agree with Using Trusted Financial Advisers And Getting Organised
Have you ever decided to clear out the carport or box room that is full of junk that has gathered over the years?
Using Trusted Financial Advisers And Getting Organised
It's a great feeling when all the hard work pays off and you suddenly find you could undoubtedly fit the car back into the garage, or have a new room in the house you can undoubtedly use!
We find that this happens time after time with the branch of Financial Planning.
Looking at the last few discussions we have had with doctors & dentists who call us with a question, there is a coarse theme once we start asking them questions.
Let's look at a few...
A advisor in Cambridgeshire:
He already has a Gold Excellence Award and is very likely to attain a Platinum. The implications for him with regard to the pensions Lifetime allowance and the new every year allowance are massive, with possible large tax hits.
When we asked him if he has applied for primary or Enhanced Protection, designed to mitigate some of the problems for high earners, he said he had never heard of this. undoubtedly his accountant had not warned him, and he did not have a quarterly financial adviser.
There was a lot of facts flying colse to in 2006-2009 about this subject, but it is all too easy for a time poor busy advisor to miss this sort of thing.
A advisor in London:
This lady called explaining that she was confused by the decision she needed to make in the middle of opting for the 1995 Nhs Pension project as against the 2008 version.
She had sent off the forms saying she wanted to go for the 2008 Scheme, as she intended to work to age 65, but was now having a accident of reliance when talking to colleagues.
Having got a handle on her situation, this decision was almost undoubtedly the wrong one, as even if she were to work on past age 60, it would pay to take 24 hour relinquishment (which allows you to take your Nhs Pension benefits, but plainly carry on working full or part time).
Very simply, any uplift of a few thousand pounds more on her pension by still contributing to the Nhs project in the middle of ages 60 and 65, would be made to look trifling compared to foregoing an income of say 50,000 every year for 5 years! It also means of procedure she can get early access to the tax free lump sum.
The above presumes that no large pay rises occur after age 60 such as an Excellence Award, although these are likely to be far more difficult to attain in time to come and of procedure this would need to be taken into catalogue as she approaches 60.
Having had our discussion, she has contacted the Pension Options Team to ask if she can changes her earlier decision. Let's hope this works!
A general Dental Practitioner in the North West:
The big branch here was heritage Tax Planning (Iht), with an costly life cover plan being queried in particular.
This chap had been sold a second death life procedure many years ago, designed to ensure that when both of them died, the children would have monies to pay the Iht bill. undoubtedly nothing wrong here in principle, as this sort of planning is very valid for clients in say their 40s into their 60s, as the premiums are usually quite reasonable. Possibly 20-60 per month for a few hundred thousand pounds cover.
"But I am paying 200 per month!" he said.
On investigating further, this dentist had been sold the plan back in the 1990s, and was on what is known as the accepted Basis. This is designed to build up a fund of money in addition to providing the vital cover. The idea being that as the plan is reviewed over the years with premiums rising to cover the further risk to the assurance business of an older couple, these monies can be used to help with increased premiums.
This fund value was now something like 24,000, which is quite a serious whole of money. So he could, if he chooses, replace this plan with a much cheaper option, and cash the old plan in (assuming he can collect the new cover).
Now it should be noted that if he chooses to cash in the plan, replacing it with the cheaper option, then there will be a excellent quote in 10 years' time, and then after someone else 5 years etc.
If the same level of cover was kept, then undoubtedly (as he and his wife would be older) premiums would rise to a higher (possibly much higher) level. However, with the right strategy and using gifting for example, this could be a more sensible selection for them.
The disappointing aspect is that he was not given the choice.
One of the reasons why there are quite a few of these types of policies colse to of procedure is that they were very popular - with the salespeople. The commission on a 200pm excellent plan would have been much more than a 20pm policy!
The other vital missing ingredient here was that he had not thought about gifting to his children, especially when into later life, as this can help to reduce Iht problems.
We don't intend to go into the pros & cons here about this, but we then got talking about his overall need for Iht cover and how much. Amongst many assets, he had a large personal pension fund (300,000) that on his death was in his wife's name. This had been included in the total by the dentist to arrive at the sort of outline he felt he needed to cover.
What he did not know was that he had the selection to put the fund in his children's names instead of his wife. This would mean that if he died before taking any benefits (also did he need to take benefits?), this fund would be surface his estate for Iht purposes, rescue a possible 120k.
The constant theme is not being in operate and not being organised. Of procedure this is not always distinct until an event occurs that makes man sit up and notice!
This means that doctors & dentists are missing out time after time on crucial facts in order to be able to make the right informed decisions to safeguard their futures.
One other aspect that repeatedly raises its head is that the vast majority of new medics & dentists we speak to do not and never have had a trusted adviser.
They have had plentifulness salespeople selling or trying to sell them products, and occasionally their accountant will chip in with something, but no one with who they had an exquisite ongoing association with who listened to them and gave them the answers and strategy they needed.
Other Considerations
We were just going to add that the Hutton Pension quote now also needs to be taken into account, when Hot Off The Press came some news.
With this quote we expect the general relinquishment age to rise to age 65, and vocation income to be brought in as the basis for benefits to be worked out, as well as costs to rise for employees.
So this news just announced by the government in trade newspaper Money Marketing has confirmed these thoughts:
Treasury chief secretary Danny Alexander says: "Under the agreement that unions reached with the Government in 2009, offering increases next year were expected. But because these are difficult times for everyone, social sector workers included, we are ensuring those with the broadest shoulders bear the most burden."
Further increases in contributions are imaginable in the middle of now and 2014/15. The Treasury says higher earners will see the largest growth in the middle of now and 2014/15, but that their growth will be capped at 6 per cent of pay before tax.
The Government is currently negotiating with unions about other changes to social sector pensions which could see final salary schemes substituted with vocation median schemes and bringing the social sector relinquishment age in line with the age at which you can claim a state pension.
Full Time Pay Range Proposed further rate for 2012/13
Up to 15,000pa Nil
15,001-21,000 1.2%
30,001-50,000 1.6%
50,000-60,000 2.0%
Over 60,000 2.4%
As the majority of our clients have 'broad shoulders', they will pay this extra 2.4% in 2012 on top of the 7.5/8.5% they pay now, and by 2014/15 will likely be paying 13.5/14.5% which is 6% more!
Yes you get tax relief on this, but for a 100,000 earner it will still mean an extra 300 per month or so.
We await more announcements and details!
Back to what we were saying about being organised and having a trusted adviser!
Hopefully the above examples help construe the importance of this, and with all these extra changes with the Nhs Pension Scheme, how it is becoming even more foremost than ever!
The Financial Tips lowest Line
Change is constant. It is vital that you are fully informed and write back and adjust to protect your financial future.
Action Point
What result will The Hutton article have on your finances?
If you do all your financial planning yourself, make sure that you get organised to make your life a lot easier. Keep on top of the constant changes in legislation and how it affects you.
If you use an adviser, are they on the ball with all the changes? Is it a service they offer, or is it more about
product sales? Do you have a strategy, or plainly a collection of policies?
A trusted adviser will cover all areas and plainly fee you a fee to look after you year after year.
There are distinct things we believe are vital for you to have to be able to go transmit with planning your life.
Seize the moment now and take proactive activity to get yourself organised!
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