, making us more vulnerable to fall victim to scams. If you are unsure about any financial opportunities that come your way, please contact us before you act on any approaches. Rest assured, we are here to help you.   

1 Canada Life 

Working from home – changing the way we think about where we live

One effect of the pandemic has been the requirement for many people to find ways of working from home, aided by technology. Figures1 from the Office for National Statistics (ONS) at the end of May, show that 41% were working from home, for at least part of the week. The extent to which an employee can work from home obviously depends on a number of factors, such as whether a specific physical environment, tools, or proximity to other people are required for the role. 

New horizons

It appears likely that a significant number of these workers may continue to be wholly or partially home-based after lockdown measures ease and this could give them greater choice about where they choose to live. 

If a daily commute to a place of work isn’t required, other priorities such as schools, local facilities, value for money and a better quality of life may come to the fore.

Insurance – need-to-knows

The Association of British Insurers (ABI)2 has issued reassurance that, if you are an office-based worker, now working from home because of government advice or because you are self-isolating, your home insurance cover will not be affected. The ABI has stated: ‘You do not need to contact your insurer to update your documents or extend your cover.’

It is worth checking your policy document, but company property such as a mobile phone or laptop is not usually covered by a standard household insurance policy. Your employer should be able to confirm that the correct insurance is in place to cover these items outside of the usual place of work. 

What if I have an accident whilst working from home?

As you are in control your own home environment, you are responsible for your own safety. Therefore, if you were to suffer an accident whilst working at home, your employer would generally only be responsible if it was due to their negligence, meaning that they had failed to take reasonable care for your safety and the accident was due to that negligence.

If you have a protection policy such as Accident and Sickness or Income Protection, and you have an accident or suffer an illness that prevents you from working, you may be able to make a claim.

Do you have the right cover in place?

If you are unsure whether you have the right insurance cover in place, contact us for advice on your own individual circumstances.

1 ONS,2020

2 ABI, 2020

Sources

https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/healthandwellbeing/bulletins/coronavirusandthesocialimpactsongreatbritain/5june2020

 

Protecting your loved ones

Losing a member of your family at any stage in life can be devastating, particularly when children are involved. 

Family life brings responsibilities such as ensuring your dependants are provided for in case you die, particularly if you have a mortgage or other debts. When you have young children there are additional practical and emotional problems connected to the loss of a parent. In addition to dealing with grief, the financial pressures of raising a family on just one wage can be overwhelming. The death of a non-working partner has its own financial impact, such as childcare provision. 

No need to be complicated 

Different types of protection policies are available but a simple level-term policy, where a pre-decided lump sum is paid out should you die within a stated period, is among the simplest to arrange and is typically very cost-effective. The amount payable on death (sum assured) should be enough to cover any outstanding debts, including mortgage, regular outgoings, potential university fees and so on. The period of cover (term) should reflect the needs of your dependants – children will probably need support until they finish education and a partner may need it until pensionable age.

Joint or single cover?

A joint policy will cover yourself and your partner, paying out on the first death within the term. Alternatively, you can have separate single-life policies, which can be a bit more expensive but means there could potentially be two pay outs. A young, fit individual should be able to easily find affordable life cover. Premiums with rise with age, health, lifestyle choices such as smoking and other factors that affect your life expectancy. Your adviser can help find a suitable policy for your circumstances as long as you are open about your lifestyle, especially if you have existing medical issues.

Keep under regular review

A review with your adviser will help to ensure that you have the right cover in place for your financial circumstances, giving you the peace of mind that you’ve got things covered.

As with all insurance policies, conditions and exclusions will apply

Your home may be repossessed if you do not keep up repayments on your mortgage