What you need to know about the Autumn Statement 2014
On 3rd December 2014 George Osborne gave us his Annual Autumn Statement which for reasons best known to someone else is in December. But that’s not important right now and if you’re like me it will be googled later. Anyway here are some of the main points relevant to your personal financial planning broken down into relevant headings.
The income tax personal allowance will rise to £10,600 in April 2014 which is £100 higher than expected. The higher rate tax threshold will also increase to £42,385 in April, again £100 more than expected.
Anyone in receipt of Universal Credit will find their benefits frozen for the coming year.
The ISA limit has been raised to £15,240 in April. The chancellor has also said that with immediate effect when the saver dies their spouse will inherit the ISA and be able to maintain its tax free status. This could be very interesting for future IHT planning.
As expected the Chancellor announced that if you die prior to age 75 in receipt of a joint life annuity pension your dependents with receive the dependents income tax free.
This brings joint life annuities in line with flexi-access drawdown but there was no mention of final salary schemes dependents pensions so watch this space.
There were no changes to the tax relief through pensions either before or after age 75.
The single tier state pension is expected to start in April 2016 at £151.25 per week.
As usual the Government wants a headline maker in the Autumn Statement and this year it’s stamp duty. The stamp duty system has been revamped from a stepped to a tiered charging system as show below.
After months of hard work you are about to buy your first home and as a result are about to take on a considerable amount of debt! You’ve probably realised by now that if something happens to you or your partner that affects your ability to pay the mortgage, you could be up a certain creek without the proverbial paddle.
Now is not the time to panic, in this blog I will cover 5 of the most common options to help you make an informed decision about which protection risks to prioritise.
So what could go wrong?
Well…. you, your partner or both of you could:
Be diagnosed with a Critical Illness
Be unable to work due to illness or accident
I’m going to assume that as you are reading this post, you have accepted that you are not invincible and that unfortunately these things could happen to you. If this is not then give yourself a good shake and start reading from the top. Part of the reason I became a Financial Planner & Mortgage Adviser was down to my experience as a First Time Buyer. My wife and I are degree educated and we were both working in good jobs at the time. We spoke to an Independent Mortgage Adviser about our mortgage options and we were bamboozled by all the jargon! In this post I hope to use my professional and personal experience to shed some light on the financial jargon surrounding protection. This should enable you to be better informed about what protection you might need in your life.
The tools of the trade
I’m only going to cover the simplest forms of protection in this post as there are many options, bells and whistles that can be added which would turn this post into an essay. So let’s take a few of the more common protection policies and explain what they can be used for and how they work.
5 common protections policies and when they will pay out
Pays out on
Diagnosis of a listed Critical Illness
Inability to work due to illness or accident
Decreasing Term Assurance
Level Term Assurance
Critical Illness Cover
Family Income Benefit
Permanent Health Insurance / Income Protection
5 common protections policies and how they pay out their benefits
Pays out a
Decreasing Term Assurance
Level Term Assurance
Critical Illness Cover
Family Income Benefit
Permanent Health Insurance / Income Protection
• – Standard Cover
♦ – Available as an option
So what’s the difference?
Life Assurance & Critical Illness
In a Decreasing Term Assurance (DTA) policy the amount you are insured for reduces each year as shown in the graph below. With a Level term Assurance (LTA) the amount you are insured for stays the same throughout. These policies are the most commonly used to pay off a mortgage with the lump sum benefit. A Family Income Benefit (FIB) is a policy which pays out a monthly or annual income which could be used to cover your monthly payments throughout the term of the policy. All of the above can come with various additional features such as Critical Illness Cover (CIC) which can make them very flexible and useful. Standalone CIC policies are also available which with either a decreasing or level sum assured.
Permanent Health Insurance (PHI) policy, sometimes known as Income Protection, pays out a set percentage of your income to replace your earnings should you become unable to work due to illness or injury.
What will this all cost?
The cost will depend on various factors that are personal to you such as:
Amount of cover
Term of the cover
Generally speaking, life cover is the least expensive as it is the least likely to be claimed on. Both critical illness and income protection are more likely to be claimed on and are therefore more expensive. The big questions are deciding what cover you feel you should have, as few of us can afford to cover all eventualities or are unwilling to pay the premiums to do so. You need to prioritise what you want to cover and a good Financial Adviser will make recommendations based on your personal circumstances. Don’t be afraid to disagree with your Adviser or question the recommendations. I find that when this happens I have to justify my recommendations more fully. This means my clients usually come away happier as they have a better understanding of the products we agree on and arrange. Life Cover (non‐investment) and Income ProtectionThe plan will have no cash in value at any time, and will cease at the end of the term. If premiums are not maintained, then cover will lapse.Critical Illness CoverThe policy may not cover all definitions of a critical illness. For definitions please refer to the Key Features and Policy Documents.
Interest rates will remain at 0.5% for another month after today’s announcement by the Bank of England.
At this point economist and advisers all over the UK will be making their predictions as to when the rates will rise. My advice is simple for those with mortgages, stress test your finances by calculating the effect of an interest rate rise.
For savers it’s a little more complicated, savings rates are almost negligible so you may need to consider investing your savings. But before you invest make sure you understand and are comfortable with the risks. There is no point chasing returns if you can’t sleep at night worrying about the stock market.
If you need advice on mortgages, savings or your investments call 02895 815000.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
The value of units can fall as well as rise, and you may not get back all of your original investment.
If you could get a competitive quote on your home insurance and in doing so donate up to £15 to charity, would you be interested?
When I used to work for The Cooperative I was told to always offer to save my client’s money on their home insurance first. For reasons best known to someone else I haven’t paid enough attention to home insurance since setting up From Acorns. It seems to be too easy to get bogged down with mortgages and pensions and have forgot the importance of saving money on my client’s home.
Who wants to pay more for their home insurance? If I can potentially save you money, hassle a
I took a little more notice when my own home insurance came up for renewal recently and when I ran a quote it was the best around and with comprehensive cover. I mentioned it to a couple of family members and when their home insurance came up for renewal they asked me for a quote and it turns out I have access to some pretty competitive insurers.nd raise some money in aid of a good charity then I should, right?
I think I owe most of my clients an apology; I should have tried to save you some money.
It’s time to make amends
If you send in a copy of your home insurance renewal or quote I will shop around and try to beat it. No guarantees but if you take out home insurance with From Acorns Financial Planning we will donate £10 to charity.
From Acorns Financial Planning will donate £10 to Charity for every new Home Insurance policy!
Not only that, if you refer a friend we will donate an extra £5 to charity for each policy. That means a potential £15 for charity for just one home insurance policy and up to £30 if you refer a friend*.
You couldn’t beat it with a big stick!
* Offer is at the discretion of From Acorns Financial Planning Ltd
Why Marie Curie Cancer Care?
It is estimated that 1 in 3 of us will develop cancer in our lifetime. Personally speaking it sometimes feels like more than this. I can’t think of anyone I know whose family hasn’t had their lives affected by one form of cancer or another.
There are many great charities out there doing a lot of good work but Marie Curie Cancer Care provides support and care for people with terminal illnesses and their families.
What else will you get?
When your renewal is due we will check your premium against the market for you and arrange a new policy if necessary.
We will also store all your documents electronically so that if you need to claim you can simply call us for the details.
So what do you need to do?
Simply call us on 02895 815000 or send an email to [email protected] with a copy of your renewal or the best quote that you can find and we will compare it against the best that we can find. If we think that the cover you have isn’t suitable we’ll also give you a further recommendation quote.
When should you start preparing your company for Auto-Enrolment?
Whether you want to set up pensions for your employers or not, Auto-Enrolment is here to stay. The question is not if but when should you start preparing to set up a workplace pension for you company.
The Pensions Regulator (TPR) recommends that companies should start preparing with 18 months to go until your staging date. So far with the companies I’ve spoken with it looks like more and more are waiting to the last minute. Business is tight and there seems to be no time to spare for the inevitable.
The simple answer is the sooner the better.
The more time you have to prepare the better your pension solution will be. Remember automatic enrolment is more than a pension problem. It is likely to involve your accounts department (or Accountant) and HR before you even get to the pension solution. I’ll stick to the pensions issue for now.
If you take the time to prepare and analyse your workforce properly you may be able to save a small fortune by categorising your workforce appropriately. Ultimately though my experience so far is that many employers are going to try and save a few pound by going down the DIY route by playing eeney meeney miney mo with pension providers.
As long as you fulfil your Auto-Enrolment obligations, right?.. Wrong!
In 5-10 years most of the Northern Ireland workforce will have been auto-enrolled into their company pensions. At first many won’t have a clue what they have got and many of them won’t care. After a few years workers will get educated, not only with what they have got but what their friends have got at your competitor down the road.
If you want to be the company everyone wants to work for, a good pension scheme is going to be high on the list of criteria.
If you would like to make sure your company remains ahead of the competition then give us a call on 02895 815000. We will work with you and your team to make sure you get the best workplace pension solution for your company’s future.
The End is Nigh… well the end of the tax year that is
Last minute tax planning is less than ideal but it’s better than no tax planning. Every year we all get our tax allowances and every year we get the same warning before April 5th… use it or lose it.
What are the tax allowances for this year?
I’m going to limit this post to the main two tax allowances, Pensions and ISAs. Simply because for most of the population these are more than enough to cover our financial planning needs.
ISA Allowances 2013/14 & 2014/15
Up to the 5th April 2014 you can invest up to £11,520 in ISAs of which £5,760 can be invested in a Cash ISA. Remember there is now carry forward of unused allowances with ISAs. From 6th April your annual ISA allowance will increase to £11,880 with a maximum of £5,940 in cash.
For those who have a little more to invest and want to create a fund for their child there are allowance for Junior ISAs and Child Trust Funds as detailed in the table below.
Up to the 5th April 2014 you can invest up to the lower of 100% of your gross earnings or £50,000 in a registered pension scheme. From 6th April your annual pension allowance will reduce to £40,000 however carry forward is allowed under certain rules.
Although it won’t affect most of us it’s important to remember that there is a lifetime allowance to consider. This is being reduced from £1.5m to £1.25m from 6th April 2014.
Again for those with a little more to invest there are children’s allowances available.
Beware the Tax Dog
Remember that just because it is tax efficient doesn’t necessarily mean it’s the most suitable investment for you or your objectives. Think carefully about what you want to achieve before making any investment. Obviously as a Financial Planner I am going to recommend getting advice but if you are in any doubt on how to proceed then get in touch on 02895 815000.
Are there any 95% Loan-to-value Mortgages available in Northern Ireland?
It is hard to save for a deposit in today’s economy regardless whether you are a First Time Buyer or a Home mover. It is difficult if you own a property with little or no equity and want to get a remortgage while the rates are low. Almost on a daily basis I get asked if there are there any 95% LTV mortgages available in Northern Ireland.
I thought this post might help even more people find the answer.
As a Financial Planner & Mortgage Adviser I always like to point out the risks with mortgages with such low deposits. The Northern Ireland market is at best in the early stages of an economic recovery but what if NI house prices drop again? 95% loan-to-value mortgages could very quickly become negative equity mortgages. It’s important to consider if you afford a bigger deposit?
So assuming you are comfortable with the risk; can you get a 95% loan-to-value Mortgage in Northern Ireland (NI) in the current market? The answers are shown in the table below depending on the type of mortgage you are looking for; Buy to Let, First Time Buyer, Help to Buy, Let to Buy, Remortgage, Self-Build or a Homebuyer mortgage.
95% LTV Mortgages
95% LTV Mortgage
Buy to Let
First Time Buyer
Help to Buy
Let to Buy
As you can see 95% loan-to-value mortgages are few and far between and you need a good credit rating to get one.
Rates, Fees and Affordability
As with all mortgages the rates, fees and affordability calculations will vary from lender to lender. For a 95% LTV mortgage in the current market, expect the fine tooth comb approach.
Good news for First Time Buyers, Help to Buy and Homebuyers with low deposits across Northern Ireland. Alas everyone else will have to save a little more or pay down their existing mortgages
From Acorns Financial Planning Ltd are based in Tyrone, Mid Ulster. We provide a comprehensive Financial Planning and Mortgage Advice service to clients across Northern Ireland and the UK.
If you have any questions or if you need help getting a mortgage for a 95% LTV mortgage in Northern Ireland or further afield call 02895 815000, email [email protected] or leave a comment below.