Category: Financial News

A new year often means that you are setting yourself goals to achieve in the coming year and in financial planning it is important that your family is looked after if anything should happen to you. If you are in a couple and have kids, the focus should be on whether both incomes would still be required if either party was to pass away or become seriously ill?

All ‘protection planning’ should be bespoke to an individual’s circumstances. The three main covers are life and/or critical illness that tend to pay a tax-free lump sum and income protection that pays out an income if you cannot work due to accident or illness.  A general rule of thumb is to take out life and/or critical illness cover for any mortgages you may have, to make sure your house is paid for. However often this is insufficient in itself as it does not take into account how the running costs are to be met by continuing to live there.

It is also important to make sure any pensions have a completed ‘Nomination of Beneficiaries Form’ so that benefits are paid to the correct person on death. As a general rule all of the above should be covered off within a Will.

The new reimbursement provisions effective (in England) from 1^st April 2017, mean that practices can claim up to £1734.18 pw for the first 26 weeks of a GP’s sickness absence, falling to half   –    £867.09 in the second 26 weeks of absence.

We have been told you must submit invoices to the CCG along with a fit note. So, if your doctor’ sessions were covered by colleagues and the costs the practice incurred were £1200 a week, that is what you can claim.

A key part of financial planning often overlooked is making sure that you receive the maximum state pension in retirement. To get a state pension forecast simply use the tool on the website https://www.gov.uk/check-state-pension.

If there is a shortfall, there are 2 options:

Pension Freedoms.

There is an old adage that “Just because you can, doesn’t mean you should” however, according to the Association of British Insurers,  over £3 billion has been paid out in lump- sum cash payments from British pensions. If you choose to access your pension- pot ‘as a lump sum’ then 25% of it is paid tax free which means the remaining 75% you will be paying tax at your standard marginal income tax rate.

It is important to remember that, if you are still earning, then any extra pension monies you take out will be included in your total tax liabilities before working out your tax levels.

In most cases to lose 20% of your pension fund or, in some cases 40%, in order to have the ‘cash in the bank’ is ill- advised, especially when pensions themselves are efficient tax- saving wrappers. This argument is enforced by the low interest rates currently being offered. In cases where you have no choice but to take the pension as a lump sum then ‘flexible’ or ‘phased’ drawdown over several tax years can effectively save thousands of pounds – simply by spreading the withdrawal over several tax years.

It is also important to remember the purpose of setting up your pension in the first place, which in most cases will have been to provide an income in retirement. One wonders whether in 10 years time those who have decided to ‘cash- in’ their private pensions and are possibly living off a measly state pension won’t, in time, come to regret their decision?

If you have a pension- pot and you are uncertain of your options, it is absolutely essential to take good Independent Financial Advice on the matter.