December 30 2011,
by Stewart Hood – (Arcadia Financial Solutions)

PENSION pots have been reduced following a Government switch in the way they are valued and a High Court failure to block it.

The switch from the retail price index (RPI) to the consumer price index (CPI) came into effect in April, after being announced by Chancellor George Osborne in the June 2010 emergency budget. The move will save the Government £6billion a year on public sector pensions.

Two groups, mainly consisting of unions, launched the legal action claiming the move was unlawful, but this month (DEC) the High Court rejected the argument.

This decision has implications for private sector pensions too and financial advisor Stewart Hood, director of the Plymouth office of Arcadia Financial Solutions, said: “A cunning plan might be taking it too far, but the switch from CPI to RPI as a method of revaluing pensions was ingenious if nothing else.

“In simple terms, overnight our pension pots have reduced and to maintain the same expectations in retirement we all need to put more in. It’s all part of the pension crisis playing before our very eyes”.

Mr Hood, a chartered financial planner, said the Government’s method for revaluing state pensions, using CPI rather than RPI, would have repercussions in the private sector, and added: “It seems probable that benchmark will be the industry norm so will have an effect on the private sector too. The change doesn’t seem important but it could affect nearly each and every one of us and in a substantial way, most people receive a state pension of some sort”.

He explained both the CPI and RPI measure “a basket of goods” but stressed there are differences. For example, the CPI excludes most owner occupier costs and the RPI excludes some people at each ends of the social spectrum. “However, the main difference is that RPI uses the arithmetic mean and the CPI the geometric mean as a form of averaging,” Mr Hood said.

Apparently the latter cannot be higher than the former. Clever eh? Arise Blackadder. On that basis pensioners can only lose.

“It’s a technical adjustment but it’s massive – no wonder the unions have contested it, unsuccessfully, in the courts. This will, and the calculations vary, equate to a difference of about one per cent a year on the increase in the value of our pensions and those with future promises of benefits have in effect had their pension pots downsized one per cent a year for the rest of their lives”.

By: Stewart Hood

March 02 2012,
by Stewart Hood -(Arcadia Financial Solutions)

A PLYMOUTH financial adviser has raised concerns about how the UK will pay for it’s ageing population as new figures show the numbers saving into a personal pension have hit a record low. The Office for National Statistics (ONS) has revealed the proportion of UK employees enrolled in workplace pension schemes has fallen below 50 per cent for the first time since records began in 1997.

The figures also highlight the gulf between public and private sector workers. While 48 per cent of workers are now saving into a workplace pension scheme,  down from 55 per cent in 1997 – just a third of private sector workers are part of a company scheme, compared to 83 per cent of public sector employees.

The numbers are likely to be a concern for the Government and the comments of Stewart Hood, director of the Plymouth office of Arcadia Financial Solutions, show ministers are right to be worried.

Mr Hood describes private sector pension take-up as having undergone a “seismic shift” and predicts the pension “headache” will only get worse. “The headache of how the UK is to pay for its ageing population is growing rapidly,” he said. “Public sector pensions have held up in terms of numbers but there has been a seismic shift in the private sector.  This is caused by three main reasons: economic hardship, reduction in the number of final salary schemes, and a lack of confidence in financial products”.

Mr Hood, a chartered financial planner, said the Government is responding by bringing in compulsory enrolment of workers, but feels this has been “watered down”. Under the Government’s plan all workers aged 22 and older will be automatically enrolled into a retirement savings plan offered by their employer from October this year. Ministers hope this will create nine million new savers, although it has been predicted that up to three million employees will opt out immediately.

Under this auto-enrolment scheme, companies must pay a minimum of one per cent of every employee’s salary into a pension, rising to three per cent by 2017. Workers must pay a portion of their salary too, phased in over five years, starting at one per cent and rising to four per cent by 2017. The Government will offer a further one per cent in tax relief.

However Mr Hood said: “This legislation was watered down in the recent Autumn Statement with smaller employers likely to be exempt from the legislation. As it stands at the moment, there is therefore likely to be a tripartite system in respect of pension contributions – public sector, large employers and small employees”.

So we have a system where life expectancy is rising year-on-year, pension contributions similarly declining year-on-year and a lack of appetite to address the problem. “The headache can only get worse”.

By: Stewart Hood

December 16  2011,
by Stewart Hood – (Arcadia Financial Solutions)

A PLYMOUTH financial advisor is concerned that city people are not financially protecting their families – even though it can cost less than the price of a curry.

Stewart Hood, director of the Plymouth office of Arcadia Financial Solutions, said more than half the population have no life insurance and millions of people have no cash reserve to support them if they lost their jobs. Yet Mr Hood, a chartered financial planner, said the cost of protection is less per month than a trip to a restaurant or takeaway.

With Plymouth having more than 20 curry houses, Mr Hood is amazed that our love of spicy food is not equalled by a desire for financial security. “It might be synonymous with India but a lot of us in the UK like a curry, so much so that there are nearly 100,000 people employed in an industry serving 2.5million people a week and with an annual turnover of nearly £3.6billion,” he said.

“Incredibly there are more people employed in the UK curry industry than three of the great industries: coal, steel and shipbuilding combined. But he added: “Here’s some other staggering facts: 54 per cent of adults have no protection on death and four million adults could survive financially for only six months if they lost their jobs”.

The ‘life insurance gap’ in the UK has been calculated at £2.4trillion,” he said. “It looks like some of us are preferring a curry to protecting our family”. And yet providing for your family is so cheap, said Mr Hood. For example, £10 per month will provide £135,000 worth of cover for 20 years on a guaranteed basis for a non-smoking male, aged 29, and non-smoking female, aged 26.

Ok, I have used curry as an example, but even in these difficult economic times we all spend on the little things. And swapping something minor each month for protection for your loved ones will result in something major – financial peace of mind.

Just last year, Britain was revealed as having the third largest mortality protection gap in Europe, behind only Germany and Sweden.

But it’s not a problem just restricted to the UK. The European Insurance Report 2010, questioned 11,000 people across 12 European countries and found hundreds of thousands of people do not have enough life insurance.

The study said just 11 per cent of respondents across Europe claim to be well positioned financially if they die or suffer a long-term illness or disability.

By: Stewart Hood

by Andrew Jenkinson – (Drewberry Insurance)

We thought it would be a good idea to compile a short guide, just to explain as simply as possible, the benefits of private medical insurance (PMI) and how it works for people in the UK.

Definition
A health insurance policy is designed to offer the policy holder with access to private facilities to receive treatment for acute medical conditions. While illness or injury can be a stressful event, this insurance policy is designed relieve some of the stress by ensuring the policyholder receives the best treatment as quickly as possible.

The policies are not designed as a ‘cure all’ for every ailment, but they have many benefits including the member being able to choose their specialist, at a time convenient to themselves at the hospital of their choice.

There is absolutely no difference between private medical insurance (PMI) and health insurance – it is simply just two different names for the same thing, this is not to be confused with permanent health insurance which is very different.

Exclusions
PMI is designed to work in tandem with the NHS with accident and emergency and GP services still being delivered by the NHS. Chronic conditions or incurable ailments are not covered; health insurance is specifically designed for the treatment of “short term” acute conditions.

Generally exclusions may include the following:

• Drug abuse
• Self-inflicted injuries
• Infertility
• Cosmetic surgery
• Preventative treatment
• Mobility aids
• Health Insurance Cover and Products

Policies vary from insurer to insurer and cater for all different budgets. Although many insurers are moving towards modular products the most common tiers of cover range from fully comprehensive, to a mid-range and budget option.

Naturally the greater the level of cover the higher the premiums, where a comprehensive plan will cover both inpatient treatment and outpatient treatment in full, a mid-range option may limit the outpatient treatment to a monetary limit and a basic plan may well provide inpatient cover only.

David, Consultant at Drewberry Insurance stated “The health insurers have come out with a whole suite of products and variations on what we used to consider a standard health insurance policy.

With all these nuances it is so important to speak with an expert when considering cover, not only will they ensure you find a suitable plan but with their buying power you are likely to get more competitive rates”.

In-patient treatments – this means one or more nights spent in a hospital and is the core cover provided by a health insurance plan. It means a stay in a private hospital which will often include en suite bathrooms, telephone and internet and usually results in much faster treatment than through the NHS. Charges covered by the policy for in-patient treatment generally include:

• Hospital bills
• Specialist/consultant fees
• Diagnostic tests
• Psychiatry (although there are grey areas – check for exclusions)
• Physiotherapy or other ongoing out-patient care related to the incident of illness or injury

Day-patient Care – may require attendance from the patient at a clinic or hospital regularly. They may even need to be there for as much as half a day with no hospitalisation required.

Out-patient treatments include:

Diagnosis

• Investigation/diagnostic tests
• Consultation with a specialist or treatment not needing overnight hospitalisation
• Radiotherapy/chemotherapy
• Physiotherapy
• Psychiatry

Important Cost Factors

The most important thing to remember about health insurance is there is no significant ‘standard’ as far as cover is concerned, so they may differ quite dramatically from insurer to insurer. One may offer less, or more cover, for less or more premium, so it pays to know what kind of product you are looking for and how to shop around; comparing apples with apples.

Factors such as voluntary and/or a compulsory excess may also make a difference to the cost of the policy. Other important cost factors include the hospital selection and grade, opting for family private health insurance to cover partners and children and whether alternative therapies and other additional benefits are required.

Agreeing to more NHS treatment and less private, will also reduce cost, and smokers will pay more for health insurance, as will people who are older. For those who are working or intending to live abroad choosing international medical insurance increases the cost and opens up a number of additional questions which are not to be discussed in this guide.

What about company health insurance?
The cover provided by corporate health insurance schemes are very similar to that of an individual plan, the makeup is still that of combining inpatient and outpatient treatment. However the larger the scheme the more competitive the premium per employee and should the scheme be large enough the insurers can provide terms with no medical underwriting.

Drewberry Insurance is a trading style of Drewberry Ltd, who are an appointed representative of Chase Templeton Ltd which is authorised and regulated by the Financial Services Authority |FSA Number 311612.

by Andrew Jenkinson – (Drewberry Insurance)

With only limited state incapacity benefits available, when it comes to protecting our incomes in case of illness or injury the onus is most definitely on us to take action.

What is income protection cover?

Income protection (sometimes referred to as permanent health insurance) is a type of insurance designed to payout a monthly income to replace lost earnings during times of sickness or injury when time has to be taken off work.

It is usually possible to cover up to 65 per cent of gross earnings and plans can provide long-term protection until retirement.

When the ‘own occupation’ definition of incapacity is applied (such as for office based workers), this cover can payout for practically any non self-inflicted illness or injury that prevents you from working in your own job.

For more policy information please visit the Drewberry income protection insurance website.

Why this cover is important?

Many people think that their employer or the state will look after them if they were to become too ill or injured to continue working for a certain period of time or altogether.

The reality is that employers only have to provide up to 28 weeks of statutory sick pay at weekly rate of £81.60 (2010/11) and state benefits (in the form of the Employment and Support Allowance) can only go up to a maximum of £113.90 per week (2010/11) for the most severely disabled (basic rate is £67.50 per week).

These limited benefits are not usually anywhere sufficient for most households to continue keeping up to date with the essential monthly expenses, such as for housing costs, utility bills and groceries.

What are the alternatives?

First of all, even if an employer does pay over and above statutory sick pay this will only ever be for a limited period of time and cannot be seen as a long-term form of protection.

Even the very generous sick pay entitlement often obtained in the public sector is usually only six months full pay and a further six months half pay.

However, it is worth checking whether your employer offers cover under an employee group income protection scheme, which can be provided as an employee benefit.

Although income protection provides the most comprehensive form of illness insurance it can be quite expensive for older or non-office based workers.

In this case, rather than not taking out cover at all, many individuals consider short-term accident and sickness insurance as an alternative, which can payout for up to 12 or 24 months and naturally comes with lower monthly premiums.

For more policy information please visit the Drewberry sickness insurance webpage.

Drewberry Insurance is a trading style of Drewberry Ltd, who are an appointed representative of Chase Templeton Ltd which is authorised and regulated by the Financial Services Authority |FSA Number 311612.
Andrew Jenkinson – (Drewberry Insurance)

By Philip Dales – (Dales Independent Financial Advisers)

I had an interesting conversation yesterday with an unhappy Saver, not mine I hasten to add.

The gent in question had been saving regularly for 15 years. He was justifiably upset that after 15 years he was about to get less back at maturity than he had put into his savings plan over the whole term. It raises two questions:

1. Our understanding of the risks we are taking

2. The purpose of savings

3. What if you had not started the plan in the first place?

I know that’s 3, but I’ve always been a fan of the Spanish Inquisition

Dealing with each point in turn.

1. What did you understand of the risks when you took out the plan? Did you expect any risks, did you understand the relationship between risk and reward.

Most of us take risks everyday and most are calculated risks based on our experiences. Usually we know, that generally the higher the risk the greater potential for reward but also at the same time we know the greater danger of failure or loss. We learn this as children whether it be stealing sweets from the pantry or showing off a new trick on your bike, before you’ve really nailed it.

2. The purpose of savings.

I know this sounds like a silly question, but I’m not sure if we really take much time to think about it when we set out to save. I wonder if sometimes we save just because we know we should. I think at present there are a lot of people saving because the media keeps telling us we’re all in trouble now, and that its all our fault for not saving enough.

3. Where would we have been if we didn’t save?

Now this requires a little latitude: forget for a minute that the Savings plan gave us less than we had put in, we’ll come back to it later.

If Mr A had not started two £25 pm savings plans, 15 years ago, would he now have £8,000? In my experience the simple answer is NO, and a resounding no at that. Therefore, from this sense it could be suggested that the savings plan has worked. Indeed if Mr A had placed £25 each into a Mr & Mrs A’s bank account each month would they have more? Theoretically yes, but this assumes he continues to pay the same money each month, and that he bit his lip every time he thought about how much it was worth, and every time he walked into a shop and saw a new shiny thing or needed a new car etc. etc.

The thing is Saving Plans have a place; they are fire and forget you start them well within your means, and they run for a specified time. You get a statement once a year, which you soon forget because to start with they are going to be worth very little. Then all of a sudden the years tick by and “Thump” a cheque lands on your door step. “Here is that money you forgot about”.

You see, the thing is, you don’t start saving because you can’t afford to and if you don’t start saving you don’t have any savings.

When you start to think about it most of us, yes I really mean most of us, can afford £25 pm. Even those with low incomes will soon grow accustomed to £25 less each month. £25 soon disappears, its less than the average take out, or a few drinks on a Friday at the village pub.

One last thought:

Savings Plans don’t have to be endowments, or have life cover within them; they can be tax efficient savings such as ISA’s. However, think about this: If your goal is to have some money to help your children out when they need to buy their own place or maybe get married, or even getting political, pay off their student debts. What happens if you die half way along?

The old style savings plan, the terrible much maligned endowments of the last millennium made sure the money was there whether you reached maturity or not.

The unscrupulous mis-sold them, manipulating the rules, growth rates and such, earning big money but there are many people out there that did very well from them.

Notwithstanding this: The message is clear, start saving, small amounts soon rack up, and 15 years is not that far away.

The only thing we spend but can never get back is TIME!

For more information or advice on Savings Plans, ISA’s and other investments contact Philip Dales at DALES Independent Financial Advisers: advice@pndales.co.uk or go to our website www.pndales.co.uk. Nottingham office: 0115 832 0265 or Newark office: 01636 87 00 69.

Philip Dales Cert PFS
Director

by Andrew Jenkinson – (Drewberry Insurance)

A recent study by Aviva found that half of the 688 employers surveyed believed that staff sickness has a significant impact on business: 27% admitted it can present a huge headache. Interestingly the research has also emphasised the emotional strain it can place on an employer. Just more than a third – 34% stated they had concerns regarding how to balance legal obligations while conventional business demands remain. While more than half of respondents stated their chief concern would be the health and wellbeing of the employee, as opposed to the running of the business.

With conditions such as cancer and heart disease; survival rates are improving, as are the odds of returning to complete health, and employees who are recovering, now wish to return to normal working lives. With this 17% of employers who might need to deal with life-threatening illness in the workplace, admitted they believed that their duty to both care for the employee and manage the business would be more difficult.

While ill employees do require due consideration, they also require expert psychological as well as physical support to assist in returning to work; those same support systems help them to remain in the workforce. Support systems include occupational health services and programs or incentives to help employees lead a healthier lifestyle.

Many employers are now utilising business protection plans as a way of finding the balance between their emotions to provide for their employees and the running of the business.

Products such as key man insurance and shareholder protection are set up to ensure your business is protected should vital staff suffer serious illness or death. While the core function of a group income protection scheme is to provide employees with a percentage of their gross earnings should they be unable to work for a prolonged period of time due to illness or injury.

Over the years the income protection insurers have recognised the need for additional services to support employees during long term sickness. As a result many insurers now offer employee assistance help lines and rehabilitation services to help manage sickness absence rates and support both employers and their employees during such difficult times.

With the limited requirements of statutory sick pay and the minimal Employment and Support Allowance available should an employee suffer long term absence, income protection is somewhat of a hot topic. Introducing such benefits not only removes the need to worry about the difficult questions which would no doubt arise should an employee suffer long term sickness but also adds value to your overall employee benefits package showing your employees the value you place on them.

Andrew Jenkinson – (Drewberry Insurance)

by Andrew Jenkinson – (Drewberry Insurance)

Life insurance can be bought these days for a very small premium. This is primarily because life expectancy is increasing rapidly. It is a good time to purchase, or review, a policy when major life changes take place, such as purchasing a home, getting a higher paid job or starting a family. There are different types of policies available with varying price ranges.

Critical Illness Insurance is also an important policy option to consider including on a life assurance plan in order to help pay for any costs during a time of illness or injury. During periods of incapacity it is likely that time will need to be taken off work with associated loss of earnings.

The Need for Life Cover

Life insurance is one of the most important types of family and mortgage protection cover available. This is because the death of a partner can have a significant impact on family finances. A life insurance payout can help to provide for a child’s future and other living expenses, such as for a mortgage, to enable loved ones to continue to maintain the sort of lifestyle they are accustomed to should the worst happen.

One of the main lifestyle changes that prompt people to purchase life assurance is when they are buying a home. The extra financial responsibility of a mortgage brings to mind thoughts of what would happen if a partner died.

Mortgages still need to be paid in the event of a death and, in a worst-case scenario, those that are left behind may not be able to pay for the mortgage and may therefore be forced to leave the family home. For this reason, mortgage life cover is one of the most common types of life insurance (more information on this policy type can be found on the Drewberry mortgage life insurance webpage).

Even those that do not earn an income, such as stay-at-home parents, have reason to consider taking out cover as these important household functions come with a significant replacement cost should the worst happen.

Purchasing Life Insurance Cheaply

It is relatively cheap for many people to buy life insurance cover, and the cost of like for like cover has reduced over time as life expectancy has increased and insurers underwriting has become more efficient. For instance, a 35 year old, non-smoking, male can obtain a £100,000 life insurance policy over a 20 year term for about £10 per month.

When looking for life assurance it makes sense to contact an independent insurance brokerage. An independent adviser will be able to compare the rates of all leading life insurers to obtain you the best rates and ensure you get the type of cover that meets your needs most appropriately.

Types of Life Insurance

Life Insurance policies can be bought to cover the whole of your life or over a set term, such as for 20 or 30 years, for example. One common policy type is called level term insurance which pays out the same fixed benefit amount whenever the claim is processed during the policy term.

Another popular cover type is decreasing term insurance, which comes with a slightly lower premium than level term plans as the amount of cover will reduce over the policy’s term. This type of cover is often used to protect a repayment mortgage as the amount of loan outstanding falls over time.

Whole of life insurance plans run until the policyholder passes away and are therefore guaranteed to payout at some point in the future. This type of cover is sometimes used to cover specific costs associated with passing away, such as funeral costs.

It is important to review life cover from time to time, especially if there are any major life changes. One such reason would be taking on a new job because a higher salary usually leads to an increase in expenditure and, therefore, adjustments will be more difficult without that income. Re-mortgages and the birth of another child are also common triggers for updating life insurance cover.

Tips for Buying Life Cover

• Set up a policy in trust to avoid inheritance tax liabilities – which could be up to 40%;
• Are you entitle to any company life insurance benefits from your employer? This may reduce the level of personal cover required;
• Use an independent adviser to discuss your options and obtain the best premium for the most appropriate plan.

Other Important Types of Protection

Critical Illness Cover (which is commonly added to life insurance plans) is another important type of insurance to consider as illness or injury can have a huge impact on both personal and family finances. The lump-sum payout from this cover can be used to help pay for medical treatment, mortgage loan repayment or any other day to day expenses.

An alternative to critical illness insurance is income protection cover (more information on this policy type can be found on the Drewberry Income Protection website). Rather than paying out a lump-sum this policy type pays out a proportion of earnings to cover all monthly costs should you have to stop working due to sickness or injury.

These plans are often considered to be a more comprehensive form of illness insurance than critical illness protection as plans can cover nearly any medical condition that prevents you from working. As the amount of cover is based on earnings this type of policy can also make more sense from a financial planning perspective.

More life cover information can be found on the FSA’s Money Advice Service’s life insurance webpage.

Andrew Jenkinson – (Drewberry Insurance)

By Helen Kanolik – (HelenK Financial Advice Limited)

If you are looking for financial advice, there are currently two types: Independent, and the other one. Perhaps you have considered Independent advice, but you’ve heard that it’s expensive, or thought for some other reason that it isn’t for you. But do you know what it really means?

Technically, it means that the adviser is accountable to you, and not to any life assurance, pension or investment company or mortgage lender. The adviser is obliged to do their best for you, as your agent.

It also means that the adviser can deal with any company in the market-place. That brings potentially huge advantages:

•   If you have investments, pensions, life policies with different companies, the adviser
  must take them all into account when making recommendations for you. With your
  written authority, the adviser can find out full details of those plans, and remind you of
  features you’ve forgotten about – or maybe never knew before.
•   The ability to compare products and tell you the pros and cons of those you already have
  compared to those available nowadays.
•   If it is in your best interests, the adviser can help you to consolidate plans. This could be
  because new ones have lower charges, more flexibility, added features, and more
  investment choices and so on.
•   The adviser can help you to get money out of investments or pensions, when you didn’t
  realise you could do so.
•   They can also track down pensions which are with companies that have been taken
  over by others.

For example, in the past year or so, I have:

•   Helped someone to take a pension at age 60 when they thought they had to wait until 75
  – they didn’t realise that there was still a good guaranteed annuity rate (albeit lower) at
  age 60.
•   Helped a client transfer a pension pot from a very old plan with poor investment options
  into a modern one with much more choice and competitive charges.
•   Helped older clients to simplify their savings and investments and reduce the paperwork,
  so it is much easier for them to manage their money.
•   Helped clients reclaim tax that they should not have paid.
•   Tracked down information about old company pensions for a client who is now living in
  Australia.

Advisers who are not independent are not allowed to do most of this, unless the old plans happen to be with the company they work for.

The experience of dealing with lots of different companies means getting to know what questions to ask about the features and charges, and about when benefits can be taken, without incurring any penalties.

So is it worth paying for Independent advice? In my experience, almost everyone who has tried it thinks that it is.

Do contact me if you would like any more details of how Independent advice might help you achieve your goals.

by John Cotton – (Pannone LLP)

With effect from Friday 31st December the amount of savings covered by the Financial Services Compensation Scheme (FSCS) has been raised from £50,000 to £85,000. The cover is per person, so joint accounts receive cover up to £170,000.

The FSCS will pay the first £85,000 deposited with each authorised firm in the event of that firm’s failure. Savers still need to take caution where different trading names are authorised by the same firm (For example, Bank of Scotland, Birmingham Midshires and Halifax all operate under the Lloyds banking licence) as in this instance, the limit of £85,000 will only apply to the total deposited across all brands that are under the same authorisation.

Another major change is that savings compensated will no longer be reduced if you also have debts with the same firm. This is probably good news for most people that have under £85,000 in savings and debts with the same firm, as you would receive all of your savings back, rather than it being used to reduce your debt, as it is now.

The issue may arise whereby you have a large debt and also savings in excess of £85,000 with the same firm. In this instance, you would receive back only £85,000, but your debt would remain outstanding in full. It is therefore advisable, where possible, to use the savings to pay down debt so that you have less than £85,000, or move the excess to another firm.

By: John Cotton – (Pannone LLP)