Attention Company Directors…
ensuring your life protection is tax efficient….

Protection is a massive part of the whole advice process, and whilst it can be a very morbid subject, trust me when I say the implications of NOT discussing it should the worst happen are far, far worse!! However, every now and then something comes along which can make the prospect of discussing and subsequently paying for this type of cover easier to bear.

When we talk to clients about protection it isnt always driven by what level of cover, or type of cover a client SHOULD have, and the reason for this is simple, in most cases we have to consider the clients budget and affordability! so when opportunities arise that can reduce the cost of cover we cant ignore it.

For example, there is currently a way that assuming a number of criteria are met, we can make the premiums payable for basic life cover that much more affordable and tax efficient.

This is aimed more at business owners that are looking for the most tax efficient way to provide family protection, and can in some cases reduce the total cost of cover by almost 50%. It can also help businesses with too few employees for a group death in service scheme.

So if you own your own business, or know someone that does that may well benefit from discussing this in more depth, then please dont hesitate to get in contact.

I just read an extract on IFAOnline.co.uk taken from LV=’s “Little Book of Protection”, and here are some facts you may not be aware of:

• In 2009 the average length of a marriage for divorcing couples was 11 years and four months.
• 1,392 people are made redundant daily
• One in five people will be affected by depression sometime during their life
• A property is repossessed every 17 minutes
• New parents face outlaying £9,491 during the first twelve months of a child’s life
• The Office for Budget Responsibility (OBR) predicts household debt will be £2,126bn by the end of 2015. This would take the average per-household debt to £84,365
• Every 4.28 minutes someone will be declared insolvent or bankrupt
• The cost of raising a child until their 21st birthday now totals more than £210,000. This equates to £10,040 a year, £836 a month or £27.50 a day
• Between the ages of one and four, a child costs their parents an average of around £53,586

If you ask me, this is as good a reason as I can think of to ensure your protection arrangements are reviewed regularly and any cover you have is sufficient.  If you have no cover for any of the above, or death, or critical illness etc, then please consider arranging an appointment for a review.

According to one of the more prominent Sunday newspapers, the treasury have started further discussions relating to the possible axing of tax relief currently received on pension contributions by individuals who pay income tax at the higher rates of 40% and 50%.  Plans for ending higher-rate relief have restarted as the chancellor targets immediate cash flow savings as easy “wins”. This was considered last year by Ministers but instead chose to reduce the amount of tax-free income savers can put into pensions from £255,000 to £50,000 per annum.

Currently people paying into an occupational pension have amounts taken by their employers before tax is deducted thereby receiving the full “relief” straightaway, and those paying into a private pension from earned income receive basic rate tax relief initially, and higher-rate taxpayers can claim the difference through their tax returns or by contacting HMRC.

What does this mean for you? Well, if you were planning on making pension contributions this year, and you are a higher rate tax payer, then perhaps you may want to consider not putting this off. Obviously this is something we urge you to discuss with us in depth, and if you think this may affect you, then please give me a call.

I read in the press today that 55 economists believe that the Monetary Policy Committee will leave interest rates unchanged at 0.5% this week. ABN Amro has deferred its forecast, expecting the first rate hike to occur in 2012, and Barclays and J.P Morgan predict the BoE will raise rates in November, rather than August.

When interest rates do rise, a lot of households may have difficulties in repaying their mortgages, as they will have become accustomed to lower repayments, or may have taken newer, higher margin tracker loans.

So now may be a good time to review your mortgage, start to make overpayments, get yourselves used to paying higher amounts again, or even consider moving to fixed rates.

There is a huge change to pension planning coming, probably the biggest to occur in recent history, and this post isn’t just aimed at employers and their imminent duties, it is aimed at employees that will inevitably be affected by these changes, and since a HUGE percentage of employers wont even be aware of this then you may want to highlight this to your HR Dept or Line Manager, or if you are the employer, then you will need to be aware of this!

The Government estimates that about 7 million people are not currently saving enough for their retirement, and therefore they are putting the onus on employers to help encourage their employees to save for retirement. Some companies will receive official notification of their auto-enrolment responsibilities from The Pensions Regulator this week, meaning from 2012, these employers will have to automatically enrol all eligible employees in a qualifying pension scheme and make contributions to their plan.

The introduction of auto-enrolment and compulsory employer pension contributions is being staged across the UK from next year. The largest employers will take on their duties from October 2012, through to the final companies by September 2016. The regulator said in the next six months, about a third of the UK workforce (around ten million employees) will have received letters marking 18 months to their particular duty date.

What does this mean for you? The legislation will be introduced in a staged process, dependent on the size of employer and type of scheme. If applicable, they may be able to use their existing scheme to meet the new requirements, however it will have to meet certain qualifying criteria:

• The scheme must permit auto-enrolment
• Employees must be auto-enrolled within three months of joining the company (but they can opt in before this waiting period is over).
• A default investment fund must be offered.
• Delivers a minimum contribution rate (at the end of the phasing in period) of 3% of qualifying earnings for employers, and a total of 8% including employee contributions and tax relief, although this could be 7%, 8% or 9% depending.

Preparing for the changes in the law will involve pensions, finance, HR and IT departments, and it will be necessary to provide the entire workforce with information about how they are affected by these changes.

These changes raise a number of specific issues which could have a financial impact on the business, for example, if there is an existing scheme in place is the minimum contribution rate higher than currently being paid? or is it calculated on a different basis?

I am sure you will appreciate this is a massive change to pensions as we know it, and although some of you wont be affected for a little while yet, this is the sort of change that if introduced in one go may cause a big dent in a companies bottom line, and perhaps a bit of early preparation would be the better solution.

The new Kirk Ella Investments Ltd website has now been launched. www.kirkellainvestments.co.uk

The website still has many of the sections from the previous website, including lots of valuable content, however as well as having a design overhaul we have added the following features.

• Social Media integration – The Twitter feed and Blog feed is now on the homepage, which over time will provide valuable snippets of information at a glance.
• Testimonials section – We receive a number of testimonials from our clients in the form of thank you cards, emails and hand written thank you letters, and we will try to feature a number of these on the website. Obviously the names will be omitted for data protection reasons.
• Our People page – Although met with some resistance from staff that are afraid of cameras, we decided to publish mug shots of the staff at Kirk Ella Investments together with a link to their email address, and a brief profile.

Obviously there is plenty of other content, and this will continue to increase as we add news articles and updates.

We also have our Facebook Page, Twitter Account and LinkedIn account. Please visit and “like” the Facebook Page.

Facebook Page

Click here and click “like”, if for any reason the link doesnt open, just visit www.facebook.com and search for Kirk Ella Investments.

Twitter Account

http://www.twitter.com/kirkellainv

LinkedIn

Click here to visit the site. Please note, to view profiles on LinkedIn you need to have an account yourself. They are free to create, and open up plenty of networking opportunities with business people all over the region and the world.

Shane Beardsley

1 in 3 people in the UK will be diagnosed with a Critical Illness…this was the headline in an article I read recently, and it sent a shiver down my spine.

It is vital that when we select a Critical Illness provider for our client, we not only choose a company that provides good value for money, but we also choose one with a good claims performance and one that takes a human approach to some of the less straightforward claims.

I have been in the unfortunate position this year of having to process a number of critical illness claims for our clients, and whilst it isnt a pleasant experience, it is one made far more tolerable for the client knowing that they are covered and will be receiving a lump sum of money to be able to either take time out of work without worrying about money, modify their home, or repay some / all of their mortgage.

Not everyone has attractive sickness benefits at work, and in fact a good deal of employees in this country have very little over and above basic SSP, and then of course, there is always the self employed!!!

Key statistics:

• 1 in 3 people will be diagnosed with a critical illness between the ages of 40 and 70
• Breast cancer is the most common cancer in the UK
• Prostate cancer is the most common cancer diagnosed in men in the UK
• Every year, around 150,000 people in the UK have a stroke. That’s one person every five minutes.

I have heard many comments over the years from clients worried about insurance companies and whether in the event of a claim they would actually get paid, Well, in my opinion times have changed, and with tight ABI definitions, and thorough underwriting, the situation is far clearer.

Here are some statistics published on IFAOnline in recent months:

• Last year Aviva paid out almost 95% of critical illness claims totalling over £136m and 99.6% of those resulting from death totalling over £272m. Non disclosure accounted for only 1.6% of total claims declined, and 3.7% for not meeting ther conditions.
• Last year Zurich paid out 91% of claims totalling over £60m, with only 1% of claims declined for non-disclosure of facts. Cancer typically accounts for almost 50% of claims, followed by heart attacks (12%), strokes (7% and MS (3%)
• Scottish Widows have paid out over 90% of CI claims in 2010, and have paid out over £1bn in claims since 2000, and the average age of a claimant was on 55 years of age!
• Scottish Provident has paid out over 90% of all the CI claims in 2010 totalling over £88m with Cancer accounting for 63% of toal claims made.

As Independent Financial Advisers, we can give advice and make recommendations on this and many other aspects of your protection arrangements, from simple life cover and mortgage protection, through to income protection and key person / shareholder protection for business.

Please contact me if this is something you would like to discuss in more depth.

Shane Beardsley
Managing Director / Independent Financial Adviser

tel: 01482 658989
email: shane@kirkellainvestments.co.uk
web: www.kirkellainvestments.co.uk

ISAs: The start of the new Tax Year…and with it, this years ISA allowances….

The end of the 2010/2011 tax year was a little bit hectic to say the least, with many clients rushing to utilise their unused ISA allowances. I know it has been a difficult couple of years, and many people have had to be more careful with their disposable income. However, I have noticed that one thing an economic downturn will do is make people more aware of savings and emergency funds, which it seems has had a positive impact on money currently available for investment.

You may already be aware that the total amount that can be invested into an ISA this year has increased from last years limit of £10,200.00 to £10,680.00, which can be broken down into maximum of £5,340.00 into an Equity ISA and £5,340.00 into a Cash ISA, or £10,680.00 into an Equity ISA alone.

There are many ISAs and providers available in the market and if you want to discuss this and establish which may be most suited to your particular situation then please do not hesitate to get in touch.

Shane Beardsley
Managing Director / Independent Financial Adviser

tel: 01482 658989
email: shane@kirkellainvestments.co.uk
web: www.kirkellainvestments.co.uk

Following yesterdays Budget, here are some of the relevant announcements including those to personal taxation, National Insurance and Capital Gains Tax.  Further information on each is available on request.

Income Tax

The threshold from April 2011 is £7,475, and will rise to £8,045 from April 2012.

The government will be consulting on the possible merger of NI and Income tax merger, which would create a new basic rate of income tax of 32%.

Other news on income tax that came out from the Budget included the suggestion that the 50p top rate of income tax was only a “temporary” measure. George Osborne told MPs it is right the wealthy pay more in tax, but at the same time admitted a permanent 50% tax could do “lasting damage” to Britain’s economy.

Following a report, Britain is 83rd out of 86 leading economies on the level of its top income tax rate, with only the Netherlands, Denmark and Sweden taxing high-earners more.

Capital Gains Tax

Entrepreneurs’ relief – Increase the lifetime limit from £5m to £10m with effect from 6 April 2011. Qualifying gains to be taxed at a rate of 10%.

CGT annual exemption – Increase to £10,600 with effect from 6 April 2011, and confirmation that the allowance will be uprated by CPI from April 2012.

ISA Allowances

The annual allowances will be uprated by CPI from April 2012.

Corporation Tax

The main rate of corporation tax is to reduce to 26% for the financial year from April 2011, and 25% for the financial year from April 2012.

The small profits rate of corporation tax is to reduce to 20% from the financial year from April 2011.

Inheritance Tax

Estates will benefit from a 10% discount in IHT if they leave part of the money to charity. IHT is currently charged at 40% on estates worth more than £325,000. The 10% discount is taken off of the current 40% tax rate, meaning an actual reduced tax rate of 36%.

State Pension

George Osborne has confirmed the implementation of a single tier state pension. He also said that the current system was “unbelievably complex” and adds the proposed system will be flat-rate and still based on contributions and likely to be worth £140 per week.

They are also aiming to increase state pension age to 66 by 2020 and 68 by 2048.

First Time Buyer Scheme

A £250m package to help first time buyers get onto the property ladder. It is designed to help buyers unable to save a deposit. It will be five-year interest-free loan of up to 80% of the deposit. Details to follow.

Fuel duty rise scrapped

The Chancellor has scrapped the planned rise in fuel duty, and will cut fuel duty by 1p a litre from 6pm tonight and introduce a “fair” fuel stabiliser.

The fuel duty escalator will be removed when oil prices are high and replaced with a fair fuel stabiliser.

Obviously this is only a very brief summary, but if you have any concerns about this and how it may affect you, then please contact me to discuss.

Shane Beardsley
Managing Director / Independent Financial Adviser

tel: 01482 658989
email: shane@kirkellainvestments.co.uk
web: www.kirkellainvestments.co.uk

Pensions: The end of the current Tax Year…this year saw a massive cut in the upcoming annual allowances…

There has been some very significant changes to pension planning this year, and in fact far more than I can really go into in this brief article, but if you think this affects you and you are wanting to make any substantial single contributions into your pension before the end of this tax year, or early into the next tax year, then please consider giving me a call as soon as possible.

I mentioned in one of my newsletters towards the end of last year that they were slashing the annual allowance from over £250k to just £50k, but it is possible if you act quickly and you fit certain criteria to be able to still benefit from the current higher allowance. It will also be possible after 6th April to carry forward unused relief from previous years, again subject to certain specific criteria.

This is an absolute minefield and further reinforces the requirement for advice, because if handled incorrectly can result in unnecessary tax charges, so if you would like to review your pension planning, please do not hesitate to contact us and we will be able to arrange an appointment.