Archive for the ‘Pensions’ Category
Win² in action!
After a long consultation the coalition government have passed the Consumer Insurance (Disclosure and Representations) Act 2012 or CIDAR for short. It’s due to come into force from 8th March 2013.
Until now it was up to you as the consumer to tell the insurance company what they needed to know. When facts became clear after the policy was issued that would have influenced the insurance company this was known as “non-disclosure”. In other words you hadn’t disclosed material facts. In that case the legal liability was with the consumer.
Under the new law you’ll still be responsible for taking reasonable care in providing the information you’re asked for. However, it’s up to us as your adviser to ensure we request all the appropriate information.
Enhanced annuity providers estimate that 50% of applicants lose out on vital income because the medical information they gave wasn’t complete.
So what?
We specialise in retirement planning and one area where this will impact on our business is in relation to enhanced annuities. These are the type of pension that takes into account any health or lifestyle issues. In other words you get more income if you are less healthy than the average man or woman your age.
Here at 44 Financial we do a lot of things and are very good, for example, at making tea. However we’re not medical experts. So what we’ve done is to build into our retirement advice service an external interview process for clients who may qualify for an enhanced annuity.
The interview is conducted by a qualified nurse at a time to suit you – even weekends or evenings. We can then make sure that your asked all the right questions (to comply with CIDAR) and also to help make sure you get the maximum amount of income from your pension pot.
Why have you done this?
It’s all part of the Win² philosophy that we use when taking key decisions about our business. Basically if we take decisions that suit us we always try to make sure that our clients benefits too. In other words – it’s got to be a win-win situation for both of us.
In this case we make sure we’re complying with the CIDAR law, Financial Services Authority regulations and, at the same time, our clients get the as much income as they can when they retire.
That’s Win² in action! Simple isn’t it? For us, yes; but for many of our larger competitors it seems a struggle to make sure that the clients’ interests stay at the heart of what they do.
We’d like to know more about what you’re planning for retirement. If you’d like to know how we can help you pleasecontact us.
Steve Clark
Salary Sacrifice–Minimum Time?
We’ve been getting a number of questions from our clients regarding the minimum amount of time that a salary sacrifice agreement must be in place for.
This has come into sharper focus when looking at the new pension rules from October 2012 that will mean that employers have to automatically enrol employees into a workplace pension. Well those all round good eggs at HM Revenue & Customs have kindly produced an FAQ on the subject.
You can read the document here in all it’s glory.
The interesting part is when they discuss the new rules. HMRC says:
“Consequently, it is not necessary to stipulate a period for which the arrangement must be entered into or to set out "lifestyle changes" in relation to salary sacrifice for the workplace pension scheme.”
That’s good news for employers who have often struggled to define “lifestyle changes” to their employees. It also helps to reassure employers that they won’t be liable for a tax bill if the employee opts out of salary sacrifice.
It’s worth remembering that salary sacrifice needs to be established carefully and is a balance between changing your employees contracts and altering your benefit contributions. As always, it’s worth making sure that you get some advice when setting up a new arrangement.
Steve Clark
Huge numbers of workers may be missed out of auto-enrolment
The Pensions Regulator published guidance earlier in the year warning employers preparing for Auto-Enrolment (AE) that they could not rely solely on a person’s tax status or any other single factor to determine if they were a worker or self-employed.
There is now evidence from a number of actuarial consultants and legal firms that companies could be missing large numbers of eligible workers out of their auto-enrolment plans because they wrongly believe they are classed as self-employed or consultants.
Reports suggest that the audit of one client’s workforce had identified 1,000 extra eligible workers that the company did not realise would have to be auto-enrolled. Another audit at a firm uncovered an additional 500 people needing to be enrolled – increasing the total number by about 10%. This prompted comment that, “the best advice is that if it looks like a worker and smells like a worker, it is a worker.”
The designation of someone as self-employed doesn’t necessarily mean they are and other factors need to be considered including the number of hours and the location of work, the pay structure agreed and factors such as whether the person is provided with tools, a uniform or business cards.
The list of status indicators given by the Pensions Regulator is clearly not exhaustive and businesses are warned that in cases of doubt the watchdog would probably take the most cautious interpretation and class any group in question as workers.
Sources: www.professionalpensions.com
All aboard the QE!
The Bank of England’s Monetary Policy Committee (MPC) resumed quantitative easing again today.
They’ve announced that the Bank of England will purchase £50bn of government fixed interest securities through until November.
The Bank Rate was left unchanged at 0.50%.
This move comes in response to the ongoing recession, a worsening in the global outlook and a marked easing in international commodity prices, including oil.
According to the economists at Lloyds Bank, growth prospects for the near future looks set to be subdued at best.
The MPC is expected to provide further stimulus beyond November with purchases forecast to reach £500bn by end-2013.
Whilst this move is welcomed at a macro level in that it’s designed to promote economic recovery it will inevitable distort the market for UK government bonds. The National Association of Pension Funds has already been very critical of the negative impact that previous bouts of QE have had on annuity rates. Depending on the type of assets the Bank of England will purchase this could just serve to drive down rates further.
Steve Clark
Financial Planning and Divorce
No-one who is going
through a divorce finds the process easy: it’s long, messy and almost always painful. Even if there are no children involved, divorce is a procedure that takes its toll on both sides: the acrimony, the paperwork – and the inevitable meetings with your solicitor.
It’s understandable that many people involved in a divorce want to minimise the number of meetings they attend and simply let the solicitors get on with sorting it out.
Unfortunately, trying to cut down on meetings could be a serious mistake. Divorces are not just about broken relationships, dividing up the family home and arranging custody of the children. Sadly, they’re about financial planning as well – and meetings with your independent financial adviser may turn out to be even more important than meetings with your solicitor.
Even if a couple have only been married for a relatively short time their financial affairs are likely to be inextricably linked. The mortgage will almost certainly be in joint names; they could well have shared protection policies and pension benefits may need taking into account when assets are divided.
Couples who have been together for longer – and an increasing number of people are now getting divorced in later life – will find the financial situation even more complex. Pensions will certainly be an area that requires specialist financial advice as some people, particularly high-earners in final salary pension schemes, will have built up pension funds which could well be worth more than the family home.
The new rules on pensions sharing in divorce have introduced a variety of options when it comes to dividing accumulated pension funds: they have also introduced the need for some seriously complicated (and potentially contentious) calculations, making expert advice absolutely essential.
All these areas mean independent financial advice can be crucial to making sure that any financial ‘damage’ you suffer as a result of a divorce is kept to a minimum, and that you emerge with a clear idea of the financial planning steps you need to take in the aftermath of the divorce.
Virtually no-one relishes going through divorce proceedings, but if you find yourself in that position, seeking out independent financial advice will be one of the wisest decisions you make. A good IFA will help make sure that you receive the best possible financial ‘result’ from the divorce and will work with your solicitor to see that everything runs as smoothly and painlessly as possible. Whether it’s helping to sort out the mortgage, reaching an equitable settlement of pension assets or any of the other complications that a divorce can throw up, an IFA will be on your side, constantly giving advice with your best interests at heart.
If you are – or fear that you might become – involved in divorce proceedings then please don’t hesitate to contact us. We’ll provide you with expert and wholly confidential advice – and do our best to make sure that the financial pain of your divorce is kept to an absolute minimum.
Steve Clark