The blunt reality of insurance is that insurance companies are businesses and as such they aim to make a profit. The onus is therefore on the buyer to get right type of cover and the right level of cover and, of course, to provide the insurance company with any relevant information needed to assess the price of the premiums. Let’s look at these one at a time. The right type of cover First of all you need to decide what, in your life needs to be insured. This could be anything from your jewellery to your pets to your health to your income. Then you need to look at what your options are for insuring them. For example, these days it may be possible to cover consumer electronics under your home insurance or through a specialist policy. Which one is right for you will depend on your particular circumstances. Sometimes you may find that you need more than one form of cover to give you the security you need, for example, if you are self employed, you may benefit from income protection cover, payment protection cover and critical illness cover, which are all essentially different elements of the same general concept. The right level of cover Depending on your situation this can be a prime example of easier said than done. If you’re a student moving into halls/a student flat then you’ll probably have a fairly good idea how much your belongings are worth and hence what sort of level of cover you need. If, however, you’re an adult with a house full of possessions, of which you’ve long since lost track, then deciding on the right level of cover can be a bit more complicated. Having said that, you probably have a good idea of what really matters to you, so take that as a starting point. Remember that insurance, like life, is a work in progress and so it’s important to keep tabs on your level of cover and adjust it upwards or downwards as your circumstances change. For example, if your only reason for having life cover is because you have a mortgage, you can lower the level of your cover as you pay off your mortgage. It should, however be noted that even though overpaying for excessive cover carries a financial cost, it is generally far less of a potential problem than underpaying for inadequate cover. Making yourself an attractive client – ethically Ultimately insurance is a business of risk and reward and, hence, anything you can genuinely do to lower your risk to insurers is likely to be rewarded in the form of lower premiums. An obvious example of this is giving up smoking, which is, understandably, looked on very favourably when taking out health and life insurance. Sometimes it is possible to improve your premiums, if only slightly, with a little finesse. For example, in some forms of insurance, for example car insurance, occupation can be taken into consideration. Therefore if you have a job which can reasonably be described in different ways, then you may want to do some research into which definition is likely to get the best response from an insurance company. At all costs, however, avoid the temptation to tell “little white lies” even if “everyone else is doing it”. For example, if a teenager is the main driver of a car then they need to be listed as such, even though it’s almost certainly going to make a sharp difference to the premiums. Leaving aside moral issues, the simple reality is that insurance companies may take your word about facts when they are taking your money for premiums, but in the event of a claim, they may well decide to do their own fact checking and that is when you could find yourself facing significant problems.

It’s probably fair to say that in the UK, topics related to the NHS tend to make their fair share of news headlines, both positive and negative. The NHS can and does save lives, but at the same time, it is facing (more than) its fair share of pressures, both in terms of budget and in terms of possible staffing issues post Brexit. It is therefore, arguably, hardly surprising that sometimes the NHS is unable to deliver either the level of care or the speed of care patients and their families would prefer. Crowdfunding is the new charity appeal The basic concept of people needing medical care getting help from their community when the NHS was unable to meet their expectations is nothing particularly new. Prior to the advent of the internet and the digital age, people ran official or unofficial charity appeals to help raise funds either for their own treatment or for the treatment of someone they loved. The digital age has, however, helped to make this fact more visible since it is much easier to look at the entries on crowdfunding sites than to keep track of appeals, large and small, across the UK. The statistics are revealing. On the crowdfunding site JustGiving, a total of 2,348 medical-treatment-related campaigns were initiated during the course of 2016 – as compared to a mere 304 in 2015. That’s an increase of around 700%. Cancer still kills – and it kills children As a parent, when you think about your children’s health and wellbeing, the idea of them getting cancer may seem far-fetched but actually any child under the age of 15 has approximately a 1 in 500 chance of being diagnosed with cancer and even once they reach their young adult years (15-24) the danger is far from over with over 2000 young adults being diagnosed with cancer each year. In fact, it is the most common cause of death in children (aged up to 15), ahead of the likes of traffic accidents, even though the latter may be far more visible. While children in the UK are typically eligible for NHS treatment, the treatments available and the speed with which it can be delivered may fall rather short of what those on the receiving end would consider ideal. Even when the NHS can deliver what is required with the minimum possible delay, the consequences of a child becoming ill can really drive home the fact that children and specifically childcare can be very expensive. Even if one parent is already a home maker, the extra requirements of caring for a sick child can mean that they need additional help either from their partner or family or from professionals. Either of these options has the potential to have a severe impact on the family finances, which can put a strain on the strongest of relationships at what is already a difficult time. Critical illness cover can protect both adults and children When looking at insurance, it may be tempting to focus on the breadwinner(s) in the family to protect the income they generate in the event that they become unable to work. In reality, however, if one member of a family falls victim to a critical illness, then the impact is very likely to extend to the family as a whole and that impact may well have a (significant) financial element even though the child in question is too young to bring in any meaningful income. Because of this, it can be very advisable for parents to take out critical illness cover for both home makers in a family and for minor children (and to encourage young adults to take out their own policies) as well as for income earners.

Managing your money in a tax-efficient manner is generally to be recommended at any stage in life, but it’s arguably most important for pensioners, who need to make the income they’ve earned during their working years, last them all of the rest of their days, literally. Over recent years, the government has permitted greater flexibility with regard to how people can manage their pension, however greater freedom brings with it a greater degree of responsibility for people to understand what their options are and what they mean in practical terms. You have several options as to how to treat your pension pot when you reach retirement ageOption 1 – withdraw up to 25% of your pension pot as a tax-free lump sum and use the rest to buy an annuity. This was one of the only options prior to the world of pension freedoms and it may still be a very good option for some people. Annuities have the advantage of reliability and simplicity and in some cases these may be major selling points. Option 2 – withdraw up to 25% of your pension pot as a tax-free lump sum and reinvest the rest to provide an income (known as income drawdown). This approach carries the usual risks and rewards of any form of investment and as such benefits from being well-managed. Option 3 – withdraw cash lump sums on a regular basis, paying tax on 75% of each withdrawal. This keeps your pension pot in limbo, so to speak, in that you neither get the security of an annuity nor the potential returns offered by income drawdown. Option 4 – withdraw the full pot as a lump sum and pay tax on 75% of it. This option is only likely to be recommended in a very small percentage of instances. Option 5 – leave it be for the time being. You can simply leave your pension pot to grow until you have need or want to use it. Pensions income is taxable but you still have a personal allowance At current time (2017/2018 tax year), if your total income is less than £100K, the first £11.5K of your total income is tax free. The key word here is total income, in other words, if you have non-pension income, such as income from employment, then this will also count towards your taxable income. If you find you can live comfortably on less than your personal allowance, it may still be worth your while to withdraw extra income from your person, to make the most of your tax-free income allowance each year. If you earn £100K or more, then each £2 you earn reduces your personal allowance by £1, hence, if you earn 123K or more, then your personal allowance will be eliminated. Other standard tax-free allowances still apply You can still hold ISAs and take advantage of their tax effectiveness. For example, if you withdraw more income from your pension than you actually need in order to make the most of your personal allowance for income tax, you could find it useful to place the extra in an ISA (cash or any other form) to shield it from tax. If you want, or need, to hold funds outside of an ISA wrapper, there are further options available to you. At this point in time, you have a dividend allowance of £5K although this is due to reduce to £2K next (tax) year. Similarly you have a personal savings allowance of £1K (base rate tax payers) or £500 (higher-rate tax payers), meaning that you can earn interest on savings up to this amount without having to pay tax. For pension and investments advice we act as introducers only.

Money only has any meaningful value, when it’s used to help you achieve your goals. When you’re thinking of how to allocate your disposable income, here are five outcomes you may wish to keep in mind. Looking after yourself and your loved ones It may lack glamour, but having the right insurance in place can make a huge difference in difficult times. When thinking about insurance, it’s often a good idea to start by thinking of yourself. What would happen if you A) lost your job, B) became ill and required care or C) died? You need to determine what sort of funds you would need to be able to keep going comfortably in order to be able to determine whether or not any existing protection is sufficient. Then broaden the net to the people you love, your pets and your possessions. Finally, think about your daily life and consider whether there are any ways you could feasibly cause accidental damage to someone else or even just be blamed for it and if so whether insurance could mitigate this. For example, third-party insurance is mandatory for drivers, but cyclists could also benefit from it since they will have someone on their side if they are blamed for an accident. Likewise third-party insurance for pets, particularly dogs, can also come in useful. Preparing for your later years As long as you live, you’re only going to get older. When you’re in your twenties, your later years are literally a lifetime away, but starting your preparations early can really give them a head start. The older you get, the closer your later years get and the more important it is to be ready for them. Planning for your own death In simple terms, as soon as you have either A) assets or B) people who depend on you in any way at all, then you should really be thinking about what will happen to them in the event of your death. This applies even if you’re a young adult. Sadly young people can and do die and those with assets and/or personal responsibilities need to be prepared for that possibility. Saving and investing for your future plans The main difference between saving and investing is that saving emphasizes preservation of capital, whereas investing emphasizes growth. For most people, both form an essential part of achieving their plans and life goals. Organising a place to live For many people this phrase will translate as “buying a house” but there are other options, such as building your own home or living on board a boat. You may even enjoy the flexibility of renting and having the use of a home without the responsibility of maintaining it. Whatever your preferences, you do need somewhere to live and hence this fact should be incorporated into your financial plans. Your plans are your own but help is available These days there seems to be a whole barrage of adverts from companies which claim that they can either offer you the cheapest deal themselves, or get the cheapest deal for you. The problem here is that the deal with the cheapest headline price may actually be inappropriate for your situation and you may only find this out when you have already spent a lot of money on it and need to make use of it only to discover that it falls short of your expectations. Getting professional advice can help to avoid this pitfall and to ensure that you get the deal which delivers the best value to you and the people you love. They will also work to get this deal for you at the best available price. Ideally, you should have a “financial health-check” with an adviser on a regular basis and certainly in preparation for any major life change, such as a house purchase or the arrival of a new baby.

As we prepare to bid a (fond) farewell to the year 2017, here’s a quick round up of the year’s main financial news. January While it wasn’t, strictly speaking, financial news, the inauguration of President Trump, was pretty much guaranteed to set the stage for some major changes in numerous areas, including financial changes.  As the UK looks to leave the EU, it will presumably have to negotiate a trade deal with President Trump and his government. March The triggering of Article 50 and the consequential start of the Brexit negotiations was arguably the single, biggest financial event of 2017, at least from the perspective of people living in the UK. March was also the month in which the UK held what was billed as its last ever spring budget.  The chancellor, Philip Hammond, declared that going forward, budgets would be presented in the autumn.  This, however, is unlikely to be the point for which the Spring 2017 Budget will be remembered.  It is, arguably, far more likely to be remembered for the chancellor’s decision to raise national insurance for the self-employed and the political furore which resulted.  Ultimately the chancellor backed down. May The election of President Macron put an end to fears that the far right would take power in France and set France on the path to economic reform.  At present time it remains to be seen how far and how fast France will travel down that path, let alone where it will eventually lead or what implications it will have for the UK.  President Macron is likely to be one of the major figures on the EU’s side of the Brexit negotiations. June Right after the French election, the UK had an unexpected election, which, it was hoped, would bring about a more decisive result than the 2016 election.  In actual fact, it left the Conservatives with an even smaller majority and a “confidence and supply” deal with the DUP.  From a financial point of view, what was noticeable was not just what parties offered in their manifestos, but what they didn’t.  For example, the Conservative manifesto conspicuously did not include a promise to refrain from raising national insurance for the self employed. July The government announced plans to ban retailers from charging customers for using payment cards (both debit and credit).  While the change is in response to an EU directive, the government has gone further than the directive required by also banning charges for the use of ewallets such as PayPal.  On the one hand, it’s understandable that governments would wish to encourage the use of digital payments in an attempt to squeeze out the (untaxed) cash economy.  On the other hand, it will be interesting to see the effect of this move in practice, since real-world retailers have the option to stop accepting payment cards and online ones could simply move to “handling fees”. September While Angela Merkel technically won a historic fourth term as German chancellor, her party did not win an outright majority and has struggled to form a coalition.  To put a new twist on an old joke, when Germany sneezes, the EU catches a cold.  More accurately, it is likely to be difficult for the EU to progress with key decisions until they know which way the political winds will be blowing in Germany.  A long period of political uncertainty in a key EU state could turn out to be very unsettling both for the markets and for Brexit negotiators. November Inflation saw the Bank of England raise interest rates from 0.25% to 0.5% and a new mandate saw Philip Hammond u turn on his spring u turn and start to implement his plan to increase national insurance for the self employed.  Presumably the increased revenues he expects to collect from the self employed will at least help to cover the stamp duty exemption he granted to first-time buyers (for the first £300K of homes costing up to £500K) and the 3% increase in the state pension promised for next year.

If you were born after the 5th of April 1951 (for men) or 1953 (for women), you will receive what is being called the “new state pension” as opposed to the old one.  Any contributions you made under the old scheme will be transferred to the new one and treated under its rules.  Here are five key points about it. The “additional state pension” has been abolished Under the old system, your state pension entitlement was based on a combination of your national insurance contributions (basic state pension) and your earnings during your working life (additional state pension), unless you chose to opt out of paying the earnings-related contribution, for example, to put extra money towards a workplace pension scheme.  The new state pension is based purely on national insurance contributions and, going forward, only a person’s individual contributions will be counted, but during the introductory period, women who paid reduced national insurance contributions, sometimes known as the “married women’s stamp”, might be able to improve their own state pension by claiming on their partner’s contributions. The name “flat rate pension” is a bit of a misnomer The full state pension will only be given to those with (at least) 35 years’ of qualifying contributions.  You need a minimum of ten years’ of qualifying contributions to receive any state pension at all and if you have at least ten years of qualifying contributions but few than 35 years’ worth of qualifying contributions, then the level of state pension you will receive will be in proportion to your level of contributions. Any existing pension contributions will be respected Your existing pensions contributions will have been converted into a “starting amount”.  If this is exactly equal to what you require to claim the full new state pension then you will receive the full amount, but will be stopped from building up any further entitlement.  If you already have more than you would have received under the new system, for example, you have been paying into the additional state pension, then this will be respected, but again, you will be stopped from building up any further entitlement, if you have less, then you will receive less but you will have the opportunity to build up further entitlement, even if you already have 35 years’ of contributions.  For example, if you were “contracted out” of the additional pension for an extended period but now want to make up the difference to improve your entitlement, you will be able to do so. Deferment is still possible, but is worth less Under the new system, each year you defer taking your state pension will earn you an increase in payments of 5.8%, which is almost half of the 10.4% offered by the old system. It’s still often a good idea to make your own plans At current time the full new state pension is £159.55 per week.  This is, obviously, better than nothing and may be enough on which to live comfortably if you have paid off your mortgage and are based in one of the more affordable parts of the country.  At the same time, however, it’s unlikely to be the sort of income on which dream retirements are built.  It’s also worth remembering that during a lengthy retirement period, inflation may well raise the cost of living, but it is entirely up to the government whether or not the state pension is increased and, if so, to what extent.  For example, during the last election, the Conservatives conspicuously declined to renew their “triple-lock guarantee” (that pensions would raise by the highest of inflation, average earnings or 2.5%).  Because of this, it can be very advantageous to make your own plans to fund your retirement and to view the state pension as a handy top-up rather than a mainstay of them.

Arguably the most significant difference between childhood and adulthood is that as adults, the default assumption in most cases is that we have the ability and the authority to take our own decisions about how we want to live our lives.  We also have responsibility for dealing with the consequences of them.  There are times, however, when we’re unable to act for ourselves and it is strongly recommended to think about those times and what we should do about them. Wills While it is theoretically possible to use any one of a number of channels to communicate your wishes with regard to what you would like to happen to your estate after your death, a legally-valid will is by far the most strongly recommended.  Quite simply a well-drafted will makes it clear who should receive what and how (for example directly or via a trust).  The drafting of a will can also be a helpful part of the process of succession planning, in other words, making sure that you leave as much as possible to the people and causes of your choice, rather than HMRC. Powers of attorney While the principle of delegation has probably been around for as long as humanity, the importance of appointing a delegate to act on your behalf if you become incapacitated has grown significantly over recent years as lifespans have extended and lifestyles have changed.  At current time, there are three, legally-recognized, ways of granting someone the authority to make decisions and take actions on your behalf, in the event that you are unable to do so. Ordinary power of attorney is used when an individual only requires temporary assistance, for example during a period of ill health from which they are expected to recover. Enduring power of attorney was used up until 1st October 2007, at which point they were replaced by lasting power of attorney.  Basically enduring power of attorney works in much the same way as a property and financial affairs lasting power of attorney. Lasting power of attorney replaced enduring power of attorney and it comes in two forms: health and welfare LPA and property and financial affairs LPA.  The former empowers your representatives to take decisions regarding your health and wellbeing if you become unable to do so.  The latter allows them to take decisions relating to your money and your property, up to and including selling your home.  Unlike the health and welfare LPA, a property and financial affairs LPA can be used straight away, even while you are still capable of managing other matters – but only with your consent. Making a power of attorney work for you There are basically two aspects to making any kind of power of attorney work for you.  One is getting the right attorney (or attorney’s) and the other is given them clear guidance as to your wishes.  When considering the former, as well as thinking about how well you know a person, how much you trust them and to what extent you have confidence in their judgement, it’s also a good idea to think about how much time they would have available if you needed them.  When considering the latter, think about how you can give them clear guidance so that they are in a position to act as you would have wished, even if they have to take decisions quickly.  Unless they have a clear indication of your wishes and expectations, there is a very good chance that they will end up taking decisions based on what they themselves would have wanted in that situation, which may be very different from what you want.  Hence, as is so often the case in life, communication is crucial. For will writing we act as introducers only.

A quick internet search on the term “DIY” will bring up countless results ranging from making your own gifts, to customising shop-bought products, to traditional home-improvement jobs.  These last are often the source of comedy gold (think of the programme Home Improvement), but they can have serious consequences if they go wrong.  Here are five points to consider before you decide whether or not to go down the DIY route or call in the professionals. Is it legal/OK with your insurer? There are certain jobs, typically anything involving electric, which must be undertaken by a qualified professional in order to be in compliance with the law.  Even if it is legal for you to undertake a job, your insurer may require it to be completed by a professional in order for your to be covered. What is the potential risk? All jobs carry some element of risk, for example, even something as basic as painting could result in a tin of paint being overturned on a floor or path and if you are working with ladders there is even more risk.  Jobs which involve power tools can result in a lot of damage if they go wrong and if your task relates to anything structural, then you could literally bring the house down (or at least a part of it). Do I have adequate insurance cover? You probably have home contents insurance, but accident-related damage often requires extra cover, either as an add-on to an existing home-contents policy or as a stand-alone purchase.  Even if you are an experienced DIYer, jobs can go wrong, in fact, even if you are a professional, jobs can go wrong, which is why reputable professionals tend to have insurance.  It would be a bit ironic if you opted, for example, to save money by painting a room yourself, only to have to replace an expensive carpet on which you had spilled paint. Do I realistically have the skills and tools to do this job? As a rough rule of thumb, one effective way to get a ballpark feel for this is to look at the list of tools and materials required for the job and ask yourself whether you have them (or at least have easy access to them) and, if so, whether you really feel comfortable using them.  If the answers to these questions are yes and yes, then have a look at the instruction and, again, ask yourself realistically, how you feel about following them.  When considering this question, look carefully to see if the instructions apply to all situations, for example, assembling a piece of flat-pack furniture, or if there are parts in which you need to apply your own judgement, such as compensating for an uneven floor or wall.  Also check any assumptions, such as that plumbing is already in place and double-check for yourself that they actually apply in your, personal, situation. What do I value more, my time or my money? If you’ve come to the conclusion that you’re capable of doing the job, then the final question is whether or not doing the job is really worth your, personal, time.  If you think you’d enjoy it, then that’s a clear sign to do it yourself.  If, however, you’re simply prepared to do the job because you think it would save you money, then it’s time to think carefully about how much money you could realistically expect to save and what that would mean in practical terms.  To reiterate one of the previous points, your figures should take into account the cost of taking out appropriate accident cover, unless you already have it.

The days of 100% mortgages are unlikely to return any time soon.  Quite the opposite, in the current climate, it’s a case of “the bigger the better”, where deposits are concerned.  While it may be the purchaser who hands over the deposit, many first-time buyers are turning to the bank of mum and dad for help to get on the housing ladder.  This, however, impacts on the financial health of the parents in question.  With this in mind, here are three points to consider on the topic. Set expectations early Ideally parents should start teaching their children about the importance of managing money as soon as the latter are old enough to grasp the basic concepts of it.  As they grow, involving them in the management of the family finances, as far as reasonably possible, will both help them to learn the skills they’ll need themselves in later life and help them to gain an appreciation of what is within their parents’ means – and what isn’t.  Clear communication should go a long way to stop children making plans based on unrealistic expectations of what their parents can do for them. Start saving early The pre-school years can be very expensive, but once children reach school age, costs can often become more manageable, which gives parents about 11 to 13 years to prepare for when their child leaves school.  This money may well be needed to help them through university or to help with the practicalities of entering the world of work, for example if they need a car to reach their place of employment, but having it ready can go a long way to avoid overloading the family finances at what can be a very expensive time and can therefore make it easier for parents to start saving again for their children’s next major milestones in life, such as marriage, getting on the housing ladder and having children, which are often closely connected.  While it might sound great, in theory, to give a financial gift to your children as a surprise, in reality, it is likely to be better practice to make them aware of what you are doing and why and, crucially, what they can expect in what timescales.  Basically this relates to the previous point about setting realistic expectations. Take tax into consideration every step of the way When your children are born, it’s worth taking some time to think about the advantages and disadvantages of opening a Junior ISA for them.  The obvious advantage is its tax-efficiency.  The potential disadvantages is that once the money has been deposited, it’s locked away until the child turns 18 and once they do turn 18, the money is theirs completely to use as they wish, whereas you might prefer to have some degree of control over how it is spent.  As soon as your child turns 16, they become eligible to open a cash ISA in their own name, which they can hold at the same time as their Junior ISA, giving a two-year period in which meaningful tax gains can be made.  Once they are adults, if the family is still working largely as a single unit, from a financial perspective, then it may be worth parents and other older relatives considering giving the younger adults gifts to put into an ISA wrapper, on the understanding that, unless otherwise agreed, the money is to be kept for major events and purchases (such as weddings and buying a home).  This has the advantage of providing tax-efficient savings, which may go some way to compensating for the fact that interest rates are currently very low.

For many people a mortgage is one of the biggest financial commitments they will ever make, which is why it’s so important to choose the right product for your, personal situation.  At this point in time, it’s very hard to find interest-only mortgages for residential properties (although they are still available in the buy-to-let sector), which means that for practical purposes, your choice of mortgage boils down to a tracker mortgage, an offset mortgage or a fixed-rate mortgage. Tracker mortgages Tracker mortgages are pegged to the base rate set by the Bank of England and hence rise and fall in line with the decisions taken by the Monetary Policy Committee.  While this means that borrowers benefit from any reductions to the base rate, it also means that the responsibility for absorbing any increases lies with the borrower rather than the lender.  From a lender’s perspective, this makes tracker mortgages less risky than fixed-rate mortgages and hence they can offer them at a more affordable rate. Offset mortgages Offset mortgages are a relatively new product in the UK and the basic idea behind them is that the borrower treats their mortgage rather like a current account with a huge overdraft facility.  By transferring their savings into the mortgage product borrowers reduce the balance of the loan and hence the amount of interest payable.  If need be, however, they can still access their money.  Given that interest rates paid to savers are typically lower than those charged to borrowers, the question of whether or not these mortgages are right for any given borrower usually relates less to interest rates themselves and more to whether or not such products fit in with a borrower’s overall financial plan. Fixed-rate mortgages Both the Mortgage Market Review and the recent review of buy to let mortgages undertaken by the Prudential Regulation Authority emphasised the need for lenders to examine how potential borrowers would cope in the event of interest-rate rises.  The reason for this is obvious.  At this point in time, interest rates are so low that there is far more scope for them to go up than for them to go down.  Borrowers who are also thinking about this possibility might be tempted to take out a fixed-rate mortgage now so that they have confidence about what their repayments will be over the coming years.  While this may be an astute move in some cases, there are a few points to consider. Fixed-term mortgages tend to be more expensive than tracker mortgages.  In theory, interest rates can go up infinitely and if you have a fixed-rate mortgage, it’s the lender who has to absorb the cost of this, so while fixing your payments can bring a level of certainty and a feeling of security, this can come at a price. Longer-term fixed-rate mortgages tend to be particularly expensive.  This fact is a corollary of the previous point.  Basically, fixed-rate mortgages are a combination of a loan and an insurance policy.  The longer the term of the policy, the more the lender is exposed to the risk of interest-rate rises and hence the higher the price of the cover. Exiting a fixed-rate mortgage early can lead to penalties Admittedly exiting any form of loan earlier than the lender expected can lead to penalties, particularly if the borrower is offered some kind of introductory deal, the cost of which needs to be recouped by the lender over the lifetime of the product, but given that the nature of fixed-rate mortgages is such that they are likely to attract people looking for a guarantee of stability, we feel it’s important to emphasise this point.  If borrowers are looking to fix their rate because they are concerned that they may be about to enter choppy financial waters, then it may be best to seek professional advice now to look at what options are open to you, rather than assuming that a fixed-rate mortgage will resolve the issues you may face.

Death itself is fairly straightforward for the deceased, it can, however, be both complicated and distressing for those left behind, even when the death involves an elderly person dying quietly in their sleep.  The life of those left behind can be made much simpler by some judicious planning.  Here are 7 points to consider. Minimise your tax liability Managing personal income and assets in later life is essentially a balancing act between making sure you have enough to take care of your present needs while doing what you can to reduce the value of your estate for tax purposes.  Good financial advice can easily pay for itself here. Make a will In times of stress, such as after a bereavement, people generally appreciate clear and straightforward instructions.  A well-written will spares your loved ones the complication and confusion of trying to work out what was intended to be left to whom. Take out life insurance and place it in a trust Even when your estate should be more than sufficient to take care of your beneficiaries over the long term, life insurance can still have a valuable role to play.  There are two main reasons for this, both of which relate to the fact that placing a life insurance policy within a trust wrapper essentially ring-fences it from the rest of your estate. Payments can be made before probate is complete The law does allow for certain payments to be made out of a deceased’s estate before probate is complete, for example, funeral payments, but for the most part HMRC gets their share before anyone else.  Given that, however sympathetic companies may be, they usually still want their bills paid on time, it can be extremely helpful to have the proceeds of a life insurance policy to tide them over during the process of probate (which can be extremely lengthy). Payments are excluded from inheritance tax calculations Inheritance tax is based on the value of a person’s estate and, as previously mentioned, putting a life insurance policy into trust ring-fences it from the estate and hence from the calculation of the estate’s value.  This can be particularly helpful as a means of passing on legacies to people other than legally-recognised partners as it preserves the IHT-free allowance.  It should also be noted that at this time only spouses and civil partners can receive assets from a deceased person without any IHT being payable at the time (assuming that the estate is large enough to be liable for IHT).  For couples in alternative, committed relationships, inheritance planning takes on a whole new level of importance. As an added benefit, trusts can permit both control and flexibility If you simply make a bequest to someone in your will, then it is entirely up to them what they do with it.  In many cases, particularly when dealing with competent adults, this is entirely desirable.  In some cases, however, especially when dealing with more vulnerable people such as children or even younger adults, it may be preferable for the donor to exercise some degree of control over how their legacy is used.  A trust can be written in such a way that it is subject to supervision by a responsible party, who can either act on the beneficiary’s behalf or guide them as to the best course of action.  If so wished, the level of supervision can be reduced over time before being withdrawn completely. A final point on trusts Trusts can be extremely useful, but need to be set up correctly to be both fully effective and fully legal.  Because of this, it is strongly recommended to seek professional advice when setting one up. The Financial Conduct Authority does not regulate tax and trust advice.

It may seem hard to believe these days, but once upon a time, savers with relatively modest bank balances could still generate a decent income from leaving their money in a savings account to earn interest.  Right now, however, those days are long gone and unless and until they come back, people need to think seriously about how best to manage their money in a low-interest-rate environment. How much cash do you need? In the real world, most people are going to need some level of cash in hand, if only in the digital sense of a positive balance in a bank account.  It is also often preferable for people to have some form of cash savings, the so-called “cash cushion” easily accessible both to deal with predictable events such as replacing household items and in case of emergencies.  Assuming you are one of these people, your options for storing your cash are: hard cash, current accounts and savings accounts. How best should you store your cash? The answer to this question is really one of personal preference based on the practicalities of the individual’s situation.  For most people, the ideal might be to have a combination of hard cash, current accounts and savings accounts but percentage of funds held in each will be a matter of taste.  Those in the countryside, with a long trek to an ATM or bank might prefer to keep more money in cash, if they can do so safely, whereas those in cities might feel more comfortable keeping most of their money in a bank.  The question of how much cash to keep in a current account and how much to keep in a savings account will also depend on a person’s situation.  Obviously, you’ll need to keep enough in your current account to cover regular outgoings such as bills and have cash at hand for when you need it, but you probably want to keep as little as you feasibly can in a current account, since they are likely to pay little to no interest. Cash ISAs are now, effectively, super-savings accounts When ISAs were first introduced, once you took money out, that was basically it.  You had to accept that your tax-free allowance for that year had been reduced (or eliminated).  Now, however, if you take money out of a cash ISA, you can replace it (within the same tax year), which means that it is feasible to use them as tax-effective savings accounts for the cash you need to keep readily available. Alternatives for your extra cash Once you’ve stored enough cash for immediate and foreseeable needs and emergencies, you then need to think about what to do with any other disposable funds you have.  Assuming you still have a tax-free allowance available, then putting them into a cash ISA is certainly an option and, if you have used up your tax-free allowance, then there is still the option of using a regular savings account.  At this point in time, however, neither of these is likely to generate significant returns.  Those prepared to take a little more risk might want to look at peer-to-peer lending platforms and/or the bond market.  The returns generated in these areas are both still linked to prevailing interest rates, but as you are effectively lending directly to the borrower (rather than lending money to a bank to lend to someone else), the effective returns can be much better than the returns on bank deposits, even in cash ISAs.  Those seeking the best returns, however, may well find themselves needing to look elsewhere, such as investing in the stock market and accepting the higher degree of risk in exchange for the prospect of much better returns. For investments we act as introducers only.