Even those who’ve never had a pet and never wanted a pet could probably explain the arguments for having pet insurance, courtesy of the many adverts for the product. Now imagine what would happen if your pet could talk. What would it say about insuring you? If you die, who would look after me? Would you really be happy with the thought of your pet ending up in a shelter if you died? What about your children landing up in a children’s home? Admittedly if you have a partner or family this latter option is less likely (in both cases), but it does happen. Even if you do have someone in mind to take care of the ones you love in the event of your death, how will they manage without the support you are currently able to offer? Pets and children can both be expensive, in the latter case, there may be some state support for those in real need, but even if there is, would it really provide for them the way you would have if you had lived? In very simple terms, if you have a pet or a person who depends on you in any way, then life insurance should be thought of as a must-have rather than a nice-to-have. If you have an accident, who would walk me? Let’s say you find yourself temporarily incapacitated. You know you’re going to recover, hopefully sooner rather than later, but who walks your dog in the meantime (or opens doors for your cat)? Again, you might well turn to a partner, family or even friends, but that places extra responsibility on them and you may have to accept your pet getting walks when other people can manage it, if they can manage it, rather than getting the amount of exercise they usually have at the times they usually have it. If you had the money, of course, you could actually pay for a dog-walker to come round and take your pet out when you want and for however long you want. For dog walks, read school runs, play-dates and any other children’s activity. If you don’t have children, then think about everyday life, shopping, washing, cooking, cleaning, think about making any regular payments, such as mortgages or rent. If your plan is to rely on state benefits, you may get a nasty shock if you are ever unfortunate enough to find yourself in that situation. Even if you are in employment and have some degree of cover from your employer, you may find that you actually need more. Insurance policies such as income-protection insurance and payment protection insurance can help if you find yourself discovering the truth of the saying that accidents can happen to anyone. If you get ill, who will buy my food? Good health is something it’s only too easy to take for granted – until it’s taken away. Being laid up with a cold for a few days can be bad enough for your income if you’re self-employed, succumbing to a critical illness can be devastating, even if you’re in employment. As we mentioned above, neither state benefits nor standard employment cover may provide anything like the level of protection you need in your particular situation. If that is the case, you want to arrange cover beforehand, so that it’s there if you ever need it, rather than discovering the reality of the situation when you go to claim on the cover you thought you had. In addition to income-protection insurance and payment protection insurance, you may also want to look at critical-illness cover. We hope it will be money spent on something you will never need, but if you ever do, you could find it makes all the difference to your financial health during your recovery.

With the notable exception of children, smaller is generally cheaper. This is usually very true when it comes to housing (on a like-for-like basis of course, a studio flat in London might well cost more than a house in rural Wales). Because of this, there’s an obvious financial attraction in downsizing property once children have flown the nest. As is so often the case in life, planning ahead can help to keep costs down and maximise the money you can call your own after the move is complete. Prepare your own house for sale Even though the UK has a shortage of housing, meaning supply is generally tight, it still makes sense to present your house as attractively as possible to get the best possible price for it. There are plenty of articles online, which give guidance as to what to do in preparation for a sale (and what to avoid doing). A good estate agent will also be able to give some tips. Remember to budget for all the moving fees If you’re downsizing you may be able to make your next house purchase outright but you’ll still need to pay many of the fees associated with buying and selling houses, such as estate agent commission, conveyancing fees and surveys. There’s also stamp duty to consider and depending on the logistics of your move, you may find yourself paying the 3% surcharge up front and having to recoup it later. There will also be the costs of actually moving from A to B, although these can be minimised through a combination of shopping around for the best deal and advanced planning. Downsizing your possessions can pay in all kinds of ways If you’ve been in your present home for a while, there’s a good chance you’ll have accumulated a lot of “stuff” some of which will be very precious to you and some of which may be very useful, but much of which you could probably move on in one way or another. First of all, the less stuff you have to move, the lower your moving costs are probably going to be. Secondly, if you are able to sell at least some of your unwanted possessions, then you can use the money to offset the costs of moving. Digitising lets you keep memories without the memorabilia Digital cameras are relatively recent inventions, so many of us have collections of old photographs, which can be scanned and kept in digital form. This also protects against the photographs being damaged for example if liquid is spilled on them or if there is a fire, plus it allows them to be shared. Paperwork of all kinds is also a good target for digitisation. The idea of digitisation, however, can go beyond just scanning photos and papers. Now that we have digital cameras, it effectively costs nothing to photograph items which have special significance for us, so we can remember them and the memories they trigger once we have moved the item on to pastures new. Whether it’s a ticket stub from a concert or a special item of clothing, you can create a digital memory of it and pass on the original. There are all kinds of options for donating and selling physical items Even donating items to charity can help reduce your moving costs by reducing the amount of possessions you need to move, but if you’re looking to make a little money out of your unwanted items then there are plenty of real-world options (car-boots, Gumtree…) and a whole host of online ones. While eBay may be the best-known place for selling on your old possessions, there’s also Amazon and numerous niche sites for certain items from books and CDs to designer clothes and accessories.

The plight of JAMs (those who are just about managing) has been hitting the headlines on a regular basis over recent times. Essentially JAMs are people who are living from one pay-day to the next, perhaps managing to avoid racking up any (more) debts, but unable to make meaningful inroads into existing debts or to build up savings. Political parties say they want to help – but can they? Theresa May herself has acknowledged the plight of the JAMs and politicians of all persuasions have been busily setting out ideas to improve their situation, but realistically it’s an open question as to how much any government can actually do, particularly with all the uncertainties about Brexit on the horizon. Can the JAMs help themselves? While it may be disheartening to see how little money, if any, you have left over at the end of the month and to feel that there is no point in even trying, nothing could be further from the truth. The less money you have, the more important it is to make every penny work for you. That’s what will put you on the path to being able to cope, even if the unexpected happens such as you losing your job or becoming ill. Start by (re)assessing your outgoings in terms of your needs A need is anything necessary to keep you housed, clothed and fed or anything which is a legal obligation, such as a contract until it expires. Making savings here is likely to involve a combination of education, adaptation and creativity. For example, even if you and your family enjoy meat, the fact is that it is the most expensive form of food around. Cutting it out, if only temporarily, can go a long way towards reducing food bills. If you’ve never tried vegetarian cooking then help is at hand on the net, where there are plenty of budget-friendly recipes to be found for free. Likewise, if you’re put off the idea of using “own brand” products and such like because you worry about what other people will think of you (or your children), then decant them into other containers and only you will know. Make use of every money-saving option you can find, including old-fashioned money-off coupons and online codes and signing up for loyalty cards where you shop frequently. Look at the activities you carry out every day and see if there is a more economical way of doing them. For example, if you get the bus to work, could you walk one or two stops further to get a lower fare? If you take the car to a park and ride, could you cycle instead? As soon as you can free up a little money each month, start putting it to work Your first task is to build up some emergency savings, ideally at least two or three months’ salary. Once this has been achieved, start tackling any debts. With debts, the standard advice is to “snowball” or pick the highest-interest debt first and start paying it off. While this can be good advice, if you have lots of “little” debts, e.g. small balances on credit cards, it could be worth paying these off first and closing the cards as this may help to make a quick improvement to your credit rating and help you to transfer your debts to a lender who charges lower interest. If you’ve managed to avoid debts, you’re obviously in a better situation. In this case, you may want to look at getting professional advice as to how you can use this extra income to generate a return for you and improve your overall situation as quickly as possible.

Even though children will typically have a lot of influences in their lives as they grow up, their inner circle of family and friend and, in particular, their parents, will usually have the biggest influence of all. Part of a parent’s job is to ensure that their children learn the practical skills they will need to see them through adult life and these days that means having a solid grasp of financial skills. The (very) early years The best time to start teaching your child the basics of money is when they start to display an awareness of it and an interest in it. This may be when they start learning to count or it might be earlier depending on the child. The key point at this stage in particular is to ensure that any lessons are put into a context which can be grasped by a young child. For example, an older child might grasp the significance of being told that it would take X hours of work to pay for a given item, but a younger one is likely to have much less of an awareness of time or a clear understanding of what working for a living means. Hence, the answer to a question such as “Is X expensive” is best phrased as a comparison to something a child can grasp e.g. “Yes, we could buy X pairs of shoes for you for the same amount of money.”. The older childhood years Once children have begun to grasp the passing of time in a meaningful way, then it becomes possible to teach them the connection between time and money and hence to help them develop an appreciation of the value of the latter. This is also the time when you can start helping them to learn the basics of earning a wage and managing their money by giving pocket money in return for helping with housework and then guiding them through the basics of budgeting with it. The Santa Clause Dealing with Christmas can be challenging for parents whose children are still young enough to believe in Santa Claus. One way to address this is to tell them that although Santa does indeed organise and deliver the presents, the parents of children who have been good are expected to make a contribution to help cover his time and costs and hence what children receive depends in part on what their parents can afford. To this might be added the fact that Santa is very careful about leaving live animals as presents as he needs to be absolutely sure that people have the time and money to look after them all year round. The teenage years This is the time when children begin to develop the maturity to understand adult concepts such as saving and investing and the difference between “good” debt (low-interest debt used to buy assets, e.g. mortgages) and “dangerous” debt (high-interest consumer debt). In addition to the connection between work (time) and income, they also need to learn to grasp the concepts of need versus want, cost versus benefit and risk versus reward. Teenagers are notoriously influenced by peer pressure, but it’s worth noting that the more financially aware a child is and the more they understand the reasons for their parents’ financial decisions, the easier it is for them to accept them, particularly if they’re given some input into the decision-making process. One way to deal with requests (or pleas) for “big-ticket” items (such as fancy phones) is to respond by asking the person making the request to come up with a concrete plan as to how to pay for it. If they do, then it may be reasonable for them to get the item. If they don’t then the ball stays in their court. Instead of refusing and trying to get them to understand your reasons, you’re challenging them to come up with a plan themselves.

These days, there is a lot of advice available about how to keep safe online and data-security breaches at major organisations make new headlines. As Kim Kardashian recently demonstrated, however, breaches of physical security can be both frightening and costly (even with insurance). With that in mind, here are three pointers to keeping yourself and your valuables safe in the real world. Be careful with the internet Using cloud storage services to keep copies of valuable memories can be a great way to protect against the theft of the devices on which they are stored, but beware of posting pictures of your valuables on social media. Even if you know your way around your privacy settings, all it takes is for one person to share an image innocently and you literally never know where it is going to end up. Likewise be careful about sharing information about holidays you are on for the same reason. In very simple terms, assume anything which goes online is in the public domain and therefore keep social media for content you’re happy to share with the world. In the real world, make yourself more hassle than you’re worth The essence of protecting yourself from crime essentially involves making it more effort than it’s worth to target you. In terms of protecting your home, some simple and straightforward precautions can really go a long way to making this a reality. Make sure the entrance to your house has plenty of lighting, with a motion-sensitive trigger. This will both help you to see your way to your own front door, but make it obvious if anyone else is heading towards your property. On the subject of lights, internal lights can be fitted with a timer to go on and off when you’re out. Real CCTV has to be positioned with care (although any company involved in the industry can advise on this) but realistic fake cameras can act as a deterrent. Burglar alarms are cost-effective and free of the legalities of CCTV. Secure locks on both doors and windows will go a long way to preventing unauthorised entry and adding peep-holes and/or chains will make it easier for you to see who is at the door before you decide whether or not you want to answer it. On that note, remember to ensure that you know the identity of anyone who calls at your house not only before you let them in but before you divulge any details of your property and/or your habits. Most people will probably be who they say they are but one of them might be a burglar checking out a potential target. If you don’t have it already, double glazing is a whole lot harder to break than single glazing. Finally, if you do have any irreplaceable possessions, consider investing in a safe, ideally a hidden wall safe. If this is not practical, e.g. you’re renting, then think about imaginative hiding places, for example, you can get containers which look like tins of beans and which can be put in your cupboards (along with their real life counterparts). Take stock of what you have so you can get the right cover for it Much of what you have in your home is probably replaceable albeit at a cost. Items such as TVs and electronics are unlikely to have a huge amount of sentimental value, but have great attraction to thieves. Take the time to make an inventory of your possessions and their value. If possible gather up any documents showing proof of ownership and, ideally, take scans of them to store in the cloud. This will give you a reasonable figure for home contents insurance. When you choose your policy, check if there are any exclusions, limitations or stipulations for cover. For example some policies may require individual items over a certain value to be itemised. For possessions which really matter to you, e.g. jewellery, take clear pictures and note all relevant details. In a worst-case scenario, this may help you to recover a beloved item.

Even with the NHS (and possibly private medical insurance as well), the simple fact of the matter is that it’s miserable being ill and the more ill you are the more miserable it is. When your illness reaches a stage where it can affect your financial well-being, life can get really bad and, in a worst-case scenario, if you are diagnosed with a terminal illness without appropriate insurance cover, your last days can become even more stressful and their aftermath even more so for your loved ones. Making arrangements so that bills can be paid during a period of illness has obvious relevance to the self-employed, but even the employed and home-makers should take the issue seriously. While the employed may get some protection through employee benefits schemes, it may not be enough for your needs and similar comments apply to state benefits. Home makers may not earn an income but their time has a value and in the event of their illness and death, someone will have to stand in for them and what they do (cooking, cleaning, chauffeuring…). Start with taking care of yourself Given that prevention is usually a whole lot less hassle than cure (and often cheaper too), protecting your finances should generally start with protecting yourself. These days we all know the basics of a healthy lifestyle, eat well, drink plenty of healthy liquids (like water and unsweetened fruit juices) and avoid excessive alcohol consumption (or excessive consumption of anything), avoid smoking, take plenty of exercise and get a good night’s sleep each night. It’s a short list, but in the real world, many people may look on all of this as a case of “easier said than done”. There’s a certain element of truth to this, leading a healthy lifestyle can be challenging in today’s world, but even taking small steps, such as literally walking a bit further, can add up to a big difference and we have to point out, stopping smoking can make a big difference to your finances as well as your health. Put protection in place in case of illness What type and level of protection you’ll need depends greatly on your personal situation, however here are some ideas of what you should consider. Pet Insurance – this may come as a surprise for the top of the list, but pets don’t qualify for state support and unexpected veterinary bills are unwelcome at any time. Do you really want to be worrying about paying them when you’re seriously ill? Payment Protection Insurance – the infamous PPI. It may have had a very bad press, but the mis-selling scandal was exactly that, PPI was being sold inappropriately. For some people it may be a very useful product. It will take care of repayments towards credit products, such as credit cards and loans, under certain conditions. PPI cover can include spells of unemployment, which may or not be the case with other forms of cover. Income Protection Insurance – PPI is sold for specific products and is often provided by the relevant lender (for an extra fee). IPI provides and income for you to use as you wish. It will typically pay out in case of illness or injury, some policies may also provide an element of unemployment cover, but this varies. Critical Illness Cover – This insurance pays out if you suffer from certain serious conditions. Policies vary on what they cover, but typical examples include cancer and heart conditions. Protect you and your loved ones in the event of your death The standard comment about life insurance is that it’s there for the people you leave behind, which is true, but policies can also pay out in the event of terminal illness, thereby potentially making it easier for you to spend your last days in comfort as well as for your loved ones to manage financially and emotionally after your death.

The financial decisions we take during our working years will have a huge influence on our quality of life when we reach our senior period. Minimising our tax liability is a very significant factor when it comes to saving for our later years, making the most of our pensions and, ultimately, ensuring that our estate goes to the people we love rather than HMRC. Pension saving and taxation The major headline benefit of saving for our later years by means of pensions is that pensions contributions attract tax relief. There are annual and lifetime limits on this relief, however in practical terms they are only likely to have a meaningful effect on particularly high-net-worth individuals. Tax relief is also applied on contributions made by individuals whose earnings are below the income tax threshold. In this case, there is an annual limit of £2,880 in personal contributions, to which 20% tax relief is added, meaning that a person can save a total of £3,600 into their pension each year. People on lower incomes can make higher contributions to their pensions if they wish, it’s just that the tax relief will only be applied on the first £2,880. It’s also worth remembering that some people in this situation may find it beneficial to register for certain benefits (e.g. Child Benefit and Carer’s Allowance), even if the overall household income is too high for them to receive any payments. This is because they can build up NI contributions in their own name and hence improve their own state pension. While the state pension may be less than many people would like to have to live on, if you can claim it, it makes sense to do so, particularly since it may entitle you to other benefits. Pensioners and taxation In the old days, taxing pension income was a fairly straightforward matter. You had a fixed income from a state pension and/or a fixed income from an annuity bought with your pension fund. Either or both of these could rise in line with inflation, but essentially your tax bill was much the same from year to year. The “pensions freedoms” introduced in April 2015 mean that pensioners now have the ability to vary their income from one year to another in line with their needs and wants. This, obviously, has implications in terms of tax management and planning ahead, as far as possible can bring very meaningful rewards. For example, if a person thinks there is a reasonable expectation that they will need £5,000 one year and £15,000 the next, it could be best for them to withdraw £10,000 each year, to make the most of their annual, personal allowance. Estate planning and taxation While it’s important to leave a will, a will simply indicates who should receive what out of your estate. Making sure that there is something in your estate left for them to receive is the job of inheritance planning. The good news about pensions, or, more specifically, pensions funds, is that they’re excluded from a person’s estate when its IHT value is calculated. The even better news is that as of April 2015 it became possible for pension funds to be passed on from one person to another and as of April 2016, the beneficiary received the income taxed at their marginal rate (as opposed to 45% as before). This has clear implications for estate planning, particularly for those who have younger relatives, such as grandchildren, with no or little income. In such cases it may be most advantageous to bequeath them their share of your pension pot directly so that they can make full use of their personal allowance, rather than having them receive their money via higher-earning relatives who will pay more tax on it to begin with. The Financial Conduct Authority does not regulate tax and trust advice.

The plight of first-time buyers has been making headlines for a long time now – along with the importance of the “bank of mum and dad”. Young adults who want to move away from the parental home for study or work (or just so they can have their independence) face the challenge of saving for a deposit, while paying rent. Given that owning a home is an ambition shared by many people, it’s worth looking at ways to make it easier. Putting together the deposit Those four little words may represent one of the biggest financial challenges any individual will ever face. It’s long been understood that even in the heady days of the housing market, long before the Mortgage Market Review, when it came to deposit bigger was better. These days 100% mortgages, while theoretically still available, are very much a niche market and even 95% mortgages are challenging to obtain. The government attempted to address this issue with the introduction of the Help to Buy ISA in December 2015. Under this scheme, buyers can save up to £12K, which will be topped up with a 25% bonus, i.e. a possible maximum of £3K. This scheme has, however, come in for serious criticism as the funds saved can only be used after the sale is complete rather than put towards the deposit, which is typically paid upon exchange of contracts. In theory, mortgage lenders could look for ways to work around this, but since the Help to Buy ISA is due to come to close in November 2019, there is very little time for them to do so. In addition to this, April 2017 will see the launch of the Lifetime ISA, which is available to savers between 18 and 39 and which addresses this complaint by making it possible for savers to access their funds on exchange rather than having to wait for completion. In other words, it makes it possible for savers to use their funds for a deposit rather than forming part of the purchase price. The Lifetime ISA also offers a 25% bonus and there are conditions attached to its use, so potential home buyers should do their research and make sure it is a suitable product for their situation before deciding whether to use it. Reducing the level of the mortgage you require The government’s equity loan scheme, effectively increases a buyer’s deposit by up to 20% of the purchase price of their new home (this is increased to 40% in Greater London). The purchasers need to put up a 5% deposit themselves, which means the mortgage lender only needs to advance 75% of the price (55% in Greater London). The property must be a new build and the maximum price is £600K (this also applies in Greater London). The buyer must have a repayment mortgage as opposed to an interest-only one. The loan is without charge for the first five years and after that fees are payable until it is repaid. Making yourself more attractive to a mortgage lender Unless you can actually afford to buy a house outright, you’re going to need a mortgage, which means that you’re going to need to be able to convince a mortgage lender that you’re a good prospect. First and foremost this means convincing them that you meet the affordability criteria set out in the Mortgage Market Review. With this in mind, it helps to start getting your financial ducks in a row as early as possible. Healthy financial habits such as budgeting, saving and keeping your financial paperwork (physical or digital) in order, will all stand you in good stead when it comes to getting a mortgage, as will having a gleaming credit record.

As you move through life, your needs and wants often change as does the type of insurance cover you require and the level of cover. While insurance may be an unglamorous topic, having the right cover in place can make all the difference in a difficult situation. Here we take a look at what types of personal cover you may need at different stages of your life. Young adult student, without children Although students are adults in the eyes of the law, they are in a very specific financial situation in that they often have little to no personal income and therefore any form of insurance which relates to income protection is probably a waste of money. Medical and dental insurance, however, could well be worthwhile and if the student has any plans to travel and/or work abroad then the appropriate insurance should be regarded as a must, even if they have an EHIC card. Young adult workers, without children Once a young person is earning an income and supporting themselves, at least for the most part, then it becomes appropriate to look at some form of income protection. At a basic level, a younger adult could look to self-insure, at least in part. Young adults with budgeting skills will know how much money they need to meet their commitments each month and the more cash savings they have the longer they will be able to meet those commitments if they are out of work (or ill). Having said that, some element of insurance may be helpful. If they have pets, pet insurance will help ease the pain of expensive vets bills, which can hurt even when you’re working. PPI could be a useful way to ensure you meet credit commitments if you are experiencing financial turbulence. Young adults who are self employed should definitely look at critical illness cover and income protection insurance, even those in standard, paid, employment may wish to see if they would benefit from some extra cover in this area. For people without financial dependents (and with savings to cover their funeral) life insurance is only likely to be relevant if they have a mortgage. Adults with children Pretty much everyone agrees that children change your life in all kinds of ways and that includes your financial life. Once you have children, you have people who are going to be financially dependent on you for at least 16 years and quite possibly for a lot longer. That means life insurance ceases to be something you need to keep your mortgage provider happy and becomes something which is vital to ensuring that your children will be in a good position to cope financially in the event of your death. When both parents are involved in raising children, then both usually need to be insured even if only one parent earns an income, because the death of the home maker would mean that someone else would have to step in to replace the contribution they currently make to the running of the house. The level of cover has to reflect the fact that children, by definition, are at the start of their lives and will therefore have financial needs long into the future. Empty nesters In some ways, empty nesters are in a similar position to young adults without children, but these days it is far from unusual for parents still to be offering some level of support to adult children, particularly if the children have their own children. It is also possible for people to be grandparents when their own parents are still alive. Because of this, it may be best for people in this stage of life to take a very detailed look at their situation, possibly with help from a professional, to see what sort of insurance they require at this point and what level of cover.

What kind of pension or pensions you have will determine what can happen to any remaining funds after your death. Here is a quick look at different types of pensions and what the options are for inheritance planning. The State Pension At current time, if you are married or in a civil partnership, widow(er)/surviving partner may be able to inherit some of your entitlement to a state pension. As the rules relating to state pensions are set by the government, this can, however, change at any time. Defined Benefits Pensions Often known as final-salary pensions, these schemes will have their own rules about what happens to your pension in the event of your death. This may well depend on whether or not you have already started to access it. If you are, or have been, a member of one of these schemes, then it is a good idea to check what these rules are so you can decide what steps, if any, need to be taken in order to ensure that your loved ones are protected in the event of your death. Defined Contributions Pensions – Annuities There are essentially two ways to pass on your annuity in the event of your death. One way is to buy an annuity which makes specific provision for a spouse’s pension. Obviously annuity providers are going to take account of this requirement when deciding how much income to offer for your pension pot, hence you are almost certainly going to be offered less than you would have received without equivalent provision. An alternative would be to opt for an annuity protection lump sum death benefit. In this scenario, if the income drawn from the annuity is less than the original purchase price thereof, the difference is transferred to your designated beneficiary. While this option will almost certainly increase the price of the annuity compared to an equivalent product without this protection, it is also almost certainly cheaper than opting for an annuity with a spousal pension since the provider’s liability is limited to the purchase price of the annuity. Defined Contributions Pensions – Income Drawdown Since April 2015, it has been possible for holders of pension funds which have been designated for income drawdown, to pass their remaining assets to whomsoever they please in a tax-efficient manner by using a vehicle called Nominee Flexi-Access Drawdown. The Nominee can, in turn, use a vehicle called Successor Flexi-Access Drawdown to pass on any remaining assets to their designated heirs and so on for as long as there are assets to transfer (assuming the regulations stay as they are now). The huge advantage of this approach is that, like a life insurance policy which is placed into a trust, the pension pot is kept out of the deceased’s estate and therefore avoids a (potentially hefty) IHT bill. This may be of particular importance to pensioners who also own property as the price of even a relatively modest home can soon gobble up an IHT allowance. As part of pensions freedoms, the government has also removed the hefty 55% “pensions tax”, which decimated the nest eggs left to surviving loved ones. As rules currently stand, if the holder of the pension fund dies before their 75th birthday, their pension fund can be passed on without any form of tax being payable. This continues down the line as the assets are passed from person to person. For example, if both the original saver and the first nominee die before their 75th birthday, the first successor will inherit the remaining assets without paying tax on them. Once the pension holder reaches their 75th birthday, any withdrawals are treated as standard income for the purposes of tax.

A week is a long time in politics. It was about the length of time it took Chancellor Philip Hammond (and/or his boss Prime Minister Theresa May) to decide that the proposed increase in National Insurance Contributions (NICs) for the self employed was best abandoned. Here is a quick guide to what happened and some possible explanations as to why and what it means. The manifesto pledge In the run-up to the 2015 general election, their predecessors George Osborne and David Cameron campaigned on a pledge to lock taxes and NI and to combat scepticism about politicians’ election promises, guaranteed that they would bring in legislation to make it illegal for them to do so, which they duly did. The “get-out-of-jail-free” card The legislation, however, only applied to NI contributions made by employers and the employed, hence Philip Hammond was in his legal right to raise NICs for the self-employed. The court of public opinion While the letter of the law was on the Chancellor’s side, politicians also have to answer to the court of public opinion and the judgement here was clear. The stated campaign pledge had been “no increase in NICs” and the fact that the related legislation had only specified Class 1 NICs was irrelevant. Not to put too fine a point on it, the move was seen as a betrayal of a manifesto promise and this fact was made clear in many newspaper headlines. A swift U turn It’s probably safe to say that neither Philip Hammond nor Theresa May expected the change to NICS to be popular with the self-employed, but that they completely underestimated the scale and strength of the reaction of the general public. Even though the change only impacted a relatively small number of people, it was perceived as the Conservatives using legal technicalities to get around a clear manifesto pledge and that went down very badly with the public as a whole. If newspaper columns are to be believed, the backlash made both backbench MPs and cabinet ministers very nervous. March 2017 is about halfway through a 5-year parliament. The proposed increase was due to take effect in April 2018 and hence would have factored in tax returns filed between April 2019 and January 2020. In other words, the subject was very likely to be fresh in people’s minds at election time in May 2020. Just as MPs need to think about their constituents’ opinions, so governments need to think about their backbenchers’ opinions, particularly ones which have an absolute majority of 12 and a working majority of 17. The Chancellor and Prime Minister quickly decided that this was one battle which was more hassle than it was worth and beat a hasty retreat. The end…? Philip Hammond and Theresa May may be taking their cue from the old saying “least said, soonest mended”. In other words, by backing down now, they’ve effectively put a stop to the topic for the time being and, of course, with Brexit looming, it’s a safe bet that journalists will have plenty of other material for columns and the public matter for debate. At the same time, financial books still need to be balanced and in a letter to Conservative MPs, Philip Hammond stated that it was his view that the benefits gap between the self-employed and the employed had narrowed sufficiently that the gap between their relative levels of NI contributions had ceased to be justifiable. Given that the manifesto pledge only applied to the current parliament, i.e. up to the 2020 election, it is entirely possible that Chancellor will seek to raise NI for the self-employed at some point in the future.

If nothing else, the slew of TV adverts which accompanied the introduction of auto enrolment will hopefully have raised awareness of the importance of making preparations for old age and of the fact that it’s never too early to start thinking about your future. Even though auto enrolment is now in full swing, its potential importance is high enough that it can be worth recapping what it means in practice. Auto enrolment potentially applies to all working adults Employers must automatically enrol all working adults into a workplace pension provided that they meet the relevant criteria. These are: Not already be contributing into another workplace pension scheme (having previously been a member of another scheme is fine, as is contributing to a personal pension at the same time). • Be aged between 22 and state pension age • Earn more than £10KPA • Be aged between 22 and state pension age • Earn more than £10KPA You can choose to opt out of auto enrolment, however if you do your employer must auto enrol you again after three years, unless you reconfirm that you wish to remain outside the scheme and so on for as long as you continue to meet the qualifying criteria. Advantages of auto enrolment From the government’s perspective, the main advantage of auto enrolment is that it works on the basis that people will have to take action if they take a conscious decision that saving for their later years through a workplace pension is not for them, at least not at the point, rather than obliging them to take action if they do decide that they want to make a commitment to saving for old age. From an employee’s perspective, the advantage of the scheme is that employers are mandated to make contributions on behalf of their employees, rather than being in a position to put pension contribution under the heading of optional benefits. Disadvantages of auto enrolment While the headline benefit of employer contributions may sound enticing, it needs to be viewed in context. The government has set a minimum level of contribution which needs to be made into a workplace pension (assuming the employee wishes to participate) and the percentage of this which needs to be met by the employer. There are three ways in which this minimum level of contribution can be calculated. These are known as tiers. At current time tier 1 requires a minimum overall contribution of 3% (of pensionable earnings), of which the employer must pay at least 2%. Tiers 2 and 3 require a minimum contribution of 2% of which the employer must pay at least 1%. As of April 2018, the minimum contribution will rise to 6% (Tier 1) and 5% (Tiers 2 and 3) of which the employer must pay at least 3% (Tier 1) or 2% (Tiers 2 and 3). From April 2019 the figures will be 9% and 4% for Tier 1 and 8% and 3% for Tiers 2 and 3. In other words, employees could find that enrolment in a workplace pension scheme does wind up making a noticeable difference to their take-home pay. Alternatives to auto enrolment With auto enrolment and workplace pensions making so many headlines, it’s easy to forget that even those in work can opt for private pensions and, in principle, employers could agree to make contributions towards them. Admittedly it is an open question as to whether or not they would, but in any case the individual would still be able to qualify for tax relief on contributions at the going rate. As private pensions are outside the scope of the government regulations, they can offer more flexibility with regards to contribution levels and therefore, even without employer contributions, some people may find them a more suitable channel for their pension saving.