25 Jun 2020

Protecting your family and your future

Publications

Coronavirus and lockdown have emphasised how important it is to create a resilient savings and investments structure. While it might feel exhausting to deal with financial issues during this period, a full understanding of your finances is more critical than ever. Here are the key areas you should consider and the questions you should ask yourself.

Wills and probate

Regardless of whether you have dependants and/or valuable assets, creating a will is essential. It can speed up the process of probate, maximise assets and minimise tax liability.

“Are the beneficiaries I chose still relevant?”

Your chosen beneficiaries are likely to change as you move through different life stages, such as marriage, divorce, and starting a family. Reflecting these changes in your will as soon as possible will ensure that your estate is distributed to the right people and according to your wishes.

“Have I chosen the right executor(s)?”

Choose one or more executors you trust fully to take on the responsibility of organising your estate and making sure that your wishes are fulfilled. Review this decision regularly to ensure that the nominated party is still competent, able and willing to take on the role.

Find out more about how we can help on our pages for estate & inheritance tax planning and probate.

Life cover

As a baseline, your life cover should be arranged in a suitable trust to ensure the proceeds do not form part of your estate and are therefore not subject to inheritance tax.

If you own a business, a tax-efficient relevant life cover plan will pay a tax-free lump sum to your employees’ dependants if they pass away while on your payroll. The policy is arranged under a discretionary trust arrangement. Premiums paid by employers are not normally assessable for National Insurance Contributions. Employees might also choose to take out their own life insurance.

We will review your business and personal life insurance policy and trust documents to ensure that all beneficiary nominations and trust deeds are up to date. We can also ensure that your policy remains competitively priced, tax-efficient and relevant to your age, health and lifestyle.

Pension planning

A pension is a long-term savings plan built up over your working life that grows entirely free of UK tax. Individuals make regular payments into their pension; if you have a workplace pension, you also receive employee contributions.

“Am I at risk of breaching the contribution limits?”

Higher earners should be aware of recent changes to the Tapered Annual Allowance. Income thresholds have been raised for the tax year 20/21, meaning a new threshold income of £200,000 and adjusted income of £240,000. If you are above both the threshold and adjusted income figures, your annual allowance is reduced by £1 for every £2 that you exceed the adjusted income figure.

Further to this, the minimum Annual Allowance for those who are fully tapered will reduce from £10,000 to £4,000. It is important to ensure you are not overpaying and at risk of a penalty. If you’re uncertain about whether you’re at risk of breaching the limits, please contact us for guidance.

“Can I afford to retire?”

Everyone’s ideal retirement will look very different and you should be sure that you are consistently saving in line with your desired retirement age. Different factors, such as the cost of care for elderly parents, can take a big chunk out of your retirement pot and may mean you need to work longer if you’re not prepared for the impact.

You will also need to understand when and how you can draw your pension to ensure you have enough money saved for your planned retirement age.

Investments

Recent stock market volatility has led many individuals to reconsider the structure of their investment portfolio to protect against market fluctuations. Individual Savings Accounts provide some of the best opportunities for tax relief alongside Venture Capital Trusts and the Enterprise Investment Scheme.

We will review your portfolio to ensure that you are comfortable with where your money is invested and the level of risk. We will also identify ongoing tax relief opportunities.

“What are the benefits of consolidating investments?”

By consolidating your investments, you can better ensure that you are adhering to tax rules, minimising fees and taking full advantage of allowances or redemptions. Consolidation also makes it easier to maintain the desired level of diversity.

Critical illness cover

While being diagnosed with a serious illness is not something that people like to think about, many of us are more aware than ever of the need to consider it. We should always make it a priority to financially prepare for when life does not go to plan.

“Can I currently apply for cover?”

Yes. Some insurers are still taking applications, but the process may be delayed, particularly if you have had coronavirus symptoms or have had to self-isolate. In this case, cover may be subject to a full recovery or negative test result for COVID-19.

“Will my policy pay out if I am affected by coronavirus?”

If you are left with critical complications due to coronavirus, your policy should still pay out if that complication (e.g. heart failure) is already covered. Check the fine print, as exemptions may vary.

Private medical insurance

PMI policies are adapting to the current situation with new support services including online GP consultations, additional mental health support and 24/7 helplines with access to pharmacists, midwives, counsellors and nurses to answer questions about treatment and medication.

“Should I consider PMI?”

The backlog of NHS consultations and operations that have been delayed due to COVID-19 looks set to significantly affect waiting times. This makes it crucial now to consider the many benefits of PMI on both a personal and corporate level, where individuals and employees can gain fast-track access to the very best quality care.

“Can I apply for PMI at the moment?”

Yes, some providers are accepting applications. There might be a delay where additional medical evidence is required. You may also have to answer specific questions regarding coronavirus.

“I already have a PMI insurance policy. Is my cover affected?”

The NHS is currently co-ordinating all coronavirus care, which means individuals cannot be privately treated. However, some providers are offering a cash benefit for those hospitalised with the virus.

“If I cancel my cover, will I be able to apply again?”

If you have an existing policy you will want to protect your underwriting status and level of cover, as new exclusions and limits are being introduced. This means you may not have access to the same terms in the future.

“Can I still make claims and receive other treatment privately? “

You can still make claims and providers are looking at ways to verify claims without GP reports. All non-urgent treatment is on hold and most insurers are offering digital access to GPs and specialists.

Equity release

Many clients previously taking income from their investments have decided to use the lifetime mortgage as an alternative. With exceptionally low base interest rates currently available and rates set for life, it makes good financial sense to review your position now.

“How can I access advice?”

Due to social distancing rules, the Equity Release Council is temporarily allowing advice to be given remotely by video or telephone – though it must be recorded – with many lenders using automated or desktop valuations.

“Can some of my property still be left as inheritance?”

Yes, you can choose to put aside a percentage of your home’s future value to leave as inheritance. Most lifetime mortgages also include a no negative equity guarantee, ensuring you will never owe more than your home is worth.

To help you understand the features, costs and risks of a lifetime mortgage, we would be happy to provide a personalised illustration.

Your financial health check

In keeping physical and mental health at the front of your mind this year, you should continually consider your financial health too. We recommend taking regular financial health checks and reviewing your options. If you have any queries about the strategies we’ve outlined here, or about your current financial planning structure, please get in touch with your usual BKL contact or use our enquiry form.

 

 

BKL Wealth Management Limited is an appointed representative of Vintage Wealth Management Limited which is authorised and regulated by the Financial Conduct Authority. FCA number 593380.